The named officials at the now-defunct lender include former chief financial officer Christopher Wright, former president and chief production officer Shea Pallante, and former chief credit officer Elliot Salzman.
“Plaintiffs have had four opportunities over the course of more than two years to plead a viable case,” U.S. Magistrate Judge Lee Dunst wrote, noting that the latest complaint is vague, overly broad and fails to specify the role of each executive.
The 35-page recommendation was decided on June 13, according to FindLaw.com.
NMN also reported that neither Sprout’s ex-CEO, Michael Strauss, nor the company itself have responded to the employee lawsuit and were not recommended for dismissal.
Sprout — a Long Island, New York-based non-QM lender — abruptly closed in July 2022 after rising mortgage rates left it with unsellable loans. Hundreds of workers were allegedly not given their final two paychecks or severance.
HousingWire previously reported that Sprout retroactively canceled health insurance in May 2022, which prompted multiple lawsuits. More than 100 former employees sued that summer, but the case has seen multiple twists, including a failed settlement and several amended complaints.
Strauss previously paid a $2.45 million federal fine in 2009 tied to the collapse of American Home Mortgage, and he lost his origination license in Illinois in 2023 after attempting to launch another mortgage venture.
