Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. Conn.: Former employee states unfair business practices claims against employer, (Dec 9, 2013)

By Jody Coultas, J.D.

A former employee of Generation Financial Mortgage LLC stated a Connecticut Unfair Trade Practices Act (UTPA) against Generation for allegedly scrupulous business practices, the federal district court in Bridgeport has held (Walters v. Generation Financial Mortgage LLC, December 5, 2013, Eginton, W.).

Walters founded Amston Mortgage Company Inc., a reverse mortgage company that originated and sold reverse mortgages to senior citizens on the East Coast. After Generation acquired Amston, Walters was made president of the Amston subsidiary, and tasked with running the existing Amston operations and expand it to other East Coast states.

Around the same time, Generation was developing plans to create a national call center to increase revenues by selling more loans. Walters felt that the call center would be in direct competition with his Amston business, and that Generation began putting more marketing dollars into the national call center instead of retail operations like Amston.

Generation fired Walters based on his lack of production, specifically a 36% drop in average monthly loan value from the previous year. Counsel for Generation notified Walters that he had an opportunity to require Generation to purchase his 3,500 B units, which he failed to exercise, and that Generation would exercise its option to purchase those units at 10 cents per unit, for a total of $350. Generation sent plaintiff a check for $350, noting that Walters failed to dispute its assessment of fair market value despite being required to do so within ten days of the notification letter.

Walters stated a UTPA violation at the summary judgment stage, according to the court. In support of its motion for summary judgment, Generation argued that it could not have been trying to eliminate a competitor because Generation was based on the West Coast while Amston was based on the East Coast of the United States, it paid Walters the agreed-upon consideration for the sale of Amston, and that a breach of contract alone does not create a viable UTPA claim. Whether Generation acquired Amston because Amston was a competitor was not dispositive of the UTPA claim. Walters countered that Generation planned to operate and did operate a national call center virtually from the date of the sale of Amston, so competition was inevitable, and that Generation’s breach of the duty of good faith and fair dealing and their fraud deprived him of twenty-nine months of compensation under the employment agreement. Because Walters’ allegations encompassed the unfair, unscrupulous, and injurious acquisition of his company, the court found that the claims went beyond a mere breach of contract claim. Walters sufficiently stated that Generation’s actions offended public policy, was immoral, unethical, oppressive, or unscrupulous, and caused substantial injury.

The court granted Generation summary judgment of Walters’ breach of fiduciary duty claim, but denied dismissal of Walters breach of employment agreement, breach of good fair and fair dealing, and fraud claims. Walters alleged that Generation intended from the outset of its relationship with Walters to terminate his employment and avoid making payments to him under his employment agreement. There was a question of fact as to whether Generation unjustifiably terminated and/or stripped Walters of his units was disputed, as was whether Generation made false representations with the intent of inducing Walters’ reliance so that they could acquire Amston at a reduced price.

The case is No. 3:10 cv 647 WWE.

Attorneys: David Skinner Rintoul (Brown, Paindiris & Scott) for J. Todd Walters. Michael A. Pavlick (K&L Gates, LLP) for Generation Financial Mortgage LLC and Amston Mortgage Co. Inc.

Companies: Amston Mortgage Company, Inc.; Generation Financial Mortgage LLC

Cases: StateUnfairTradePractices ConnecticutNews