Caliber Home Loans, Inc. v. CrossCountry Mortg.

1

CALIBER HOME LOANS, INC., Plaintiff, v. CROSSCOUNTRY MORTGAGE, LLC, Defendant.

No. 2:22-cv-00616-RAJ

United States District Court, W.D. Washington, Seattle

March 30, 2023

ORDER

The Honorable Richard A. Jones, United States District Judge.

This matter comes before the Court on Defendant CrossCountry's motion to dismiss Plaintiff's complaint. Dkt. # 12. Having considered the submissions of the parties, the relevant portions of the record, and the applicable law, the Court finds that oral argument is unnecessary. For the reasons below, Defendant's motion to dismiss is GRANTED in part and DENIED in part.

I. BACKGROUND

Plaintiff Caliber Home Loans, Inc. (“Plaintiff” or “Caliber”) is a Texas-based mortgage brokerage firm. Dkt. # 1 (Complaint) ¶ 5. Plaintiff employs loan originators around the country to sell residential mortgage services to borrowers. Id. ¶ 6. Defendant CrossCountry, LLC (“Defendant” or “CrossCountry”) is an Ohio-based retail mortgage lender and a competitor of Plaintiff. Id. ¶¶ 7-8.

Plaintiff alleges that, in an unusually short period of time, Defendant hired over 80 employees from Plaintiff who worked in various offices in cities in Washington, Oregon, Texas, Florida Tennessee, and California. Id. ¶ 13. These individuals had been employed as Branch Managers, Sales Managers, Loan Consultants, and Support Staff for Caliber. Id. Plaintiff also alleges that several more employees plan to depart Caliber to join Cross Country. Id. ¶ 14.

Specifically Plaintiff alleges that CrossCountry put into action a “Master Plan” to raid Plaintiff's employees and confidential information. Defendant is alleged to have started off their plan by hiring Texas-based Sales Managers Jeannie Martin-Smith and Kathleen Hays early 2021. Id. ¶ 20. From there, Defendant hired eight more Caliber employees before the close of 2021, seven of whom were based in Washington. Id. ¶¶ 2122.

Plaintiffs allege that the “Master Plan” was explained in a December 3, 2021 email sent from Mark Everts's^[1]personal email address (evertsmark@gmail.com) to his work email address (mark.everts@caliberhomeloans.com). In the email, Everts wrote of potentially moving from Caliber to CrossCountry, staffing his new office with “at least 4 to 8 top producers,” and grooming other high-producing employees for future management roles. Id. ¶ 25, Ex. A (Everts Email). He specifically identified Caliber employees Hans Illingworth and Michelle Muqtadir as “connections.” Id. As to Muqtadir, Everts explained that she was reluctant to leave her job, but noted that she was “loyal to [Everts] and would for sure jump if she knew [Everts] was on board.” Id. Everts appeared to be directing his thoughts toward someone named Scott, writing that he was “[t]alking turkey with you here Scott.” Id. Everts then asked Scott to keep the information that followed confidential. Id. Everts noted that he had sufficient funds saved for retirement, but was “excited” about this new opportunity. Id. Essentially, Everts indicated that an offer to join CrossCountry would have to be lucrative enough to be worth the “rig-a-ma-roll” of leaving Caliber and “uprooting [his] team and going elsewhere.” Id. He ended the email saying, “I hope that will give you enough and I see by my clock that it is just 5 min. before 5 your time:)” Id.

Plaintiff alleges that this email was sent from Everts to CrossCountry's Executive Vice President Scott Foreman. Id. ¶ 24. Plaintiff characterizes the Everts email as the “Master Plan” that set into motion CrossCountry's raid of nearly 80 Caliber employees. Id.¶ 25 Defendant, on the other hand, characterizes this email as Everts “record[ing] his thoughts about leaving Caliber to join Cross Country,” and objects to Plaintiff's allegation that this email was sent from Everts to Foreman, despite sentences being addressed to “Scott” and despite Everts acknowledging that the email was sent 5 minutes before what would have been 5:00 p.m. in Foreman's office in New Jersey. Dkt. # 12 at 3.

Just 13 days later on December 16, 2021, CrossCountry extended to Everts a confidential offer of employment as a Branch Manager with a $1,000,000 sign-on bonus and a potential $500,000 loan volume bonus. Id. ¶ 27, Ex. B (CrossCountry Offer Letter). Plaintiff alleges that Everts signed the offer letter on December 19, 2021, although he continued working at Caliber for three more weeks. Id. ¶¶ 28, 30. Plaintiff alleges that, during this time period, Everts misappropriated Plaintiff's confidential info in the form of extensive amounts of borrower information, to then be used at CrossCountry. Id. ¶ 31. On January 11, 2022, one day after he resigned from Caliber, Everts emailed Caliber Loan Officer Danny To with an offer to leave Caliber and join CrossCountry, and referenced a $400,000 sign on bonus. Id. ¶ 34.

