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Millenium Home Mortgage LLC v. Thierry

United States District Court, E.D. Pennsylvania

August 26, 2019



          CHAD F. KENNEY, J.

         I. Introduction

         This suit arises from Defendant Daniel Thierry's alleged diversion of leads generated while employed by Plaintiff Millenium Home Mortgage, LLC to his future employer. Based on these allegations, Plaintiff brought suit against Defendant for, among other things, violating the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. Defendant moved to dismiss the Complaint based in part on the ground that Plaintiff has not suffered a cognizable loss under the CFAA and thus has failed to state a recoverable claim. For the reasons set forth below, Defendant's Motion to Dismiss (ECF No. 6) will be granted.

         II. Background [1]

         In 2011, Defendant made his initial capital contribution in Millenium and acquired a 5% interest in Plaintiff, with a vesting schedule by which he could ultimately own up to 20% of the company by December 31, 2013. ECF No. 3 at ¶ 8. On January 1, 2014, Defendant was added as a member of Plaintiff. Id. at ¶ 9. From 2011 until October 2017, Defendant maintained dual roles as a member and also as an employee and was compensated for originating loans and received profit distributions allocated at each year end and approved by all Millenium Home Mortgage, LLC members. Id. at ¶ 10.

         In December 2013, Plaintiff decided to make additional contributions to working capital in order to satisfy net worth requirements of certain investors who purchase its loans. Id. at ¶ 11. At the time, Defendant maintained an investment account with Janney Montgomery Scott ("JMS"), valued at approximately $100, 000. Id. at ¶ 12. Defendant transferred ownership of this JMS investment account to Plaintiff, representing his contribution to working capital. Id. at ¶ 13. Following this transfer of ownership, JMS sent monthly account statements to Plaintiff, naming "MILLENIUM HOME MORTGAGE LLC" as the owner of the account. Id. at ¶ 14. Defendant is still a member of Plaintiff, with a 20% membership interest. Id. at ¶ 15.

         Plaintiff believes that Defendant started discussions with Embrace Home Loans ("Embrace"), a competitor to Plaintiff, about accepting a position in September 2017. Id. at ¶ 16. On October 6, 2017, Defendant provided notice to Plaintiff that he was voluntarily terminating his employment effective immediately. Id. at ¶ 17. That same day, Defendant emailed at least one Millenium file related to a customer to Embrace regarding a proposed $203, 000 loan ("Customer X"). Id. at ¶ 18. The next business day, Defendant commenced employment with Embrace. Id. at ¶ 19.

         Internal records reflect that in the months leading up to his departure, Defendant generated nearly 60 leads for potential Millenium loans that were never closed by Millenium. Id. at ¶ 20. At least three of the leads generated for Millenium by Defendant between September 8 and October 1, 2017, were closed by Embrace in November 2017. Id. at ¶ 21. Plaintiff believes that many of the other leads generated by Defendant while he was employed at Millenium were diverted to Embrace and subsequently closed by Embrace. Id. at ¶ 22. Plaintiff believes its lost profits based on Defendant's "diversion of loans could potentially exceed $350, 000." Id. at ¶ 23.

         After Defendant left Millenium for Embrace, Customer X contacted Millenium to report that Defendant could not handle his loan at Embrace and requested that Millenium continue to work with him to close the loan. Id. at ¶ 24. Plaintiff alleges that "all of the financial information related to Customer X had either been deleted from the Millenium system or had never been saved to the Millenium system by [Defendant], in violation of Millenium policies." Id. at ¶ 25.

         Plaintiff believes that confidential and proprietary information relating to its customer lists and leads, along with other trade secrets, were provided to Embrace by Defendant. Id. at ¶ 26. Though Plaintiff believes that in order to divert these leads and ultimately to close the loans on behalf of Embrace, Defendant would have needed information about these borrowers and their personal financial documents including paystubs, W-2s, tax returns, asset statements, driver's licenses, social security cards or passports, and possibly credit reports run by Defendant while he was still working for Millenium and "data from Millenium's client data base and other borrower information that should have been saved to Millenium's system," Plaintiff does not go so far as to explicitly allege that these referenced documents or information were necessarily taken from Millenium's computer system. Id. at ¶¶ 27-28.

         In November 2017, Defendant contacted a managing member of Millenium requesting a buyout of his membership interest and noting that he was planning to liquidate the money held in the JMS investment account that he previously conveyed to Millenium as a contribution to working capital. Id. at ¶ 29. In response, the managing member informed Defendant that until an agreement could be reached on the return of Defendant's capital, he was not permitted to liquidate any accounts held in the name of Millenium, including the JMS account. Id. at ¶ 30. Contrary to this instruction and without the consent of any other member of Millenium, Defendant contacted JMS to liquidate the account and receive direct payment of over $120, 000, causing Millenium's "net worth to drop below the required threshold, creating the potential for investors to discontinue buying Millenium loans." Id. at ¶¶ 31-32.

         In December 2018, Defendant filed a complaint against Millenium and Millenium's operating manager for shareholder oppression and breach of fiduciary duty. That case is still pending in New Jersey Superior Court. In March 2019, Plaintiff filed suit in this Court asserting the following claims: violation of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030 et seq. (Count I); conversion of the JMS account (Count II); conversion of confidential information (Count III); and breach of fiduciary duty and duty of loyalty (Count IV).

         Defendant moves to dismiss the Complaint arguing, among other things, that Plaintiff has not suffered a loss recoverable under the CFAA. ECF No. 6-1. The Court agrees. Because Plaintiffs CFAA claim fails, the Court declines to exercise jurisdiction over Plaintiffs remaining state law claims. Accordingly, the Complaint is dismissed in its entirety.

         III. ...

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