Barry Brooks, Heston C. King, Stefen Douglas Brooks, Johanna Barton, and Jesse Rodriguez Benavides v. Excellence Mortgage, Ltd. LADTD-1, LLC Grothues Financial, Ltd. Grothues Brothers Management I, LLC And Georgetown Mortgage, L.L.C.

Opinion

ACCEPTED 04-13-00106-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 6/2/2015 4:36:48 PM KEITH HOTTLE CLERK

FILED IN 4th COURT OF APPEALS SAN ANTONIO, TEXAS 6/2/2015 4:36:48 PM KEITH E. HOTTLE Clerk DARBYRILEY BOARDCERTIFIED/CIVIL TRIALLAW CHRISRILEY,M A TEXASBOARDOF LEGALSPECIALIZATION LEGALASSISTANT darbyriley@rileylawfirm com

C H A R L E S AR I L E Y , P C charlesriley@rileylalvfirmcom June2, 2015

FourlhCourtof Appeals 300 Dolorosa,Suite3200 San Antonio.Texas 78205-3037

Re. Barry Brooks et al. v. ExcellenceMortgage,Ltd. et al., CauseNo. 04-13-00106-CV

JU S T IC ESBARNARDANdALVAREZ: T O T H E H ON OR A B L E

The appellantloan officersrespectfullysubmit this letter,containingadditional

citationsand succinctcomment,with respectto Appellees'Motionfor Rehearing.

1. A N T IT R U S TC L A IMS

Motion for SummaryJudgmentlimited to grounds asserfedby the Motion.

Attached hereto are peftinent excerpts from the mortgage company parties'

Motionfor SummaryJudgment.The Motionat CR 126-128showsthe grounds traditional

assertedon the loan officers'tortious interferenceand antitrustclaims against the

mortgagecompanyparties.

"Whena motionfor summary judgmentassertsgroundsA and B, it cannotbe upheldon groundsC andD,whichwerenotasserted, evenif the summary judgment proofsupports themandthe responding partydid not exceptto the motion."

3 2 0 L e x i n g t o nA v e . S a nA n t o n i o ,T X 7 8 2 1 5 - 1 9 1T3e l : ( 2 1 0 )2 2 5 - 1 2 3 6 F a x :( 2 l 0 ) 2 2 1 - 7 9 0 7 FourthCourtof Appeals June2, 2015 Page:2

Roberfsv. SouthwestIexas MethodistHospital,Sl 1 S.W.2d 141,146 (Tex.App-

San Antonio 1991,writ denied),quoted in McConnellv. SouthsidelndependentSchool

District,858S.W.2d 337, 342 (fex. 1993);T. Pnnoru,Suuunnv Juoctuerurs tNTexns:

PnRcrce, PRoceouRE, (3d ed. 2013). ANDRrvrew,53.06t21

The mortgagecompanypartiesonly soughtsummaryjudgmenton the antitrust

claim on the ground that their action "merely enforced reasonablenon-disclosure

agreements."(CR 128-129).The Court'sopinionon Motionfor Rehearingfinds a fact

issueon whether"Excellencefalselyclaimedit had the sole rightto servethe pipeline

c u s t o m e rs."Op i n i o np, . 1 8 . T h u s ,havingfoundthatthe mor tgagecompanypar ti esdi ' d

agreementsgave them exclusiverightto provethat the non-disclosure not conclusively

serve the pipelinecustomers,the Court properlydenied summaryjudgment on the

antitrustclaims.

B. The Appel/ees'New Argument on Causation

The mortgagecompanypartiesgo beyondtheirMotionfor SummaryJudgmentin

arguingthat the panel'sOpinionon Motionfor Rehearing"is inconsistent with appellants

pleadedcausationtheory"on the antitrustclaim. (Appellees'Motionfor Rehearing,p. 7).

They point out that the loan officerspleadedthat the injunctionsuit by Excellence

Mortgage,Ltd. was groundless.(ThirdAmendedOriginalCounterclaim, CR 269-270).

(The loan officersalso pleadedthat the moftgagecompanyparties"unlawfully" refused

to transferthe loansas requestedby the pipelineborrowers).ld. FourthCourlof Appeals June2, 2015 Page:3

The mortgagecompany parties cite Houston Mercantile change Corp. v. Dailey

PetroleumServicesCorp., 1993 WL 322901(Tex. App.-Houston [14thDist.] 1993, no

writ) for the propositionthat a personwho initiatesa lawsuitis generallyimmunefrom

exceptionis where the suit is groundlessand/or antitrustliability.The well-recognized

broughtfor an anticompetitivepurpose,as allegedhere. See /n re BurlingtonNofthern,

822 F.2d 518,527,529 (sthCir. 1987). (Evena successfullitigantmay be foundto have

abusedthe litigationprocessin orderto effectuatean antitrustviolation).

