Dynex Settlement in Teamsters Pension Fund Securities Fraud Case
is Important Development for Asset-Backed Securities Class Actions
(New York City – Oct. 6, 2011) The real estate trust Dynex Capital Inc. has agreed
to pay $7.5 million to settle a New York class action lawsuit over securities fraud in
the sale of bonds backed by thousands of loans on manufactured homes, according
to Cohen Milstein Sellers & Toll PLLC.
In March 2011, U.S. District Judge Harold Baer issued one of the few decisions to
ever have certified a class of investors pursuing federal fraud claims in connection
with the sale of asset-backed bonds. The case is an important one for investors
because it provides a road map for prosecuting fraud claims involving other asset
backed bonds on a class-wide basis, according to Plaintiff’s attorney Joel Laitman,
of Cohen Milstein Sellers & Toll PLLC of New York City.
“We’re pleased because the settlement represents a real recovery in terms of the
percentage of maximum recoverable damages had Plaintiff prevailed on all aspects
of liability and damages at trial and on appeal,” said Laitman.
The lawsuit was filed in 2005 by Teamsters Local 445 Freight Division Pension Fund
and Dynex lost multiple attempts to have the case thrown out of Court. The
settlement still must be approved by Judge Baer of the U.S. District Court,
Southern District of New York.
The Plaintiff charged that Dynex, its subsidiary Merit Securities Corp., and senior
executives at both companies lied about the quality of mobile home loans that were
collateral for bonds sold as Merit Series 12-1 and Merit Series 13 from Feb. 7, 2000
to May 13, 2004.
According to the lawsuit, Dynex and its representatives made misleading
statements that artificially inflated the value of the bonds, understated the amount
of delinquencies and repossessions affecting the bonds and violated its own publicly
stated underwriting guidelines in making poor-quality loans. Defendants also made
false statements about the deteriorating performance of the downgraded bonds
because the company was scrambling to protect itself in the midst of a dramatic
financial collapse, the lawsuit charged.
The class is represented by Joel P. Laitman, Michael B. Eisenkraft, Christopher
Lometti, Daniel B. Rehns, Kenneth M. Rehns and Richard A. Speirs of Cohen
Milstein Sellers & Toll PLLC.
For more information about the case, Teamsters Local 445 Freight Division Pension
Fund et. al. v. Dynex Capital Inc. et. al, No. 05-1897 (HB) (S.D.N.Y), visit