NASCAR team sues lender for missing sponsorship payments

Fabio Pagani/fabioderby - stock.adobe.com

A NASCAR team is suing an Atlanta-based mortgage firm for $4.1 million for allegedly failing to make its monthly sponsorship payments. 

Jesse Iwuji Motorsports is accusing Equity Prime Mortgage of breach of contract, in a lawsuit filed Monday in the U.S. District Court for the Southern District of Florida Fort Lauderdale Division. EPM stopped paying for the sponsorship of the car competing in the NASCAR Xfinity Series in October because of troubles affecting the mortgage market, according to the complaint.

"An executive at EPM told an executive at JIM that EPM 'got margin called' and was suffering due to mortgage rate hikes, and thus EPM could not make any additional compensation payments to JIM under the EPM Agreement," wrote attorney Darren Heitner of Fort Lauderdale, Florida-based Heitner Legal.

A federal judge dismissed an amended version of the lawsuit without prejudice Wednesday, meaning it could be refiled, because of a jurisdictional question regarding the parties' diversity of citizenship. Heitner told National Mortgage News Tuesday afternoon in an email, following the dismissal of the original complaint for the same reason, that the lawsuit would be amended and refiled. 

A summons was issued to EPM Monday. Neither EPM nor JIM responded to requests for comment Tuesday

The mortgage lender and servicer signed a $6 million sponsorship agreement with JIM last November, according to the complaint and a copy of the contract attached as an exhibit. The sponsorship agreement requires EPM to pay $2,250,000 in the first year, in monthly installments of $187,500, and $3,750,000 in the second year, in monthly installments of $312,500. 

EPM's logo featured prominently on the team's car during eight races in the 2022 season, according to the contract, while also appearing on JIM race suits, hats and content. In exchange for the sponsorship, EPM would receive at least 10 pit passes for the primary races and 4 passes for 24 other races, use of JIM likeness for advertising, and appearances from team owners Iwuji and co-owner and NFL Hall of Fame running back Emmitt Smith among other perks.

EPM made the required $187,500 monthly payments to JIM between December 2021 and September 2022, the suit said. On Sept. 29, 2022, an unnamed executive texted an unidentified JIM executive to confirm EPM wouldn't make further payments in the deal. JIM sent EPM a notice to terminate the sponsorship, and EPM failed to remedy the nonpayment in a 30-day window per the contract, according to the suit.

Despite acknowledging the notice to terminate, EPM still had its logo on JIM's stock car in the Oct. 2 race at the Talladega Superspeedway in Alabama and requested its guests receive special access for the race, the suit said. 

"EPM's failure to make payments to JIM under the EPM Agreement, particularly without any reasonable advance notice, has greatly impacted JIM's operational cash flow and served as a total blindside to JIM's ownership group and race partners," the suit said. "The damages sustained by JIM far exceed the remainder of the monies owed by EPM to JIM under the EPM Agreement."

CEO Eddy Perez founded Equity Prime Mortgage in 2008. EPM is licensed in 50 states and offers conventional, government-insured and reverse mortgages. The business counts 819 full and part-time employees on LinkedIn, with 12 offices across nine states. It also touts sponsorship deals with two professional golfers.

Mortgage firms have often turned to sports marketing to spread brand awareness, but they don't typically disclose the terms of their agreements. Lenders Guaranteed Rate and Ruoff Mortgage also have NASCAR-related sponsorship deals.