“Plaintiffs’ attorney offers to exit loanDepot class action over conflict of interest” —
- “Ari Karen, a partner at Mitchell Sandler PLLC, has submitted a motion to withdraw as counsel for borrowers who filed a class-action lawsuit against loanDepot in July 2025 amid a dispute over conflicts of interest.”
- “loanDepot filed a motion in November 2025 to disqualify Karen and his law firm, citing the ‘presence of significant ethical conflicts’ in a case where the lender faces accusations of steering and violation of the loan officer compensation rule.”
- “The potential conflict stems from Karen’s previous representation of Sean Johnson, a former loanDepot loan officer. Karen defended Johnson in a February 2022 arbitration after the lender accused him of breach of contract and poaching when he left to join Movement Mortgage. Karen also later served as the defense attorney for Movement in a related lawsuit filed by loanDepot in Delaware.”
- “Crucially, Johnson is the loan officer who originated the loans for the four named plaintiffs in the current class action — Nathan Johnson, Rachel DeBaun, Nathan Moor and Shawn Derrick.”
- “U.S. District Court Judge Julie R. Rubin signaled on June 1 that she would disqualify Karen and Mitchell Sandler from the loanDepot class-action case unless they produced valid conflict-of-interest waivers from the former clients.”
- “‘Absent competent waivers, Mr. Karen and his firm are operating under material conflicts of interest in the representation of Plaintiffs and putative class members in this case,’ Rubin wrote in her memorandum opinion.”
- “In a response filed the following day, Karen stated that although he had already obtained waivers from the former clients, he believed the ‘Plaintiffs’ interests are best served by withdrawing from this litigation and allowing the case to proceed with current Co-Counsel Michael Paul Smith and Smith, Gildea & Schmidt, LLC’s representation.’”
- “‘The firm and its ethics expert believe that the facts and law permit the firm’s representation of the Plaintiffs consistent with its ethical obligations and that such a determination could have been reached without further consideration by the court,’ Karen said in a statement given to HousingWire.”
- “‘However, the firm believes that it is in the Plaintiffs’ best interests for it to withdraw from the case to prevent these distractions from undermining the Plaintiffs’ ability to pursue the serious legal claims against loanDepot on behalf of the putative class.’”
- “In a court filing on Wednesday, the company also wrote that ‘Mr. Karen was informed of this serious conflict of interest nine months ago and therefore had ample time to confer with his Former Clients or withdraw; he instead forced loanDepot and this Court to expend significant resources to address this issue, but now asks the Court to wipe the slate clean without reviewing the waivers he supposedly has obtained already.”
- “‘Despite the troubling nature of this engagement, loanDepot will consent to the withdrawal of Mr. Karen and Mitchell Sandler PLLC, provided the Court clarifies in its order that they are barred from any further involvement in this case, which Mr. Karen’s proposed order fails to address,’ the filing added.”
- “Because the plaintiffs are accusing loanDepot of steering violations under the Truth in Lending Act (TILA), the court noted that Karen’s current representation could expose his former clients — including Johnson — to civil and criminal liability using confidential information he gained while representing them.”
- “In her decision, Rubin detailed how the current and prior litigation are substantially related, pointing out the inherent ethical dilemma Karen faces.”
- “‘Plaintiffs do not address the obvious scenario where Mr. Johnson is deposed by Defendant or called as a witness at trial, which would place Mr. Karen in the untenable position of having to examine his Former Client, Mr. Johnson, to establish that he — as Plaintiffs’ loan officer — steered Plaintiffs ‘towards mortgage loans that contained higher rates and less favorable terms,’ as expressly alleged at paragraph 76(b) of the Amended Complaint,’ Rubin wrote.”
- “According to the judge’s memorandum opinion, loanDepot asserted that because Johnson originated the mortgages for all four named plaintiffs, he had access to confidential information concerning the loans — including borrower names, loan numbers and compensation. The lender argued that Karen naturally would have learned this information through his representation of Johnson.”
