As the Big 5 of the National Association of Mortgage Field Services (NAMFS) have paid tens of millions of dollars in settlements and jury awards; as the remainder, including ServiceLink, face pending litigation with respect to the Dynamex ruling recently issued by the California Supreme Court in Dynamex Operations West v. Superior Court, many are asking what the fallout is going to be with respect to US Department of Housing and Urban Development (HUD) contracts going forward. Specifically, in Lawson v. Grubhub Inc, U.S. District Court for the Northern District of California, No. 3:15-cv-05128, U.S. Magistrate Judge Jacqueline Scott Corley originally ruled that Lawson, a former Grubhub driver was not an employee. However, after the Dynamex ruling, Corley reversed her opinion and appears poised to drop the matter into the lap of the state court,

A state court ought to decide if Grubhub must prove its delivery driver was an independent contractor and not an employee under a new game-changing state labor standard, a federal judge said Thursday. “It would make the most sense to have the California courts decide this California law issue,” U.S. Magistrate Judge Jacqueline Scott Corley said during Thursday’s court hearing.

The outcome of that ruling is absolute in a California courtroom — Lawson would be an employee. And with additional litigation pending against multiple NAMFS members, on both coasts of the US, the reality is the time for HUD to issue guidance has come.

Everyone in the Mortgage Field Services Industry is well aware of the fact that NAMFS members have done everything in their collective power to skirt the law over the past several years. In 2012, Brad Hurst sued Buczek Enterprises, claiming to be an employee as opposed to being an independent contractor. Buczek Enterprises paid six figures to make the case go away; however, not before the federal court issued a scaything Opinion. Then came Fred Bowerman whom sued then Field Asset Services now Assurant Field Asset Services in federal court. The 51 page ruling which the Court handed down not only reaffirmed the Hurst Decision, it chastised Assurant in not to friendly terms. In only seven of 154 cases — the rest are still pending as Assurant forced singular cases hoping to forestall damages — the jury handed down $2.2 million in verdicts. Happening nearly simultaneously, Bennett Vinson sued then Asset Management Specialists (AMS), now owned by Mortgage Contracting Services (MCS). Seeing the writing on the wall, MCS paid millions in settlements and took a different tactic. MCS rewrote their Master Services Agreement (MSA) with language so draconian in its forbidding of any future class action litigation that many within the California legal community have questioned the constitutionality of the MSA itself.

California is merely Ground Zero for litigation; California’s ability to generate revenue is the litmus test going forward. And as the federal judiciary is loathe to deal with the matter, make no mistake whatsoever that Guardian Asset Management is going to shoulder the brunt, on the federal side, of that which MCS and Assurant (now Nationstar – Xome) and ServiceLink are dealing with on the GSE and state level sides. Here is a brief summary of how the impact of Dynamex plays out in 22 states,

Guardian appears to be caught like a deer in the headlights. Guardian, the only HUD Management and Marketing (M&M) Field Service Manager (FSM) to survive contract realignment under HUD M&M FSM 3.12 solicitation, will be sued. The only question which presents is when and how costly will the litigation be. This is because the key contract which Guardian possesses is in California — Ground Zero for Dynamex. And if anyone believes that HUD, or NAMFS, or anyone will come rushing in to rescue Guardian, they are sadly mistaken. And the larger problem for this is that if Guardian does not successfully defend against this claim, it will become law throughout the US regardless of state laws prevailing as federal law supersedes state law.

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