Class Action Filed Against United Wholesale Mortgage (UWM)
By Scott Glovsky on March 25th, 2022 in Class Action, In The Media
Attorney Scott Glovsky Files Class-Action Lawsuit Against United Shore Financial Services
On Friday, December 11, 2020, the Law Offices of Scott Glovsky filed a class-action lawsuit against United Shore Financial Services, LLC d/b/a United Wholesale Mortgage (UWM) in the United States District Court for the Eastern District of Michigan.
What is This United Wholesale Mortgage (UWM) Class Action About?
The plaintiffs are mortgage brokers in California who contracted with United Wholesale Mortgage (UWM) for the purpose of providing customers for UWM’s mortgage business. Despite having faithfully executed their duties under the contracts, in March 2020 UWM unilaterally breached the contract by charging plaintiffs for the return of commissions that were rightfully earned under the UWM contracts. UWM stated that the return of earned commissions was justified because the customers refinanced their loans within 365 days of closing with UWM. However, the express terms of their contracts permit UWM to recoup commissions only if a refinancing occurred within 180 days of closing the loans. UWM acknowledged that its unilateral change enabled it to recover $870,000 in broker earned commissions.
Accordingly, UWM’s unilateral change to 365 days from 180 days more than doubled the time in which it could legally seek the return of commissions from the plaintiff brokers. UWM’s change was done without the consent or approval of these brokers, and breached their contracts. In their class action lawsuit, the brokers are asking the court to declare that UWM’s actions are wrongful, and to award damages to the brokers and all those similarly situated.
You can read the class action complaint here.
Media on Our UWM Class Action
HousingWire.com published two stories on our lawsuit.
- Three brokers go to war with United Wholesale Mortgage published on December 16, 2020
- United Wholesale Mortgage moves to dismiss broker lawsuit published on February 12, 2021
In response to the class-action complaint filed against it, UWM filed two motions to dismiss on February 10th, 2021. The two motions to dismiss were based on (1) Lack of Subject-Matter Jurisdiction under CAFA and (2) Failure to State a Claim.
(1.) Motion to Dismiss on the Grounds of Subject-Matter Jurisdiction
In its first motion to dismiss, UWM claimed that Plaintiffs do not meet the requirements to form a federal class-action suit under the Class Action Fairness Act of 2005 (CAFA). CAFA requires at least 100 members of the class, as well as a minimum of $5 million in damages for the suit to fall under federal subject-matter jurisdiction.
The Defense first addressed the size of the class, stating that the Plaintiffs are unable to meet the requirement of at least 100 putative class members. It claimed that under 100 brokers were informed that their EPO timeframe would change from six months to twelve months, and that all brokers who continued to work under UWM automatically agreed to the change in terms, under conditions of the UWM Wholesale Brokers Agreement. It claimed there are only 74 affected brokers who repaid their commissions or who had their commissions withheld.
The Defense then addressed the amount in controversy. It claimed that a total of 74 brokers were affected, and that the total amount recouped was less than $870,000. The Defense claimed that no other damages can be considered, and that the amount withheld from the affected brokers does not come close to the minimum requirement of $5 million.
(2.) Motion to Dismiss on the Grounds of Failure to State a Claim
In its second motion, UWM moves to dismiss on the grounds of failure to state a claim. The Defense argues that the Company Plaintiffs agreed to the change in EPO terms by default when they continued to conduct business with UWM. The Defense claims that there has been no breach of contract, and that Company Plaintiffs have failed to state a legitimate claim.
UWM also moved to dismiss the three Individual Plaintiffs listed on the complaint. The three Individual Plaintiffs are individual representatives of the Company Plaintiffs. The Company Plaintiffs have entered into contract with UWM, but the Individual Plaintiffs have not. The Defense argues that the Individual Plaintiffs have failed to state a claim.
The Court’s Decision
On March 4th, 2022, United States District Judge Laurie J. Michelson issued an order responding to the Defense’s motions to dismiss.
On the first motion to dismiss on the grounds of subject-matter jurisdiction, the Judge found that the Plaintiff class does indeed meet the requirements for federal subject-matter jurisdiction under CAFA. The Court disagreed with UWM’s definition of “affected broker”. UWM sent an email to 100 brokers, informing them of the change in EPO policy. Whether or not these brokers continued working with UWM under these new terms, all 100 brokers may be affected due to the policy change that allowed UWM to retroactively withhold commissions earned before the effective date. The Court also indicated that damages suffered by the class members exceed the recouped $870,000, as there is the future threat of commissions being retroactively withheld, as well as future litigation from UWM, as its statue of limitations does not run out until 2026. In its ruling, the Court wrote, “…the Court concludes that the brokers’ amount in controversy was made in good faith an likely exceeds $5 million.”
On the second motion to dismiss on the grounds of failure to state a claim, the Court found that the Company Plaintiffs do have sufficient grounds to state a claim. Regardless of whether the brokers chose to continue doing business with UWM, their continued business cannot be taken as acceptance of UWM’s retroactive action. Even brokers who did not continue their business, therefore not accepting the new terms as UWM defines it, are at risk of having their commissions retroactively withheld. Therefore, the Court determined that the Company Plaintiffs have successfully stated a claim. Regarding the Individual Plaintiffs, the Court agrees with the Defense that the Individual Plaintiffs have no separate claim outside of the Company Plaintiffs.
What Does This Mean for the Future of this UWM Class Action Suit?
The Court has found that this class action suit does indeed meet the requirements of the Class Action Fairness Act, and that the federal district court has subject matter jurisdiction over this case. The Court has found that the claim stated by the Company Plaintiffs is sufficient to proceed with this suit. The Judge has denied the Defense’s motion to dismiss the Company Plaintiffs.
About the Law Offices of Scott Glovsky
The Law Offices of Scott Glovsky has represented injured consumers and victims of wrongful business practices for more than the past two decades. We get justice for our clients and hold the wrongdoers accountable.
For more information, contact [email protected].