Fired Sprout workers to drop class action seeking lost wages

Former Sprout Mortgage workers are dropping their long-running lawsuit to recoup lost wages from the failed lender. 

Attorneys for plaintiffs told a federal court last week they intend to file a voluntary dismissal, which would end the nearly four-year-old case. The expected wind down wraps a difficult journey for the laid-off workers, who were at one time set to receive a $3.5 million settlement before a series of setbacks. 

The dismissal is based on former CEO Michael Strauss' financial situation, attorneys said. The embattled executive has all but disappeared from legal proceedings, including Sprout's bankruptcy case, and has previously been accused of actions akin to money laundering. 

"Defendant Strauss has essentially no assets of any value that plaintiffs would be able to reach even if they were able to secure a default motion against Strauss in this case," they wrote. 

According to public records, Strauss owes six- and seven-figure liens on two upscale New York properties and $3 million in state taxes. Around 300 creditors are also still seeking over $87 million from the non-qualified mortgage lender which abruptly shuttered in July 2022.

A magistrate judge OKed the filing Monday. Attorneys said they'd give notice to the over 150 individuals who filed consents to join the lawsuit, so they can weigh pursuing individual suits.

Counsel for plaintiffs didn't respond to requests for comment Monday. 

How the wage case unfolded

A Sprout executive on July 6, 2022 allegedly told hundreds of employees in a video call they would be laid off, and did not tell them whether they would receive their final paychecks. Employees quickly sued the lender for their pay, and for health insurance coverage which was allegedly retroactively rescinded months before the call. 

Strauss and Sprout agreed to a settlement with former workers in early 2023, and approximately 800 employees were eligible to receive compensation, attorneys then said. With Sprout's concurrent bankruptcy case proceeding however, a federal judge halted the deal, including holding $1.95 million already held in escrow by a settlement service. 

Plaintiffs then attempted to hold three former Sprout leaders liable, including the executive who hosted the fatal video call. A federal judge later cleared them of wrongdoing.

The former workers turned their attention to Strauss, although a federal judge earlier this year threatened to close their lingering case if the workers couldn't serve notice on the CEO. Plaintiffs eventually served Strauss at eight separate addresses, but provided no updates before last week's decision to dismiss the suit.

Strauss' wife has since founded another mortgage company, Southern California-based Investor Funding Corp., although it's unclear if Michael Strauss is participating in the new business.