Citing Professor Starks’ analysis, the judge denied class certification in Shupe et al. v. Rocket Companies Inc. et al.
Retained by Sullivan & Cromwell and by Goodwin Procter
In June 2021, plaintiffs filed a class action lawsuit against Rocket Companies Inc. (Rocket), a technology company with real estate, mortgage and eCommerce businesses. The plaintiffs alleged the defendants made false and misleading statements regarding Rocket’s mortgage business between February 25, 2021 and May 5, 2021. Plaintiffs also alleged certain defendants committed insider trading while possessing material non-public information. Counsel for the defense retained Cornerstone Research to support three experts at the class certification stage of this federal securities matter: Mark Garmaise of the University of California, Los Angeles; Laura Starks of the University of Texas at Austin; and René Stulz of The Ohio State University.
In September 2024, the judge for the United States District Court for the Eastern District of Michigan denied class certification. The court’s opinion cites Professor Starks’ analysis many times, including stating that “Dr. Starks’s findings are largely dispositive,” and in finding that “Plaintiffs have not shown that common questions predominate, because…Defendants have rebutted [the Basic presumption of class-wide investor reliance] by proving [Defendants’] alleged misrepresentations had no impact on the price of Rocket stock.” The judge based his conclusion in part on Professor Starks’ analysis and the court ruling in the matter In re Goldman Sachs Group Inc. Securities Litigation. He found that “fatally for Plaintiffs here, like in Goldman, Defendants have produced expert testimony suggesting that no analyst referenced [Defendants’] alleged misrepresentations in reports issued throughout the Class Period…. This ‘sever[s] the link between’ Plaintiffs’ alleged ‘back-end price drop’ and their alleged ‘front-end misrepresentation[s].’”