Thus,to succeedon this issue,the mortgagecompanypartieshad to first,move

provethat the suitwas for summaryjudgmenton that ground,and second,conclusively

purpose. The mortgage not groundlessand was not broughtfor an anticompetitive

companypartiesdid neither. The Courthas properlydeniedsummaryjudgmenton the

antitrustclaim.

2. T OR T IOU SIN T E R FERENCE

A. As the Courtfoundin its Opinionon Motionfor Rehearing,page22, the sole

groundassertedby the mortgagecompanypartiesfor summaryjudgmenton the tortious

claimis the contentionthatthey"engagedin no tortiousor wrongfulconduct" interference

that preventedthe pipelinecustomersfromdealingwith the loan officers. CR 126-127.

The Court had previouslyfound that the loan officershad raisedfact issueson each

elementof an antitrustclaim;it thus properlyheldthe antitrustviolationwas an unlawful

act to supportthe tortiousinterferenceclaim. ld. FourthCourtof Appeals June2, 2015 Page:4

B. The mortgagecompanypartiescontend(Appellees'Motionfor Rehearing,

pp. 9-10)that "appellants' pleadingsdid not basethe tortiousinterference claimuponan

antitrustviolation. See CR 265-66." However,the loan officers'Responseto the

mortgage company parties' Motion for Summary Judgment clarifiesthe "unlaMul

conduct"complainedof in the ThirdAmendedOriginalCounterclaim.ld. A|CR 281-82,

the loanofficerslaidout the extensiveunlaMulconduct,includingthe antitrustviolations,

and citedthe TexasAntitrustStatute. Where,as here,therewas no objectionto the lack

of a supportingpleading,"[a] movantmay . try by consentan issueraisedby the non-

movantin its summaryjudgmentresponsewhich is not pled in its petition." Pnrrorl,

supra,S 3.06[1],citingGoodyearTireand RubberCo. v. Mayes,236S.W.3d754,756n.

1 (Tex. 2007).

C. The mortgagecompanypartiescontend(Appellees'Motionfor Rehearing,

pp 6-7)that the Courtshouldnot haveacceptedthe opinionsof the loanofficers'expert

witnessesthat the pipelinecustomers'privacyrightswere violatedwhen theirfileswere

to GeorgetownMortgagewithouttheirknowledgeor consent.This objection transferred

was not preservedfor appellatereview. Moreover,such rightsare spelledout in detailin

t h e F T C ' sS a fe g u a rdasn d P ri va cyRules,16 C.F.R.S 313.1, et seq. See also 15 U .S.C .

$ 6801(a):

"Privacyobligationpolicy. lt is the policyof the Congressthat each financialinstitutionhas an affirmativeand continuingobligationto respect the privacyof its customersand to protectthe securityand confidentiality of thosecustomers'nonpublicpersonalinformation." FourthCourtof Appeals June2, 2015 Page:5

The mortgagecompanypartieshave not contendedthat they compliedwith this

federalpolicyor the regulations.The affidavitsfrom the two expertsput forth by the loan

officers establishedunlaMul conduct by the mortgage company parties, both in

transferringthe pipelineloan files to Georgetownwithouftransferletters,and in refusing

to transferthe files to Premierwith transferletters.

Respectfullysubmitted,

/D% ^lJ V'0 T DarbyRiley Attorneysfor Appellants

cc. Samuel V. Houston, lll WilliamH. Ford GregoryA. Scrivener (viae-serve) Page 1 of 46,

20 10cI 16e15 -P00067

NO. zoro-Cl-r6915

EXCELLENCE MORTGAGE,LTD. F Y IN THE DISTRICTCOURT 5 R Y V. F 5 zz5TH JUDICI-ALDISTRICT

a \t'. NTFN, INC. D/B/A PREMIER ? tr€ r:-L u,

-== :u.6 NATIONWIDE LENDING, ROBIN C. A Y

MORTON, BARRY BROOKS,HESTON 5 * /'l

-= t=l C. KING, STEFENDOUGI.d.SBROOKS, 5 -9 -rr1 F> () r-1 JANUARY MAY GOETTE, JOHANNA 5 , - r l - v

BARTON,JESSERODRIGUEZ !t$r.h - 5 ><7, BENAVIDES,AND SANTEX, LTD. J

GROTIIIIES FINANCIAL. LTD.. GROTHUES BROTHERS MANAGEMENT I. LLC. AND GEORGETOWN MORTGAGE. LLC'S MOTION FOR SUMMARY JUDGMENT

