Jury Awards $3.75M in Tech CEO’s Fraud Suit
Table of Contents
Case Background
Rahul Mewawalla, a seasoned executive with experience in technology and media, joined Freedom Mortgage Corporation in 2020. He accepted a high-level role to lead a new technology initiative. The initiative, later named Xpanse, was presented as a strategic venture backed by the financial strength of Freedom Mortgage. Mewawalla engaged in extensive discussions with Stanley Middleman, who led Freedom Mortgage and related entities. They discussed forming a new, independent tech company with Mewawalla as CEO and co-founder.
Cause
Mewawalla claimed he accepted the role based on specific promises. Stanley Middleman allegedly assured him that Freedom Mortgage would inject substantial assets, revenues, and technology into the new venture. The company would be a Delaware C-Corporation, enabling clear equity allocation. Mewawalla was promised a 5% equity stake, a $1 million signing bonus, and a $1.5 million salary. He began leading Xpanse after its incorporation on May 27, 2020. Despite these assurances, the defendants allegedly failed to transfer his employment formally to Xpanse, failed to issue the promised equity, and ultimately disregarded the agreed terms.
Injury
Mewawalla claimed he invested substantial time and energy to build Xpanse from the ground up. He managed hiring, shaped company strategy, and publicly represented the venture as its CEO. However, the defendants allegedly stalled formal arrangements, withheld compensation, and later excluded him. This, he asserted, resulted in professional, financial, and reputational harm.
Damages
The complaint sought financial compensation for lost wages, promised bonuses, and equity. Mewawalla also pursued statutory penalties under Washington law for wage withholding. In addition, he requested an equitable accounting to determine the value of the promised equity. The total claimed damages exceeded the minimum federal jurisdictional threshold.
Key Arguments and Proceedings
Legal Representation
Plaintiff: Rahul Mewawalla
Counsel for Plaintiff: Kate Sungeun Shin | Patrick R. Kitchin | Ekwan Eric Rhow | Barr Benyamin | Brandon Ross Teachout | Jonathan Michael Jackson | Miri Gold | Oliver Rocos
Defendants: Stanley C. Middleman | Michael B. Middleman | Gregory E. Middleman | Freedom Mortgage Corporation | Xpanse, LLC | Archwell Holdings, LLC | Archwell Solutions, LLC | Archwell Management, LLC | Keystone B2B, LLC | Erik L. Anderson
Counsel for Defendants: George Anthony Borden | Paul B. Gaffney | Ricardo Leyva | Ikenna Ugboaja | David Aaron Goldstein | Robert John Nolan | Stephen Holbrook Sutro
Claims
Mewawalla brought eight causes of action:
Fraud – False Promise
Fraud – Concealment
Breach of Contract
Breach of Covenant of Good Faith and Fair Dealing
Wrongful Discharge in Violation of Public Policy
Wrongful Withholding of Wages (RCW 49.48.010)
Intentional Wrongful Withholding of Wages (RCW 49.52.050)
Equitable Accounting
He demanded a jury trial and sought relief under both contract and employment laws.
Defense
The Defendants denied all material allegations made by Rahul Mewawalla and asserted that he was employed solely by Freedom Mortgage Corporation under a written agreement dated March 30, 2020. They claimed he was never employed by Xpanse or any Archwell-related entity, and that discussions regarding his equity stake in Xpanse were preliminary, non-binding, and never formalized. According to the defense, Mewawalla’s termination in January 2021 was lawful and based on cause, as permitted under the agreement.
They also rejected all fraud-based claims, stating there was no intent to deceive and no duty to disclose further information. Allegations of retaliation under California Labor Code § 1102.5 were denied outright, with the defendants asserting that no protected activity occurred. Additionally, several claims and parties were already dismissed by the Court, which the defense emphasized as further weakening the Plaintiff’s case.
Jury Verdict
In a federal jury trial, Rahul Mewawalla prevailed on claims of false promise and concealment, securing $3.75 million in damages. However, the jury found in favor of the defendants—Freedom Mortgage, Xpanse, and the Middlemans—on breach of contract and breach of good faith, rejecting those claims.
Court Documents
Court documents are available for purchase upon request at Jurimatic@exlitem.com