July 22, 2024

Judge narrows racketeering complaint from AmNet against CrossCountry Mortgage

A federal judge dismissed racketeering claims against CrossCountry Mortgage in a poaching lawsuit, but eight other counts from a competitor remain.

California-based American Mortgage Network sued its larger rival in January, accusing it of using a “transition desk” of dedicated staff to poach originators and divert loans. The complaint accuses former branch manager Spencer Thomas of diverting 15 mortgages to CrossCountry worth approximately $7 million, in violation of his AmNet contractual obligations. 

U.S. District Judge Richard Story last week dismissed four racketeering allegations against CrossCountry, Spencer and another employee, William Myers, suggesting AmNet didn’t offer supporting evidence for those four counts. 

“In this case, AmNet’s allegations that an agreement was reached between CrossCountry and Myers, and/or CrossCountry Transition Desk loan officers are conclusory and, therefore, insufficient,” the judge wrote. 

Myers was dismissed from the lawsuit entirely, but counts against CrossCountry and Thomas, including breach of contract and misappropriation of trade secrets, remain. 

“We have a lot of claims that are surviving that can win our client significant damages, and this was only the initial motion-to-dismiss phase,” said Ari Karen, partner at Mitchell Sandler, on behalf of AmNet. “It’s certainly not the end of the case.”

A spokesperson for CrossCountry declined to comment, while separate attorneys for the lender, Myers and Thomas didn’t respond to messages. Thomas has since moved to Nationwide Mortgage Bankers, and Karen said his departure from CCM shouldn’t disrupt the case. 

The lawsuit is one of several poaching and theft of trade secrets lawsuits against the Cleveland-based CrossCountry, many of which the lender has survived seemingly unscathed. A federal judge last winter tossed a similar raiding complaint from Guild Mortgage, and CCM settled a separate suit by Caliber Home Loans this year. 

The AmNet lawsuit is the rare mortgage poaching complaint which accused a competitor of violating the Racketeer Influenced and Corrupt Organizations Act, often associated with organized crime. AmNet filed the claims in connection with CCM’s purported transition desk, which AmNet blamed for other CCM poaching schemes.

Judge Story also narrowed some of AmNet’s counts against Thomas, suggesting the plaintiff company failed to show facts regarding Thomas’ supposed solicitation of colleagues to join CCM. 

AmNet is seeking unspecified damages and disgorgement of the profits CCM realized from alleged diverted loans, among other relief. No future hearing has been scheduled in the U.S. District Court for the Northern District of Georgia in Gainesville.

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