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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2011
COMMITMENTS AND CONTINGENCIES [Abstract] |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are parties to various legal proceedings, including those described below. Although the ultimate outcome of these legal proceedings cannot be ascertained at this time, and the results of legal proceedings cannot be predicted with certainty, the Company believes, based on current knowledge, that the resolution of any of these proceedings, including those described below, will not have a material adverse effect on the Company’s consolidated financial condition or liquidity. However, the resolution of any of the proceedings described below could have a material impact on consolidated results of operations or cash flows in a given future reporting period as the proceedings are resolved. One of the Company's subsidiaries, GLS Capital, Inc. (“GLS”), and the County of Allegheny, Pennsylvania are defendants in a class action lawsuit filed in 1997 in the Court of Common Pleas of Allegheny County, Pennsylvania (the “Court”). Between 1995 and 1997, GLS purchased from Allegheny County delinquent property tax receivables for properties located in the County. The plaintiffs in this matter have alleged that GLS improperly recovered or sought recovery for certain fees, costs, interest, and attorneys' fees and expenses in connection with GLS' collection of the property tax receivables. The Court granted class action status in this matter in August 2007. In February 2011, as a result of motions filed by GLS, the Court refined the class to include only owners of real estate in the County of Allegheny who paid an attorneys' fee between 1996 and 2003 in connection with the forced collection of delinquent Allegheny County property taxes. As a result, the Court has dismissed all claims against GLS with the exception of whether attorneys' fees and related expenses charged by GLS in connection with the collection of the receivables was reasonable. Such attorneys' fees and related expenses were assessed pursuant to prevailing County ordinance. Plaintiffs have not enumerated their damages in this matter. No trial date has been set. On April 1, 2011 in the matter styled Basic Capital Management et al (the “BCM Plaintiffs”) versus Dynex Commercial, Inc. (“DCI”) and Dynex Capital, Inc. (DCI and the Company, together, the “Respondents”), the Supreme Court of Texas partially reversed the Fifth Court of Appeals at Dallas (the “Court of Appeals”) and remanded the case back to the Court of Appeals for consideration of arguments not previously reached by the Court of Appeals. The appeal to the Supreme Court of Texas was filed by the BCM Plaintiffs. Dynex Capital and DCI have filed a motion to reconsider with the Supreme Court of Texas. The Company anticipates that the Supreme court will grant or deny its motion to reconsider by the end of 2011. For further discussion of this litigation, see the Company's Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission on March 16, 2011. Dynex Capital, Inc., MERIT Securities Corporation, a subsidiary ("MERIT"), and the former President/Chief Executive Officer and current Chief Operating Officer/Chief Financial Officer of Dynex Capital, Inc., (together, the "Defendants") are defendants in a class action brought by the Teamsters Local 445 Freight Division Pension Fund (the "Teamsters") in the United States District Court for the Southern District of New York (the "District Court"). The original complaint, which was filed on February 7, 2005, alleged violations of the federal securities laws and was purportedly filed on behalf of purchasers between February 2000 and May 2004 of MERIT Series 12-1 and MERIT Series 13 securitization financing bonds (the "Bonds"), which are collateralized by manufactured housing loans. After a series of rulings and an eventual dismissal by the District Court, the Teamsters filed an amended complaint on August 6, 2008, essentially restating the same allegations as the original complaint and adding the Company’s former President/Chief Executive Officer and current Chief Operating Officer/Chief Financial Officer as defendants. The Teamsters seek unspecified damages and allege, among other things, fraud and misrepresentation in connection with the issuance of and subsequent reporting related to the Bonds. On March 7, 2011, the District Court granted the Teamsters' motion to certify the class for this action. In September, 2011, the Defendants entered into a memorandum of understanding, reflecting an agreement in principle to settle all claims asserted in this matter. The memorandum of understanding sets forth terms of a proposed settlement whereby the Company would pay $7,500 into an escrow account following the negotiation and execution of a definitive settlement agreement and preliminary approval by the Court. The disbursement of the escrowed payment will be subject to negotiation and execution of a definitive settlement agreement, notice to the class, and final approval by the Court, in addition to any other conditions contained in the definitive settlement agreement. The Company continues to deny that it violated any federal securities laws and has agreed in principle to this settlement solely to eliminate the expense, burden, and uncertainty of the litigation. For further discussion of this litigation, see the Company's Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission on March 16, 2011 and the Quarterly Reports on Form 10-Q for the three months ended March 31, 2011 and June 30, 2011.

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