Rocket Hit With Investor Lawsuit Over Insider Trading Suspicions

Sept. 10, 2021, 3:09 PM

An investor in Rocket Cos., corporate parent of Rocket Mortgage and Quicken Loans, sued the company in Delaware, seeking to investigate claims that its controlling stockholder, Cleveland Cavaliers owner Dan Gilbert, sold $500 million worth of stock based on inside information.

The lawsuit, filed late Thursday in Delaware Chancery Court, accuses Gilbert’s holding company, Rock Holding Inc., of dumping more than 20 million shares in late March, two days before the end of a fiscal quarter that saw the lender perform “well below” market expectations.

The move came while Rocket downplayed concerns about contracting sales margins and a price war stemming from increased competition, even though its chief financial officer later admitted the negative trends emerged “at the end of Q1,” or before the $500 million stock sale, the complaint says.

Rocket didn’t immediately respond to a request for comment Friday.

The lawsuit seeks internal files from the company under a Delaware law giving corporate shareholders broad inspection rights if they credibly suspect wrongdoing at the top. Records cases often reflect an attempt to drum up fiduciary breach claims.

The allegations echo a trio of proposed securities fraud class actions facing Rocket in the U.S. District Court for the Eastern District of Michigan. The records lawsuit was filed by a family trust that previously led unsuccessful shareholder litigation over SmileDirectClub Inc.'s initial public offering.

Cause of Action: Section 220 of the Delaware General Corporation Law.

Relief: Disclosure of relevant company records; costs and fees.

Attorneys: The trust is represented by Grant & Eisenhofer PA and Abraham, Fruchter & Twersky LLP.

The case is Doris Shenwick Trust v. Rocket Cos., Del. Ch., No. 2021-0780, complaint filed 9/9/21.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com

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