A federal appeals court has ended a class action lawsuit against Kansas City-based NovaStar Financial.
The 8th U.S. Circuit Court of Appeals said Tuesday that the lawsuit filed in 2007 wasn’t specific enough to meet the detailed pleading requirements of the Private Securities Litigation Reform Act. The decision affirms Judge Ortrie D. Smith’s dismissal of the case last year.
Although the lawsuit’s lengthy petition included 36 pages of allegedly misleading press releases and transcripts, the 8th Circuit said the plaintiffs didn’t specify exactly what was misleading about those statements. NovaStar, a publicly traded mortgage servicer, suffered massive losses in 2006, causing its stock to plummet in early 2007. However, the company publicly had maintained a rosy outlook in the preceding months.
The company continues to suffer and said in an Aug. 14 U.S. Securities and Exchange Commission filing that it might file for bankruptcy.