Pricing exceptions are widespread in mortgage — and so are the regulatory risks

Read Now

Defunct FGMC, former employees seek $1.75M settlement on WARN Act suit 

If approved by a judge, former employees will agree to release all WARN Act claims to resolve a 2022 suit against FGMC

The now defunct First Guaranty Mortgage Corporation (FGMC) and former employees – who sued the mortgage lender in a class-action suit after an abrupt layoff – are seeking a Delaware bankruptcy judge to settle a Worker Adjustment Retraining Notification (WARN) Act lawsuit for $1.75 million.

In June 2022, laid off employees filed two separate district court actions alleging WARN Act violations related to their abrupt employment terminations. The WARN actions were merged into a single case a day after FGMC laid off about 80% of its workforce in a virtual meeting in June 2022. Less than a week after the staff reduction, the lender and its affiliate Maverick II Holdings filed for Chapter 11 bankruptcy protection.

The class-action suit, representing more than 400 staff members, sought damages accounting for 60 days’ pay and employee retirement income security benefits of more than $4 million.

FGMC denied violating the WARN Act and claimed various and affirmative defenses to the WARN action. These included “unforeseeable business circumstances” and “faltering company” statutory reductions to the WARN Act’s 60 day notice requirement.

After more than a year since the suit was filed, FGMC and the ex-employees are now seeking the green light from the Delaware Bankruptcy Court for a settlement of $1.75 million in relief for all class members, according to a joint motion filed Nov. 20.

The administrator of the class counsel’s choice will distribute the settlement amount to the class members. Class representatives will receive a one-time combined total payment of $27,000 for their service on behalf of the class members.

In exchange, former employees will agree to release all WARN Act claims following the court’s approval – resolving the suit against FGMC. 

“Continued litigation will be complicated, protracted and expensive,” according to the joint motion. 

“The proposed settlement amount is $1.75 million, which is at the upper end of the WARN reserve under the [$2.5 million claims] plan. If the plaintiffs were not to succeed, they’d lose the benefit of the settlement agreement and access to the WARN Reserve.” 

Attorneys for FGMC and former employees representing the class didn’t respond to comment.

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular Articles

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please