Antitrust Law Daily Wrap Up, ANTITRUST—Tex. App.: Former employees’ counterclaims against loan company survive summary judgment, (Apr 2, 2015)

By Linda O’Brien, J.D., LL.M.

Genuine issues of material fact precluded the dismissal of antitrust counterclaims by loan officers in an action by their former employer seeking to enjoin the use of confidential information obtained during their employment, the Texas Court of Appeals in San Antonio has held on a motion for rehearing. Thus, the trial court order granting the employer’s motion for summary judgment was reversed and remanded (Brooks v. Excellence Mortgage, Ltd. April 1, 2015, Alvarez, P.).

Barry Brooks, Heston King, Stefen Brooks, Johanna Barton, and Jesse Rodriguez Benavides were loan officers employed at mortgage services provider, Excellence Mortgage, Ltd. After Excellence merged with Georgetown Mortgage, the employees left their employment at Excellence and began to work for another mortgage company, Premier Nationwide Lending. Excellence filed suit seeking injunctive relief against the former employees to prevent the use of company confidential information to contact Excellence customers whose loan applications were in process when the employees left.

The former employees filed counterclaims, seeking commissions for loans that closed after they left Excellence’s employment and alleging a violation of the Texas Free Enterprise and Antitrust Act of 1983. The trial court granted summary judgment in favor of Excellence on the employees’ counterclaims and the former employees appealed. In May 2014, the appellate court affirmed the trial court order and the former employees moved for rehearing.

Antitrust claims. The appellate court found that the former employees presented sufficient evidence to raise a fact issue as to whether Excellence’s conduct in preventing the former employees from contacting the in-process loan customers was an unreasonable practice. To establish a conspiracy in restraint of trade under claim under the Texas antitrust statute, a plaintiff must show that the alleged conspiracy was unreasonable and had an adverse effect on competition in the relevant market.

Excellence contended the employee nondisclosure agreements were not non-compete covenants that unlawfully restrained trade and that the former employees violated those agreements by using Excellence’s confidential information to solicit Excellence’s in-process customers. In response, the former employees’ evidence included affidavits from former Excellence employees and a Premier area manager that Excellence transferred files to Georgetown after the merger without first obtaining its loan customers’ written requests in violation of federal and state regulations. The evidence also showed that Excellence and Georgetown worked together to effect the file transfers and Excellence sought to prevent the former employees from competing for the in-process loan customers.

Furthermore, the former employees’ affidavit evidence stated that Excellence had a 50 percent market share of the residential loan market in the San Antonio area and Excellence’s conduct to prevent competition would result in a demonstrable economic effect. Taking the former employees’ evidence as true, the court determined there were genuine issues of material fact on whether Excellence’s actions amounted to unreasonable practices and whether a demonstrable economic effect could be reasonably inferred. Thus, Excellence was not entitled to summary judgment on the antitrust counterclaims.

The case is No. 04-13-00106-CV.

Attorneys: Darby Riley (Riley & Riley, Attorneys at Law) for Barry Brooks. Samuel V. Houston, III (Houston Dunn, PLLC) and Gregory A. Scrivener (The Ford Firm, PC) for Excellence Mortgage, Ltd., LATD-1, LLC, Grothues Financial, Ltd., Grothues Brothers Management, LLC, Grothues Brothers Management II, LLC, and Larry E. Grothues.

Companies: Excellence Mortgage, Ltd.; LATD-1, LLC; Grothues Financial, Ltd.; Grothues Brothers Management, LLC; Grothues Brothers Management II, LLC

Cases: Antitrust TexasNews