Nations Lending, Academy Mortgage settle poaching case

Two lenders who claimed a mortgage team hopped back-and-forth between the firms with trade secrets have settled a federal lawsuit.

Academy Mortgage agreed to pay an undisclosed sum to Nations Lending Corp. over a complaint naming seven Hawaii-based employees, according to court records. The team in question allegedly diverted 13 customers, and another 10 prospective borrowers, to Academy when they left Nations in January. 

Academy, in the course of the lawsuit, accused the plaintiff firm of poaching the same employees from its own ranks in July 2022. The company in a March filing suggested Nations did so because starting a new Hawaii branch with loan officers who didn't have existing referral partners would've been difficult. 

An Ohio federal judge last week approved the parties' dismissal without prejudice, meaning the claim can't be refiled. The complaint was initially filed by Nations in a Cleveland court despite the lending team's location in Hilo, Hawaii. 

The lawsuit sought unspecified damages in excess of $750,000. An attorney for Nations Monday confirmed the settlement and noted the terms were confidential. Other lawyers for the parties and a representative for Guild Mortgage, which purchased Academy in March, didn't reply to requests for comment. 

Nations accused its rival of misappropriating over 1,200 customer records, along with breaching employees' non-solicitation, non-disclosure and non-compete agreements. The Greater Cleveland-based lender obtained a temporary restraining order from a Cuyahoga County Common Pleas Court in late February, which barred the seven workers from all mortgage work. 

Academy fired back in March and said Nations gave it inadequate notice of the complaint. 

"NLC manufactured an emergency out of Academy's re-hiring of a group of loan officers that NLC had previously poached from Academy just one-and-a-half years prior," wrote attorneys for the Utah-based Academy. 

Nations in court filings disputed that it poached the employees in 2022, asking the competitor to provide evidence. Self-reported employment data in the Nationwide Multistate Licensing System show at least three employees hopping back-and-forth between the lenders during the specified time. 

The branch that Academy opened this year was just 1.3 miles from the Nations office, according to the complaint. Hilo, Hawaii is one of the state's largest cities with a population around 46,000, according to 2020 U.S. Census Bureau data. 

Nations sponsors 355 mortgage loan originators, according to NMLS data, and was responsible for over $2.9 billion in loan volume in 2022, according to Home Mortgage Disclosure Act data.

Among the wave of poaching and trade secrets cases filed between mortgage lenders in the past few years, few have reached resolutions. Mutual of Omaha Mortgage and Waterstone Mortgage are currently arguing before Florida jurors in their similar lawsuit, while other complaints between leading companies remain in lengthy litigation.