Digital Mortgage Lender Better.com Moves to Dismiss Whistleblower’s Complaint


Last week, both the entity defendant (Better Holdco, Inc. or Better) and two individual defendants (Vishal Garg and Nicholas Calamari) filed motions to dismiss the Consolidated Amended Complaint (CAC) in an action brought by Sarah Pierce (Plaintiff) in the Southern District of New York.  The case alleges that the defendant mortgage company retaliated against the plaintiff, a former executive.

Plaintiff characterizes her action as being “At its core … a whistleblower retaliation claim based on the improper retaliation that Pierce suffered from Defendants in direct violation of both the Sarbanes-Oxley Act … [as amended by the Dodd-Frank Act] … and also New York Labor Law §740, as amended.”

Plaintiff alleges that until her “illegal termination” on February 4, 2022 she was “the functional equivalent of its [Better’s] Chief Operating Officer” with a base salary of $1,000,000 a year. Plaintiff describes Better as a “digital mortgage company which operates an online platform for mortgage originations and related services …”  She identifies Vishal Garg as Better’s “Founder, CEO and significant shareholder…” and Nicholas Calamari as Better’s general counsel.

According to Plaintiff, Better announced in May 2021 that it planned to go public through a merger with a SPAC, Aurora Acquisition Corp, a transaction that has not yet closed. Accordingly, Better is still privately held.

Plaintiff alleges that beginning “at least from November 2021 onward” she voiced concerns to senior management and the board about misrepresentations and improprieties by company leaders. As a result, the “ … CEO [Vishal Garg] and the company retaliated against her by scapegoating her for the company’s deteriorating financial state …, ” conduct that allegedly is on-going.

The CAC alleges nine causes of action: Violation of New York Labor Law §740; Violation of Sarbanes-Oxley; Dodd-Frank Retaliation; Breach of Fiduciary Duty (on behalf of Better Holdco and its shareholders); two counts of Defamation; Intentional Infliction of Emotional Distress; Tortious Interference with Contract; and Breach of Contract.

Different causes of action are directed at different defendants, although the CAC is sometimes unclear in this regard.[1] The two individual defendants filed a joint motion to dismiss and Better filed a separate motion to dismiss.  Notwithstanding any lack of clarity in some instances on which defendants are subject to a particular cause of action, it does appear over-all that the defendants seek to address the cause of action in which that defendant is implicated. Neither motion addresses all the causes of action.

Collectively, the two motions raise many issues. Perhaps of most general interest, Better argues for dismissal of the Sarbanes-Oxley claim because that act only applies to public companies and for dismissal of the Dodd-Frank retaliation claim because Plaintiff alleges that she did not register as a whistleblower withe the SEC until three months after she left Better, which step Better was not even aware of. “Because an employer obviously cannot retaliate against an employee ‘because of’ activity of which it is unaware, Plaintiff’s Dodd-Frank retaliation claim fails to state a claim.”  Regarding §740 of the New York Labor Law, Better argues that an amendment to the statute that broadened the whistleblower protections only after the time after Plaintiff’s cause of action accrued. Prior to January 26, 2022,  Better notes that the whistleblower protections only applied to employees who reported a “substantial and specific danger to public health and safety.”  In addressing the Breach of Fiduciary claim, he individual defendants’ argues that it a derivative claim that fails to allege demand futility on a director-by-director basis as required by New York law.

Plaintiff’s counsel is The Law Offices of Neal Brickman, P.C.  Counsel for the individual defendants is Kobre & Kim LLP. Counsel for Better is Kaplan Hecker & Fink LLP .