Michigan Judge Has Rules Rocket Mortgage Noncompete Agreements Are Unenforceable And Violate Michigan Law
A Michigan judge ruled on Friday that Rocket Mortgage noncompete agreements are void and unenforceable. Thus, dealing a blow to the lender in its long-running legal battle with Swift Home Loans. Wayne County Judge Brian R. Sullivan issued the ruling. Judge Sullivan cited the state’s Antitrust Reform Act. Under the law, post-employment covenants to restrict competition are only enforceable if they reasonably protect a company’s interests.
A Rocket spokesman said in a statement that the company “categorically” disagrees with the judge’s opinion. They said the company plans to appeal.
Numan said he’s pleased with the judge’s decision. He noted that the noncompete provisions in this case are:
“Not fair to the loan officers, because at the end of the day, they’re just trying to make a living for themselves and their families. They should be allowed to make a living and not be handcuffed just because Rocket doesn’t want someone to be a broker,” Numan said in an interview. “There’s no confidential information being used or taken, nor any past client information, in this case.”
Rocket first sued in 2022. They alleged its former employees violated noncompete clauses in their employment when they joined Swift. Numan launched Swift in late 2020. Swift initially partnered with Rocket’s wholesale channel Rocket Pro. They soon switched and signed with competitor United Wholesale Mortgage (UWM).
The rivalry between Rocket and UWM escalated in March 2021. UWM announced it would no longer work with brokers also doing business with Rocket Mortgage. Rocket followed with a broader lawsuit in September 2022 that sought, in part, to bar former employees from competing.
Sullivan noted that the defendants did not dispute the validity of Rocket’s confidentiality and non-solicitation provisions. Numan also claimed he complied with them. However, after exhaustive discovery, Rocket did not allege any violations of these clauses. The judge also found no evidence the former employees unfairly competed against Rocket.
Sullivan also wrote:
Rocket Argued Their Extensive Training Justified The Lawsuit
Rocket also argued that its extensive training justified the restrictions in the Swift Home Loans lawsuit. Company lawyers cited an affidavit from Rocket VP of Learning and Development Julie Edwards. She claimed the lender invests at least $42,500 per banker.
But Sullivan dismissed the affidavit. He said it lacked supporting detail. He added that it also relied on undisclosed information rather than personal knowledge. In addition, he also noted that the training only lasted “roughly one month.” This month was only used to help new hires pass the mandatory SAFE Act exam.
The judge further rejected claims that customer information had been misused. Sullivan described Rocket as “essentially a telemarketing operation.”
Rocket Mortgage and it’s predecessor, Quicken Loans was known for it boiler room tactics. Rocket requires each originator to make 6,500 to 8,000 calls annually.
By contrast, Swift buys 120,000 to 150,000 leads each month and makes about 800,000 calls. Repeat business accounts for only 1% to 2% of its volume.
The spokesperson for Rocket mentioned other two cases. In these cases, 3rd Circuit Court judges Muriel Hughes and Annette Berry issued rulings with opposite opinions.
Rocket’s lawyers point to other cases in their briefs:
However, Sullivan disagreed. He wrote that the House of Lending and F5 Mortgage cases differ. Why? It’s because Rocket identified former employees who took potentially confidential information.
