A mortgage executive helped a rival lender create its wholesale division at the height of the recent mortgage boom before departing to that competitor with dozens of his colleagues, a poaching lawsuit claims.
Paramount Residential Mortgage Group is seeking over $25 million in damages from Axia Home Loans in a case scheduled to go to trial in November in a California state court. Executives from both firms are currently undertaking depositions in the three-year-old lawsuit involving breach of contract and theft of trade secrets claims.
The complaint targets David Pilotte, a former PRMG leader and current executive vice president of Axia’s wholesale division. Pilotte’s former firm is accusing him of sabotaging it by failing to staff up amid rampant home loan demand and disparaging his employer to his workers.
“Pilotte was already checked out for months,” wrote counsel for PRMG in an April filing. “He was just waiting for Axia to be further along in developing the wholesale division so he could join in time for its launch.”
Axia in a statement said the company and Pilotte deny the allegations, and said it strongly believes PRMG is not entitled to any damages. A representative for PRMG and an attorney for the plaintiff didn’t respond to requests for comment.
The case is pending in the Superior Court of California, Riverside Superior Court, near PRMG’s Corona headquarters. Axia, the smaller lender, is based in Bellevue, Washington near Seattle.
Lenders in the past two years, including Axia, have filed numerous lawsuits to mixed success over alleged raids by competitors. Axia last month accused California-based Mason-McDuffie of taking 28 of its employees and confidential company information.
Pilotte joined PRMG in 2012 and began speaking to Axia executives in late 2019, including CEO Alex Rosenblum and general counsel Ronald Gapp, according to the complaint. The lender claims Pilotte contacted Gapp, also a former PRMG employee, 56 times in a three-day stretch in April 2020 during normal business hours.
“These were not teenagers gossiping about personal issues, and they were not a couple at the beginning of a dating relationship chatting all the time — rather, these were high level businessmen in constant communication during business hours, discussing plans for creating a competing wholesale lending business for PRMG’s competitor Axia on PRMG’s dime,” wrote PRMG’s attorneys.
The leader’s subterfuge included sowing distrust among his staff through numerous means, PRMG claims. He allegedly only hired a few employees despite an unlimited recruiting budget in early 2020, in turn also placing a significant workload on his brokers.
In one instance, Pilotte paid an out-of-pocket bonus against company rules to one of his workers to make PRMG look bad, according to the complaint. He also allegedly discussed with Axia preferred office locations for the firm’s upcoming wholesale operations, types of loans and other business plans.
In the weeks leading to his departure, Pilotte told his employees Axia could offer them better positions and compensation, PRMG claims. He left the lender in July and became Axia’s executive vice president of the wholesale division in August 2020.
Pilotte in a declaration filed in June claims he left for numerous reasons, including a desire to leave retail. PRMG CEO and founder Paul Rozo also allegedly called him “El Chaparrito,” or little man in Spanish, to Pilotte’s discomfort.
“Although I told Mr. Rozo I did not appreciate it, he continued to call me by that nickname in front of other employees and senior management and at Board meetings,” he wrote in a court filing. Rozo, according to court documents, is tentatively scheduled for a deposition next week.
Pilotte acknowledges speaking with and visiting Axia while employed with PRMG, but denies sharing confidential company information or discussing other workers who would depart. He said he ultimately quit over a July weekend after a social media post by his supervisor disparaged people he knew.
A jury trial is scheduled to begin Nov. 17, according to court records.
PRMG is the larger company in the lawsuit, originating over $1.5 billion in mortgage volume through April of this year, according to data from S&P Global. Axia meanwhile counted $280 million in mortgage volume through the same period and $1.3 billion in all of 2022.
