In re Ready Capital Securities Litigation

Background

Two proposed securities class actions were pending against Ready Capital Corporation, Thomas E. Capasse, and Andrew Ahlborn. Jerry Quinn filed the first action, and David Goebel filed the second. The complaints alleged that the defendants misled investors about Ready Capital’s commercial real estate loan portfolio, including the extent of non-performing loans, which allegedly caused the company to report overly optimistic credit-loss and valuation allowances. The complaints asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.

Ready Capital announced on March 3, 2025, that it had recorded substantial losses and would fully reserve for non-performing commercial real estate loans. The complaints alleged that Ready Capital’s stock price fell 26.8 percent after the announcement. The Quinn action covered purchases from November 7, 2024, through March 2, 2025. The Goebel action covered purchases from August 8, 2024, through March 2, 2025.

Allan T. Parr moved to consolidate the two actions, to be appointed lead plaintiff, and to have Levi & Korsinsky, LLP appointed lead counsel. The opinion states that Parr was the only party then seeking appointment as lead plaintiff. The motion was unopposed.

Consolidation

The court applied Federal Rule of Civil Procedure 42(a), which allows consolidation when actions share a common question of law or fact. It found that the two complaints made substantially similar allegations, asserted the same causes of action, and named the same defendants. Although the complaints differed somewhat in their allegations and class periods, the court found that consolidation would promote judicial economy and convenience and presented little risk of prejudice.

The court therefore granted Parr’s motion to consolidate the Quinn and Goebel actions. The consolidated action was placed under the caption In re Ready Capital Securities Litigation and docket number 25 Civ. 1883 (PAE).

Lead Plaintiff

The Private Securities Litigation Reform Act requires the court to appoint the person most capable of adequately representing the proposed class. The statute creates a presumption in favor of a person who timely seeks appointment, has the largest financial interest in the requested relief, and satisfies the relevant requirements of Federal Rule of Civil Procedure 23.

Parr timely moved for appointment and certified that he purchased 85,876 Ready Capital shares during the relevant class period and lost $192,526.04 when the share price fell. Because no person with a larger financial interest had come forward, the court treated Parr’s financial interest as sufficient for this purpose.

At this early stage, the court considered whether Parr’s claims were typical of the proposed class and whether he was an adequate representative. It found that his claims arose from the same alleged conduct and injuries as the other proposed class members’ claims. It also found that Parr was willing to perform the duties of lead plaintiff, had retained counsel experienced in securities-fraud cases, and had no apparent interests antagonistic to the class. The court found no credible basis to conclude that he could not fairly and adequately represent the class and therefore appointed Parr lead plaintiff.

Lead Counsel

The court reviewed Levi & Korsinsky’s submissions concerning the firm’s background and experience, including its experience litigating securities class actions. Finding the firm qualified, the court appointed Levi & Korsinsky as lead counsel.

Disposition and Next Steps

The court granted Parr’s motion to consolidate Quinn and Goebel, appointed Parr as lead plaintiff, and appointed Levi & Korsinsky as lead counsel. It directed the parties to confer and jointly file a proposed schedule for an amended complaint and briefing on any motion to dismiss by July 15, 2025. The opinion addressed case organization and leadership; it did not resolve the truth of the securities-fraud allegations or the defendants’ ultimate liability.