The Delaware Court of Chancery has dismissed a derivative shareholder lawsuit accusing the board of Rocket Companies Inc., its chairman, and controlling stockholder of breaching fiduciary duties by allegedly selling $500 million worth of stock based on material nonpublic information. Chancellor Kathaleen St. J. McCormick ruled that the plaintiffs failed to demonstrate a motive to support their claims.
The lawsuit alleged that Rocket’s board chairman Daniel Gilbert, founder of Rocket Mortgage and majority stockholder through Rock Holdings Inc., sold shares ahead of a negative business outlook announcement that caused the stock to drop 17% in May 2021. However, the court found that the timing relied upon by shareholders did not substantiate allegations of insider trading.
According to the court opinion, the stock sale was led by then-CEO Jay Farner and Scott Elkins, Chief Investment Officer of Rock Ventures, the entity managing Rocket’s family of companies. The court noted that Farner and Elkins began preparations to sell shares when the trading window opened in early March 2021, but delayed the sale until market conditions aligned with their target price following the collapse of Archegos Capital Management later that month.
Chancellor McCormick rejected arguments that the March 23 board presentation or Gilbert’s $500 million charitable donation plans motivated the sale, confirming the transaction was a continuation of the company’s IPO process intended to provide liquidity for Rocket’s operating subsidiaries.
The court further observed that Farner personally held a significant stake in Rocket stock during the period but did not sell, incurring a loss of approximately $800,000 when the stock price fell—contradicting claims that insiders acted on material nonpublic information.
Representatives for both parties have not yet responded to requests for comment.
