A Florida district court dismissed a class action lawsuit
against United Wholesale Mortgage (UWM) and its CEO Mathew Ishbia alleging
anticompetitive practices in the wholesale lending market. The case centered on
UWM’s ultimatum prohibiting partner brokers from doing business with Rocket
Mortgage or Fairway Independent Mortgage.
The case is The Okavage Group, LLC, on behalf of itself
and all others similarly situated v. United Wholesale Mortgage, LLC, and Mathew
Ishbia, filed in the U.S. District Court for the Middle District of
Florida.
The Okavage Group, LLC, and the other parties referenced in
the claimed UWM and Ishbia coerced brokers into signing an addendum pledging
not to do business with Rocket or Fairway and agreeing to monetary penalties
for breach of contract. UWM’s actions allegedly caused the plaintiffs financial
harm and reduced competition.
In response, the defendants sought to dismiss the case,
arguing various legal grounds including lack of personal jurisdiction and
unsustainable market definition.
The initial complaint was filed in April 2021, followed by a
first amended complaint in August 2021. The plaintiffs argued UWM, the largest U.S.
wholesale mortgage lender, instituted an anticompetitive policy that excludes
mortgage brokers who work with two of the largest mortgage lenders in the
country.
“Plaintiff claims defendants’ conduct ‘has had the effect of
increasing the costs of mortgage loans and has increased the costs of
operations’ of plaintiff and other class members to ‘an artificially high,
non-competitive level,’” the court report states. “Plaintiff states that,
although there are other alternatives in the wholesale mortgage market,
‘elimination of two of the largest, and two leading wholesale mortgage lenders,
who have been very highly rated, and have offered very competitive prices, significantly
reduced competition in the relevant market.’”
Additionally, the plaintiffs argued UWM used its “dominant” position
and influence in the wholesale mortgage market to coerce brokers into signing
the ultimatum.
“Plaintiff claims that UWM is aware of its position as an
industry leader in the wholesale mortgage industry and points to UWM’s annual
report from March 2023 in support, specifically its claim that ‘it has
agreements with more than 12,000 individual brokers,’ and out of those, 11,500
brokers chose to work with UWM after the ultimatum was issued,” the court wrote.
“Further, plaintiff alleges that in a Q4 2022 earnings call in March 2023,
Ishbia indicated that 2022 was UWM’s ‘eighth consecutive year as the No. 1
wholesale lender,’ and has referred to UWM in interviews as ‘dominant’ in the
wholesale market. Plaintiff states that ‘[d]ata from the fourth quarter of 2022
indicates that UWM is the largest wholesale market lender, with a most recent
approximate 54 percent share of the wholesale market,’ increased from 34
percent in 2020.”
Underscoring the plaintiff’s points about UWM’s market influence,
the complaint again pointed to the March 2023 earnings call, in which Ishbia
reportedly said UWM “has great control of [its] margins” and “control[s] the
margins in this industry.”
Additionally, the plaintiffs pointed to comments made during
a Facebook live event in which Ishbia and others disparaged brokers who chose
not to sign the ultimatum.
“Plaintiff claims that many of the brokers attending the
event made public comments on the Facebook live event forum which ‘included
many expressions of agreement,’ including ‘We are ALL IN;’ ‘We are all family!
Brokers are better when we work together;’ and ‘Brokers are family. We don’t go
against our family;’ among other comments showing support for the change,” the court
wrote. “Ishbia’s statements and the brokers’ communications took place on a
public forum — Facebook — and plaintiff claims that ‘[b]rokers also used UWM’s
Facebook page to discourage brokers who disagreed with the boycott,’ citing to
various comments.”
The plaintiffs alleged UWM’s ultimatum violates federal and
state antitrust laws, constitutes tortious interference and violates Florida’s
Deceptive and Unfair Trade Practices Act.
UWM and Ishbia motioned to dismiss the case, asserting the case
could not proceed because the court lacks personal jurisdiction over Ishbia and
the antitrust claims were based on a “legally unsustainable market definition.”
The defendants also argued that neither the antitrust claims, the tortious
interference claims nor the allegations brought under the Florida Deceptive and
Unfair Trade Practices Act included a claim on which relief could be granted. They
further contended one count for declaratory relief (Count IX) in the complaint
was “duplicative and improper.”
After considering both arguments, the court agreed with the defendants’
claim that the court lacked personal jurisdiction over Ishbia, reasoning that
the allegations were based solely on his role in directing and announcing the
ultimatum. The court considered Florida’s corporate shield doctrine, as well as
the state’s long-arm statute, which informs decisions regarding personal
jurisdiction and the state’s due process clause under the 14th Amendment.
The plaintiffs countered by arguing personal jurisdiction
could be exercised over a non-resident defendant who commits a tort outside of
Florida resulting in injury in Florida. The court responded, asserting that the
corporate shield doctrine may prohibit the exercise of personal jurisdiction
over a non-resident corporate employee sued individually for conduct performed
in his corporate capacity.
The court acknowledged the plaintiffs’ argument but held
firm in its stance on the tort claim.
“While it is true that the corporate shield doctrine does
not protect a corporate officer who commits intentional torts, such as fraud or
other intentional misconduct ‘whether the complaint sufficiently states a cause
of action for an intentional tort,’” the court wrote. “Here, plaintiff has
alleged at least one intentional tort against Ishbia, tortious interference
with business contracts and prospective economic advantage (Count XVI), but due
to the pleading infirmities outlined below, count XVI should be dismissed and
cannot serve as plaintiff’s jurisdictional hook to Ishbia. Because I find the
corporate shield doctrine applies here, I do not reach the question of whether
Ishbia’s electronic communications, which were merely accessible in Florida,
are sufficient to satisfy Florida’s long-arm statute.”
Addressing the plaintiffs’ questions about whether UWM’s
calls for a boycott of competitors could be viewed as an attempt to monopolize
the wholesale market, the court cited the U.S. Supreme Court’s past treatment
of cases concerning corporate boycotts.
“Plaintiff alleges that because of UWM’s high market share
and market power, ‘there is a dangerous probability that UWM will achieve its
goals and attain monopoly power,’” the court wrote. “…. [P]laintiff has not
adequately established the relevant market as the wholesale mortgage market,
and thus, fails to plead that defendants possessed enough market power in the
overall mortgage market to pose a danger of monopolization, as the evidence
plaintiff relies on reflects only an 11 percent share in the overall mortgage
market.”
The court noted that the burden for alleging sufficient
facts to establish a prima facie case of jurisdiction falls on the plaintiffs, who
failed to adequately do so.