Guild Mortgage has filed a petition in a district court in Washington to confirm a $10.7 million award resulted from an arbitration dispute against three former employees accused of poaching when they transitioned to rival CrossCountry Mortgage.
The case began in August 2021 when Guild filed a demand for arbitration claiming Christopher Flowers, Cory Flynn and Lisa Jolliffe, who left the Kirkland branch weeks before joining CCM, allegedly “engaged in a massive, coordinated effort to divert” its customers and employees.
Guild claims the group stole “substantial amounts” of information, recruited away its employees and created confusion among its customers. The lender asserted claims for breach of contract, fraud, unfair competition and tortious interference, among others.
In October 2022, the defendants denied the allegations and Flowers, the former branch manager in the Kirkland office, filed a counterclaim alleging harassment, hostile work environment and outrageous conduct inflicting emotional distress. Guild denied the allegations.
After about one year, in September 2023, an arbitrator issued and signed Guild’s award, but the company said the defendants “have not complied” nor “indicated that they will do so.” Ultimately, the lender filed on Dec. 19, 2023, the petition in the U.S. District Court, Western District of Washington, Seattle.
According to the document, the award arises from “Defendants’ breaches of their employment agreements and violations of their other legal duties during their employment in Washington.”
In response, the three former employees filed a cross-petition in Washington and California to vacate the arbitration award – they state that because the final award was made in San Diego, that venue is the exclusive venue for the case.
The former employees claim that “speculative lost profits” and “exorbitant attorney’s fees and costs” were considered to estimate the award. Guild’s arbitration award includes $7.4 million for lost profits, $500,000 in damages, $383,902 in disgorgement, and $2.4 million for recovering attorneys’ fees and costs.
Regarding their reasons for transitioning to CCM, the ex-employees mentioned that in the years leading up to their departure, Guild’s “senior management neglected the high-performing Kirkland branch” and failed to provide competitive products. They said they “attempted in vain to correct these deficiencies, but their concerns fell on deaf ears.”
A representative at Guild did not reply to a request for comments. A spokesperson for CCM wrote that the company “does not comment on legal matters.”
Maureen Mitchell, a partner at Fox Rothschild LLP and an attorney for the former employees, wrote to HousingWire that the lawsuit “exemplifies employer overreach” and the “draconian consequences resulting from mandatory arbitration.” The award, Mitchell added, is “legally flawed and violates public policy in a number of areas.”
“The mortgage lending industry is highly competitive. These high-performing individuals and their co-workers were entitled to seek alternate employment and should not be punished for exercising their rights,” Mitchell said.
The former employees mentioned that Guild also filed a suit against CCM in October 2021 in the Western District of Washington, claiming civil conspiracy and tortious interference, among others, which was dismissed due to lack of diversity jurisdiction.
In the cross-petition, the former employees noted that Guild re-filed its complaint against CCM in the Superior Court for the County of San Diego, California on Dec. 23, 2022. But “several of its claims against CCM were dismissed on demurrer based upon California Uniform Trade Secrets Act (“CUTSA”) preemption on Aug. 14, 2023.”
In 2022, HousingWire reported about tensions rising between Guild and CCM over recruiting.
Besides the two lawsuits filed by Guild against CCM, CCM also sued the competitor for poaching a former Las Vegas branch manager and allegedly convincing her to steal proprietary information. The lawsuit, filed in May 2022, was dismissed after four months.