Griffin Funding sues West Capital Lending for lead abuse

According to the complaint, Griffin invests millions of dollars annually to generate exclusive leads through his website. To protect that investment, the company’s employment agreements prohibit LOs from copying or soliciting these leads for up to 36 months after they leave the company.

Griffin believes that former employees “stole lists of leads provided to them while employed by the plaintiff” because they “intend to continue to solicit and actively conduct business with leads.”

The lawsuit alleges that when the first allegedly diverted loan was made, WCL “immediately transferred” the amount allegedly siphoned off by the three former employees. But other loans based on Griffin’s directions continued to be made. In total, the defendants diverted at least 203 customers, causing damages of more than $3.71 million in lost revenue, the lawsuit said.

Griffin’s lawsuit alleges breach of contract, conversion, misappropriation of trade secrets and unfair competition. Griffin declined to comment when contacted by HousingWire.

WCL founder Daniel Iskander refuted the claims, saying: “Anyone can sue anyone for any reason.”

“This isn’t the first time a competitor has tried to sue us for losing loan officers to the broker channel,” he said. “We operate within all state and federal laws and most importantly with integrity to our loan officers and our borrowers. There is absolutely no validity to any form of corporate theft.”

Who owns the leads?

The Griffin case echoes similar allegations in LoanDepot’s lawsuit against WCL.

LoanDepot alleges that WCL recruited its LOs and induced them to take “active, hot leads,” then later reassigned them “on paper” to conceal the transfers, while the same LOs continued to work on the files – in some cases before officially leaving LoanDepot.

Industry attorneys say the lawsuits highlight the ongoing tension between corporate ownership of customer data and the personal connections LOs build with borrowers.

Troy Garris, co-managing partner at Garris Horn LLPsaid that “if the LO has non-public personal information about a customer the company did business with, it is proprietary to the company – there is usually little doubt about that.” But LOs control much of the business because of their relationships with borrowers, he added.

“Every mortgage company, every day they hire, they run the risk of someone bringing in someone else’s information — and then when people quit, they run the risk of people walking away with their data,” Garris says.

“LOs believe that data and relationships belong to them and that they are right in some respects. The law doesn’t say that, but no one owns those relationships, and the relationships are mostly between LOs and these individuals.”

Ron Gapp, founder of Brody Gapp LLPsaid these situations often raise questions about borrower consent and data transfer practices. He added that even if the contract doesn’t specify whether LOs can use the data, questions include: Has the borrower given you permission to use their information? How did you do it? How did you pass it on?

“It’s probably the biggest problem when a group of people leave one store and go to another,” Gapp said. “They are trying to take the data with them and that creates a lot of liability, not only for the new employer, but also for the LOs personally. There is a big risk there, even if the contracts are not clear.”

James Brody, founder and managing partner at Brody Gapp LLP, added that unapproved data transfers could trigger state data breach notifications.

“That leads to a data breach that both the employer they leave and the new one must take into account,” Brody said. “In many states, these types of data breaches, depending on how many consumers are affected, require you to write a letter to the attorney general.

“Maybe you should inform consumers that this is happening – and it happens all the time.”