A class action complaint for violations of the Employee Retirement Income Security Act (the “Complaint”) against NovaStar Financial, Inc. (OTC:NOVS) and certain individuals who are believed to have been fiduciaries of the NovaStar Financial, Inc. 401(k) Plan during the period May 4, 2006 through November 15, 2007, has been filed.
According to a press release the Complaint alleges that Defendants allowed the imprudent investment of the Plan’s assets in NovaStar Financial, Inc (“NovaStar”) common stock (OTC:NOVS) between May 4, 2006 through November 15, 2007 despite the fact that they allegedly knew or should have known that such investment was unduly risky and imprudent due to NovaStar’s serious mismanagement and improper business practices, and that the Plan’s fiduciaries also failed to disclose information about NovaStar to the Plan’s participants in violation of ERISA.

Novastar has filed a motion to dismiss which argues, among other things, that the Plaintiff lacks standing to sue. Plaintiff has opposed this motion and the motion is presently awaiting decision by the Court. In addition, so the press release, on December 1, 2008 the Court issued an Order scheduling further proceedings in this case, including a deadline of June 17, 2009 for the completion of discovery and the setting of the case for trial by jury commencing on December 7, 2009.