Redfin investor seeks $450k for “intense” effort, legal fees

The Redfin investor who sued the real estate brokerage and Rocket Companies for allegedly failing to disclose key information about their merger is seeking a $450,000 award.

Jason Morano, the plaintiff, argues in a filing dated June 11 that his “intense litigation efforts” forced Redfin’s and Rocket’s hand in publishing supplemental disclosures that had a “substantial benefit…conferred upon Redfin stockholders.” If awarded the sum, Morano will mainly use it to pay attorney fees, documentation shows.

The added disclosures included details about Goldman Sachs’ lending relationship with Rocket. The investment firm advised Redfin during its merger negotiations with Rocket.

“By quantifying the magnitude of Goldman’s existing lending relationship with Rocket, those disclosures provided Redfin stockholders with material facts necessary to evaluate the credibility of the fairness opinion,” plaintiff Jason Morano wrote. (The opinion, authored by Goldman, outlined that the number of shares Redfin stockholders would receive in the deal was fair from a financial standpoint.)

On June 4 Redfin stockholders voted to approve Rocket’s $1.75 billion acquisition of the brokerage, despite the plaintiff’s attempts to postpone the event.

Morano filed the original complaint in late May, arguing that Redfin submitted “materially incomplete and misleading” filings with the Securities and Exchange Commission to persuade stockholders to approve the merger.

The issue with the SEC filing, claimed Morano, is that it failed to disclose that Redfin’s financial adviser, Goldman Sachs, is also affiliated with Rocket Companies. He also sought to postpone the Redfin shareholder vote — the final step before the acquisition’s approval — until all information was released to stockholders.

A Washington state-based judge dismissed this ask as both Rocket and Redfin released supplemental information prior to the vote.

After the original complaint was lodged, both Rocket and Redfin argued it was meritless and a tactic used to “tax merger transactions,” in separate filings dated May 16. Both firms swatted away the Redfin stockholder’s assertions that there needed to be more thorough disclosures regarding Goldman Sachs’s relationship with Rocket. 

Rocket later revealed that Goldman Sachs has a lending commitment to it that is estimated to fall between $143.75 million and $172.5 million. And looking ahead, Goldman is expected to increase its commitment, possibly reaching between $225 million and $337.5 million.

Government officials have recently called into question the lack of federal antitrust oversight of Rocket Companies’ acquisitions of Redfin and proposed acquisition of servicing powerhouse Mr. Cooper.

Lawmakers, including Sens. Elizabeth Warren, D-Mass, and Cory Booker, D-N.J.,sent a letter to the Justice Department’s Antitrust Division and the Federal Trade Commission demanding to know why the agencies did not review the Rocket-Redfin merger during the pre-merger review period. They want answers from both agencies by June 17.

The senators also rang the alarm on the pending Rocket-Mr. Cooper merger, noting this will propel the Detroit-based company into becoming a “mortgage finance behemoth” with less incentive to compete for new customers.

The addition of Redfin and Mr. Cooper will turn Rocket into a “massive housing company that threatens to reduce choice and raise prices for American families in the housing market,” the lawmakers warned in their letter dated June 4.

Law360 was the first to report on Morano’s request for a reward.