A New Jersey appeals court has overturned a lower court ruling against an upstart company and its owners who are accused of stealing customer information from the lender that they previously worked for.
The lawsuit was originally filed in 2006 by American Federal Mortgage Corp., according to a copy of the June 30 decision from the Superior Court of New Jersey, Appellate Division, that was posted by Leagle.com. .
Two of the defendants — former American Federal employees John C. Rooney and Michael M. Bogner — founded Residential Home Mortgage Corp. after they left the company.
American Federal, which claims to be “one of the largest privately held mortgage bankers in the nation,” alleges the defendants used its confidential customer information to generate news business. Contact information was allegedly lifted from its closed loan list and customer prospect lists.
The plaintiff did not allege that any of the individual defendants signed written confidentiality agreements while working at the lender. Instead, 24-year-old American Federal relied on a common law duty of loyalty to their employer.
The defendants filed a counterclaim accusing American Federal of trying to solicit their customers.
The litigants tried unsuccessfully to negotiate a settlement before the Dec. 8, 2008, trial date. But on the day of the trial, the plaintiff’s attorneys advised that judge that the a tentative settlement had been reached in which the defendants would pay $515,000 and agree not to solicit customers or close loans from its 2005 customer list.
But the agreement called for the plaintiff to prepare a full list for attachment to the settlement which the defendants would review. They would then identify customers who “they believe to be their friends, family, and referral of friends and family that they believe would be excluded from protection of this agreement.” After that, American Federal would review the exception list of clients.
“Both attorneys agreed they saw no need to question their respective clients about their understanding of the scope and effect of the terms announced by their attorneys,” the decision stated. “Unfortunately, the attorneys found it easier to advise the trial court that the matter was settled than to reduce the terms of the settlement to a document that all parties agreed upon.”
The two parties disputed the names on the exception list, which initially included 600 names. American Federal shot back with a list of only 238 names.
In addition, the defendants opposed a permanent prohibition against ever soliciting anyone on the list, potentially forcing them to turn away unsolicited business.
“After an exchange of multiple drafts of proposed settlement agreements, accompanied by increasingly acrimonious e-mails, the attorneys eventually filed cross-motions to enforce a settlement, each contending that his or her final draft incorporated all the terms the parties had agreed to and should be enforced by the trial court,” the appeals court wrote.
The trial court ruled in favor of the plaintiffs, though it failed to “support its conclusion that the list drafted by plaintiff reflected the parties’ agreement.”
So the defendants found new counsel and appealed.
“We are satisfied that the trial court erred when it acted to enforce this alleged settlement without having conducted a hearing at which the parties would testify as to their understanding of what was encompassed in the terms placed on the record ,” the appellate court concluded. “Reversed and remanded for further proceedings.”
AMERICAN FEDERAL MORTGAGE CORP., Plaintiff-Respondent, v. JOHN C. ROONEY, MICHAEL M. BOGNER, PETER CALAUTTI, FRANK CUCCARO, GLEN R. MEYERS, and RESIDENTIAL HOME MORTGAGE CORPORATION, Defendants-Appellants. SCHWARTZ, SIMON, EDELSTEIN, CELSO & ZITOMER, L.L.C., Intervenor.
Case No. A-3723-08T3, Original Case filed March 2006, (Superior Court of New Jersey, Appellate Division).
