Greist v. LendUS, LLC

Background

Barbara Greist, Susan Schell, and Melanie Green brought a proposed collective and class action against LendUS, LLC and CrossCountry Mortgage, LLC. Their amended complaint asserts eleven claims under the Fair Labor Standards Act and California law. CrossCountry moved to dismiss the operative complaint with prejudice, arguing that the plaintiffs had not adequately alleged that CrossCountry could be liable for LendUS’s wage-and-hour violations as LendUS’s successor.

Successor-liability allegations

The court explained that a successor may be liable for a predecessor’s labor-law violations based on three considerations: whether the successor was a bona fide successor, whether it had notice of the potential liability, and whether the predecessor could provide adequate relief directly. Fairness is an important consideration in applying this doctrine.

CrossCountry argued that the plaintiffs’ allegations concerning notice were conclusory and speculative and that they alleged no facts addressing whether LendUS could provide adequate relief. The court disagreed at the motion-to-dismiss stage.

The plaintiffs alleged that LendUS was a thriving company that was not in financial distress; that the acquisition created a combined company with more than 600 branches and more than 8,000 employees nationwide; and that CrossCountry continued LendUS’s mortgage-lending services and maintained its operations, employees, locations, facilities, equipment, and marketplace activities without significant interruption or change. They also alleged, based on information and belief, that CrossCountry had notice of potential employment-related claims because the acquisition’s due-diligence process should have included a review of LendUS’s records.

The court held that these allegations plausibly established notice because CrossCountry could reasonably have reviewed records during its acquisition of a thriving company and learned about liabilities arising from LendUS’s operations. The court also held that the allegations plausibly showed that CrossCountry acquired LendUS’s assets and that LendUS had been wholly absorbed into CrossCountry, making it plausible at this early stage that CrossCountry could be liable as LendUS’s successor. The court noted that CrossCountry could seek a different ruling at summary judgment, when the evidence would be evaluated after discovery.

The court further noted that CrossCountry had waived an argument concerning the first successor-liability factor by failing to raise it in its opening brief.

Disposition

Judge Araceli Martinez-Olguin denied CrossCountry’s motion to dismiss.