Introduction to the Broadmark Class Action Lawsuit
The lawsuit claims that the proxy statement contained misleading or false statements to solicit shareholder support. The legal action targets Broadmark, Ready Capital, their top executives and directors, along with Ready Capital’s external asset manager for violating the Securities Exchange Act of 1934. Ready Capital’s acquired loan portfolio included a major development project worth $500 million that faced catastrophic setbacks. These setbacks involved substantial cost overruns, construction delays, and funding shortfalls.
Investors File Lawsuit Over Misleading Merger Disclosures
Broadmark Realty Capital Inc. (NYSE: BRMK) stockholders have filed a class action lawsuit about the May 2023 merger with Ready Capital Corporation. Their legal claims focus on misleading statements that led shareholders to approve the deal.
Broadmark and Ready Capital merger timeline
Ready Capital announced its plans to acquire Broadmark in February 2023. Broadmark shareholders gave their approval for the merger on May 30, 2023, and the deal closed the next day. The agreement turned each Broadmark share into 0.47233 shares of Ready Capital common stock, and shareholders received cash instead of partial shares. This share conversion gave Broadmark stockholders about 36% ownership of the combined company, while Ready Capital stockholders kept roughly 64%.
Allegations of false or omitted financial data
The lawsuit claims the proxy statement used to get Broadmark shareholder approval contained misleading information. Ready Capital failed to tell shareholders that:
- They understated their Current Expected Credit Loss reserves and expected credit losses
- They had no basis for their financial projections about distributable earnings per share, dividends per share, and book value per share
- A major Ritz-Carlton development project in Portland, Oregon that made up about $500 million of Ready Capital’s acquired loan portfolio faced serious problems including cost overruns, delays in construction, and funding gaps
The lawsuit also states this property needed a $130 million write-down later and led to more legal action.
Effect of high interest rates and market oversupply
The class action states Ready Capital hid vital market conditions that affected its portfolio. Many borrowers in Ready Capital’s originated portfolio struggled financially because high interest rates increased what they owed. The markets also had too many multifamily properties, which meant borrowers could not raise rents enough to pay their growing debt.
Ready Capital’s stock price has stayed below the merger price since the lawsuit began.
Lawsuit Cites Violations of Securities Exchange Act
The class action against Broadmark focuses on specific legal violations that investors claim happened during the merger process. The legal complaint identifies several defendants that include both companies involved in the transaction.
Key provisions allegedly violated
The lawsuit claims that Broadmark, Ready Capital, executives and directors from both companies, and Ready Capital’s external asset manager violated the Securities Exchange Act of 1934. The legal action specifically points to Section 14(a) of the Exchange Act as the main provision they allegedly breached. This section controls proxy solicitation rules and bans the use of false or misleading statements to get shareholder approval for corporate transactions.
The legal complaint states that defendants’ actions harmed investors who owned Broadmark common stock as of May 30, 2023. These investors could vote on the merger and lost money due to the alleged securities violations.
Role of the Private Securities Litigation Reform Act (PSLRA)
The Private Securities Litigation Reform Act of 1995 sets the legal foundations for this class action. Congress passed this legislation to handle issues with frivolous securities lawsuits and set stricter standards for class actions.
The PSLRA allows any investor who owned Broadmark common stock on the merger’s record date to apply as lead plaintiff. The act describes a lead plaintiff as “the movant with the greatest financial interest in the relief sought by the putative class who is also typical and adequate of the putative class”.
How the law protects investors from fraud
The PSLRA offers important safeguards for investors affected by alleged securities fraud. A lead plaintiff represents all other class members and guides the litigation. All the same, investors don’t need to serve as lead plaintiff to receive their share of any future recovery.
These legal mechanisms protect absent class members under securities laws. They can still receive compensation awarded from the lawsuit. The PSLRA ended up giving class members the freedom to choose their involvement based on their situation.
Court Opens Lead Plaintiff Application Process
The court has started selecting someone to lead the legal proceedings that will represent all affected Broadmark investors after the lawsuit filing.
Who can apply to be lead plaintiff
The court now accepts lead plaintiff applications under the Private Securities Litigation Reform Act (PSLRA). Any investor who held Broadmark common stock during the May 2023 merger with Ready Capital Corporation can apply. The application welcomes all qualifying shareholders, whatever their current holdings. Applicants need to show their situation matches other class members and prove they can represent everyone’s interests.
How financial interest is calculated
The court looks at the “greatest financial interest” through a full picture of each potential lead plaintiff’s stake in the case. The calculation looks at:
- Total losses from the alleged misconduct
- When and how much plaintiffs traded in Broadmark securities
- How defendants’ actions affected their investments
Financial experts help verify these calculations to ensure accurate loss assessment for potential lead plaintiffs.
Deadline for filing: July 28, 2025
The court must receive lead plaintiff motions by July 28, 2025. This strict deadline comes about 60 days after the lawsuit notice first appeared. Investors should act quickly to protect their rights if they want this role.
Responsibilities of a lead plaintiff
The chosen lead plaintiff takes on several important duties during the lawsuit:
- Picking and monitoring lead counsel for the class
- Looking over court filings and giving feedback
- Helping shape litigation strategies
- Going to depositions and hearings when needed
- Taking part in mediation and trial proceedings if required
- Making settlement decisions
Investors can still receive compensation from any potential recovery even if they don’t serve as lead plaintiff.
