The transition of three veteran sales executives from South Carolina-based lender Movement Mortgage to its California competitor Summit Funding led to a legal battle over poaching.
HousingWire reported in July hat Movement’s national sales director Deran Pennington, leader of the South and Central division Matt Schoolfield and leader of the Eastern U.S. division Chris Shelton parted ways after more than a decade working at the company to join Summit.
In reaction, Movement filed a lawsuit in a U.S. district court in North Carolina in early October, accusing its former executives and the competitor of misappropriation of trade secrets, data theft and improper solicitation, among other allegations.
A spokesperson for Movement said the company had no comment.
L. Scott Bruggemann, senior vice president and general counsel at Summit, said the company continues to compete for talented individuals “fairly” and according to “legal and regulatory requirements.”
“The company supports the free mobility of originators to change employers without overbearing restrictions,” Bruggemann wrote in an emailed response to HousingWire.
Pennington and Schoolfield did not immediately return to a request for comments. Shelton declined to comment.
According to the lawsuit, Pennington joined Movement in May 2008 and became the lender’s national sales director until he moved to Summit as a divisional leader in Charlotte in July. However, Movement alleges Pennington began engaging with Summit before that, signing a confidentiality agreement in March.
Movement claims that Pennington continued to receive compensation and had access to trade secrets and confidential information for four months. During this period, he also began to “surreptitiously solicit” Shelton and Schoolfield and asked them to help recruit other Movement employees, the lawsuit states.
In court documents, Summit and Pennington admitted they signed a confidentiality agreement in March but denied other accusations, including that Pennington used information from Movement to target its loan officers matching characteristics that would fit Summit’s business.
Increasing the tone of the legal battle, Pennington filed a counterclaim against Movement requesting about $9.8 million in unpaid compensation.
Movement also claims Schoolfield and Shelton signed an agreement that prohibited them from soliciting or recruiting its employees for 12 months after leaving the company.
Still, they allegedly did it via social media and phone apps, hiring at least five loan officers and market leaders and soliciting dozens of employees, the company claims.
The lawsuit states that to facilitate the eventual solicitation of employees, Schoolfield said in a call with regional leaders that the company would cut loan officer compensation by 50% to 60% effective Aug. 1, 2023.
The company admits that, at one point, its leadership privately discussed that as an option for addressing the declining real estate market, but no decision was made.
To help in the purported poaching scheme, Movement accuses Shelton’s assistant, Linda Plymale, of “systematically accessing and copying Movement’s confidential and proprietary information and trade secrets,” mainly related to DOMO, the company’s loan officer performance system.
According to the document, from January through April, Plymale accessed DOMO only five times. Meanwhile, in May and June, Plymale accessed the system 14 times.
“Plymale downloaded a number of specific reports that she rarely examined and a combination of reports that she had never previously accessed, demonstrating an intent to evaluate loan officer performance from a variety of perspectives,” the lawsuit states.
Plymale, listed as a defendant, did not immediately respond to a comment request.
Defendants include Heather Frye and Josh Covett, two market leaders who also transitioned to Summit. At Movement, they were responsible for overseeing, recruiting and maintaining loan officers, the lawsuit states. They did not immediately reply to a request for comment.
In early November, Movement had a partial win in the case when Judge Robert J. Conrad issued an order stipulating that Pennington, Shelton, Schoolfield and Plymale identify to Movement all devices in their possession, custody or control as of the complaint’s filing date.
The parties “shall work to remove and return confidential or proprietary Movement data” and, in addition, the defendants “shall not directly or indirectly solicit any Movement employee to leave to join Summit,” according to the judge’s order.
Movement, founded in 2008, has more than 4,500 employees across 755 locations in the country, with licenses in 50 states, per the lawsuit.
The distributed retail lender was the 19th-largest U.S. mortgage lender in the first nine months of 2023, per Inside Mortgage Finance (IMF) estimates. It originated $15.46 billion from January to September, down 19.4% year over year.
Summit is a far smaller player, originating $1.6 billion in the same period, according to mortgage data platform Modex.