Seven former employees of Prime Data Centers say the Dallas-based company and its top executives owe them more than $400 million in unpaid compensation, according to three lawsuits filed in New York, Texas, and California. The suits accuse chief executive Nicholas Laag and chief financial officer Ulrich Pelz of engineering a multi-year scheme to strip workers of promised equity even as the company ballooned into a multibillion-dollar global data center platform.
A $400 Million Fight Over Phantom Equity
The dispute centers on what's known as phantom equity, a compensation plan that ties cash payouts to a company's value without granting actual ownership stakes. As reported by The Dallas Morning News, the lawsuits allege that Laag and Pelz engineered value calculations that rendered those phantom equity plans worthless, effectively erasing what employees had been promised over years of work. The complaints describe what one filing calls a multi-year campaign to fraudulently induce employees to forfeit equity by misrepresenting and re-engineering compensation terms.
Rogge Dunn, the attorney representing the Texas plaintiffs, said company leadership pressured key employees to sign less favorable agreements, according to the Dallas News report. Court filings reviewed by PacerMonitor show that two of the plaintiffs, James Maxwell and Joseph Patito, sued in the Southern District of New York on May 28, alleging civil racketeering under federal RICO statutes and seeking to void a $500 million transaction tied to the alleged scheme.
Dallas Plaintiffs Seek the Bulk of the Damages
The seven former employees filed three similar lawsuits, one in the Southern District of New York, one in Dallas County court, and a third in the Superior Court of California. In the companion lawsuits announced Tuesday, three Dallas-based plaintiffs are seeking $185 million of the total $400 million-plus demanded across the three states, according to a report carried by Business Wire.
Those lawsuits claim Prime grew by 4,000 percent into a global data center platform, according to a company release, while the same executives allegedly stripped early employees of the compensation that helped build that growth. Prime Data Centers was accused of fraudulently pushing employees to sign new employment agreements that excluded previously agreed equity and compensation terms, and the complaints say the company made conflicting statements to investors Ares Management and another backer about its compensation obligations.
Allegations of a Property Deal Used to Dilute a Co-Owner
According to the complaints made public this week, Laag and Pelz allegedly transferred a co-owned property into an investor-backed platform without the co-owner's knowledge, using paper commitments to dilute his ownership before buying him out with funds borrowed against the asset itself, per the Business Wire account. Plaintiffs allege that same maneuver was used to strip employees of promised equity elsewhere in the company's structure.
At the heart of the New York case is a $500 million preferred equity deal that Data Realty Holdings Corp. executed with investment firm Grain Management. Court records reviewed by PacerMonitor show plaintiffs are seeking to set aside that transaction under New York Debtor and Creditor Law, arguing it was completed after they had already sent a formal demand letter in February. The filings allege Ares Management had separately warned that Prime could be liable for claims arising from its failure to implement compensation agreements, per the complaints.
Booming Growth Amid the Legal Fight
The allegations stand in sharp contrast to Prime's public trajectory. The company now operates 28 data centers across the United States and Europe and lists an expansion pipeline of more than four gigawatts on its company website, with outside deals valuing the firm at more than $6 billion, according to a release.
Private equity firm Snowhawk LP and asset manager Nuveen made a strategic equity investment in Prime Data Centers in the summer of 2025, joining Macquarie Capital, Ares Management, and Siemens Financial Services in a capital push aimed at raising more than $2 billion that year. The European Commission cleared a joint acquisition of Prime by a consortium including Ares Management, Macquarie Group, and Data Realty Group in March 2025, and Prime later secured a $200 million credit facility from Cerberus Capital Management to fund U.S. property acquisitions.
The company's expansion has continued at a rapid clip even as the litigation moves forward. Prime announced a proposed 550-megawatt data center campus in Esbjerg, Denmark, in March, with initial investments of €2 billion and potential total outlays reaching €6 billion, according to trade outlet BeBeez International. In May, the company broke ground on a $3 billion, 240-megawatt campus in Avondale, Arizona, where the first three buildings had already been pre-leased to an unnamed major hyperscaler.
Sacramento and Dallas Ties
Prime's Dallas and Sacramento facilities also received U.S. EPA Energy Star certifications in January, ranking in the top 25 percent of national buildings for energy efficiency through closed-loop cooling technology, the company announced. Hoodline has covered Prime's Sacramento groundbreaking on its SMF02 facility earlier this year, part of the same company now facing the equity claims.
Prime Data Centers, Laag, and Pelz did not respond to requests for comment, according to the Dallas News report. None of the allegations have been proven in court, and the company and its executives have signaled they intend to move for dismissal in federal court, according to trade publication The Tech Capital.
