United States District Court, E.D. Pennsylvania
COURTNEY ELKIN, individually and on behalf of all others similarly situated, Plaintiffs,
WALTER INVESTMENT MANAGEMENT CORP., DENMAR J. DIXON, GEORGE M. AWAD, ANTHONY N. RENZI and GARY L. TILLET Defendants.
B. BRODY, J.
Courtney Elkin, on behalf of herself and those similarly
situated, brings a securities fraud suit against Walter
Investment Management Corp. and several of its officers. As
required by the Private Securities Litigation Reform Act
(“PSLRA”), this Court is tasked with appointing a
lead plaintiff, who, in the eyes of the Court, is most
capable of adequately representing the interests of all class
members. Upon the unopposed motion of Movant Richard
Worley, this Court names Worley the lead
plaintiff and approves as lead counsel the selection of Lee
Albert of the firm Glancy, Prongay and Murray, LLP.
Walter Investment Management Corp. (“Walter” or
“the Company”) is a mortgage banking firm which
focuses on the servicing and origination of residential
loans. Walter is incorporated in Maryland and houses its
reverse mortgage business in Houston, Texas. Walter trades on
the New York Stock Exchange under the ticker
“WAC”. Compl. ¶ 7.
bought publicly available shares of Walter's stock
between May 3, 2016 and March 13, 2017. Compl. ¶ 1. They
allege that around this time, Walter made a series of
misstatements in its required financial disclosures to the
Securities and Exchange Commission (“SEC”).
Specifically, Plaintiffs claim that Walter made material
misrepresentations in its annual Form 10-K report for fiscal
year 2015, as well as in several Form 10-Q quarterly reports
for that same fiscal year. Plaintiffs allege that Walter
failed to disclose material weaknesses in its internal
controls over financial reporting and that this resulted in
false or misleading reports, and that Plaintiffs traded upon
this inaccurate information. Walter revealed the failures of
its internal controls in its Form 10-K for fiscal year 2016,
issued on March 14, 2017. Compl. ¶ 26. The Company
disclosed weaknesses in its Ditech Financial default
servicing unit, and that it was under investigation by the
HUD Inspector General and the Department of Justice relating
to its underwriting of certain loans. On this news,
Walter's share price fell nearly 38%, to $1.65 per share.
Compl. ¶ 27.
March 16, 2017, Plaintiff Courtney Elkin filed a two-count
Complaint against Walter and several of its directors who had
certified the accuracy of the Company's SEC filings,
namely Denmar J. Dixon, George M. Awad, Anthony N. Renzi and
Gary L. Tillet (collectively,
“Walter”). Elkin alleges violations of Section 10(b)
of the Exchange Act, 15 U.S.C. § 78j(b), and rule 10b-5
promulgated thereunder, and a violation of Section 20(a) of
the Exchange Act.
suit is subject to the PSLRA as private federal securities
action “brought as a plaintiff class action pursuant to
the Federal Rules of Civil Procedure.” 15 U.S.C. §
78u-4(a)(1). The PSLRA sets forth specific procedural
requirements that must be adhered to upon the filing of a
complaint. Within twenty days of filing the action, the
plaintiff must “cause to be published, in a widely
circulated national business-oriented publication or wire
service, ” notice to members of the purported class
regarding “the pendency of the action, the claims
asserted therein, and the purported class period.” 15
U.S.C. § 78u-4(a)(3)(A)(i)(I). Within sixty days of the
date on which the notice is published, “any member of
the purported class may move the court to serve as lead
plaintiff of the purported class.” 15 U.S.C. §
members of the purported class timely moved for appointment
as lead plaintiff, but only one motion remains
pending. On May 15, 2017, Movant Richard Worley
filed for appointment as lead plaintiff, and for approval of
his selection of Lee Albert of the firm Glancy, Prongay &
Murray LLP (“GPM”) as lead counsel for the class.
ECF No. 5.
PSLRA requires this Court to “appoint as lead plaintiff
the member or members of the purported plaintiff class that
the court determines to be most capable of adequately
representing the interests of class members.” 15 U.S.C.
§ 78u-4(a)(3)(B)(i). The PSLRA “establishes a
two-step process for appointing a lead plaintiff: the court
first identifies the presumptive lead plaintiff, and then
determines whether any member of the putative class has
rebutted the presumption.” In re Cendant Corp.
Litig., 264 F.3d 201, 262 (3d Cir. 2001) (citing 15
U.S.C. § 78u-4(a)(3)(B)(iii)(I) & (II)).
presumptive lead plaintiff is she who: “(aa) has either
filed the complaint or made a motion in response to a notice
under subparagraph (A)(i); (bb) in the determination of the
court, has the largest financial interest in the relief
sought by the class; and (cc) otherwise satisfies the
requirements of Rule 23 of the Federal Rules of Civil
Procedure.” 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I).
Although the statue sets out three criteria for awarding
presumptive lead plaintiff status, “[t]he process
begins with the identification of the movant with the largest
financial interest in the relief sought by the class.”
Cendant, 264 F.3d at 262 (quotations omitted).
“In many cases, ” such as this one, “this
determination will be relatively easy.” Id.
the movant with the largest financial stake in the litigation
has been determined, the court “should then determine
whether that entity satisfies the requirements of Rule 23 of
the Federal Rules of Civil Procedure.” W. Palm
Beach Police Pension Fund v. DFC Glob. Corp., No. CIV.A.
13-6731, 2014 WL 1395059, at *3 (E.D. Pa. Apr. 10, 2014)
(citing Cendant, 264 F.3d at 262). The initial Rule
23 inquiry is a matter of the court's independent
judgment and “should be confined to determining whether
the movant has made a prima facie showing of
typicality and adequacy.” Cendant, 264 F.3d at
263. Courts are to consider the pleadings and the
movant's application, and “apply traditional Rule
23 principles.” Id. at 264.
inquiring whether the movant has preliminarily satisfied the
typicality requirement, [courts] should consider whether the
circumstances of the movant with the largest losses are
markedly different” from those of other class members.
Id. (quotations removed). “In assessing
whether the movant satisfies Rule 23's adequacy
requirement, courts should consider whether it has the
ability and incentive to represent the claims of the class
vigorously, whether it has obtained adequate counsel, and
whether there is a conflict between movant's claims and
those asserted on behalf of the class.” Id. at
265 (quotations omitted).
adequacy inquiry also demands an evaluation of a proposed
plaintiff's choice of lead counsel. Courts are to pay
special attention to “whether the movant has
demonstrated a willingness and ability to select competent
class counsel . . .” Id. In reviewing the
proposed lead plaintiff's choice of counsel, “the
question is whether the choices made by the movant with the
largest losses are so deficient as to demonstrate that it
will not fairly and adequately represent the ...