South Carolina-based retail lender Movement Mortgage filed a lawsuit this week against Todd Scrima, founder and president at its competitor Summit Funding, accusing him of gaining illegal access to Movement’s confidential financial files and also scheming to divert Movement’s customers toward Summit.
It’s the latest salvo in a legal battle that started after the three of Movement’s veteran sales executives — Deran Pennington, Matt Schoolfield and Chris Shelton — left for Summit in July.
On Nov. 17, HousingWire reported that Movement accused Summit and its former sales executives of poaching. The November lawsuit included claims of misappropriation of trade secrets, data theft and improper solicitation against Summit and former Movement’s employees.
This new lawsuit is different — the target is Scrima himself.
“He has engaged in corporate espionage against Movement for the purpose of benefiting himself and his competing company, Summit Funding, Inc.,” attorneys for Movement wrote in the document, which was filed on Dec. 12 in the U.S. District Court, Eastern District of California.
L. Scott Bruggemann, senior vice president and general counsel at Summit, wrote in an emailed response to HousingWire that, at this time, the company “does not have anything to add to its prior comments.”
In response to the first lawsuit filed by Movement in November, Bruggemann wrote that the company continues to compete for talented individuals “fairly” and according to “legal and regulatory requirements.”
Scrima did not immediately respond to a request for comments.
Movement’s attorney Ari Karen, partner at Mitchell Sandler, said in a call with HousingWire that the lawsuit was filed separately from the first in North Carolina in November due to Scrima’s location in California. Scrima, according to him, orchestrated a “premeditated theft of information” scheme.
“Things do happen in the recruiting process. There are a lot of balls in the air; people can make mistakes, and some are innocent, some are not. But I think what distinguishes this case is the outright orchestration, the level of intent,” Karen said. “They literally went out and said: ‘We’re going to go steal Movement’s staff and their secrets. I rarely see that level of premeditation.”
According to Karen, about 50 employees left Movement to join Summit – and it’s unclear at this point whether Summit is still using the information it allegedly stole, he said.
Founded in 2008, Movement says it has over 4,500 employees across 775 locations in all 50 states. The company claims Summit, founded in 1995 by Scrima, “had fewer than 200 loan officers until Scrima engaged in a desperate and unlawful scheme to copy Movement’s successful business model.”
Specifically, Movement accuses Scrima of initiating a corporate raid of Movement’s employees using the company’s former high-level managers. It included stealing trade secrets and computer systems.
The lawsuit names nine of Movement’s former employees who allegedly transitioned to Summit as part of the scheme and had confidentiality and non-solicitation agreements. Scrima, according to the lawsuit, knew about these agreements.
The document brings an alleged text message sent on May 24 at 1:08 p.m. by Scrima to a group of executives at Summit saying he had a “great call” with Deran “working on the first 90-day plan” and providing a contact of a Movement employee.
After that, the lawsuit states the Movement employee mentioned by Scrima began accessing the company’s database, which contains “highly proprietary information regarding its financials, employees, compensation, borrowers and loan products.”
The company claims the data was later shared with Summit executives, and the employee transitioned from Movement to Summit.
On another occasion, the lawsuit states that Scrima texted Summit’s chief growth officer, Brian Mitchell, asking for Movement’s profit and loss information (P&L). In response, Mitchell asked if Scrima was sure he wanted Movement’s “proprietary/confidential information on Summit servers.”
Scrima replied, “Not on our servers. Can you maybe set up misc WhatsApp account and have them texted there?” According to the lawsuit, Scrima got the information and told executives to “dissect” them.
Per the lawsuit, Mitchell was fired from Summit in November after bringing his complaints about these actions to the company’s legal counsel. In a call with Movement representatives that he agreed to record, Mitchell said Summit had data on Movement’s employees and their wages and some 9,000 borrowers’ information. A transcript of the call is attached to the lawsuit.
“At all times, Scrima knew that his conduct was wrongful. Indeed, the mere fact that he instructed staff to hide Movement files through a WhatsApp account rather than maintain them on Summit’s servers speaks to the conscious nature of his activities,” the lawsuit states.
Movement also accuses Scrima of creating a scheme to divert its customers to Summit through its “resigning loan officers.”
The lawsuit cites an email from an LO sent in October to a borrower asking to hold off on locking and wait to close the loan with a “sister company” when rates drop. He indicated the name of a Summit employee for the new loan application. The LO who sent the email later resigned to join Summit, the lawsuit states.
“Scrima established a supposed Portfolio Retention Department at his company to facilitate this transfer of information” of potential borrowers from one company to another, according to the lawsuit.
Movement requests the court $5 million in actual damages and not less than $25 million in punitive damages, among other things. It demands a jury trial.
