PrimeLending claims a competitor raided 100 of its employees in September, stripping it of about 10% of its workforce and $30 million in annual revenue, according to a new lawsuit.
The Dallas-based mortgage arm of PlainsCapital Bank accuses First Community Mortgage of misappropriation of trade secrets in the complaint filed last week in the U.S. District Court for the Middle District of Tennessee. FCM allegedly coordinated the scheme with the aid of a longtime PrimeLending recruiting partner, culminating in the departure en masse just before Labor Day.
“Rather than investing the time to organically develop its own regional mortgage operation — or negotiating a legitimate acquisition — FCM chose to covertly target PrimeLending’s operations,” wrote attorneys for PrimeLending in the suit.
A spokesperson for PrimeLending declined to comment, while a representative for FCM didn’t respond to a request for comment Thursday. An attorney for PrimeLending directed inquiries to the company’s incoming lead counsel who also didn’t respond. It’s the latest legal battle between lenders in the war for talent against a backdrop of declining mortgage activity and mass layoffs.
On Sept. 1, approximately 100 of PrimeLending’s staff in its Mid-America regional division, including a regional manager and four branch managers, resigned and left for FCM, the suit said. FCM in October announced a significant onboarding in September, including identifying a former PrimeLending manager.
On the day of the mass departure, counsel for the Murfreesboro, Tennessee-based FCM allegedly sent a letter to PrimeLending claiming it did not accept nor request the assistance of workers subject to non-solicitation agreements for the hirings.
FCM in the letter said it hired Atlanta-based mortgage recruiting firm CAVU Partners and its founding partner Gary Sindall to assist with its recruitment efforts. PrimeLending said it entered a recruiting agreement with CAVU and Sindall in 2011, and granted them a wealth of company information to assist with their recruitment efforts.
CAVU and Sindall worked with PrimeLending through 2022, although their business agreement that included non-solicitation clauses expired in June 2020, the suit said. Despite the agreement lapsing, the sides continued their business partnership.
As late as this past July, Sindall inquired about the production volume of loan officers he and CAVU helped recruit, because their compensation for placements was based in part on post-placement production volume, according to PrimeLending. When a PrimeLending employee provided the information, Sindall allegedly quickly submitted an invoice.
“In other words, CAVU and Mr. Sindall sought to be paid by PrimeLending while they simultaneously eviscerated the company’s Mid-America operations,” wrote counsel for PrimeLending.
CAVU and Sindall are not named as defendants in the lawsuit, and Sindall didn’t respond to a request for comment Thursday.
FCM continued to harm PrimeLending following the mass exodus, PrimeLending claims. The lender hijacked a PrimeLending Google business profile for an Indianapolis office by replacing the company’s logo and information before deleting the profile weeks later, the suit said.
PrimeLending is also suffering from its now-reduced physical footprint, making rent payments on offices vacated following the mass departure, it said. The company listed four offices across Indiana, Ohio, Michigan and Wisconsin where damages from the office costs exceed a combined $153,000.
Damages could also stem from borrower activity, PrimeLending explained. The lender could incur early payoff penalties for departed personnel who target borrowers who originated their mortgages with the firm, prompting payoffs to investors in those loans.
Along with damages, PrimeLending is seeking unspecified disgorgement of FCM profits obtained through the wrongful solicitation of its employees and enjoining the lender from further misappropriating its trade secrets. The sides are due to appear in court via telephone conference Feb. 14.
PrimeLending reported a $21.3 million loss in the third quarter as annual loan production fell 46% year-over-year, according to an earnings report by PlainsCapital Bank parent Hilltop Holdings. Recently, PrimeLending announced a joint venture with Southlake, Texas-based home builder Kindred Home Loans, a familiar strategy for lenders seeking to boost business.
FCM, founded in 2002, is a subsidiary of First Community Bank of Tennessee. The lender and servicer touts wholesale, correspondent and retail divisions and said it funded nearly $3.5 billion in mortgage volume in 2021. The company operates in 46 states and offers conventional, government-insured and home opportunity loans for foreign nationals.