A Dallas-based data center company is being sued by seven former employees who believe they are entitled to more than $400 million in compensation that the company didn’t pay them.
The employees allege in three similar lawsuits that Prime Data Centers, along with CEO Nicholas Laag and CFO Ulrich Pelz, fraudulently pushed them to sign new employment agreements that locked them out of equity and compensation previously agreed to. The company has 28 data centers across the U.S. and Europe with an expansion pipeline of more than four gigawatts, per its website.
One of the lawsuits, filed in the Southern District of New York, describes Prime Data Centers and leadership’s actions as, “a multi-year campaign to fraudulently induce employees to forfeit their equity by misrepresenting and re-engineering the terms of their compensation packages.”
Legal representation for Prime, Laag and Pelz did not respond to requests for comment.
In addition to other allegations, the complaints describe a pattern of misrepresenting the value of phantom equity agreements to avoid paying them. Phantom equity is a compensation plan that ties cash payments to the value of the company without actually granting ownership in the company. The lawsuits allege that Laag and Pelz engineered value calculations that rendered employees’ phantom equity worthless, which they represented to employees, while entering into deals with outside entities that valued Prime Data Centers in the billions.
According to a release, “The plaintiffs were core members of the team who worked to help Prime grow 4,000% into a global data center platform currently valued at more than $6 billion.”
“With Prime’s explosive valuation growth and the EAs’ value tied to Prime’s value, paying Plaintiffs what they were owed had become expensive from a cash payout perspective and diluted Laag’s ownership of the company,” according to another complaint filed in Dallas County Court.
The complaints further allege that Ares Management, an investor in Prime Data Centers, warned the company during the due diligence process that Prime could be liable for claims from non-implementation of the compensation agreements, and Prime made conflicting statements to Ares and another investor about its compensation obligations under the agreements in order to close the deals.
The third complaint was filed in the Superior Court of California.
“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. Company leadership purposefully targeted key employees, pressuring them to sign new — much less favorable — agreements,” said Rogge Dunn, attorney for the Texas plaintiffs, in the release.