- “Rubin, however, said in her decision that ‘the court finds that the Johnson Arbitration (and the other arbitration proceedings in which Mr. Karen served as counsel for at least one other former loanDepot loan officer) and the current action are substantially related, and that Mr. Karen had access to, and likely obtained, confidential information through his representations of the Former Clients in the arbitration proceedings, including the Johnson Arbitration, and that such information would advance Plaintiffs’ position here.’”
“Non-Clients Say Katten Attys’ ‘Double-Cross’ Bars Immunity” —
- “Two onetime Katten Muchin Rosenman LLP attorneys accused of violating a joint defense agreement in a federal criminal healthcare fraud investigation should not be able to avail themselves of a Texas attorney immunity doctrine, according to two co-defendants who allege they were offered as ‘sacrificial lambs’ in a ‘double-cross that would make good fiction.’”
- “Plaintiffs John E. Grisham and Rob Wilburn pushed back Friday against a Texas Supreme Court bid from attorneys Barrett Howell and Ryan Meyer to review a lower appellate court opinion that permitted a suit against them to go forward. Howell has since left Katten and is in solo practice, while Meyer is based in Katten’s Dallas office.”
- “Grisham and Wilburn claim they would have never been indicted in the Northern District of Texas if attorneys Howell and Meyer, who represented James Courville, had not breached their agreement to present a united defense. Courville, who acted as a confidential informant, was never charged, and the indictment charging Grisham and Wilburn was ultimately dismissed.”
- “Grisham and Wilburn said in a Friday response that the lawyers engaged in wrongful conduct outside the scope of their representation of Courville and are now attempting ‘to cast themselves as lawyers who zealously represented their client and strategically had their client act as a confidential informant’ while ignoring that they were in a ‘defense agreement for over two years with plaintiffs [and] then lied, cheated, and stole.’”
- “Howell and Meyer were on Katten’s roster when they represented Courville in a 2019 federal criminal investigation involving blood and genetic testing company Trinity Clinical Laboratory, which was partly owned by Courville, Grisham and Wilburn.”
- “Grisham and Wilburn allege the Katten lawyers are liable for fraud and misrepresentation, breach of fiduciary duty, violation of the Deceptive Trade Practices Act, breach of contract, negligence, aiding and abetting, and conspiracy.”
- “In support of their claims of wrongdoing, Grisham and Wilburn pointed to the federal misdemeanor convictions of Howell and former Assistant U.S. Attorney Carlos A. Lopez for destroying evidence in the case. Both Howell and Lopez pled guilty in February to deleting text messages after a federal judge ordered their production in 2023. Grisham and Wilburn had sought the records to prove their joint defense agreement had been violated, court records show.”
- “‘This is not a legal malpractice case, nor is it a case where plaintiffs sue opposing counsel,’ Grisham and Wilburn said. ‘Instead, it is a case seeking to hold [Howell and Meyer] liable for the substantial damage they caused not only by refusing to honor their agreements, but by actively undercutting those agreements and offering the real parties in interest as sacrificial lambs to an overzealous prosecutor.’”
- “Grisham and Wilburn said the relationship between Grisham, Wilburn and Courville was not ‘sufficiently adversarial’ to support attorney immunity given the facts and circumstances.”
- “‘When the attorney immunity doctrine applies, it is because the relationships between the non-client, the client, and the attorney fall into clearly defined sides — the client and the non-client are clearly ‘adversarial’ to one another, and the attorney is clearly facilitating his client’s mission (often to the non-client’s known detriment),’ Grisham and Wilburn said. ‘However, the opposite is true when the attorney and his client lead the non-client to believe that the attorney is looking out not only for his client’s interests but also for the non-client’s (often against a mutual adversary).’”
- “Grisham and Wilburn claim ‘they were taken advantage of by the very attorneys who had represented to them that they were working together to defeat these charges.’”
- “‘Under these facts, the attorney immunity defense is unavailable, the trial court correctly denied the Rule 91a motion, and the Court of Appeals correctly upheld that denial,’ Grisham and Wilburn said. ‘This court must follow suit to protect both the legal profession and the citizens who rely on it.’”
Stephan is the sports journalist for the Maple Grove Report.
