{"url_path":"/sec/rc-pe/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 Legal Proceedings","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-08","source_url":"https://www.sec.gov/Archives/edgar/data/1527590/0001628280-26-032982-index.html","accession_number":"0001628280-26-032982","cik":"0001527590","ticker":"RC","issuer_name":"Ready Capital Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/1527590/0001628280-26-032982-index.html","primary_entity_key":"0001527590","primary_entity_name":"Ready Capital Corp"},"word_count":2450,"has_tables":true,"body_markdown":"Item 1. Legal Proceedings\n\nFrom time to time, the Company may be involved in various claims and legal actions in the ordinary course of business.\n\nMerger litigation\n\nOn June 6, 2024, a purported former stockholder of Broadmark filed a class action lawsuit in the Circuit Court for\n\nBaltimore City, Maryland, captioned Eibling v. Pyatt, et al., No. C-24-CV-24-000818 (Md. Cir. Ct. Balt. City), (the\n\n“Broadmark Merger Action”). The Broadmark Merger Action named as defendants Broadmark’s former board of\n\ndirectors and alleged they breached their fiduciary duties in connection with the Broadmark Merger by failing to\n\nproperly consider acquisition proposals that were purportedly superior to the Broadmark Merger, by relying on\n\npurportedly false and misleading valuation analyses, and by authorizing the issuance of a purportedly false and\n\nmisleading proxy statement. The Broadmark Merger Action also asserted claims against Broadmark’s financial advisor\n\nfor aiding and abetting these alleged breaches of fiduciary duty. The Broadmark Merger Action sought damages in the\n\nform of compensatory damages, quasi-appraisal damages, rescissory damages, and disgorgement of any merger-related\n\nbenefits. The Broadmark Merger Action also sought reimbursement for litigation expenses and attorneys’ and experts’\n\nfees. On September 13, 2024, the Broadmark Merger Action was assigned to the Business and Technology Case\n\nManagement Program of the Circuit Court for Baltimore City, Maryland. Thereafter, on December 10, 2024, the\n\ndefendants moved to dismiss the initial complaint. In response, the plaintiff filed an amended complaint on February 10,\n\n2025, which the defendants subsequently moved to dismiss on April 14, 2025. The court granted defendants’ motion to\n\ndismiss on April 1, 2026, and dismissed the lawsuit in its entirety. Although the Company was not a defendant in the\n\nBroadmark Merger Action, it is subject to contractual indemnification obligations (conditioned on the satisfaction of\n\nvarious contractual requirements) in connection therewith, including with respect to the defendants’ service as\n\nBroadmark directors and the provision of services to Broadmark, as applicable.\n\nOn March 18, 2025, a purported former stockholder of UDF IV filed a class action lawsuit in the Circuit Court for\n\nBaltimore City, Maryland, captioned The Lawrence C. Headley Living Trust v. Jones, et al., No. C-24-CV-25-002222\n\n(Md. Cir. Ct. Balt. City) (the “UDF IV Merger Action”). The UDF IV Merger Action names as defendants UDF IV’s\n\nformer board of trustees and alleges they breached their fiduciary duties in connection with the UDF IV Merger by\n\nfailing to properly consider an acquisition proposal that was purportedly superior to the UDF IV Merger, by relying on\n\npurportedly false and misleading valuation analyses, by authorizing the issuance of a purportedly false and misleading\n\nproxy statement, and by obtaining improper personal benefits that were not shared with all UDF IV stockholders. The\n\n89\n\ncomplaint also asserts claims against UDF IV’s former advisor, UMTH General Services, L.P., for aiding and abetting\n\nthese alleged breaches of fiduciary duty. The complaint seeks compensatory damages, rescissory damages, and\n\nunwinding of the UDF IV Merger, as well as attorneys’ fees and costs. On April 11, 2025, the UDF IV Merger Action\n\nwas assigned to the Business and Technology Case Management Program of the Circuit Court for Baltimore City,\n\nMaryland. Thereafter, on May 16, 2025, the defendants moved to dismiss the initial complaint. In response, the plaintiff\n\nfiled an amended complaint on July 11, 2025, which the defendants subsequently moved to dismiss on September 9,\n\n2025. Briefing on the defendants’ motion to dismiss the amended complaint was completed on December 18, 2025.