ELKIN v. WALTER INVESTMENT MANAGEMENT CORP. et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE ANITA B. BRODY ON 6/12/2017. 6/12/2017 ENTERED AND COPIES VIA ECF.(mo, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
COURTNEY ELKIN, individually
and on behalf of all others
DENMAR J. DIXON, GEORGE
M. AWAD, ANTHONY N.
RENZI and GARY L. TILLET
June 12, 2017
Anita B. Brody, J.
Plaintiff 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
Worley1, 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.
Two other groups filed for appointment as lead plaintiff: Michael Vacek, ECF No. 3, and Courtney Elkin,
Danny Trout and, Ross Arneberg, ECF No. 4. Upon review of Movant Worley’s application, in which he
demonstrated that he holds the greatest financial interest in the litigation, the other parties withdrew their motions.
See ECF Nos. 8 and 13.
Defendant 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.
Plaintiffs 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.
On 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,
A comprehensive factual overview is unnecessary at this stage, and therefore only a brief background is
“Walter”)3. 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.
This 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).4 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. § 78u–4(a)(3)(A)(i)(II).
Three members of the purported class timely moved for appointment as lead plaintiff, but
only one motion remains pending.5 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.
The 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
The action was initially filed in the Southern District of Florida under Docket Number 17-20997. The case
was subsequently transferred to this Court, upon a joint stipulation of the parties, pursuant to 28 U.S.C. § 1404(a).
ECF No. 1-7.
Notice was published by Plaintiff Courtney Elkin over Business Wire on March 16, 2017, announcing the
pendency of this action. See Ex. 1 to Decl. of Jacob A. Goldberg, ECF No. 4.
See note 1, supra.
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)).
The 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. § 78u4(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.
Once 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.
“In 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).
The 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
interests of the class,” not whether the court would “approve” of the counsel or the negotiated fee
agreement. Id. at 266.
Finally, upon establishing a presumptive lead plaintiff, a “the court should then turn to
the question whether the presumption has been rebutted.” Id. at 268. The presumption “may be
rebutted only upon proof by a member of the purported plaintiff class that the presumptively
most adequate plaintiff—(aa) will not fairly and adequately protect the interests of the class; or
(bb) is subject to unique defenses that render such plaintiff incapable of adequately representing
the class.” 15 U.S.C. § 78u–4(a)(3)(B)(iii)(II). “If no class member succeeds in rebutting the
presumption, then the district court should appoint the presumptive lead plaintiff as the lead
plaintiff.” Cendant, 264 F.3d at 268.
a. Establishing the presumptive lead plaintiff.
Richard Worley is not only the sole movant for lead plaintiff, he also has the largest
financial stake in the litigation. He suffered approximately $83,796.35 in losses. Loss Chart, Ex.
C. to Decl. of Lee Albert, ECF No. 5. No other movant presents evidence of a larger loss. The
former movants for lead plaintiff acknowledge that Worley’s stake is the largest. See ECF Nos. 8
Worley also makes a prima facie showing of typicality and adequacy. Cendant, 264 F.3d
at 263. Worley does not rely on a markedly different circumstance or legal theory than other
class members—in fact, in this traditional 10b-5 action, each purported class members’ claim is
identical because each was allegedly injured by the same course of conduct. See Dodge v.
Cambrex Corp., No. 03-CV-4896 PGS, 2007 WL 608365, at *5 (D.N.J. Feb. 23, 2007); see also
Newberg on Class Actions § 22:26, 22: 61 (4th ed.) Worley “alleges that defendants’ material
misstatements and omissions concerning Walter’s business, operations and financial prospects
violated the federal securities laws. [Worley], like all of the members of the Class, purchased
Walter securities in reliance on defendants’ alleged misstatements and omissions and were
damaged thereby.” Mem. in Supp. of Movant Worley 6, ECF No. 5-2. Worley had sufficiently
Worley also makes a prima facie showing of adequacy. Adequacy is established, at this
stage, when the proposed lead plaintiff demonstrates the ability to represent the claims of the
class vigorously, presents no conflict between the movant’s claims and those of the class, and
obtains adequate counsel. Cendant, 264 F.3d at 264. Worley’s compliance with the procedures of
the PSLRA demonstrates his ability to effectively represent class claims, and he asserts that he
has no conflict with the claims of the class. Further, he has selected experienced and competent
counsel in Lee Albert of GPM, evincing no deficiency in his ability to lead the class. GPM’s firm
resume reveals extensive experience in securities litigation, and proposed lead counsel Lee
Albert has appeared numerous times in federal court. Ex. D to Decl. of Lee Albert, ECF No 5.
Worley has therefore sufficiently demonstrated adequacy.
By establishing that he has the largest financial interest and “otherwise satisfies” the
relevant Rule 23 factors of typicality and adequacy, Worley is the presumptive lead plaintiff.
b. Rebutting the presumption
Once a movant earns presumptive lead plaintiff status, a court determines whether any
member of the class has rebutted the presumption. A court is only to consider evidence presented
by putative class members, and if no class member rebuts the presumption, the court is to appoint
the presumptive lead plaintiff as the lead plaintiff. Cendant, 264 F.3d at 268. The former
movants for lead plaintiff do not challenge Worley’s presumptive status. See ECF No. 8 and 13.
This Court also issued an order seeking input from putative plaintiffs, and received no responses.
ECF No. 10. Therefore, Worley’s status as presumptive lead plaintiff has not been rebutted.
For the reasons outline above, Movant Richard Worley is appointed the lead plaintiff in
this action and his choice of Lee Albert of GPM as lead counsel is approved.
s/Anita B. Brody
ANITA B. BRODY, J.
Copies VIA ECF on _________ to:
Copies MAILED on _______ to:
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?