No, I never encountered an issue before. But I have some thoughts to share about it. I think your dev team is right. It's a bit challenging to incorporate a sort ability on a lazy loading list. The main reason it's challenging because we are trying to blend two functionalities which are made for a different scenario. i.e Lazy loading are good when u focus on content discovery and sort is good when you do data analysis.
Consider Lazy loading, it's good for applications that cater content discovery. For example Facebook, 9gag, Twitter etc. Consider the case of facebook, they provide an endless stream of feeds which keeps you to discover new facts about your friends, family, the world etc. They keep on loading new facts to the timeline as the user scrolls. On each scroll on facebook, the user express the interesting for discovering more facts and facebook identified this behaviour and provided with a lazy loading. So that the user only needs to do scroll to see new feeds.
When we talk about sort functionality, It's a common functionality that provides the user with the power to separate data and arrange it in a particular order. Sort is useful when you do an analysis on top a data set. One thing that I noticed about analysis workflow us that, the data set provided for analysis will be well defined. i.e the user gathers all the information required before he starts an analysis. Because if he uses a volatile dataset, which will tend to deliver incorrect analysis, which further lead to bad decisions. So analysis is always critical and if you use any tools for analysis, then it's tools responsibility to ensure the user about the dataset status whether its ready or not.
In our case, the list is our dataset. which is a volatile data set, implemented based on lazy loading strategy. So it will be hard for the user to realise whether his data set is ready for analysis or not. If he doesn't realise and continue sorting, at one point the list gets updated which result in a bad analysis report. This conflict will reduce the user enthusiasm and add more effort on the user side like, checking list update, re-sort the updated list, etc instead of focusing on the right work. So, I think it better to use pre-loaded data set rather than the lazy loaded data set.
This is just my thought about it, Hope this will aid you.