162 F. Supp. 3d 270
S.D.N.Y.2016Background
- Apple Mortgage sued four former loan originators (Breitstein, Furer, Barenblatt, Ungar) after they left to work for GuardHill, alleging they copied/emailed Outlook contact lists, printed/downloaded loan documents (Forms 1003/1008), uploaded files to external drives, and deleted files from Apple systems. Apple alleged state claims (breach of duty of loyalty, conversion, unfair competition, breach of contract, conspiracy, tortious interference, faithless servant, constructive trust) and federal claims under the CFAA.
- Defendants counterclaimed for unpaid commissions, bonuses, and improper paycheck deductions (notably a $276 “FICA” deduction). Several counterclaims were later withdrawn; remaining claims were breach of contract and NY Labor Law §§191, 193 deductions claims.
- Apple later executed an asset purchase agreement with Sterling National Bank that—on its face—transferred “all of the business, assets, and rights” of Apple; Sterling was aware of the litigation. Apple ceased originating loans after the sale.
- Facts are undisputed that defendants exported Outlook contacts to GuardHill and imported them there, sent an announcement email to contacts, and that some defendants printed borrower summary pages containing SSNs and DOBs. There is disputed evidence about post-resignation access/deletions of Apple emails (for CFAA purposes) and about whether defendants actually used the proprietary data to originate loans at GuardHill.
- Apple narrowed its damages estimate substantially to about $139,734 and employed a technology consultant to investigate server access and deletions; defendants sought dismissal on multiple grounds including Apple’s alleged loss of standing after the asset sale.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing after asset sale | Apple: purchase agreement did not transfer the right to sue; Sterling never intended to acquire the litigation claim | Defs: purchase agreement conveyed all business, assets, and rights to Sterling, including litigation rights; Apple therefore lacks standing | Held: Contract language unambiguous; Apple sold its rights to Sterling and thus lacks standing—Apple’s claims dismissed for lack of jurisdiction |
| CFAA claims (unauthorized access) | Apple: defendants accessed/deleted emails and files after resignation (including via phones), so access post-resignation was without authorization | Defs: access prior to resignation was authorized; they did not access systems after leaving | Held: Triable issue exists whether defendants accessed/deleted Apple emails post-resignation; summary judgment on CFAA claims denied insofar as Apple shows injury from post-resignation email access |
| Conversion / unfair competition / breach of loyalty (taking customer lists & loan docs) | Apple: defendants misappropriated customer lists and confidential loan documents, deleted files, and used information to benefit GuardHill—supports conversion, unfair competition, breach of loyalty, conspiracy (for some) | Defs: they only made copies and did not use confidential data; Apple didn’t lose access; some acts occurred while access was authorized; Barenblatt had no evidence of wrongdoing | Held: Genuine factual disputes preclude summary judgment for most of these claims; conspiracy claim dismissed as to Barenblatt for lack of evidence; conversion/unfair competition/breach claims survive summary judgment in part |
| Counterclaims — unpaid commissions and bonuses under NY law | Defs: commissions earned on loans closed before termination and certain post-close amounts; bonuses paid routinely and thus owed | Apple: Compensation agreements don’t clearly provide post-termination commissions; bonuses were discretionary; defendants may have materially breached contracts first | Held: Summary judgment denied on unpaid-commission claims for loans that closed before defendants left (triable fact whether commissions were pre- or post-termination); bonuses held discretionary—Apple entitled to summary judgment on bonus claims; deduction claims largely denied except Breitstein’s limited post-July 2012 period where factual dispute remains |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (materiality and genuine issue standard for summary judgment)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (drawing inferences on summary judgment)
- Altman v. Bedford Cent. Sch. Dist., 245 F.3d 49 (standing/mootness if plaintiff loses standing during litigation)
- Thyroff v. Nationwide Mut. Ins. Co., 8 N.Y.3d 283 (conversion claim can encompass electronic files)
- Pachter v. Bernard Hodes Grp., Inc., 10 N.Y.3d 609 (when a commission is "earned" depends on the parties' agreement; deductions may mean commissions not yet earned)
- United States v. Valle, 807 F.3d 508 (CFAA interpretation—narrow reading regarding authorized access)
- Gallo v. Prudential Residential Servs., 22 F.3d 1219 (summary judgment: court's role in issue-finding)
- Poller v. BioScrip, Inc., 974 F. Supp. 2d 204 (employee access construed as unauthorized only post-resignation or termination)