TO THE HONORABLEJUDGE OF THE COURT:

Counter-Defendants,Excelience Mortgage Ltd., LADTD-r, LLC, Grothues

Financial, Ltd., Grothues Brothers ManagementI, LLC, and GeorgetownMortgage,

LLC, file this Motion for Summary Judgment on Counter-Plaintiffs'Counter-Claims,

and in support thereof, wouid show the Court the following:

I. Introduction and Statement of Factst

This lawsuit arises from a dispute between an employer, Excellence,and its

former employees,the Counter-Plaintiffs.,Excellenceis in the mortgage business.

Robin Morton was the Presidentof Excellenceuntil her termination on September24,

' This recitation of facts is intended to give the Court an overview of the lawsuit and the issues in this motion. Material facts relied upon as summary judgment evidenceare specifically cited in the relevant sectionof the motion below. 2 There are no separate affirmative claims against LATD-r, LLC, Grothues Financial, Ltd., Grothues Brothers Management I, LLC and GeorgetownMortgage. Ostensibly,the basis for liability against these Counter-Defendantsis some agency or participatory theory, but the exact nature of such is unclear jn Counter-Plaintiffs'pleading.As such, if Excellenceis not liable, neither are the other Counter-Defendants.

Some pages may not be legible as per original document. sr6eog.r 9 9 0 0 6 1 - 11 g r 6 9 l I f , O I O Z Clerklnitiats:) " lllllffiffiffi,ffillil ou,"'f-h-,1 (Page 8 of 46)

The Counter-Plaintiffs' breach of contract claim seeks commissions they are

allegedly owed. Counter-Plaintiffs are not contractually entitled to any commissions.The

Production PersonnelCompensation Policy unambiguously provides that a voluntarily

terminated employee is not entitled to a commission that closed cnd funded after

October 1, 2olo.r2 An employee who is terrninated by Excellence is entitled to "no

further commissions."t3 The potential loans at issue are those 9r which were in

Excellence's"pipeline."rq Of the 9r pipeline loans, none closed and funded before

October1, 2oto.ls

Moreover, the documents are extraordinarily clear about whom the customers

belong to: Excellence.Counter-Plaintiffshave no right to leave an employer and attempt

to strip that employer of its business.There is no basis upon which Counter-plaintiffs

couid be legitimately entitled to any commissionsfor work they are not entitled to.

The unambiguous language of the Production Personnel Compensation policy

provides that the loan officer Counter-Plaintiffs are not entitled to any commission on

any loans' Summary judgment for Counter-Defendantsis therefore proper on Counter-

Plaintiffs' breach of contract claims.

C. Counter-Plaintiffs' Interference with Prospective Business Relations Claim

To establisha causeof action for tortious interferencewith prospectivebusiness

relationships,a plaintiff must show that (r) there was a reasonableprobability that the

., Exhibit E. 's Id. '+ Those are loans that are in some stage of the process starting from initial customer contact but which have not yet closed.The 9r loans are tlose which Counter-Plaiitiffs sought to take with them when they left but which Counter-Defendantsenjoined. They are tle basesof Coun-ter-P1aintiffs' breach of contract and interferenceclaims. ts Exhibit A. Counter-Defendantshave produced to Counter-Plaintiffs settlement statements for those which have closed;but in the interest of maintaining borrower privacy, have not anached th"*.

5r6zo3.r 126 (Page 9 of 46)

partieswouid have entered into a businessrelationship; (2) the defendant committed an

independentlytortious or unlararfulact that preventedthe relationship from occurring;

(3) the defendant either acted with a consciousdesire to prevent the relationship from

occurring or knew the interference was certain or substantially certain to occur as a

result of the conduct; and (+) the plaintiff sufferedactual harm or damagesas a result of

the defendant's interference. Rtchardson-Eagle,Inc. u. Willfam M. Mercer, Inc., 2tg

S.W'gd 469, 475 (Tex, App.-Houston frst Dist.] z0o6, pet. denied). Independently

tortious meansthat the Counter-Plaintiffsmust prove that Counter-Defendants'conduct

would be actionable under a recognized tort. WalMaft Stores, Inc. u. Sturges, 5z

S.W.gdTLL,T26(Tex. zoor).

