159 F. Supp. 3d 324
E.D.N.Y.2016Background
- AMB (New York bank) and Cal-Con/CalCon Mutual (mortgage broker) entered a December 1, 2011 merger; parties later agreed to rescind and unwind via a January 8, 2013 Rescission Agreement with a Transition Period to June 30, 2013.
- Rescission Agreement required CalCon to use commercially reasonable / best efforts to transition 48 West Coast employees to CalCon and to reimburse certain costs; AMB alleges it continued paying employee salaries and other expenses during the Transition Period.
- AMB alleges multiple wrongful acts by CalCon and certain former AMB employees (including Joshua and Shane Erskine, Baltazar, Dlugolenski, Glynn, and Tako): delayed hiring/transfers, delayed wage payments, misappropriation of loans (the “West Coast Pipeline Loans”), access/attempts to access AMB’s loan processing software, and purchase/resale of discounted notes.
- Procedural posture: AMB filed suit in state court (breach of contract and related claims); defendants removed to federal court. AMB sought leave to file a second amended complaint (SAC) adding CFAA, unjust enrichment, and accounting claims and removing two prior fiduciary-related claims.
- The Court granted leave to amend as to removing/altering existing allegations but denied (as futile) AMB’s proposed new claims for violation of the CFAA, unjust enrichment, and equitable accounting.
Issues
| Issue | AMB's Argument | CalCon's Argument | Held |
|---|---|---|---|
| Whether leave to add a CFAA claim survives futility review | Defendants (former employees/ex-employers) accessed AMB’s protected computer without authorization or exceeded access to obtain value (loan data); CFAA civil relief available for losses ≥ $5,000 | SAC fails to plead that defendants accessed AMB systems without authorization or exceeded authorized access; allegations are speculative and on information and belief | Denied as futile: pleadings do not sufficiently allege unauthorized or exceeded access under the narrow Second Circuit interpretation of CFAA "exceeds authorized access" |
| Whether leave to add unjust enrichment claim is permissible given existing contract | AMB: pleads unjust enrichment alternatively and alleges CalCon was enriched at AMB’s expense by delaying transitions and avoiding reimbursement | CalCon: Rescission Agreement governs the same subject matter; unjust enrichment cannot lie where a valid contract controls | Denied as futile: New York law precludes unjust enrichment where an enforceable contract governs the dispute |
| Whether leave to add equitable accounting is proper | AMB: seeks accounting for CalCon’s finances and contends confidentiality/mutual relationship arose from merged operations and discovery has been inadequate | CalCon: relationship arose from contracts; AMB has adequate remedy at law (breach of contract and discovery/motion to compel) | Denied as futile: no fiduciary/confidential relationship alleged and remedy at law exists; accounting is duplicative |
| Whether amendment should otherwise be allowed to alter existing allegations / drop fiduciary claims | AMB: requested to refine allegations and drop two causes of action | Defendants: did not oppose the removal/revisions; focused objections on new claims | Granted in part: Court allowed removal of the eighth and ninth claims and revision of existing allegations |
Key Cases Cited
- TechnoMarine SA v. Giftports, Inc., 758 F.3d 493 (2d Cir. 2014) (Rule 15 leave-to-amend standards)
- McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007) (factors for denying leave to amend)
- Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162 (2d Cir. 2012) (standards for futility review of proposed amendments)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (Supreme Court 2007) (plausibility pleading standard)
- United States v. Valle, 807 F.3d 508 (2d Cir. 2015) (narrow interpretation of "exceeds authorized access" under the CFAA)
- WEC Carolina Energy Sols. LLC v. Miller, 687 F.3d 199 (4th Cir. 2012) (CFAA requires lack of authorization to access particular information; policy-based limits on scope)
- Int’l Airport Centers, L.L.C. v. Citrin, 440 F.3d 418 (7th Cir. 2006) (employee access and agency termination arguments considered in CFAA context)
- United States v. Nosal, 676 F.3d 854 (9th Cir. 2012) (interpretive analysis leading to a narrow reading of CFAA's "exceeds authorized access")
- Clark-Fitzpatrick v. Long Island R. Co., 70 N.Y.2d 382 (N.Y. 1987) (New York law: quantum meruit/unjust enrichment unavailable where valid contract governs the subject matter)