Investors Seek Compensation for Financial Losses
Broadmark investors can now seek financial compensation through this class action. They have several ways to participate, whatever their current stock ownership status might be.
Eligibility even after selling stock
The class action welcomes investors who sold their Broadmark shares after the merger. The lawsuit represents anyone who held Broadmark Realty Capital Inc. common stock during the May 2023 merger record date. Selling shares after this period doesn’t affect an investor’s right to potential compensation, as long as they owned stock during this crucial time.
Potential outcomes and settlements
A successful lawsuit could lead to:
- Financial compensation for investor losses
- Corporate governance reforms
- Settlement deals to resolve claims quickly
Most similar cases end in settlements, offering faster resolution with both monetary compensation and changes in corporate practices. The lawsuit’s main goal is to recover damages from defendants who allegedly violated federal securities laws.
Comparison with 3D Systems lawsuit
The Broadmark case runs parallel to the recent 3D Systems Corporation class action. Both cases involve claims about misleading investor communications and set specific deadlines for lead plaintiff applications—July 28, 2025, for Broadmark and August 12, 2025, for 3D Systems.
Both lawsuits follow the Private Securities Litigation Reform Act’s framework. The 3D Systems case is different because it focuses on stock buyers during a specific timeframe (August 13, 2024 to May 12, 2025). The Broadmark action centers on shareholders affected by one specific event—the merger with Ready Capital.
Conclusion
The Broadmark class action lawsuit challenges the May 2023 merger with Ready Capital Corporation. Shareholders must make major decisions about joining this lawsuit. The legal battle centers on allegations of misleading statements and Securities Exchange Act violations, especially when you have the undisclosed problems with the $500 million Ritz-Carlton development project.
Affected investors have until July 28, 2025 to seek lead plaintiff status. This role comes with key duties and lets shareholders guide the litigation process. In spite of that, note that shareholders can receive compensation without becoming lead plaintiffs – qualifying members stay in the class whatever their current stock ownership.
The lawsuit emphasizes the vital need for clear corporate communications during mergers and acquisitions. Shareholders should evaluate their options carefully as the case moves forward. The results could compensate investors for their losses and set standards for future corporate disclosures. The case’s progress through the legal system deserves close attention from affected investors.
Key Takeaways
Investors who held Broadmark stock during the May 2023 merger with Ready Capital face a critical legal opportunity with significant financial implications.
• Lawsuit alleges $500M project concealment: Ready Capital allegedly hid catastrophic setbacks in a major Ritz-Carlton development, including cost overruns and funding shortfalls that later required $130M write-down.
• July 28, 2025 deadline for lead plaintiff applications: Affected shareholders have until this date to apply for lead plaintiff status, though all eligible investors automatically remain part of the class action.
• Automatic class membership for merger shareholders: Any investor who held Broadmark stock as of the May 2023 merger record date is eligible for compensation, even if they’ve since sold their shares.
• Securities Exchange Act violations alleged: The lawsuit claims defendants violated federal securities laws by using misleading proxy statements to obtain shareholder approval for the merger.
• Ready Capital stock underperforms post-merger: Stock prices have remained below merger expectations, potentially validating investor concerns about undisclosed financial problems and market conditions.
Frequently Asked Questions about the 3D Symtoms Lawsuit
Q1. What is the deadline for investors to apply as lead plaintiff in the Broadmark lawsuit? The deadline for investors to apply as lead plaintiff in the Broadmark class action lawsuit is July 28, 2025.
Q2. Who is eligible to participate in the Broadmark class action lawsuit? Any investor who held Broadmark common stock as of the record date of the May 2023 merger with Ready Capital Corporation is eligible to participate in the class action lawsuit.
Q3. What are the main allegations in the lawsuit against Broadmark? The lawsuit alleges that Broadmark and Ready Capital provided misleading merger disclosures, including failing to disclose significant issues with a $500 million Ritz-Carlton development project and understating credit loss reserves.
Q4. Can investors still participate in the lawsuit if they’ve sold their Broadmark shares? Yes, investors who held Broadmark stock during the merger period can still participate in the lawsuit and potentially receive compensation, even if they have since sold their shares.
Q5. What potential outcomes can investors expect from this class action lawsuit? Potential outcomes include financial compensation for losses, implementation of corporate governance reforms, or settlement arrangements. The lawsuit primarily seeks to recover damages for alleged violations of federal securities laws.
Contact Timothy L. Miles Today About a Broadmark Class Action Lawsuit
If you suffered losses in Broadmark stock, call us today for a free case evaluation about a Broadmark class action lawsuit. 855-846-6529 or tmiles@timmileslaw.com (24/7/365).
Timothy L. Miles, Esq.
Law Offices of Timothy L. Miles
Tapestry at Brentwood Town Center
300 Centerview Dr. #247
Mailbox #1091
Brentwood,TN 37027
Phone: (855) Tim-MLaw (855-846-6529)
Email: tmiles@timmileslaw.com
Website: www.classactionlawyertn.com