\n\nAlthough the Company is not a defendant in the UDF IV Merger Action, it is subject to contractual indemnification\n\nobligations (conditioned on the satisfaction of various contractual requirements) in connection therewith, including with\n\nrespect to the defendants’ service as UDF IV trustees and the provision of services to UDF IV, as applicable. The\n\ndefendants and the Company intend to vigorously defend against the UDF IV Merger Action.\n\nSecurities and derivative litigation\n\nOn March 6, 2025 and April 23, 2025, the Company and certain of its executive officers were named as defendants in\n\ntwo separate but largely identical putative stockholder class action lawsuits filed in the United States District Court for\n\nthe Southern District of New York (the “Exchange Act Class Actions”). The Exchange Act Class Actions were filed\n\nunder the captions Quinn v. Ready Capital Corp., et al., No. 1:25-cv-01883 (S.D.N.Y.) and Goebel v. Ready Capital\n\nCorp., et al., No. 1:25-cv-3373 (S.D.N.Y.). The Exchange Act Class Actions allege that the defendants violated Section\n\n10(b) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and\n\nomissions regarding the performance of the Company’s loan portfolio and related matters, and that the executive officers\n\nnamed as defendants violated Section 20(a) of the Exchange Act as control persons of the Company. The Exchange Act\n\nClass Actions seek compensatory damages, costs, and expenses on behalf of the purported classes. On July 8, 2025, the\n\ncourt entered an order consolidating the Exchange Act Class Actions under the caption In re Ready Capital Securities\n\nLitigation, No. 1:25-cv-01883 (S.D.N.Y.) (the “Exchange Act Litigation”) and appointing lead plaintiff and lead\n\ncounsel. Lead plaintiff filed an amended complaint on September 8, 2025, which the defendants moved to dismiss on\n\nNovember 10, 2025. Briefing on the defendants’ motion to dismiss was completed on February 9, 2026.\n\nBetween March and July 2025, the Company was named as a nominal defendant and certain of its executive officers and\n\ndirectors were named as defendants in parallel derivative lawsuits captioned Pittrof v. Capasse, et al., No. 1:25-cv-02274\n\n(S.D.N.Y.) and Vancampenhout v. Capasse, et al., No. 1:25-cv-02930 (S.D.N.Y.) respectively, filed in the United States\n\nDistrict Court for the Southern District of New York (collectively, the “New York Derivative Actions”), and Poon v.\n\nReady Capital Corp., et al., No. 1:25-cv-01827 (D. Md.) and Cote v. Ready Capital Corp., et al., No. 1:25-cv-02429-JRR\n\n(D. Md.) filed in the United States District Court for the District of Maryland (the “Maryland Derivative Actions” and,\n\ntogether with the New York Derivative Actions, the “Ready Capital Derivative Actions”). The Ready Capital Derivative\n\nActions assert claims for violations of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5, contribution\n\nunder Sections 10(b) and 21D of the Exchange Act, breach of fiduciary duties, aiding and abetting breach of fiduciary\n\nduties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets for participating and/or\n\nfailing to prevent the securities law violations alleged in the Exchange Act Litigation and for purportedly causing the\n\nCompany to overpay for certain stock repurchases. The Ready Capital Derivative Actions seek compensatory damages,\n\ndisgorgement of compensation and profits, imposition of a constructive trust, revisions to the Company’s corporate\n\ngovernance and internal procedures, and attorneys’ fees and costs. On July 8, 2025, the United States District Court for\n\nthe Southern District of New York consolidated the New York Derivative Actions under the caption In re Ready Capital\n\nCorp. Stockholder Derivative Litigation, No. 1:25-cv-02274 (S.D.N.Y.). The Ready Capital Derivative Actions are\n\ncurrently stayed, pending: (1) dismissal of the Exchange Act Litigation with prejudice, and the exhaustion of all appeals\n\nthereto; or (2) denial, in full or in part, of the defendants’ motion to dismiss the Exchange Act Litigation. The defendants\n\nintend to vigorously defend against the Exchange Act Litigation and the Ready Capital Derivative Actions.