Genworth Financial Wealth Mgmt Inc v. McMullan et al
Filing
280
CONSOLIDATED RULING denying 195 Motion for Summary Judgment; granting in part and denying in part 198 Motion for Summary Judgment; denying 201 Motion for Summary Judgment. Signed by Judge Janet C. Hall on 3/30/2012. (Oliver, T.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
GENWORTH FINANCIAL WEALTH
MANAGEMENT, INC.,
Plaintiff,
v.
TIMOTHY MCMULLAN;
JAMES COOK;
TIMOTHY MCFADDEN;
KAREN BAZON;
TAMARA RIVERA;
and TJT CAPITAL GROUP,
Defendants.
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CIVIL ACTION NO.
3:09-CV-1521(JCH)
MARCH 30, 2012
TIMOTHY MCMULLAN;
JAMES COOK;
TIMOTHY MCFADDEN;
and TJT CAPITAL GROUP,
Counter-Claimants and
Third-Party Plaintiffs,
:
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v.
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GENWORTH FINANCIAL WEALTH
:
MANAGEMENT, INC.,
:
Counter-Claim Defendant, :
:
GURINDER AHLUWALIA,
:
Third-Party Defendant.
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CONSOLIDATED RULING ON THE PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT (Doc. No. 195); PLAINTIFF’S AND THIRD-PARTY DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT (Doc. No. 198); and DEFENDANTS’ MOTION
FOR SUMMARY JUDGMENT (Doc. No. 201)
The plaintiff, Genworth Financial Wealth Management, Inc. (“Genworth”) brought
this action for injunctive relief and damages against several of its former high-level
1
employees, Timothy McMullan, James Cook, Timothy McFadden, and the business the
three men formed after they left Genworth, TJT Capital Group, LLC (“TJT”) (collectively,
the “Principal Defendants”), as well as claims against two former Genworth employees
who went to work at TJT in administrative jobs, Karen Bazon, and Tamara Rivera
(collectively, the “Defendants”). The Principal Defendants counterclaimed against
Genworth and brought a third-party complaint against Genworth’s President and CEO,
Gurinder Ahluwalia, seeking injunctive relief and damages. Pursuant to Federal Rule of
Civil Procedure 56, both Genworth (Doc. No. 195) and the Defendants (Doc. No. 201)
move for summary judgment on Genworth’s claims, and Genworth and Ahluwalia move
for summary judgment on the counterclaims and third-party claims (Doc. No. 198).
For the reasons stated herein, Genworth’s Motion (Doc. No. 195) is denied,
Genworth’s and Ahluwalia’s Motion (Doc. No. 198) is granted in part with respect to
the tortious interference with contractual relations claim and denied in part as to all
other claims; and the defendants’ Motion (Doc. No. 201) is denied.
I.
BACKGROUND1
This action arises out of the manner in which the Individual Defendants left the
employ of Genworth in the summer of 2009. After doing so and establishing TJT, TJT
began aggressively soliciting Genworth clients with whom they had worked while still at
Genworth. Genworth mounted an aggressive campaign to retain those clients.
Acrimony between the Principal Defendants and Genworth escalated, and Genworth
commenced this lawsuit in September 2009.
1
Unless otherwise noted, the following facts are uncontested. This Ruling principally discusses
the many disputed facts in this matter alongside the analysis of the merits of the parties’ claims.
2
A.
The Individual Defendants’ contractual relationships with Genworth
The Individual Defendants all worked for the Private Client Group (“PCG”) at
Genworth. The PCG originally began as a money management business called the BJ
Group, which was owned in part by Bob Brinker. Genworth’s L.R. 56(a)(1) Stmt. (Doc.
No. 200) ¶ 1. Centurion Capital Management Corp. bought the BJ Group in 2000, and
General Electric (“GE”) bought Centurion in 2001, at which time the PCG was known as
General Electric Private Asset Management. Id. ¶ 2. At some point in 2004 or 2005,
GE spun off Genworth. Id. ¶ 3; Def.’s L.R. 56(a)(2) Stmt. (Doc. No. 210) ¶ 3.
