Better's minor court wins come amid wider scrutiny

A federal judge ruled in Better Home & Finance's favor in still-pending lawsuits with its former second-in-command, small wins for the lender amid a swirl of financial and legal developments.

U.S. District Judge Analisa Torres last week granted in part, and denied in part, Better's motion to dismiss claims from Sarah Pierce, who sued the firm last year for misleading investors and retaliation. Torres dismissed Pierce's whistleblower counts but kept intact defamation and labor law claims.

The same New York federal judge in a separate case this week granted summary judgment for Better to pursue a $2.2 million loan from Pierce; the terms of that promissory note, dictating repayment for a 51% recourse amount, remained unchanged.

The lender said Monday it was pleased with Torres' ruling in the Pierce lawsuit, but did not comment on the indemnification it's seeking. It also highlighted decisions by two federal regulators not to pursue probes related to Pierce's lawsuit.

"Better will continue to defend itself in this lawsuit and looks forward to a favorable resolution," a spokesperson said in regard to the whistleblower complaint. 

Pierce alleges, among other claims, that Better exaggerated its organic traffic to its website in an SEC filing, ignored her warnings ahead of an ill-fated mass firing via Zoom, and suggests she was fired after raising concern over founder and CEO Vishal Garg's behavior. 

Counsel for Pierce called the whistleblower dismissals a victory, suggesting the judge would have had to "make new law" in weighing the claims against the firm and its special purpose acquisition company. The lawsuit was filed during the lender's pending merger with Aurora Acquisition Corp. to go public. 

"We always knew that those claims were longshots," wrote New York City-based attorney Neal Brickman in an email. "However, now we can begin to engage in discovery to uncover further evidence that Ms. Pierce's termination was in retaliation for her protected activities."

Brickman said he's also considering filing a securities fraud claim related to misrepresentations by Aurora and Better and pointed to Better's stock price, which once sat at $17.45 per share in August but as of Wednesday midday is trading at $0.43 per share. 

"All of the things that Ms. Pierce warned the company and investors about have come to fruition," he wrote. "Better is, in our opinion, everything that is bad about SPAC transactions and Messrs. Garg and Ryan, executives who do not care about investors and shareholders, but only about lining their own pockets."

The statement refers to Chief Financial Officer and President Kevin Ryan, who unlike Garg, is not a defendant in the Pierce lawsuit.

Garg, Ryan and general counsel Nicholas Calamari, also a co-defendant, will receive multimillion dollar bonuses in connection with the SPAC merger, according to a Securities and Exchange Commission filing last week. The company awarded $17 million in transaction bonuses to certain employees including $9.7 million to Garg, $2.95 million to Ryan and $120,000 to Calamari. 

Half of the bonus was payable in cash 15 days after specified people entered into the agreement, the filing said, while the remaining half is due within 15 days of the firm's quarterly earnings report at the end of a "Retention Period." That period is defined as the last day of the second consecutive quarter when the firm achieves positive cash flow under non-generally accepted accounting principles. 

If the company remains unprofitable under that standard by Sept. 30, 2028, the unpaid portion is forfeited. In its most recent report, Better tallied a $45.5 million GAAP net loss in the second quarter. 

A spokesperson for Better didn't immediately respond to a follow-up question Wednesday regarding the timing of the bonus payments. 

The lender last week also quietly ended a lawsuit from a media giant seeking $1.8 million in alleged ad placement payments. Dotdash Meredith sued Better in March for nonpayment for ads across its brands including Investopedia and Martha Stewart. Attorneys for both parties signed a voluntary dismissal, according to court records, and Better this week declined to comment on the case. 

Better also skirted an inquiry about alleged layoffs following its August merger, which were first reported by Insider. In a lengthy comment, the lender said it's hiring more seasoned professionals who can sell in the difficult market, and referenced difficult lending conditions. 

"As a publicly listed company, we're focused on making prudent and disciplined decisions that account for market dynamics so that we can continue to serve both customers and shareholders for the long-term," the firm said in a statement.