Escala Group, Inc. (ESCL.PK) is a global collectibles company in postage stamps, coins, precious metals trading, and art and antiques. One of its major customers and joint venturers is its majority shareholder, Afinsa Bienes Tangibles SA ("Afinsa").

According to a press release dated May 9, 2006, the Complaint asserts violations of the federal securities laws and alleges that Defendants made material misstatements and omitted information regarding the true nature of Escala's business and sales activities. The Complaint alleges that on or around May 9, 2006 it was publicly reported that Spanish police had made arrests and raided the offices of Afinsa. The operation forms part of a joint investigation launched by the National Court, tax authorities, financial crime prosecutors and the National Police over an alleged pyramid-type scheme based on overpriced stamps and other collectibles. The prosecutor's office said in a statement that Spanish authorities are conducting more than 20 searches at Company offices and private residences. The prosecutor's office also said it plans to conduct "several arrests" as part of a lawsuit based on charges ranging from tax evasion and money laundering to criminal insolvency and falsification of documents. The operation comes after Barron's magazine extensively reported questionable practices at Afinsa, which purportedly operates a "no-lose" stamp-sales program for investors in Spain and Portugal.

The Complaint further alleges that as a result of these revelations, given the high level of the integration between Afinsa's and Escala's business operations, ESCL stock fell more than 50% in heavy trading on May 9, 2006.

On July 20, 2006 the judge approved lead Plaintiff Capitalia and Baltimore's motion for appointment and approval of lead Counsel. Plaintiffs filed a Consolidated Complaint on October 13, 2006. Motions to dismiss were filed by Defendants on December 18, 2006. On April 20, 2007 several individuals were dismissed from the case on the grounds that the Complaint did not sufficiently allege scienter or personal jurisdiction. The Plaintiffs were granted leave to amend Complaint deficiencies with regards to one individual. They were also successful in having the discovery stay lifted against Escala.

On June 1, 2007, a Second Consolidated Complaint was filed. In addition, new motions to dismiss were re-filed on July 5, 2007 and answers were filed on July 16, 2007. However, on October 02, 2007, the judge denied Defendants' second motions to dismiss. At the same time, a motion to certify class in regards to the appointment of class representative and class Counsel was also filed.

According to a press release date May 30, 2008, Escala announced that it has entered into agreements to settle the securities class action lawsuit and shareholder derivative action commenced against the Company and certain of its current and former officers and directors in May 2006. As part of the settlement of the derivative action, the Company will recover $5.50 million from insurers on behalf of certain named Defendants on both proceedings. The Company has also agreed to adopt certain corporate governance policies and procedures, and to pay all court approved attorneys' fees, up to a maximum of $925,000, together with approved expenses not to exceed $70,000. The Company's insurer will fund $475,000 of these amounts. The proposed settlement of the class action litigation provides for the Company to contribute an aggregate of $6 million in cash and 4 million newly issued shares of its stock (subject to increase under certain circumstances) to a settlement fund for the benefit of the class. A substantial portion of the cash contribution will be funded by insurers. If approved by the Court, all claims against the Company and its current and former officers and directors will be dismissed with prejudice and without any admission of liability or wrongdoing.

According to a news article published June 2, 2008, Escala has entered into a settlement agreement for both the class action and derivative cases pending against it. The proposed settlement of the class action litigation provides for the Company to contribute an aggregate of $6 million in cash and 4 million newly issued shares of its stock (subject to increase under certain circumstances) to a settlement fund for the benefit of the class. A substantial portion of the cash contribution will be funded by insurers. If approved by the Court, all claims against the Company and its current and former officers and directors will be dismissed with prejudice and without any admission of liability or wrongdoing.

On September 22, 2008 the court preliminarily approved the settlement and set a fairness hearing for December 3, 2008.

On November 6, 2008, a stipulation of settlement was entered by the Defendants. The judge entered separate orders approving the final settlement and plan of allocation of funds and awarded attorneys' fees and expenses of $3.25 million and $250,000, respectively.

On December 3, 2008 the judge entered a Final Order approving the settlement, granting Counsel's request for fees and expenses, and closing the case.

On October 13, 2009, an order authorizing disbursement of the net settlement fund was entered into the court record. Rust was authorized to discard paper or hard copies of Proofs of Claim and supporting documents not less than one (1) year after distribution of the Net Settlement Fund to the eligible claimants and electronic copies of the same not less than three (3) years after distribution of the Net Settlement Fund to the eligible claimants.

On October 19, 2009, another order authorizing disbursement of the net settlement fund was entered into the out record highlighting most of the same points.