Securities Class Action Against Nationstar Dismissed

On June 21, 2016, Cleary Gottlieb won a motion to dismiss a putative securities class action filed on behalf of shareholders of Nationstar Mortgage Holdings in the U.S. District Court for the Southern District of Florida.

The plaintiffs brought claims under the Securities Act and the Securities Exchange Act against Nationstar and certain of its current and former officers and directors after the company reported a loss for the first quarter of 2015.

The plaintiffs alleged that the offering materials for a secondary offering of company stock, which offering closed just days before the quarter close, misrepresented that the negative impact of lower interest rates on the company’s servicing business would be “equally offset” by the positive impact of the interest rate environment on the company’s originations business. The plaintiffs also alleged that the company’s disclosures misrepresented the growth and profitability of its originations business.

Judge William Dimitrouleas dismissed the plaintiffs’ claims as based on “nothing more than the fact that Nationstar ultimately reported a loss” in its quarterly results. The court found that the plaintiffs misread and improperly cherry-picked portions of the Nationstar offering materials and other public statements, agreeing with Nationstar that there was no misrepresentation about either offsets or the company’s originations business.

As an additional ground for dismissal, the court found that the plaintiffs failed to plead particularized facts giving rise to the requisite strong inference of scienter required for securities fraud claims.