Rocket Companies and Redfin are pushing back against a lawsuit that could disrupt the closing of the mortgage giant’s $1.75 billion acquisition of the real estate brokerage.
Plaintiff Jason Morano, a Redfin shareholder, sued the brokerage and Rocket in early May, alleging that Redfin’s disclosures to the Securities and Exchange Commission regarding the deal omitted key details for investors — specifically the relationship between Goldman Sachs, Redfin’s financial advisor on the merger, and Rocket.
Morano has asked a federal court in Washington to expedite discovery in the case, citing a June 4 shareholder vote on the proposed merger. On Monday, his attorney filed an additional request seeking a preliminary injunction to postpone the vote until more information is disclosed about Rocket’s ties to Goldman Sachs.
Rocket and Redfin, in separate filings dated May 16, argue that the plaintiff’s motion to expedite the process should be denied, claiming Morano failed to show good cause. The firms called Morano’s claims “meritless” and a common tactic used to “tax merger transactions.”
They swatted away the Redfin stockholder’s assertions that there needed to be more thorough disclosures regarding Goldman Sachs’s relationship with Rocket.
Rocket also argued the lawsuit is designed to force a settlement.
In high-stakes M&A transactions parties “are highly incentivized to settle even frivolous claims rather than entertain costly discovery or oppose an injunction request that might jeopardize or delay a premium transaction,” it said in its filing.
Both companies criticized the timing of the lawsuit. “Plaintiff chose to wait until scarcely three weeks prior to the June 4 Redfin stockholder vote to file,” Rocket’s response said. “Plaintiff’s purposeful delay is designed to prejudice defendants by leaving them with an extremely short window to present their opposition and to increase the risk that the June 4 stockholder vote would be delayed.”
Redfin urged the federal court to allow shareholders to vote without interference or delay, noting the proposed merger was a result of “a fair and considered negotiation.”
In response to the two filings, Morano’s attorney wrote that Rocket and Redfin are trying to pull attention away from the actual matter at hand.
“Rather than focus on the merits of plaintiff’s request for expedited discovery, defendants seek to muddy the waters with misguided attacks on Plaintiff’s motivations and his counsel’s litigation strategy,” Morano’s attorney wrote in a May 19 filing.
Morano’s original complaint filed May 9 alleges that Redfin filed a “materially deficient” filing with the SEC because it does not explicitly outline the fact that Redfin’s financial advisor Goldman Sachs is also affiliated with Rocket Companies.
The proxy filed with the SEC “vaguely discloses without any detail that Goldman Sachs Investment Banking has an existing relationship with Rocket,” the suit said, but “it is unclear the extent to which Goldman Sachs has received and continues to receive compensation from Rocket for lending services while simultaneously being compensated to serve as Redfin’s financial advisor.”
The plaintiff is asking for the Seattle federal court to postpone the Redfin shareholder vote, unless and until the company disseminates supplemental information curing the alleged omissions in the proxy filing.
