Antitrust Law Daily Wrap Up, ANTITRUST—M.D. Fla.: Class action claiming UWM issued illegal ‘ultimatum’ to stifle competition dismissed, (Sep 25, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

Broker had refused to amend its agreement with lender in defiance of the ultimatum issued by UWM CEO as a video on Facebook website during online event.

The federal district court in Jacksonville, Florida has dismissed a mortgager broker's putative class action lawsuit against America's second largest mortgage lender. The broker had sued the lender after the lender ceased to do business with the broker because the broker continued to do business with the lender's competitors. The broker objected to a federal magistrate judge's recommendation that the complaint be dismissed. Ruling on the broker's objections, the federal district judge upheld the magistrate's recommendations in full. Between the magistrate's recommendations and the judge's adoption of them, a federal district judge in Michigan had, in a separate and nearly identical case, followed and adopted the reasoning of the Florida magistrate's report in which the same mortgage lender was a party. The Florida judge dismissed the broker's complaint without prejudice (Okavage Group, LLC v. United Wholesale Mortgage, LLC, No. 3:21-cv-00448-WWB-LLL (M.D. Fla. Sept. 23, 2024)).

A mortgage is an arrangement whereby a lien is placed on real property, or title to such real property is conveyed, as a security for a loan of money, usually (but not necessarily) for the purpose of purchasing or improving the real property. The placement of the lien or conveyance of the title is very paperwork-intensive. The term "mortgage" is frequently used to refer to the secured loan itself. Mortgage lenders make such loans to real property owners. Mortgage brokers are intermediaries between the lenders and the borrowers; they match the borrowers to the lenders and perform tasks such as investigation of the prospective borrower and preparation of documents for lender approval, for which the broker is paid compensation from the lender and/or the borrower.

Okavage Group LLC (Okavage), is a Florida-based mortgage broker. Michigan-based mortgage lender United Wholesale Mortgage LLC (UWM) is America's second largest mortgage lender. Mat Ishbia is the CEO of UWM. Ishbia took note of market share gains by two mortgage lenders that compete with UWM (Fairway and Rocket), and on March 4, 2021, at an online Internet event, Ishbia posted a video in which he informed the mortgage brokers who had contracts with UWM that they had until March 15, 2021 to agree to an addendum to their respective contracts. The addendum provided that the brokers would not do business with Fairway or Rocket, that UWM would cease doing business with brokers who did business with Fairway or Rocket, and brokers who violated this provision would be liable to UWM for a minimum of $50,000.

Okavage declined to sign on to Ishbia's addendum, and was cut off from all business with UWM; other mortgage brokers similarly refused Ishbia's addendum and were similarly cut off from dealing with UWM. Okavage then filed a putative class action against UWM and Ishbia, alleging Sherman Act violations plus some Florida law causes of action. UWM and Ishbia moved to dismiss the complaint. A federal magistrate judge issued a Report and Recommendation (R&R) that the complaint be dismissed [Report and Recommendation, The Okavage Group, LLC v. United Wholesale Mortgage, LLC, case No. 3:21-cv-00448 (M.D. Fla., February 6, 2024)]. Okavage filed its objections to the R&R, and the district court judge ruled on Okavage's objections.

Jurisdiction. The court adopted the magistrate judge's recommendation that the complaint be dismissed with respect to Ishbia for lack of jurisdiction. Here, the magistrate found that Ishbia as an individual was acting in furtherance of his corporate employer, and accordingly protected by the corporate shield doctrine, and the tortious interference predicatefor the intentional tort exception to the doctrine was not properly pleaded. Finding the corporate shield doctrine applicable, the magistrate did not need to address the issue of whether Ishbia's electronic communications would serve as a basis for jurisdiction under Florida's longarm statute.

Sherman Act. The court adopted the magistrate judge's recommendation that the Sherman Act allegations in the complaint be dismissed for failure to state a cause of action. Under a per se analysis, Okavage did not allege any horizontal agreement at all, but did insinuate a hub and spokes scheme as a basis for a per se Sherman Act violation. This, the magistrate found, was not plausibly pleaded because there was no allegation of any "agreement" among the mortgage brokers who did accept Ishbia's ultimatum. In addition to Fairway and Rocket, the objects of Ishbia's ultimatum, there were many other mortgage lenders with whom UWM did not prohibit its corresponding mortgage brokers to deal with. The market of mortgage lenders accordingly was far from being totally cut off from brokers who sought to negotiated better deals for borrowers than what UWM was offering.

As for a rule of reason analysis, Okavage's assertion that the boycott artificially increased the costs of mortgage loans and operating expenses was not sufficiently supported by factual particulars, including market definition. Having not adequately defined a relevant market, Okavage also could not sustain its attempted monopolization claim under the Sherman Act.

Okavage's claim under Florida's Deceptive and Unfair Trade Practices Act (FDUPTA) failed for the same reasons its Sherman Act claims were unsuccessful.

Tortious interference. The court adopted the magistrate judge's recommendation that the Tortious Interference with Business Contracts allegations in the complaint be dismissed. Okavage's allegation that it lost customers who wanted UWM loans was insufficient to show any "actual and identifiable understanding or agreement" that did not come to fruition on account of UMW's ultimatum. Additionally, as alleged in the complaint, the intent behind UWM's actions was to impede business for Rocket and Fairway; the complaint was silent regarding any intention to disrupt Okavage's relationships with its actual or potential customers.

The Case is No. 3:21-cv-00448-WWB-LLL.

Judge: Berger, W.

Attorneys: Joseph E. Parrish (Parrish & Goodman PLLC) for The Okavage Group, LLC. Avi Benayoun (Greenberg Traurig, LLP) for United Wholesale Mortgage, LLC and Mathew Ishbia.

Companies: The Okavage Group, LLC; United Wholesale Mortgage, LLC

Cases: Antitrust FloridaNews