In the first-ever victory on price impact in the Sixth Circuit, Rocket Companies; its majority shareholder, Rock Holdings (RHI); their former CEO Jay Farner; and their Founder and Chairman Dan Gilbert prevailed on class certification in a securities fraud and insider trading action brought by Plaintiffs Carl Shupe and Construction Laborers Pension Trust for Southern California (SoCal).
Judge Thomas Ludington of the Eastern District of Michigan denied class certification. The Court ruled that Defendants demonstrated that the challenged statements had no impact on Rocket’s stock price, thereby rebutting the Basic presumption of classwide reliance and defeating Rule 23(b)(3) predominance. In so ruling, the Court relied on the Supreme Court’s Goldman decision—also obtained by S&C—to find a “mismatch” between the challenged statements and corrective disclosure. Invoking the Second Circuit’s Goldman decision—again obtained by S&C—the Court determined that this strong evidence of no price impact was supported by, among other things, the opinion of Defendants’ expert who found that no analysts discussed the statements in the manner Plaintiffs alleged.
The Court also ruled that the insider-trading class was not ascertainable because Plaintiffs failed to adequately define it. In addition, the Court held that both class representatives were inadequate, finding Mr. Shupe to lack honesty and trustworthiness after making misrepresentations to the Court and SoCal to lack basic knowledge of its claim.
The S&C team advising on this matter includes Sharon Nelles, Jeff Scott, Marc De Leeuw, Julia Malkina, Michael Tomaino, Adam Brebner, Jacob Cohen, Sami Briggs, Shaun Her, Conor Ferrall, Jake Ciafone and Sarah Walker.