Antitrust Law Daily Wrap Up, ANTITRUST—Tex. App.: Loan officers proceed with conspiracy claims against former employer, (Dec 10, 2015)

By Greg Hammond, J.D.

Former employees of a mortgage services provider could proceed with claims that the provider engaged in an unlawful conspiracy in violation of the Texas Free Enterprise and Antitrust Act of 1983 by preventing the former employees from contacting in-process loan customers and unlawfully refusing to transfer loans as requested by prospective borrowers. In reversing and remanding the lower court’s order granting summary judgment against the antitrust claims, the Texas Appellate Court in San Antonio concluded that the employees raised genuine issues of material fact concerning an unreasonable practice that had an adverse effect in the relevant market (Brooks v. Excellence Mortgage, Ltd., December 9, 2015, Alvarez, P.).

Excellence Mortgage, Ltd., a mortgage services provider, filed suit against five former loan officer employees, seeking to prevent the former employees from using company confidential information to contact Excellence customers whose loan applications were in process when the employees left. The former employees filed antitrust counterclaims claiming that Excellence and other companies engaged in a conspiracy in restraint of trade by using false allegations made under oath in its lawsuit against them and by using the lawsuit as a justification for their unlawful refusal to transfer loans as requested by prospective borrowers. In April 2015, the appellate court reversed and remanded the trial court’s order of summary judgment against the antitrust counterclaims. The case was before the appellate court once again on the employees’ motion for rehearing.

The appellate court granted rehearing and withdrew its April 2015 opinion and judgment. Nevertheless, the appellate court once again reversed the trial court’s order granting summary judgment on the employees’ antitrust claims.

Unreasonable practice. First, the court found that the employees raised a genuine issue of material fact, under the Texas Antitrust Act, with regard to an unreasonable practice. In particular, a number of affidavits provided “some evidence” that Excellence transferred files to Georgetown Mortgage, L.L.C. without first obtaining the pipeline loan customers’ written requests; that those transfers are prohibited under state or federal regulations; that Georgetown and Excellence worked together to effect the transfers; and that Excellence and the other appellees sought to prevent the employees from competing for the pipeline loan customers.

Adverse effect. In addition, the employees raised a genuine issue of material fact that the supposed unreasonable practice caused an adverse effect on competition in the relevant market. The employees provided affidavits identifying the restrained market as the construction-to-permanent loan market in the greater San Antonio area and claiming that Excellence had about 50 percent of that market. The affidavits further claimed that Excellence’s actions had an adverse effect on its portion of the residential mortgage market in the San Antonio area and that loan products offerings, interest rate options, and closing cost packages were affected by competition. The appellate court concluded that it could reasonably infer that the appellees’ actions to prevent competition for pipeline loan customers in the greater San Antonio area would result in a demonstrable economic effect, which was sufficient to raise a fact issue.

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

Attorneys: Darby Riley (Riley & Riley) for Barry Brooks. Samuel V. Houston, III (The Ford Firm, PC) for Excellence Mortgage, Ltd., LADTD-1, LLC, Grothues Financial, Ltd., Grothues Brothers Management I, LLC and Georgetown Mortgage, L.L.C.

Companies: Excellence Mortgage, Ltd.; LADTD-1, LLC; Grothues Financial, Ltd.; Grothues Brothers Management I, LLC; Georgetown Mortgage, L.L.C.

Cases: Antitrust TexasNews