West Capital Lending is facing mounting legal pressure from rival lenders and a former employee after withdrawing its federal lawsuit accusing loanDepot of unlawful loan officer compensation practices.
The Irvine, California-based brokerage voluntarily dismissed the case without prejudice on Oct. 20, three weeks after a federal judge found it had failed to sufficiently connect loanDepot's alleged compensation violations to its own financial losses.
Meanwhile, loanDepot is pursuing separate allegations involving employee recruitment and confidential borrower information. Griffin Funding is seeking millions in damages over alleged customer diversion, and a former West Capital employee has brought wage-and-hour claims.
The disputes put several industry practices under scrutiny, including LO compensation, employee classification, and ownership of borrower leads.
Federal Judge Finds West Capital Lacked Standing
West Capital sued loanDepot in March, alleging the lender's production manager compensation structure violated the Truth in Lending Act and Regulation Z by tying incentive pay to loan pricing and profitability.
The brokerage claimed the arrangements encouraged managers to offer higher-priced loans while selectively discounting rates to undercut competitors.
But U.S. Magistrate Judge John D. Early found that West Capital had not plausibly demonstrated how the alleged violations caused its competitive losses.
"Many businesses can and do undercut competitor prices without violating the law," Early wrote in his Sept. 29 ruling, obtained by NMP.
The judge granted loanDepot's motion to dismiss in part, giving West Capital 21 days to amend its complaint. Instead, the brokerage voluntarily dismissed the federal action without prejudice on Oct. 20.
The ruling addressed West Capital's standing to bring the case, not whether loanDepot's compensation practices violated federal law.
loanDepot Presses Borrower Data Claims
Separately, loanDepot's 2025 lawsuit against West Capital and its co-founders alleges the brokerage improperly recruited more than 175 loan originators and misappropriated confidential borrower information. West Capital has denied the allegations.
The dispute has since turned to leads purchased from LendingTree, with loanDepot asking an Orange County court to compel West Capital to answer questions about the leads, according to a report by National Mortgage News.
loanDepot alleges West Capital resold those leads to originators classified as independent contractors, raising questions about the handling of borrowers' nonpublic personal information.
Griffin Funding Seeks $11.1 Million
West Capital also faces a lawsuit from San Diego-based Griffin Funding, which alleges former employees diverted customers and proprietary information after joining the brokerage.
Griffin alleges at least 203 loans were diverted, causing more than $3.7 million in lost revenue, and is reportedly seeking up to $11.1 million in treble damages.
A separate wage-and-hour lawsuit reportedly brought by former West Capital loan closer Emily Cox alleges unpaid overtime and minimum wages. The proposed class could include more than 50 employees, according to published reporting.
The allegations remain unresolved.
Regulatory Scrutiny Adds to Pressure
The litigation follows regulatory actions involving West Capital's lending operations.
In July, the Washington State Department of Financial Institutions entered a consent order requiring West Capital to pay a $75,000 fine and $3,000 in investigative costs to resolve licensing and compliance allegations. The brokerage neither admitted nor denied the allegations.
The company also reached a multistate settlement in 2023 involving allegations of unlicensed origination activity, with approximately $464,000 in assessed penalties, including amounts conditionally held in abeyance.
Those enforcement matters are separate from the current civil litigation.
Growth Amid Legal Battles
The disputes have unfolded during a period of rapid expansion for West Capital.
The brokerage has continued recruiting experienced executives, including former loanDepot leaders. NMP previously reported the appointment of Giorgio Bertuol as president of sales and the more recent hiring of Michael Guazon as senior vice president of sales strategy.
The cases reach beyond a rivalry between two California companies. They involve the boundaries of employee recruiting, the handling of borrower information, and the compensation arrangements that shape how loans are priced and sold.
The federal ruling also illustrates the difficulty of challenging a competitor's compensation practices in court. West Capital alleged loanDepot violated federal rules, but the judge found it had not sufficiently established that those alleged violations caused the brokerage's losses.
That leaves the underlying compensation allegations unresolved, while separate disputes over recruitment, borrower leads, and employment practices continue.
