California Legal Brief

The Rule of Guild Mortgage Company LLC v. CrossCountry Mortgage LLC is that employees owe an actionable duty of loyalty to their employers and branch managers with management authority and discretionary responsibility owe fiduciary duties that can support aiding and abetting tort claims, under circumstances where employees conspire with competitors while still employed to recruit colleagues, divert customers, and convert business pipelines.

Appeal from judgment after orders sustaining demurrers without leave to amend in Superior Court, San Diego County.

Defendant Appellant was Guild Mortgage Company LLC — the nationwide residential mortgage lender whose Kirkland branch employees allegedly conspired with competitor while still employed.

Plaintiff Respondent was CrossCountry Mortgage LLC — the rival mortgage lender who allegedly induced and conspired with Guild employees to gut the Kirkland branch.

The suit sounded in breach of fiduciary duty, aiding and abetting tort, interference with contract and prospective economic advantage, computer fraud, and unfair competition. No cross-claims were alleged.

The key substantive facts leading to the suit were that during an 18-month period starting January 2020, CCM allegedly induced and conspired with Guild's Kirkland branch manager Christopher Flowers and other employees to recruit colleagues to CCM, divert Guild customers to CCM, and convert Guild's pipeline of loan applications to CCM while still employed and paid by Guild. The conspirators allegedly accessed Guild's computer system without authorization, copied confidential customer financial information and employee data, resulting in mass resignation of virtually all Guild's Kirkland branch employees and Guild losing the entire branch.

The procedural result leading to the Appeal: The trial court sustained CCM's demurrers without leave to amend as to all claims, ruling that (1) Guild employees owed no actionable common law duty supporting an aiding and abetting tort claim, (2) CUTSA preempted the interference and computer fraud claims, and (3) the unfair competition claim failed for lack of a predicate claim.

The key question(s) on Appeal: 1. Whether employees owe actionable duties of loyalty and whether branch managers with discretionary authority owe fiduciary duties that can support aiding and abetting tort claims 2. Whether CUTSA displaces interference claims and computer fraud claims based on conduct beyond mere misappropriation of trade secrets 3. Whether the unfair competition claim survives if predicate claims are viable

The Appellate Court held that employees owe an actionable duty of loyalty to employers even while seeking other employment, branch managers with management participation and discretionary authority owe fiduciary duties by operation of law, and CUTSA does not displace claims where the gravamen involves coordinated schemes to destroy business operations rather than mere misappropriation of confidential information.

The case is inapplicable when employees are merely seeking other employment without actively working for competitors while employed, when managers lack discretionary authority or management participation, or when claims are based solely on misappropriation of trade secrets rather than broader conspiracies to destroy business operations.

The case leaves open the precise boundaries of what level of management authority triggers fiduciary duties by operation of law, whether similar duties apply to employees below branch manager level, and the exact scope of CUTSA displacement for claims involving both confidential information and broader business destruction schemes.