Judge set to toss Guild's poaching suit against CrossCountry

A federal judge is poised to dismiss Guild Mortgage's poaching lawsuit against CrossCountry Mortgage over its alleged raid of Guild's Kirkland, Washington branch, according to a new filing.

U.S. Magistrate Judge Michelle Peterson granted CCM's motion to toss the suit on a jurisdiction argument, she wrote in a filing dated Dec. 6. The recommendation, which includes two other orders in CCM's favor, will be ready for consideration by a District Judge Dec. 23 if no objections are filed by the parties.

Guild sued CCM last October in the U.S. District Court for the Western District of Washington, accusing the Brecksville, Ohio-based lender of misappropriating the Seattle-area branch with over two dozen employees and massive amounts of confidential business and client information. The case was slated for a jury trial early next year.

Peterson in the report last week granted CCM's request to seal ownership documents to protect the identity of investors, and also denied Guild's motion for a six-figure sanction against CCM for allegedly stalling the case. The judge however weighed a $25,000 sanction against CCM if it didn't provide a complete list of its states of citizenship within 30 days of the report's adoption, a point related to Guild's accusations of stalling.

"Because the court anticipates objections to this report and recommendation, the court will hold this sanction in abeyance unless and until the report and recommendation is adopted," wrote Peterson. The proposed order and dismissal is pending an approval by U.S. District Judge John Coughenour, according to an attached filing. 

An attorney for CCM declined to comment Thursday and a spokesperson for Guild this week cited a policy of not commenting on pending litigation. A representative for CCM and an attorney for Guild didn't respond to requests for comment.

The tentative orders, which could be delayed with objections, would be the latest poaching suit win for CCM among at least a dozen similar cases against the lender since 2017. Amid the industry's refinance boom and subsequent decline, various mortgage firms have accused competitors of raiding their ranks in federal cases which are still ongoing.

CCM sought to dismiss the Guild lawsuit earlier this year on a jurisdiction argument, describing in a series of filings earlier this year its ownership structure to the court and tying one of its corporate members to an unnamed California citizen. Peterson found the San Diego-based Guild and CrossCountry share citizenship in California, removing the complete diversity required for the federal court's jurisdiction.

Guild doesn't oppose the dismissal, according to the report, but sought recovery of attorney's fees based on CCM's failure to uncover its California citizenship until 10 months into the lawsuit. In September, Guild requested the court award it $633,000 in attorney's fees to partially compensate it for the over $2 million worth of attorney's fees it accrued over the course of the lawsuit.

"Although CrossCountry's failure to conduct a reasonable investigation into its citizenship is highly suggestive of gross negligence, bad faith has not been shown on the record before the court," wrote Peterson. "Accordingly … the court concludes sanctions in the form of attorney's fees are not warranted in this matter."

The judge also granted CCM's request to seal documents describing its corporate ownership, citing concern from a "third-party investment vehicle", Radcliff CCM I LLC, over the identity of its investors. Daniel Jemal, the chief financial officer of Radcliff, filed a declaration Nov. 14 with the court urging to keep its investors' identities private. The ownership documents are sealed in federal court records and the information is redacted in a separate filing. 

"Because Radcliff identifies concern about losing investors who fear public pressure not to invest in its projects, the court concludes there has been a sufficient showing of potential injury if the remaining documents are not sealed," the judge said.

CrossCountry still faces two poaching lawsuits from loanDepot in Illinois and New York federal courts. A poaching complaint from Dallas-based Caliber Home Loans accusing CCM of raiding more than 80 employees has not been updated since early August.