\n\nIn early August 2025, the Board received a demand letter from a purported Ready Capital stockholder (the “Derivative\n\nDemand Letter”). The Derivative Demand Letter closely mirrors the allegations of the Exchange Act Litigation and\n\nReady Capital Derivative Actions and demands that the Board investigate the facts alleged in these actions. The\n\nDerivative Demand Letter requests that the directors investigate any purported wrongdoing that occurred between\n\nAugust 2, 2024, and August 1, 2025, and commence legal proceedings against the Ready Capital executive officers and\n\ndirectors named in the Exchange Act Litigation and Ready Capital Derivative Actions. The Company and the demanding\n\nstockholder have agreed to hold the Derivative Demand Letter in abeyance until: (i) the defendants’ motion to dismiss in\n\n90\n\nthe Exchange Act Litigation is denied in whole or in part; or (ii) the demanding stockholder or the Company give written\n\nnotice that they no longer consent to the voluntary abeyance of the Derivative Demand Letter.\n\nOn May 8 and May 14, 2025, the Company and certain of its executive officers and directors were named as defendants\n\nin two separate but largely identical putative class action lawsuits filed by purported former Broadmark stockholders in\n\nthe Superior Court for King County, Washington (the “Broadmark State Court Actions”). Certain former directors and\n\nofficers of Broadmark and certain affiliates of the Company and its directors, including Waterfall, were also named as\n\ndefendants. The Broadmark State Court Actions were filed under the captions van Wyk et al. v. Ready Capital Corp., et\n\nal., No. 25-2-14038-5 SEA (Wash. Super. Ct. King Cnty.) and Whittlesey v. Ready Capital Corp., et al., No.\n\n25-2-14567-1 SEA (Wash. Super Ct. King Cnty.). On June 20, 2025, the court consolidated the Broadmark State Court\n\nActions under the caption In re Ready Capital Corporation Securities Litigation, No. 25-2-14038-5 SEA (Wash. Super.\n\nCt. King Cnty.) (as consolidated, the “Broadmark State Court Litigation”). The Broadmark State Court Litigation alleges\n\nthat the defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act by issuing false and misleading\n\nstatements and omissions in connection with the Broadmark Merger regarding the performance of the Company’s loan\n\nportfolio and related matters and seek disgorgement, compensatory damages, and the costs and expenses of litigation. On\n\nAugust 19, 2025, the plaintiffs filed a consolidated complaint, which the defendants subsequently moved to dismiss on\n\nOctober 20, 2025. On February 2, 2026, the defendants moved to stay the Broadmark State Court Litigation pending\n\nresolution of the Broadmark Federal Court Litigation. On February 19, 2026, the motions to dismiss and stay were\n\ndenied. Discovery has since commenced in the Broadmark State Court Litigation. On May 1, 2026, plaintiffs filed their\n\nmotion for class certification. Briefing on plaintiffs’ motion is expected to be completed in August 2026.\n\nOn May 28, 2025, the Company and certain of its executive officers and directors were named as defendants in a\n\nputative class action filed by a purported former Broadmark stockholder in the United States District Court for the\n\nWestern District of Washington (the “Broadmark Federal Court Litigation”). Broadmark and certain of its former\n\ndirectors and officers were also named as defendants. The Broadmark Federal Court Litigation is captioned Grant v.\n\nReady Capital Corp., et al., No. 2:25-cv-1013 (W.D. Wash.). On October 15, 2025, the court entered an order appointing\n\nlead plaintiff and lead counsel. On November 25, 2025, the lead plaintiff filed an amended complaint asserting that the\n\ndefendants violated Sections 14(a) and 20(a) of the Exchange Act and Section 11, 12(a)(2), and 15 of the Securities Act\n\nby issuing false and misleading statements and omissions in connection with the Broadmark Merger regarding the\n\nperformance of the Company’s loan portfolio and related matters. The amended complaint seeks compensatory and\n\nrescissory damages, as well as attorneys’ fees and litigation expenses. On January 12, 2026, the defendants moved to\n\ndismiss the amended complaint. Briefing on the defendants’ motion to dismiss was completed on March 4, 2026. On\n\nJanuary 8, 2026, the defendants moved to transfer the Broadmark Federal Court Litigation to the U.S. District Court for\n\nthe Southern District of New York, where the Exchange Act Litigation is pending. Briefing on the defendants’ motion to\n\ntransfer was completed on February 5, 2026.