Movement sues Summit, former veteran sales executives for poaching

Key Takeaways:

– Movement claims that former employee Pennington engaged with Summit while still working for Movement, soliciting other employees and using confidential information.
– Summit and Pennington admit to signing a confidentiality agreement but deny other accusations.
– Pennington has filed a counterclaim against Movement for unpaid compensation.
– Movement also accuses former employees Schoolfield and Shelton of soliciting and recruiting its employees in violation of their agreement.
– Movement alleges that Shelton’s assistant accessed and copied confidential information related to the company’s loan officer performance system.
– Defendants Frye and Covett, who transitioned to Summit, are also named in the lawsuit.
– A judge has ordered the defendants to identify and return any devices with Movement’s confidential data.
– Movement is a large mortgage lender with thousands of employees and licenses in 50 states.
– Summit is a smaller player in the mortgage industry.

HousingWire:

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

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Property Chomp’s Take:

Hey there! Let’s dive into the latest legal battle between Movement and Summit. Movement, a distributed retail lender, is suing Summit, a smaller player in the mortgage industry, for allegedly poaching its employees and stealing trade secrets. It’s a classic case of a big fish accusing a smaller fish of unfair competition.

According to the lawsuit, Movement claims that one of its former employees, Pennington, started engaging with Summit before officially leaving Movement. They allege that Pennington continued to receive compensation and had access to confidential information while actively soliciting other Movement employees. In fact, Pennington is said to have recruited Shelton and Schoolfield, who then went on to hire several loan officers and market leaders from Movement.

Summit and Pennington have admitted to signing a confidentiality agreement but deny the other accusations made by Movement. Pennington has even filed a counterclaim against Movement, seeking unpaid compensation of around $9.8 million. It seems like both sides are digging in their heels and preparing for a long legal battle.

To make matters worse, Movement also accuses Shelton’s assistant, Linda Plymale, of accessing and copying their confidential and proprietary information. Movement specifically points to DOMO, their loan officer performance system, as the main target of Plymale’s actions. Movement claims that Plymale accessed DOMO more frequently after joining Summit, suggesting that she had intentions to evaluate loan officer performance from various perspectives.

The case took an interesting turn when Judge Robert J. Conrad issued an order in favor of Movement. The order requires Pennington, Shelton, Schoolfield, and Plymale to identify and return any devices in their possession that contain Movement’s confidential data. Additionally, the defendants are prohibited from directly or indirectly soliciting any Movement employee to join Summit.

Movement, with over 4,500 employees across 755 locations in the US, is a significant player in the mortgage industry. In the first nine months of 2023, they ranked as the 19th-largest mortgage lender, originating $15.46 billion in loans. On the other hand, Summit is a smaller player, originating $1.6 billion in the same period.

It will be interesting to see how this legal battle unfolds and what evidence will be presented in court. Both Movement and Summit are claiming to have acted fairly and within legal boundaries, so it will ultimately come down to the judge’s interpretation of the facts. In the meantime, the mortgage industry will be watching closely to see how this case may set a precedent for future employee poaching disputes.

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