It stands to reason that companies want to recruit the best employees that can help them stay competitive. However, many argue that there is a right and wrong way to recruit talent, which is the crux of a legal battle between loanDepot and Movement Mortgage.
The former filed a lawsuit on June 22 in a federal district court in Delaware, accusing Movement of unlawfully poaching more than 25 loanDepot employees over three months, damaging its business, and “effectively crippling” several branches, among other allegations.
“Inducing individuals to breach contractual prohibitions against employee solicitation and misuse of confidential information in order to steal business and customer relationships crosses the line into unfair competition, and we will continue to vigorously protect our interests,” said a loanDepot spokesperson in a statement.
The lawsuit argues that Movement’s targeting and hiring strategies were meant to steal company secrets and confidential information while convincing loanDepot employees to breach their contracts with the lender and bring others along.
“Movement knew of these contractual restrictions but willfully induced these employees to flout them,” the lawsuit says. “Movement has also engaged in numerous acts of unfair competition designed to decimate numerous loanDepot branches.”
While Movement is the only defendant named in the case, the lawsuit points out six former loanDepot employees with “access to loanDepot’s confidential and trade secret information” who violated their contracts when jumping to Movement.
That list includes four loan officers from Pennsylvania—John DePaul, Joseph Kunzig, Kevin Luchko and Anthony Rizzello—Clay Higgins in Florida and Sean Johnson in Virginia. loanDepot indicated that it has “commenced arbitrations” against specific people on the list.
“By virtue of their positions at loanDepot, the former employees were entrusted with volumes of non-public, personal information of customers, applicants and borrowers protected by federal and state laws and regulations,” the lawsuit said.
It outlines several instances in 2021 where the South Carolina-based lender “orchestrated” several resignations from loanDepot branches across Virginia, Pennsylvania, Maryland, Florida, Delaware and Washington, D.C.
The lawsuit claims that each of the six former employees signed incentive agreements prohibiting them from soliciting loanDepot’s employees and unauthorized use or disclosure of its trade secrets.
LoanDepot alleges that in the weeks leading up to the listed employees’ departure, they “accessed and misappropriated confidential and trade secret documents about loanDepot’s business, its employees and its clients; information that, in the hands of Movement, was used to convert customers to Movement and away from loanDepot.”
The alleged poaching tactics included all-expense paid recruiting trips to Movement’s headquarters in South Carolina and, in some cases, offering a $125,000 signing bonus to any loanDepot loan originators to breach their contracts and come to Movement.
“As is evident from the timing and the nature of the resignations, Movement and the former loanDepot employees strategically coordinated these group resignations from loanDepot with the Former Employees while they were still employed by loanDepot, in a manner calculated to cause maximum impact, disruption and harm to loanDepot.”
LoanDepot is seeking damages and permanent injunctive relief against Movement, claiming that the company misappropriated trade secrets while aiding and abetting breaches of contracts, among other alleged misdeeds.
Movement Mortgage did not immediately respond to a request for comment on this story.
