Three former executives at Dallas-based Prime Data Centers allege the company and two of its top leaders carried out a yearslong scheme to deny them compensation they earned as the company grew from a startup into a multibillion-dollar business.
The lawsuit, filed July 31 in Dallas County, claims former Vice President of Human Resources Natalie Funcheon, former Chief Commercial Officer Chris Sumter and former Head of Utilities and Incentives Jeremiah Collins are collectively owed more than $200 million under their employment agreements.
Similar lawsuits filed by four other former employees in New York and California push the total amount sought to more than $400 million.
At the center of the dispute are employment agreements that promised "phantom equity," a form of compensation tied to the company's value without giving employees actual ownership of the business.
Unlike traditional stock, phantom equity doesn't give employees ownership in a company. Instead, it promises a cash payout tied to the company's value.
The plaintiffs allege Prime Data Centers stopped honoring those agreements after the company's valuation increased dramatically.
Dallas attorney Rogge Dunn, who represents the Texas plaintiffs, said in a statement that the lawsuits are about employees who helped build the company but never received the compensation they say they were promised.
"As Prime's value skyrocketed, instead of honoring its contractual commitments so employees who were instrumental in its growth could benefit financially from their work, company ownership looked for ways to take from them what they earned and were owed," Dunn said.
The lawsuit alleges Prime's value increased from about $140 million to more than $6 billion, causing the value of those agreements to rise along with it.
It goes on to allege company leaders refused to honor those agreements because doing so "was expensive and would potentially cost them control over Prime."
According to the lawsuit, CEO Nicholas Laag and Chief Financial Officer Ulrich Pelz repeatedly told employees their employment agreements and phantom equity "were worthless," while at the same time representing to investors that those same agreements had "substantial value for recruitment and retention purposes" and selling company equity "at escalating valuations for their own benefit."
Attorneys representing Prime Data Centers, Laag and Pelz did not respond to requests for comment.
The plaintiffs allege executives then encouraged employees to sign new agreements that significantly reduced the value of their compensation.
The lawsuit claims the revised agreements made it harder for employees to earn compensation by raising performance thresholds, adding new restrictions and changing how the company calculated the value of phantom equity.
It also alleges the company told employees their phantom equity had no value even as Prime continued securing investments based on valuations in the hundreds of millions — and later billions — of dollars.
The former employees say they repeatedly raised concerns with company leadership and asked for independent reviews of their compensation but were unsuccessful.
Prime Data Centers, Laag and Pelz are accused of breach of contract, fraud and several other civil claims. The lawsuit seeks monetary damages and other relief.
Similar lawsuits filed by four other former Prime Data Centers employees are also pending in federal court in the Southern District of New York and in California state court, raising similar allegations over the company's handling of employee compensation agreements.
Emmanuel Rivas Valenzuela is KERA's breaking news reporter. Got a tip? Email Emmanuel at erivas@kera.org. KERA News is made possible through the generosity of our members.
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