One of the most eventful securities class actions in recent years reached an anticlimactic end on Tuesday as Dynex Capital Inc., agreed to pay $7.5 million to settle a class action brought by a Teamsters pension fund accusing Dynex of fraud involving mortgage-backed bonds. The case generated plenty of fireworks over the years, including a key ruling from the U.S. Court of Appeals for the Second Circuit on collective scienter, a nasty fight among the lawyers involving allegations of fraud on the court, and a judicial lecture on diversity at law firms.
Teamsters Local 445 Freight Division Pension Fund first filed their complaint in 2005 on behalf of purchasers of bonds collateralized with mobile home loans that were issued by Merit Securities, a subsidiary of Dynex. The plaintiffs alleged in their 2008 second amended complaint that Dynex and two of its top executives misrepresented the quality of the loans.
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