LoanDepot is celebrating a “significant legal victory” in a poaching suit against CrossCountry Mortgage, after a federal judge in a new order suggested the Irvine, California-based lender is likely to succeed in its claim of misappropriated trade secrets.
U.S. District Judge Edmond E. Chang on Tuesday barred CCM from using thousands of documents taken from loanDepot by Chicago-based former employees in their January departure and ordered them returned. CCM is also barred from soliciting loanDepot employees to join the firm, according to the preliminary injunction filed in the U.S. District Court for the Northern District of Illinois.
“CCM is likely to be found liable for aiding and abetting the individual defendants’ contractual and fiduciary obligations, as well as being responsible for tortious interference with contract,” Chang wrote.
The ruling replaces a temporary restraining order issued against CCM in April. It follows a forensic review conducted over the past several months which identified thousands of loanDepot documents in CCM’s internal systems allegedly brought by the five workers.
LoanDepot, which is also suing CCM in New York for raiding its ranks, issued a rare public statement about the lawsuit Wednesday lauding the order.
“We are extremely pleased with the Court’s ruling,” said Frank Martell, loanDepot president and CEO, in a press release. “loanDepot will continue to vigorously protect its interests.”
The lead counsel for loanDepot, James Witz of Chicago-based Littler Mendelson, P.C., also praised the ruling, stating the lender takes the protection of its trade secrets and contractual agreements with its employees “very seriously.”
A representative for CrossCountry declined to comment Wednesday. The Brecksville, Ohio-based CCM has made few public comments regarding its numerous poaching battles in federal court, and has seen mixed results in its various defenses this year.
The court also rejected CCM’s claim that some of the customer information it received didn’t constitute protectable trade secrets.
LoanDepot filed the complaint in April, after five of its loan consultants resigned in January and allegedly took with them to CCM thousands of documents from the company. Chang granted the TRO, which contained most of the same provisions as the preliminary injunction but didn’t include anti-solicitation protection against CCM itself. The TRO was extended several times through Dec. 15.
A forensic review conducted by consulting firm Charles River Associates identified the thousands of documents from loanDepot in CCM’s internal systems. The files included customer contact lists and loan details, as well as loanDepot internal leaderboards, marketing ideas, a pre-approval tracker and other past loan information.
CCM asked the court to modify the TRO by removing protections for “basic customer-contact information” which it defined as names, phone numbers, street and email addresses. But the judge denied the motion.
“The extensive downloading and spiriting away of the information by the Individual Defendants, and the later downloading by CrossCountry into its system, circumstantially show that basic customer-contact information indeed does have economic value,” Chang wrote.
CrossCountry said it refused to accept loanDepot’s confidential information brought by the former employees and blocked access to it, but Chang wrote CCM only blocked access to the information at the court’s behest in April.
LoanDepot also asked Chang for a nationwide ban on CCM soliciting its employees, including referring to its TRO against the company in the similar New York suit. The judge granted the request in part, but suggested the order would be too vague and overbroad.
Chang also didn’t submit a preservation order for the loanDepot documents, but warned any absence of records and emails from CCM following the earlier forensic review and preliminary injunction would be “highly suspicious.”
In the New York poaching case between the companies, the parties will file motions and responses in February and March regarding a preliminary injunction against CCM.
In yet another raiding lawsuit against CCM, a Washington federal judge earlier this month indicated the court would toss Guild Mortgage’s complaint and reject its request for six-figure sanctions against CCM for allegedly stalling the case, instead suggesting a smaller penalty. Both companies Tuesday filed objections to the judge’s proposed order.