Opus Bank is suing over what it calls a theft of its employees by smaller rival First Foundation Bank.
Irvine-based Opus, the second largest bank by assets based in Orange County, is suing Irvine-based First Foundation in Orange County Superior Court for unlawfully hiring nine executives, including Opus’ director of income-property banking.
“Opus alleges that First Foundation has engaged in an aggressive and illegal campaign to target, solicit and hire away key Opus employees,” said an Opus court filing. “Former Opus employees now employed by First Foundation contact Opus employees and encourage the Opus employees to breach their duties of confidentiality.”
First Foundation, the fourth largest bank by assets based in OC, responded last week by filing a motion to countersue.
“We believe Opus’ lawsuit is utterly without merit,” Betty Shumener, an attorney for First Foundation, said in an interview. “The Opus lawsuit is a vehicle designed to disrupt First Foundation’s business. It’s a harassment case from a competitor.” First Foundation’s lawyers further say that the Opus workers left because of a hostile work environment.
Neither Opus Bank spokesperson Jeff Leonard nor its attorney, Peter Bertrand, returned messages seeking comment.
Brawling Bank CEOs
The case is between two chief executives who used to work together and now head two relatively new banks that have grown quickly and whose headquarters are within a couple miles of each other near John Wayne Airport.
Opus Chief Executive Stephen Gordon was founding chairman and chief executive officer of Commercial Capital Bancorp Inc., which was based in Irvine.
First Foundation Chief Executive Scott Kavanaugh was also involved in Commercial Capital as a founding stockholder, a board director and a chief administrative officer. James Brakke, another director at First Foundation, and David DePillo, president of First Foundation, also worked at Commercial Capital.
Commercial Capital became a publicly traded company with assets growing to more than $5.7 billion. It was acquired in 2006 by Washington Mutual Inc. in an all-cash transaction valued at $1 billion.
Bank Beginnings
First Foundation Bank began in 2007 with $32 million in capital as an affiliate of an investment advisory firm. Kavanaugh started that year as the bank’s chief operating officer and became chief executive in 2009. The firm’s assets have steadily climbed to $3.5 billion.
Opus was founded in 2010 when a group of investors led by Gordon completed the acquisition and recapitalization of Bay Cities National Bank. The bank attracted famous Wall Street investors, such as Paul Singer’s Elliot Associates LP, Barry Sternlicht’s Starwood Capital Group Global LP, and the publicly traded Fortress Investment Group. Together, the three control 38% of the shares, while Gordon owns 5.8%. The bank grew rapidly, and assets were $8 billion as of March 31.
The shares got halved in October when the bank warned its third-quarter results included $38.8 million in charge-offs. Its criticized loans, those with potential weakness, tripled to $359 million as of March 31 compared to the same period a year earlier.
In the past year the two banks’ stock prices have moved in different directions. Opus’ shares have declined 34%, while First Foundation’s have soared 47%, in line with the 46% rise in benchmark KBW NASDAQ Regional Banking Index. Opus now has a market cap of $882 million, while First Foundation has a $551 million market cap.
The 34% decline in Opus also reflects a mild rebound this year—with shares trading after-hours on Thursday at $23.90, up about 30% over the March low of $18.20.
Hiring Spree
First Foundation in March 2016 issued press releases to announce the hiring of three former Opus executives:
n C.J. Donovan as senior vice president, director of loan production, who previously served as director of income property banking at Opus.
n Jay Kanner and Monica Dallalzadeh as vice president, branch managers at the bank’s Indian Wells and Pasadena locations, respectively. Kanner previously worked at Opus as vice president client experience manager, while Dallalzadeh’s previous roles at Opus were vice president, area manager and vice president, retail banking manager.
The other six named in the lawsuit are: Tina Castaneda, a former loan processing supervisor; Richard Christensen, formerly district banking manager for Opus’ California/Arizona District; Jocelyn Hamada, a vice president of procurement and facilities; Debi Hill, a client experience manager at the Chino Hills branch; Colette Park, a vice president and client experience center manager at one of Opus’ largest retail branches in the Beverly Hills area; and Nathan Werdowatz, who worked with Donovan in income property in San Diego.
At least 12 other employees who worked at Opus are now at First Foundation and weren’t named in the lawsuit, according to an Opus filing.
Pending Court Dates
Late Thursday, lawyers for First Foundation asked the court to allow the bank to file a cross-complaint or countersuit against Opus.
First Foundation’s lawyers allege that Opus is guilty of unlawful recruitment practices similar to those the bank alleged against First Foundation.
First Foundation also has a motion for summary judgment, or dismissal, to be heard in September.
Failing that, a jury trial is scheduled for Dec. 4.