McFadden and Cook had started working with the BJ Group in 1996 and 1999, Def.’s
L.R. 56(a)(1) Stmt (Doc. No. 203) ¶ 4, and McMullan served as head of the PCG
between 2004 and 2009, Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200) ¶ 3.
After the spinoff, all five of the Individual Defendants signed a document entitled
“Conditions of Employment Acknowledgment” (the “Contract”). The Contract conditions
the employee’s continued employment with Genworth on the employee reading and
agreeing to three additional documents: (1) the “Proprietary Information and Inventions
Agreement” (the “Confidentiality Agreement”), (2) the “Genworth Code of Ethics” (the
“Code”), and the “Resolve Guidelines” and “Resolve Program Handbook” (collectively,
the “Arbitration Agreement”). Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. U, at
4-8 (the Contract signed by all the Individual Defendants). The Contract therefore
unambiguously states that some of its relevant terms, namely those that appear in the
Confidentiality Agreement, the Code, and the Arbitration Agreement, do not appear
within its four corners. See id. The record does not contain copies of the
Confidentiality Agreement, the Code, or the Arbitration Agreement signed and dated by
3
any of the Individual Defendants.
According to a Genworth employee, the Confidentiality Agreement as it existed
in 2005 when the individual defendants signed the Contract expressly prohibited “use,
publi[cation] or . . . disclos[ure] . . . [of] confidential information,” including, by way of
example, “information or materials concerning [Genworth]’s . . . customer relationships.”
Bartle Aff. (Doc. No. 214-1) ¶ 2, Ex. A. But the same employee testified that this
language specifically identifying customer information as confidential was not added to
the agreement until 2006 and did not apply to employees who signed the earlier
version. Def.’s L.R. 56(a)(1) Stmt (Doc. No. 203) Ex. 8 (the “Bartle Dep.”), at 41:142:17. The Principal Defendants claim that they have never seen this version of the
Confidentiality Agreement. Def.'s L.R. 56(a)(1) Stmt. (Doc. No. 203) Ex. 1 (the “July 8
Cook Decl.”), ¶ 14, Ex. 2 (the “July 8 McFadden Decl.”), ¶ 11, Ex. 3 (the “July 8
McMullan Decl.”), ¶ 21. Instead, each claims that he signed a different confidentiality
agreement which, although it did prohibit disclosure of confidential information, did not
specifically mention customer information as confidential. July 8 Cook Decl. Ex. A; July
8 McFadden Decl. Ex. A; July 8 McMullan Decl. Ex. A. Although Cook and McFadden
appear to claim that they signed the same earlier confidentiality agreement, July 8 Cook
Decl. Ex. A; July 8 McFadden Decl. Ex. A, McMullan claims that he signed yet another
version of the confidentiality agreement, July 8 McMullan Decl. Ex. A. Bazon and
Rivera do not contest that the Confidentiality Agreement proffered by Genworth binds
them.
In addition, Genworth submitted a version of the Code dated 2006, after all the
Individual Defendants except Rivera signed the Contract. Genworth’s L.R. 56(a)(1)
4
Stmt. (Doc. No. 200) Ex. W (the “2006 Code”), at 1, 44.2 This version of the Code does
not contain a disclaimer of any contractual rights. See generally id. The Defendants
submitted as evidence a version of the Code dated 2004, when Genworth was still part
of GE, which states: “GE does not create any contractual rights by issuing the [Code].”3
Def.’s L.R. 56(a)(1) Stmt. (Doc. No. 203) Ex. 9 (the “2004 Code”), at 2. A Genworth
employee testified that employees are trained on updated versions of the Code and
must reaffirm their commitment to its principles, Bartle Dep. at 17:3-20, but no written
reaffirmations or copies of training materials appear in the record.
Both versions of the Code have extremely similar sections discussing the need
for employees to protect confidential and proprietary information and avoid conflicts of
interest. 2004 Code at 26, 29-30; 2006 Code at 29-30, 36-37. McMullan testified that
he “perhaps” did not comply with the Code’s intellectual property provisions, Genworth’s
L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. E (the “McMullan Dep.”), at 221:7-222:16, and
Cook testified that he had violated the Code’s conflict of interest provisions, Genworth’s
L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. H (the “Cook Dep.”), at 224:15-24.
