360 Mortgage Group, LLC v. Fortress Investment Group LLC

Background

360 Mortgage Group, LLC sued Fortress Investment Group LLC for tortious interference with 360 Mortgage’s contract with the Government National Mortgage Association (GNMA, also called Ginnie Mae). 360 Mortgage had been licensed by GNMA to service and originate mortgage loans for GNMA’s mortgage-backed securities programs. Under their Guaranty Agreement, GNMA could declare an immediate default if 360 Mortgage received three or more notices of certain violations.

Between September 2017 and May 2018, 360 Mortgage received three notices of violation concerning liquidity, mortgage prepayment speeds, and mortgage-pooling requirements. The opinion states that 360 Mortgage cured each violation within the 30-day period. In April and May 2018, an affiliate of Fortress, New Penn, bought about $5 billion of 360 Mortgage’s GNMA servicing portfolio. A dispute later arose over an alleged $11 million overpayment. Fortress representatives demanded payment, threatened to put 360 Mortgage out of business, and referred to Fortress’s relationship with GNMA. Fortress also communicated with GNMA about the dispute and sent GNMA a copy of New Penn’s lawsuit against 360 Mortgage.

In October 2018, GNMA terminated 360 Mortgage’s issuer license, citing the three notices. GNMA representatives testified that a later specialized review uncovered another violation and that the termination was based on compliance concerns, not Fortress’s influence. The court noted evidence that the termination occurred months after the third notice, after GNMA learned of the dispute, and under circumstances that witnesses described as unusual. The senior GNMA officials who made or approved the final decision were not deposed and did not provide affidavits.

Summary-judgment standard

Summary judgment is proper only when the evidence shows no genuine dispute about any fact that could affect the outcome and the moving party is entitled to judgment as a matter of law. On this motion, the court had to view the evidence and reasonable inferences in 360 Mortgage’s favor, as the nonmoving party. A reasonable jury’s ability to choose between competing accounts generally prevents summary judgment when the dispute depends on witness credibility.

Tortious-interference claim

Under New York law, tortious interference with contract requires a valid contract between the plaintiff and a third party, the defendant’s knowledge of that contract, intentional procurement of the third party’s breach without justification, an actual breach, and resulting damages. The plaintiff must also show that the breach would not have occurred but for the defendant’s conduct.

The court held that factual disputes prevented summary judgment on whether GNMA actually breached its contract with 360 Mortgage. Although the agreement gave GNMA discretion to declare an immediate default after three notices, the court found that a jury could determine whether GNMA exercised that discretion arbitrarily or in bad faith, including whether Fortress influenced the decision for reasons unrelated to GNMA’s responsibilities.

The court limited the issues that could be presented at trial. The agreement’s unambiguous language allowed GNMA to declare an immediate default when 360 Mortgage received three or more notices; it did not require the violations to remain uncured after the 30-day cure period. Therefore, 360 Mortgage could not argue that GNMA breached that specific provision. The court also ruled that 360 Mortgage could not argue that GNMA breached another provision, because the three notices and the termination letter identified the three-notice provision as the relevant one. This ruling superseded contrary analysis in the court’s earlier order on Fortress’s motion to dismiss.

The court also found factual disputes about causation—whether Fortress intentionally caused GNMA’s termination and whether the termination would have occurred without Fortress’s conduct. The court identified evidence of Fortress’s threats, its communications with GNMA, the timing of the termination, the unusual circumstances surrounding the termination, and questions about whether other issuers who received three notices were treated differently. Fortress relied on GNMA witnesses who denied that Fortress influenced the decision, but the conflicting evidence and unresolved credibility issues required a trial rather than summary judgment.

Noerr-Pennington defense

Fortress also argued that the Noerr-Pennington doctrine protected its efforts to influence government action. That doctrine generally protects petitioning the government from liability under the First Amendment. The court held that unresolved legal and factual questions prevented summary judgment on this defense.

The court did not decide the doctrine’s full scope or whether a so-called sham or corruption exception applied under these circumstances. It ruled only that, assuming one of those exceptions applied, 360 Mortgage had raised factual questions about whether Fortress’s conduct was protected petitioning activity. Viewing the evidence in 360 Mortgage’s favor, a jury could infer an improper exchange involving GNMA’s president based on the alleged threats, the timing of events, the unusual termination, and the president’s later move to lead an organization to which Fortress was a large contributor. The court stated that the legal questions about the defense would be addressed before trial through supplemental briefing.

Disposition

Judge Lorna G. Schofield denied Fortress’s motion for summary judgment. The court directed the clerk to close the motion and stated that a trial scheduling order would follow.