NEXA Mortgage LLC and Secured Mortgage Processing (SMP), scored a major victory yesterday, Sept. 19, in the companies' drawn-out legal battle with Smart Mortgage Centers Inc. when the Twelfth Circuit Court of Illinois dismissed the case for a lack of evidence.
In the initial complaint, filed in Feb. 2020, plaintiff Smart Mortgage Centers claimed that two former employees, Brian Noe and Eileen Pruitt, “stole” confidential client information from its database in coordination with their new employer, NEXA Mortgage.
"There had been a lot of frustrations over the years on this particular case," said NEXA Mortgage CEO and Co-Founder, Mike Kortas. "But, in the end, I'm glad we did it. I'm glad that there's case law out there against these folks... so they can't do it in the future, hopefully."
Lawsuit Dismissed
The Summary Judgement reiterates the plaintiff’s initial claim that the defendant and former employee, Brian Noe, “accessed and downloaded information from Smart Mortgage’s client database … then emailed the files tiled email.zip and noe.zip to his personal email prior to his departure from Smart Mortgage on December 20, 2019,” including the allegation that defendant Eileen Pruitt “accessed or downloaded confidential client data for… the benefit of NEXA Mortgage.”
However, the court stated that the claims were not sufficiently supported with evidence, given that there was no evidence proving the defendants copied, emailed, downloaded, or in any way transferred Smart Mortgage’s trade secrets, confidential, or proprietary information.
The only other evidence offered by Smart Mortgage to support its claims was that Noe, while at NEXA, closed 37 loans for customers he previously did business with while at Smart mortgage. Yet, Noe’s internal records show that 15 of those customers were “self-generated” or self-sourced, so he did not use Smart Mortgage’s database to solicit those customers.
“The mere fact that each and every client Smart identifies had a prior business relationship with Noe undermines any claim that a confidential database was misappropriated or used,” the Summary Judgement read. “This is similarly true with respect to defendant Pruitt…”
NEXA Comments
Although Kortas said he and his wife, SMP CEO, Edna Montijo, are pleased to have the case finally dismissed, he commented that it did come at a significant cost. "I'm excited to stop spending a hundred thousand a month in attorney fees on this case," Kortas said.
He explained his frustration with the court system for allowing the plaintiff to keep filing amendments to the original complaint.
“I didn't expect it to go this long and [cost] this much money. It took two years just to get past the filing of amendments on the original case,” Kortas said. “Because the courts allowed them to amend it over and over… It was crazy. I think we [spent] about a half a million before the thing was the actual lawsuit.”
But that’s not simply due to legal fees, Kortas explained.
“The state of Massachusetts refused to give me a license over this,” Kortas added, claiming that it was a violation of his right to due process. “But suing the very regulator who then regulates you is a bad idea. So [there’s] massive amounts of lost revenue out of the state of Massachusetts alone over this thing,” he added.
As the largest brokerage in the nation, Kortas said that NEXA Mortgage was able to endure the drawn-out legal battle, unlike most loan officers around the nation. But, he said the fight is not over.
Kortas added that he intends to seek damages related to the lawsuit from Smart Mortgage, though did not stipulate what amount.
"I have this chip on my shoulder about doing the right thing, and I will never settle a lawsuit if we're on the right side," Kortas added.
Representing NEXA, Mitchell Sandler Attorney Ari Karen declined to comment on future litigation, but did share his thoughts on the recent outcome.
"While it's extremely satisfying that the court ultimately determined [to dismiss], it's unfortunate that NEXA and its employees were forced to litigate this case despite the lack of any basis for its initial filing," said Karen.
An attorney for Smart Mortgage Centers did not respond to an immediate request for comment.
