Banks Litigate Employee Exodus

“Our suit is before the court and it’s going to be going on for a while,” Richard Matthews, attorney for Virginia Beach-based Resource Bank, told MortgageDaily.com. “We’re proceeding with the damages cases and for injunctive relief on other issues that are before the court. And that will go through its due course in the litigation process. We feel like we have a very strong case.”

Resource Bank’s suit against Chesapeake-based Monarch Bank includes an alleged breach of their non-solicitation agreement by the two top executives, an alleged breach of the Virginia Uniform Trade Secrets Act, which prohibits the removal of confidential information, and violation of Virginia’s business conspiracy statute, which prohibits those two from “conspiring with Monarch to cause the majority of the mortgage division to resign and move on over to Monarch,” he explained.

“There were a total of 79 resignations within a very short period of time,” Matthews noted. “There were over 40 [resignations] on the same day, all of whom went to Monarch. That’s a pretty good chunk of people.”

The two top executives and 12 other top people, as well as Monarch Bank itself, are named in the suit, which was filed in a local court on June 11, according to Matthews. The others who left Resource and went to Monarch include clerical staff, processors, underwriters and low level loans officers — “the whole spiel,” he said.

One bank employee told MortgageDaily.com that Resource Bank’s parent, Fulton Financial Corp., “sent a handful of people from Lancaster [its headquarters in Pennsylvania] to help us.” But that there was “no break in our mortgage operations. We are still functioning. It’s business as usual. Plenty of people stayed with us.”

Monarch Executive Vice President Brad E. Schwartz told MortgageDaily.com that there was no conspiracy in the fact that his bank “ended up hiring a good number of people from Resource. People can work where they want to work.”

He explained that he told the new employees who had come from Resource Bank to look through everything they had and to return anything that had come from Resource.

His bank had been trying to expand its mortgage operations for a year and had placed an ad in a local newspaper seeking additional employees, he noted.

Monarch’s attorney, Robert W. McFarland, told MortgageDaily.com the bank “did absolutely nothing wrong and has acted appropriately. It did not conduct any type of raid on Resource. There was no conspiracy. This is simply people who were not going to remain at Resource; they were going to go elsewhere and they talked to a number of other possible employers and they ended up liking Monarch and have come with us.

“When we hired the two primary people who were running Resource’s mortgage division we were aware they had non-solicitation clauses in their existing employment agreements and we told them to comply and made sure they complied and it is our understanding that they fully complied.”

Other new employees who came from Resource and “may have inadvertently taken documents or things,” those items were returned as soon as Monarch learned about them, he said. All totaled, ten boxes of materials were returned to Resource Bank, nine of which came from one person whose wife had packed up everything from his office while he was hospitalized for surgery.

Resource Bank’s Matthews said its staff is inventorying the returned materials and, although it seems “we really had gotten pretty much what we were looking for,” the question remained as to whether “we have it all.”

In addition to paper files being taken from Resource, he said there was “evidence of data being forwarded electronically as well.”

While McFarland and Schwartz both note that Monarch had run an ad in a local newspaper seeking new employees for its mortgage department, Matthews said, “My feeling is the evidence will establish that the ad was nothing other than an attempt to provide some sort of cover for just raiding the whole [mortgage] department” at Resource.

Meanwhile the top two former Resource executives have filed suit against the former employer over the alleged breach of the non-solicitation clause in their employment contracts and seeking back pay, says Matthews, who calls the suit a matter of “contractual interpretation” and says that the two failed to provide the required 90-day notice of departure.

Monarch has until July 2 to file a response to Resource’s suit.

“At this point in time,” Matthews explained, “the pleadings will be refined, answers have to be filed and it will go into the discovery process, with depositions and document requests, and all the various jockeying between the two sides.”