\n\nOn July 18, 2025, the Company and Broadmark were named as nominal defendants, and certain of the Company’s and\n\nBroadmark’s current and former executive officers and directors and Waterfall were named as defendants in a double\n\nderivative action filed by a purported former stockholder of Broadmark in the United States District Court for the\n\nDistrict of Maryland (the “Broadmark Derivative Litigation”). The Broadmark Derivative Litigation is captioned\n\nMurguia v. Broadmark Realty Capital Inc., et al., No. 1:25-cv-02350-JRR (D. Md.). The Broadmark Derivative\n\nLitigation asserts claims for violations of Sections 10(b), 20(a), and 14(a) of the Exchange Act, SEC Rule 10b-5, breach\n\nof fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and\n\ncontribution pursuant to Section 10(b) and 21D of the Exchange Act for participating in and/or failing to prevent the\n\nsecurities law violations alleged in the Broadmark Exchange Act Litigation and for purportedly causing the Company to\n\noverpay for certain stock repurchases. The Broadmark Derivative Litigation seeks revisions to the Company’s corporate\n\ngovernance and internal procedures, disgorgement, compensatory damages, and attorney’s fees and costs of litigation.\n\nThe Broadmark Derivative Litigation is currently stayed, pending: (1) dismissal of the Broadmark Exchange Act\n\nLitigation with prejudice, and the exhaustion of all appeals thereto; or (2) denial, in full or in part, of the defendants’\n\nmotion to dismiss the Broadmark Exchange Act Litigation. The defendants intend to vigorously defend against the\n\nBroadmark State Court Actions, the Broadmark Federal Court Litigation, and the Broadmark Derivative Litigation.\n\nLegacy UDF IV litigation\n\n91\n\nAs a result of the UDF IV Merger, the Company assumed certain outstanding litigation against UDF IV and affiliated\n\nparties.\n\nOn March 20, 2020, Megatel Homes, LLC and certain of its affiliates filed a lawsuit against Mehrdad Moayedi, United\n\nDevelopment Funding, L.P., United Development Funding II, L.P., United Development Funding III, L.P., UDF IV,\n\nUnited Development Funding V, and various other affiliates (collectively the “UDF Defendants”) in the United States\n\nDistrict Court for the Northern District of Texas, captioned Megatel Homes LLC, et al. v. Moayedi, et al., No. 3:20-\n\ncv-00688-L-BT (N.D. Tex.) (the “Megatel Action”). The Megatel Action alleges that the UDF Defendants knowingly\n\nparticipated in a scheme to “prop” up Moayedi’s companies, and thereby defraud the plaintiffs, by lending funds to\n\nMoayedi’s companies, which Moayedi’s companies then used to repay older loans they had received from the UDF\n\nDefendants, rather than using such funds to “advance” real estate projects with the plaintiffs. The plaintiffs assert claims\n\nunder the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and for common law fraud, statutory fraud, and\n\nfraudulent inducement. The plaintiffs seek compensatory damages, treble damages, exemplary damages, and attorneys’\n\nfees. On May 18, 2020, the defendants moved to dismiss the plaintiffs’ complaint, which the court granted in part and\n\ndenied in part on November 16, 2021. The plaintiffs filed an amended complaint on November 29, 2021, which the\n\ndefendants again moved to dismiss. The court denied the motions to dismiss on June 27, 2022. Discovery in the Megatel\n\nAction is complete and summary judgment motions have been filed by all Defendants in an attempt to dispose of the\n\nlitigation. The court will issue a forthcoming order setting a trial date, likely after the summary judgment motions are\n\ndecided. The UDF Defendants and the Company intend to vigorously defend against the Megatel Action."}