The agreementsbetween the parties clearly define who the customersbelong to:

Excellence.There is absolutelynothing unlawful or tortious about Excellenceseekingto

retain its customers by enforcing its lawful agreementspreventing Counter-Plaintiffs

from taking them. The conduct of using the legal process to prevent the loan officers

from taking those customers is neither unlawful nor tortious.r6As is explained below,

Counter-Plaintiffs confuse legitimate protection of confidential information contractual

provisionswith covenantsnot to compete,

BecauseCounter-Defendants engaged in no tortious or wrongful conduct, it

cannot be liable for tortious interference. Summary judgrnent is appropriate for

Excellenceon Counter-Plaintiffs' tortious interferenceclaims,

'6 Indeed, the Employment Agreement (Exhibit C) has a provision allowing for injunctive relief for failure to return company information, including customerinformation, after leaving employment.

5r6eo3,r 127 (Paqe 10 of 46)

D. Counter-Plaintiffs'Anti-Trustclaims.

Counter-Plaintiffs allege unfair trade restrictions under Tpx. Bus. & Corrru.CooE

$ rS'oS.To establishthat a defendantcontracted,combined, or conspired in restraint of

trade in violation of section 1S.oS,a plaintiff must show that the alleged contract,

combination, or conspiracyis unreasonableand has an adverseeffect on competition in

the relevant market. winston u. Am. Med. Int'L,93o s.w.z d g4s, gsr-s2 (Tex. App.-

Houston [rst Dist.] 1996, writ denied). The Texas Antitrust Act does not prohibit all

restraints of trade; instead, it prohibits only those that restrain trade unreasonably,

DeSanhsu. WackenhutCorp., zgg S.w.zd 67o,687 (Tex. 1990). counter-Defendants

did not restrain trade at all, but merely enforcedreasonablenon-disclosureagreemenrs.

"Non-disclosure agreements are different than non-compete covenants."

shoreline Gcs, rnc. u. McGaughev, g-o7-964-cv, zooS wL t747624 (Tex, App.-

corpus christi Apr. 17, zoo8, no pet.); citing zep Mfg. c,o. u. Harthcock, gz4 s.w.ed

654, 663 (Tex. App.-Dallas rgg2, no writ) (affirming the trial court's summary

judgment enforcing a non-disclosure clause despite being accompanied by an

unenforceablenon-competecovenant);see also CRC-EuansFipeline Int'I,Inc. v. Myers,

927 S.W.zde59, e65 (Tex.App.-Houston [rst Dist.] 7996,no writ) (affirming the trial

court's denial of temporary injunction enforcing non-disclosureatreement, ,clespitethe

fact that such agreements do not restrain trade, because trial court could have

reasonably found that former employees did not learn any trade secrets during the

courseof their employment). While non-competecovenantsare consideredrestraints of

trade, non-disclosure agreements are not. McGaughey at it; citing CRC-Euans,g2T

S.W.zdat e65; Zep,8z4 S.W.edat 66g. Non-disclosureagreementsdo not necessarily

restrict a former employee'sability to compete with the former employer, nor do they

5r6ao3.r r.o 128 (Page 11 af 46)

prohibit the former employeefrom using, in competition with the forrner employer,the

generalknowledge, skill, and experienceacquired in the former employrnent.Zep,8z4

S.W.edat 663. Rather, such agreementsprevent only the disclosureof trade secretsand

confidentialinformation acquiredby the former employee.fd,

The agreementsdo not provide, and Excellencehas not asserted,that Counter-

Plaintiffs cannot work in the mortgagebusiness.There is no restriction on where, when

and for whom that Counter-Plaintiffs can work. There is nothing preventing Counter-

Plaintiffs from using their general knowledge, skill, and experience acquired at

Excellence.Indeed, Counter-Plaintiffs are using their knowledge and skill and working

with a competitor in the same market. What Counter-Plaintiffs cannot d.o is steal

Excellence'sexisting customers.Excellence'sefforts to prevent them from doing so are

not a restraint of trade. As such, surnmaryjudgment is proper for Counter-Defendants

on Counter-Plaintiffs'anti-trust claim,

E. Counter-PlaintiffMorton'sClaim

Counter-Plaintiff Morton pleads some ill-defined claim to alleged entitlement to

brokerage fees. Without stating any specific cause of action, counter-piaintiff Morton

allegesunlessthe 9r pipeline loans were transferred to a licensedbroker after Morton's

termination, she is entitled to a brokerage fee.'z There is no authority cited for this

position' Summary judgment is proper for Counter-Defendantsfor at least tvvoreasons:

1) there is no recognizable cause of action for the alleged harm and z) nothing in Morton's ErnploymentAgreemententitles her to compensationafter termination.

'z This appears to be what Counter-Plaintiff is contending although it is difficult to ascertain.

S162o3.1 11