A federal judge in New York has decided to dismiss the majority of accusations made by a former top executive at Better against the digital nonbank lender and other high-level executives, including claims related to labor and securities laws violations.
However, Judge Analisa Torres, from the federal court of the Southern District of New York, ordered on Sept. 29 that the case will proceed with other claims, such as intimidation and retaliation, according to court filings.
Sarah Pierce, former executive vice president for customer experience, sales and operations, filed a lawsuit on June 8, 2022, in the New York federal court, including Better Holdco, its founder Vishal Garg and general counsel Nicholas Calamari as defendants.
In the suit, Pierce asked for around $200 million in compensatory damages, punitive damages and civil penalties, interests and other costs.
In her decision, Torres granted Better a motion to dismiss several claims, among them that the company violated the Sarbanes-Oxley Act and the Dodd-Frank Act, which prohibits employers generally from retaliating against employees and whistleblowers.
Garg and Calamari’s motion to dismiss Pierce’s claim for breach of fiduciary duty, intentional infliction of emotional distress and tortious interference with contract were also granted.
Meanwhile, Torres maintained Pierce’s accusations against Better related to the New York Labor Law § 740 retaliation and the defamation claim under the theory of respondeat superior. Also, Garg’s motion to dismiss Pierce’s defamation claim was denied.
In another dispute involving Pierce and Better, Torres ruled that the former executive has to repay a loan to Better per the terms of the agreement, along with interest.
Pierce worked for the lender for over five years, reporting directly to Garg from September 2020 through February 2022. The company offered Pierce the option to purchase 450,000 shares of Better’s common stock at $5.06 per share.
The parties entered into two partial recourse promissory notes, whereby Better lent Pierce $2,277,000, with repayment for a 51% recourse. The earliest due date was 120 days after the termination of her employment. She left the company on Feb. 4, 2022.
Neal Brickman, an attorney for Pierce, wrote to HousingWire that the “Judge’s decision denying Better’s attempt to dismiss Ms. Pierce’s seminal claim – for retaliatory discharge pursuant to New York Labor Law Section 740 – to be a resounding win.”
“Ms. Pierce will now be able to conduct detailed discovery as to what actually went on with respect to her termination, including ascertaining additional facts showing that her termination was in retaliation for her engaging in protected activity,” Brickman wrote.
Regarding the defense’s next steps, Brickman wrote that they are considering commencing a 10(b)(5) action related to the “material misrepresentations that Better and Aurora made in their zeal to go public.”
“Now under public scrutiny, the stock price has tumbled from an opening public trade of $2.40 per share, to today’s price of 46 cents,” Brickman said. “Mr. Ryan and Mr. Garg continue to thrive and to pay themselves handsomely, while the shareholders suffer catastrophic [losses].”
A Better spokesperson wrote in a statement that Torres’ decision follows the Occupational Safety and Health Administration’s dismissal of Pierce’s whistleblower claims in August 2022 and the Securities and Exchange Commission’s decision not to take enforcement action against Better and end its investigation.
“Better will continue to defend itself in this lawsuit and looks forward to a favorable resolution,” the spokesperson wrote to HousingWire.
Better went public on Aug. 23 through a deal with special purpose acquisition company (SPAC) Aurora Acquisition Corp., ending a two-year journey to make the business public.
In connection with the closing of the SPAC deal, the company awarded transaction bonuses of $17 million in the aggregate to certain employees commencing on Sept. 25, including Garg, Calamari and chief financial officer Kevin Ryan, per SEC filings.
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