Lender Wins Lawsuit Over Mass Branch Exodus

A complaint was originally filed on March 2, 2009, in a federal court located in Pensacola, Fla.

The plaintiff in the lawsuit is Shrewsbury, N.J.-based Mortgage Now Inc.

Two former Mortgage Now employees, Bryan Stone and Phillip Heppding, are named along with Guaranteed Home Mortgage Corp. as defendants.

Stone was an eight-year employee who managed Mortgage Now’s branch in Destin, Fla., and Heppding was a sales manager who started in 2006. Around 26 people were employed at the branch, which closed more than 30 loans each month.

Operations suffered as Mortgage Now struggled financially and top executives in a bitter dispute. Loan officers, some who weren’t paid on time or whose payroll checks bounced even as the branch thrived, became disenfranchised with Mortgage Now.

Court documents indicate that Stone, who reportedly learned that the company might not survive, initially contacted White Plains, N.Y.-based Guaranteed in December 2008, then asked for a 12-week leave of absence under the Family Medical Leave Act due to his wife’s high-risk pregnancy. But Mortgage Now claims that Stone had already accepted a job with Guaranteed by the time he began his leave of absence in February 2009.

With plans to open the new Guaranteed branch on March 1, Stone recruited Heppding — who planned to leave Mortgage Now after his Feb. 21, 2009, paycheck was issued. But the company got wind of his plans and terminated him on Feb. 17 for disloyalty.

The defendants weren’t the only employees to abandon the branch. In all, 18 Mortgage Now employees were hired by Guaranteed. Several loan originators and a pair of loan processors were terminated or quit shortly after Heppding’s termination. Many landed at Guaranteed.

Office space was secured directly across the street from Mortgage Now’s office, and employees were given a tour of the facility while still employed with Mortgage Now.

E-mails presented as evidence indicated that loan originators who moved to the new branch were anxious to close completed files and needed access to the Encompass loan origination system. Many originators were sitting on files while still at the old company in anticipation of moving to their new jobs.

One employee said Stone advised her to sandbag since she would likely not be paid by Mortgage Now after it learned she would be leaving. Another employee testified that he uploaded eight of his 13 files in process to the Guaranteed’s LOS.

Files continued to be moved to Guaranteed — including many that were generated from LendingTree leads purchased by Mortgage Now — until March 2009, when Mortgage Now requested a preliminary injunction. As many as 1,561 LendingTree leads were allegedly stolen.

In anticipation of a February 2009 visit by a Mortgage Now executive, employees were allegedly told to hide any clues that they were moving the files.

“Stone, Heppding, and Guaranteed had improperly organized and/or participated in the solicitation of Mortgage Now’s employees and customers and in the process had taken proprietary information,” the lawsuit states.

While none of the loans from Mortgage Now ultimately closed at Guaranteed, Mortgage Now said it suffered losses because of expenses it paid for credit reports, mortgage leads and staffing while loan originators sat on their pipelines in anticipation of closing the loans with Guaranteed. Production at the office fell from 34 closings in January to 18 in February and continued to suffer during the next two months as the branch operated in chaos.

Based on the estimated lost closed loans from February until April, the judge determined damages of $280,261 and awarded judgment to Mortgage Now on Sept. 20.

The defendants “engaged in disloyal and tortious conduct which caused irreparable harm and damages to Mortgage Now.”

For its part, Guaranteed is challenging the judge’s decision.