United States District Court, E.D. Pennsylvania
F. KENNEY, J.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.