Summit Funding broke court order in Movement poaching case, judge rules

Summit Funding is facing more heat in a poaching lawsuit after a federal judge found the lender in civil contempt for violating court orders. 

Movement Mortgage is suing the Sacramento-based competitor in two separate cases, accusing the firm's founder and CEO and other employees of organizing a raiding and theft of trade secrets scheme. The plaintiff company last month claimed Summit continued to solicit nearly two dozen of its workers after Nov. 3, violating a court order.

"Movement shows by clear and convincing evidence that Summit knowingly violated the terms of the injunction," wrote U.S. District Judge Robert J. Conrad in a Thursday order in a North Carolina court. 

The judge granted expanded relief barring Summit from recruiting Movement personnel and customers and from using Movement's confidential customer data. The relief along with attorney's fees was sufficient punishment under the civil contempt finding, Conrad wrote.

Summit's loss came in the same week one of its divisional leaders, Deran Pennington, filed counterclaims against Movement for upwards of $9 million. The former co-national sales director at Movement, named in the poaching suit, claimed Monday Movement's CEO told him in 2020 he was going to make "too much money" under his compensation plan. 

Pennington suggests he was entitled to 2% of Movement's $390 million net profit that year, equating to approximately $7.8 million in addition to a $250,000 salary. The ex-director is seeking $3.2 million in unpaid compensation, an amount he's seeking to triple under a state law.

Ari Karen, partner at Mitchell Sandler and counsel for Movement, denied Pennington's accusations Thursday. Summit and attorneys for the other parties didn't return requests for comment. 

Movement, no stranger to poaching accusations, sued Summit founder and CEO Todd Scrima last month in California for corporate espionage for his alleged hands-on role in the plot. The South Carolina-based lender's lawsuit included evidence purportedly showing Scrima advancing the scheme via text message, and the firm is seeking as much as $40 million in damages. 

Summit's scheme included a specifically hired employee who facilitated the transfer of home loans in process, and originators allegedly described Summit to customers as a "sister company" of Movement. Pennington is also accused of accepting a $2 million sign-on bonus from Scrima last year and continuing to work at Movement for four additional months to advance the poaching plan. 

The smaller Summit funding employs over 200 loan officers, according to Nationwide Mortgage Licensing System records, compared to Movement's over 2,500 LOs. Movement originated over $13 billion in mortgage volume through September, according to data from S&P Global, compared to Summit's $1.5 billion. 

No further court hearings have been scheduled in either of Movement's lawsuits.