B.
Individual Defendants’ Departure From Genworth
As of December 2008, McMullan began planning to leave Genworth and start his
own money management firm; as of January 2009, Cook and McFadden had agreed to
join him. Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 197) ¶¶ 23, 25. In April 2009,
2
These page numbers refer to pages 1 and 44 of Exhibit W, the unnumbered front and back
covers of the 2006 Code.
3
In response to the Defendants’ submission of the 2004 Code, Genworth submitted an undated
version of the Code, which does not contain this disclaimer. Genworth’s Reply Br. in Supp. of its Mot. for
Summ. J. on its Affirmative Claims, Ex. B (the “Undated Code”).
5
McMullan, Cook, and McFadden created a business strategy document for the
proposed new enterprise; the document identified the proposed business’ strategy as
persuading Genworth clients with whom McMullan, Cook, and McFadden worked to
move their money management business to TJT. See id. ¶¶ 26, 28-29.
In furtherance of this plan and while still employed at Genworth, McMullan began
removing information about the targeted clients from Genworth client databases and
sending it to TJT’s eventual custodian, Charles Schwab. Id. ¶¶ 40, 42. Cook and
McFadden also sent client contact information to Charles Schwab. Id. ¶ 54. McMullan
also solicited Brinker, who had remained in an advisory role in the PCG’s various
incarnations, to end his relationship with Genworth and begin a new one with TJT. Id.
¶¶ 47-50. Brinker ultimately elected to contract with TJT on a non-exclusive basis and
continue working with Genworth as well. Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200)
Ex. F.
C.
Genworth’s Reaction to the Defendants’ Activities
During July 2009, after McMullan’s departure from Genworth, Genworth’s cochairman, Ronald Cordes, negotiated an extension of Genworth’s advisory agreement
with Brinker in which Brinker would provide non-exclusive advisory services to
Genworth. Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200) ¶¶ 7-9. Upon learning from
Genworth clients that the Principal Defendants also claimed to have an agreement with
Brinker, Cordes met with Mary Jo Zandy, Brinker’s authorized agent, on August 21,
2009. Id. ¶ 10.
The accounts of the meeting vary. According to Zandy, Cordes stated that
McMullan had stolen client records, Genworth’s Reply Mem. in Supp. of Mot. for Summ.
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J. (Doc. No. 232) Ex. Q (the “Zandy Dep.”), at 96:8-16, and accused Zandy and Brinker
of destroying Genworth’s business, id. at 96:2-6. Zandy also stated that Cordes further
threatened imminent legal action, including subpoenas and lawsuits, against Zandy and
Brinker. Id. at 97:23-99:4. Zandy also stated that, in response to Cordes’ threats, she
decided to attempt to persuade Brinker to rescind his agreement with TJT, id. at 106:711, and that Brinker agreed, id. at 113:20-22. Zandy later sent an e-mail to Cordes
stating that no agreement existed. Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. I.
Cordes, in contrast, states that, “I informed Ms. Zandy that the Defendants had
been representing to Genworth’s clients that TJT had an advisory agreement with Mr.
Brinker, and Ms. Zandy agreed to check with Mr. Brinker to confirm that no such
agreement existed.” Cordes Decl. (Doc. No. 200-1) ¶ 5.
After the meeting and several telephone conversations, Cordes wrote an e-mail
to Zandy in which he requested that Zandy confirm in writing that Zandy had
communicated to McMullan that Brinker did not have an agreement with TJT.
Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. L, at 2. Zandy did not reply until
August 26, at which time she notified Cordes that she could not so confirm in writing.
Id. at 1.
In the meantime, Genworth sent a letter and duplicate e-mail, over Ahluwalia’s
signature, to Genworth clients with whom Cook and McFadden had prior relationships.
Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200) ¶ 14. In the letter, Ahluwalia wrote: “We
were surprised to learn that you may have been solicited recently by someone no
longer employed with our firm. If you were contacted, we apologize and hope he did
not cause you any inconvenience or concern. If you are contacted in the future, please
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know that this individual and the firm he represents are not affiliated with us, Bob
Brinker, or The BJ Group Services.” Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex.
