These days, if a company is hit with more than a dozen adversary claims in a lawsuit, the only thing it will likely want is to make the litigation go away as fast as possible – even if the company feels it’s on the right side of the dispute.
Primary Residential Mortgage faced that situation recently, but management decided not to back down. And now, after a take-nothing verdict, the Utah-based company has the chance to ask for attorneys’ fees.
Salt Lake City-based PRMI and three former employees were ordered to file attorney fee requests by Friday for a jury trial they won Dec. 14 against Dallas-based Everett Financial (d/b/a Supreme Lending), a rival residential mortgage bank that sued the defendants in 2014.
Supreme brought 13 claims that, in a nutshell, alleged three of its former regional managers – Barry Jones, James Durham and Shannon Fortner – breached their employment agreements when they left Supreme and improperly raided Supreme’s southeast operations. In their move to PRMI, they brought a group of more than 80 Supreme employees from more than a dozen branches in Alabama and Florida.
The variety of claims Supreme brought included breach of contract, breach of fiduciary duty, misappropriation of trade secrets, tortious interference, civil conspiracy and unfair competition.
Supreme alleged PRMI was part of the conspiracy by aiding and abetting the individual employees with their breach of fiduciary duty by negotiating in secret with them for four months before they announced their departure from Supreme. At trial, Supreme sought more than $5 million in damages.
After a two-week trial in Dallas federal court, eight women and two men rendered a take-nothing verdict as to all of Supreme’s claims against PRMI and the individual defendants. Jurors also awarded the individual defendants $500,000 for their counterclaims that alleged they were underpaid during their time at Supreme.
The jury also found that Supreme should pay the individual defendants $4.5 million in punitive damages, but U.S. District Judge Sidney Fitzwater did not include that amount in his final judgment (which he issued the same day) due to lack of actual damages found in connection with one of the individual defendants’ claims.
Lawyers for the defendants are expected to ask Judge Fitzwater to include the $4.5 million award in an amended final judgment.
At trial, the defense explained to the jury that the residential mortgage banking industry is a “free agent” market and that it is commonplace for many loan officers and other employees to follow regional and branch managers when they go elsewhere.
“I could not be more proud to represent a company as I was with PRMI in this lawsuit,” said Dallas Norton Rose Fulbright partner Richard Krumholz, PRMI’s lead attorney for the trial.
He said he’s proud for a few reasons:
One: “In the face of a very aggressive plaintiff who I believe really brought this case out of vengeance, PRMI stood its ground and didn’t settle.”
Two: “PRMI got a great result not only for itself, but for its former employees.”
Three: “PRMI stuck by them every step of the way, knowing they were right and that led to a just result.”
“They did so despite the fact that it was very costly in terms of money, resources and time,” Krumholz added. “As a result, I feel the company did exactly what it should have done in this circumstance. It didn’t bend to the pressure that many litigants bend to.”
Krumholz said he was also proud of the young attorneys on his legal team who stepped up to the plate. A few associates from Norton Rose Fulbright’s Dallas office who played integral roles in examining witnesses at trial included John Herring, Joey Piorkowski and Alex Wendt, a newly-minted lawyer from Baylor Law School who just recently found out that she passed the bar exam.
Others who played a significant role on the trial team included Houston NRF partner Warren Huang and PRMI Chief Legal Officer Darryl Lee.
The lead attorney for Supreme, Mike Bowers of Dallas firm Bell Nunnally & Martin, said his client “clearly” disagrees and disputes with the other side’s allegation that Supreme brought the litigation out of vengeance.
“I would like to point out that, prior to trial, PRMI made a substantial offer of settlement,” Bowers said. “That fact indicates that not only was the case not brought out of vengeance, but also that PRMI itself recognized the merits of the case.”
“On the other hand,” he added, “Mr. Everett and Supreme Lending believe strongly in parties, Supreme Lending included, abiding by the contractual obligations they agree to. Because it was believed that the individual defendants ignored their contractual obligations with the assistance of PRMI, it was important to our clients to seek to hold the defendants accountable.”
He said despite the outcome of the result, his client remains “resolute that the trial was a valuable investment of time and money to stand up against unfair recruiting and business tactics.”
“We are proud to be a part of that stand,” he said.
Bowers added that Supreme’s legal team does “believe there were errors” in the ruling and that “we’re still considering our options” with respect to an appeal.
The Bell Nunnally trial team also included partners Kris Hill and Heath Cheek and associate Scott Larson.
“The genesis of the case was that we believed there was an improper attack or raid of an entire region of operations of Supreme Lending,” Bowers said. “We contended – and still believe – that PRMI interfered with Supreme’s contractual relationship with various people including the defendants, which resulted in the loss of the southeast region.”
Bowers also pointed to a 2017 summary judgment ruling in which Judge Fitzwater wiped out all of the individual counterclaims that the defendants brought against Supreme Lending President Scott Everett.
According to lawyers on the case, at the heart of the dispute was a key set of emails, text messages and phone calls recorded by the individual defendants that described the terms under which they left Supreme.
“They contended they had rights to leave at any time and take anyone they wished with them; and we believed the understanding was if they wished to leave, they needed to take that to the owner first and come up with an exit strategy,” Bowers said. “It was a contested fact that obviously the jury ruled against us.”
Jurors delivered their verdict after deliberating for less than a day. Krumholz said the jury included a headmaster of a private school, three nurses, a legal assistant, someone who worked in the insurance field and a housewife whose husband is business owner.
Krumholz said he had to immediately “race” to Fort Worth after closing arguments to catch his daughter’s graduation from nursing school at Texas Christian University.
“My wife picked me up from the courthouse, and just after the graduation ceremony I got the call that I had been waiting for – the verdict was in,” he said.