On November 14, 2018, Sidley client Altisource Asset Management Corporation (NYSE: AAMC) prevailed in a Third Circuit decision affirming the dismissal of a putative securities-fraud class action against the company.
AAMC is a registered investment adviser based in the U.S. Virgin Islands that provides portfolio management and corporate governance services to investment vehicles that own real estate-related assets. Its primary client is Front Yard Residential Corporation (formerly Altisource Residential Corporation), a real estate investment trust that acquires and operates quality, affordable single-family rental homes throughout the United States.
AAMC was spun off from a former subsidiary of Ocwen Financial Corporation in 2012, and William Erbey was the Chairman of AAMC, Ocwen, and certain other public, related companies. In the wake of various adverse events relating to Ocwen in 2014, the share prices of AAMC, Ocwen and several other Erbey-related public companies dropped. Investors then sued in separate actions.
AAMC, represented by Sidley, moved to dismiss the complaint against it, arguing, among other things, that AAMC’s disclosures about its relationships with Ocwen and with Mr. Erbey were not false or misleading. The district court agreed, dismissing the complaint and denying plaintiff’s request for leave to amend as futile. The plaintiff appealed to the Third Circuit.
Following oral argument held in St. Croix, U.S. Virgin Islands, the Third Circuit affirmed the dismissal. The Third Circuit concluded that the proposed amended complaint did not and could not allege any false or misleading statements about AAMC’s relationships with Ocwen and with Mr. Erbey, so the amendment would be futile. According to the Court, the complaint against AAMC fell on the wrong side of the “carefully-struck balance” between “forestalling meritless suits while preserving for ‘defrauded investors’ the ‘indispensable tool’ of private litigation.”
AAMC was represented by a Sidley team that included Walter Carlson (who argued the appeal), David McAloon, David S. Petron and Myles C. Pollin, and by Stephen H. Gray, AAMC’s General Counsel and Secretary. AAMC’s local counsel in the U.S. Virgin Islands was Chad C. Messier of Dudley, Topper and Feuerzeig, LLP.