After closing its doors due to financial difficulties, a large mortgage foreclosure firm was hit with a class action lawsuit for failing to pay its employees for over three weeks of work.
According to a statement issued on May 14, 2015 by the firm’s CEO and Senior Partner, Butler & Hosch, based in Orlando, Florida, was in operation for over 40 years and focused its representation to residential mortgage lenders and servicers. Through a series of acquisitions beginning in 2013, the firm expanded its footprint to 27 states and the District of Columbia. Butler & Hosch’s CEO stated that as a result of the latest merger, “BH was (i) actively prosecuting 50,000 to 60,000 foreclosure files at any given moment, (ii) employed nearly 700 attorneys, paralegals, and back office staff, and (iii) had access to 90% of the foreclosure industry in the United States.”
The firm’s rapid and aggressive expansion ultimately culminated in its own downfall. As the CEO described it, “Unfortunately, BH grew too fast and could not merge processes from the acquired entities quickly enough to meet our economic forecasts which resulted in short term cash crunches and our ability to attract new capital in the interim.” As a result, the firm did not have enough cash on hand to fund payroll and was forced to immediately close its doors. There was no mention in the CEO’s statement of the plan for the thousands of cases being handled by the firm.
BH employees did not walk away quietly. A class action lawsuit was promptly filed in federal court in Florida on behalf of firm employees, claiming that the firm violated the federal Worker Adjustment and Retraining Notification (“WARN”) Act (29 USC 2101 et seq.) by laying off its entire workforce without providing the required advance 60 days notice. The suit alleges that the May 14 email from the CEO was the only notice given to the employees of their immediate termination, despite the fact that firm leadership was aware of the pending problem before that time. The firm had failed to pay employees for three weeks of work prior to the mass layoff. The employees demanded their unpaid wages, as well as their accrued holiday and vacation pay, retirement benefits, and COBRA benefits. Additionally, there are allegations that the firm failed to pay for employees’ healthcare costs since April or earlier, while it was still collecting premiums from employees. This has resulted in a number of former employees also being stuck with medical bills that were unpaid by health insurance.
Butler & Hosch’s rapid expansion coupled with its poor financial planning led to its demise, and its failure to properly inform employees of the firm’s condition compounded its problems. The firm has voluntarily appointed a third party fiduciary to manage the firm’s affairs post-closure.