On January 7, 2022 Hans Illingworth (previously identified by Everts as someone who would consider jumping to CrossCountry) left his employment with Plaintiff to join CrossCountry as a Regional Manager. Id. ¶ 32. On January 10, 2022, Everts and several other employees (including Michelle Muqtadir) left Caliber and officially joined CrossCountry. Id. ¶ 33. More Caliber resignations followed. In February 2022, ten individuals left Caliber to join CrossCountry, and in March-April 2022, fifteen more employees did the same. Id. ¶ 35. Additionally, 40 support staff employees resigned from Caliber. Id. ¶ 36. The parties refer to the various employees that left Caliber for CrossCountry during the time period at issue as the “Departing Employees.” See generally Dkt. # 1; see also Dkt. # 12 at 13.

The complaint alleges that many of the above-mentioned Departed Employees sent to their personal email addresses confidential documents detailing customer interest rates, FICO scores, income, home appraisal values, and other information at around the same time that they left Caliber for CrossCountry. See Dkt. # 1 ¶ 76. The complaint describes in detail how Mark Everts, Mason Buckles, Casey Granston, Hans Illingworth, Lori Johanson, Timothy Lauch, Ryan Mallory, Michelle Muqtadir, and Melissa Medved sent messages from their Caliber email accounts to their personal email accounts that included documents containing customer and loan information. Id. ¶ 76(a)-(i). For example, on December 21, 2021, Lauch sent several spreadsheets of lists of agents, “prospects,” “leads,” “preapprovals,” and a client list that included customer contact information and loan information for 400 individuals to his personal email account. Id. ¶ 76(f)(i). A few days later, on December 23, he emailed to himself a zip file with 72 spreadsheets. Each included detailed loan information for various customers, such as the loan amount, down payment, sales price, monthly payment, and property taxes. Id. ¶ 76(f)(ii). Five days later, Lauch sent to himself a “pipeline” spreadsheet with information concerning 150 customers. Id. ¶ 76(f)(iii). And just over a week later, on January 6, 2022 (four days before he resigned from Caliber), Lauch sent himself a zip file with numerous spreadsheets with detailed loan and mortgage information for 75 customers. Id. ¶ 76(f)(iv).

Plaintiff states that Caliber generally requires sales employees to execute restrictive covenant agreements in favor of Caliber that prohibit employees from: (1) soliciting Caliber employees to end their employment; (2) removing loans in process at Caliber; and (3) retaining, using, or disclosing Caliber's confidential business information. Id. ¶ 38. Plaintiff alleges that on January 11, 2022, Plaintiff sent a demand letter to Everts regarding his “restrictive covenants and Caliber's concerns about his misconduct.” Id. ¶ 61. On January 18, Defendant responded to the letter, denying any wrongdoing or that Evert diverted loans or recruited Caliber employees to join CrossCountry. Id. ¶¶ 62-63.

In January 2022, Plaintiff sued Everts in King County Superior Court, and the action resulted in a Stipulated Injunction. Id. ¶ 65. As employees continued to leave Caliber in 2022, Plaintiff sent cease and desist letters demanding the return of confidential information to several former employees, copying Defendant on each. Id. ¶¶ 66-67. Plaintiff alleges that none of the former employees responded and that Defendant responded in March 2022 by stating that CrossCountry did not have enough information to “adequately investigate.” Id. ¶¶ 68-69.

Plaintiff filed a complaint in this Court on May 6, 2022, alleging unfair competition, misappropriation of trade secrets, conversion of confidential and proprietary information, tortious interference with contract, tortious inducement to breach fiduciary duty of loyalty, tortious interference with advantageous business relationships, and civil conspiracy. See Dkt. # 1 ¶ 91-156. Plaintiff seeks compensatory damages in excess of $5,000,000, attorney's fees and costs, statutory damages under the Defend Trade Secrets Act, pre-judgment interest, and any other relief that the Court deems appropriate. Id. at 45. Defendant moved to dismiss the complaint in its entirety for failure to state a claim under Rule 12(b)(6). See Dkt. # 12. Plaintiff filed a response in opposition to Defendant's motion, Dkt. # 13, and Plaintiff filed a reply in support of dismissal. Dkt. # 14.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint for failure to state a claim. Fed.R.Civ.P 12(b)(6). The court must assume the truth of the complaint's factual allegations and credit all reasonable inferences arising from those allegations. Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007). A court “need not accept as true conclusory allegations that are contradicted by documents referred to in the complaint.” Manzarek v. St. Paul...