A lawsuit lodged against First Guaranty Mortgage Corp. by former employees was given class-action status by a federal bankruptcy judge in mid-January.
The class-action suit, currently made up of 425 employees, alleges that the Plano, Texas-based lender failed to adhere to Worker Adjustment and Retraining Notification (WARN) requirements when it laid employees off “without cause” or notice in June. Soon after, the company declared bankruptcy.
Per the WARN Act, employers are required to provide written notice to employees at least 60 calendar days in advance of a mass layoff, though some exceptions do exist.
Plaintiffs of the class-action suit – which was given a green light by Judge Craig T. Goldblatt of the U.S. Bankruptcy Court for the District of Delaware on Jan. 11— claim that their employer’s violation of the WARN Act entitles them to receive damages from the lender, including “unpaid wages, salary, commissions, bonuses and accrued holiday pay.”
FGMC declined to comment.
In June, FGMC explained that the layoffs were a result of “significant operating losses and cash-flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry.”
Soon after, FGMC and its affiliate, Maverick II Holdings LLC, announced that they would be filing for bankruptcy and seeking Chapter 11 protection.
The class action lawsuit was originally filed on June 30, 2022. Plaintiffs claimed that the lender “carried out mass layoffs and/or plant closings at its facilities in April 2022 and later on June 24, 2022, terminating hundreds of its employees without cause and without 60 days’ notice.”
Three months later, FGMC denied violating the WARN Act. The lender said it acted in good faith and that FGMC is not liable due to “unforeseeable business circumstances” and “faltering company” exceptions under the WARN Act.
Exceptions to the WARN Act’s 60-day notice period include a natural disaster, a faltering company scenario, and unforeseen business circumstances. First Guaranty Mortgage Corp. in a WARN cited an unsuccessful effort to obtain funding before its June bankruptcy.
Per the class action suit, FGMC has 10 business days to provide the class counsel with an electronic spreadsheet containing the names and known addresses of former employees. Those contacted have 35 days to opt out of the class action suit.
Lori Buckley, Gayle Zech, Roberta Martinez, Jennifer Jackson and James Davies, who filed the original class-action suit, will serve as representative of all employees involved.