J (the “Ahluwalia Letter”).
D.
This Lawsuit
On September 25, 2009, Genworth filed this action. Genworth alleged that (1)
Cook, McFadden, and TJT violated the Computer Fraud and Abuse Act (“CFAA”), 18
U.S.C. § 1030; (2) all the Defendants violated the Connecticut Unfair Trade Secrets Act
(“CUTSA”), Conn. Gen. Stat. Ann. § 35-50 et seq.; (3) the Individual Defendants
breached contracts with Genworth; (4) all Defendants violated the Connecticut Unfair
Trade Practices Act (“CUTPA”), Conn. Gen. Stat. Ann. § 42-110 et seq.; (5) all
Defendants violated the Stored Communications Act (“SCA”), 18 U.S.C. § 2701 et seq.;
and (6) all Defendants tortiously interfered with Genworth’s contractual relations and/or
business expectancies.
On October 21, 2009, the Defendants answered and brought a counterclaim
against Genworth and a third-party claim against Ahluwalia. The Defendants claimed
that Genworth and Ahluwalia are liable for (1) defamation; (2) disparagement; (3)
tortious interference with advantageous business relations, (4) CUTPA violations, and
(5) common law unfair competition.
E.
The Class Action in the Eastern District of New York
On December 22, 2009, a putative class action made up of Genworth clients was
filed in the United States District Court for the Eastern District of New York. Goodman
v. Genworth Fin. Wealth Mgmt., Inc., No. 2:09-cv-5603 (LDW), ECF No. 1 (E.D.N.Y.
8
Dec. 22, 2009).4 McMullan provided material support to counsel for the plaintiffs in the
class action by reviewing and editing the operative legal documents. Genworth’s L.R.
56(a)(1) Stmt. (Doc. No. 197) Ex. E, at 407:10-410:5, Ex. EE (e-mail communications
between McMullan and class counsel about draft documents in the class action, about
which McMullan recommended changes “to have more bite.”), Ex. FF (e-mail from
McMullan to class counsel discussing analysis McMullan performed on a potential
plaintiff’s Genworth investments), Ex. GG (unsolicited communication to Genworth
client about class action enclosing press release issued by class counsel). McMullan
also apparently helped counsel for the class action plaintiffs to solicit Genworth clients
to speak to them and potentially join the lawsuit. See Baum Aff. (Doc. No. 76), Ex. E.5
That lawsuit is pending.
F.
The Preliminary Injunction
After Genworth became aware that TJT was continuing to solicit business from
Genworth clients, Genworth moved for a temporary restraining order and a preliminary
injunction. After a two-day evidentiary hearing, this court (Bryant, J.) made detailed
findings of fact and issued a preliminary injunction. See generally Ruling on Motion for
Preliminary Injunction (Doc. No. 101). The injunction forbids the Defendants from,
4
This court takes judicial notice of the docket entries in the class action. See Anderson v.
Rochester-Genesee Reg’l Transp. Auth., 337 F.3d 201, 205 n.4 (2d Cir. 2003).
5
For reasons that are not immediately clear, Genworth did not submit this exhibit as part of the
summary judgment briefing process. Because they have already been submitted in this litigation and
Judge Bryant relied upon them in her preliminary injunction ruling, this court may consider them here. See
Clinkscales v. Chevron U.S.A., 831 F.2d 1565, 1570 (11th Cir. 1987) ("The affidavits appended to
appellant's motion for a preliminary injunction were, however, part of the written record before the district
judge at the time he ruled on the summary judgment motions. These affidavits were therefore properly
before the district court.").
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among other things, soliciting business from Genworth clients, using Genworth client
lists, or using Genworth’s proprietary information for their own benefit or for the benefit
of a third-party. Id. at 18-20.
II.
STANDARD OF REVIEW
Summary judgment is appropriate only when “the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). No genuine disputes as to any material fact exist,
and summary judgment is therefore appropriate, when “the record taken as a whole
could not lead a rational trier of fact to find for the non-moving party.” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A material fact is one
which “might affect the outcome of the suit under the governing law,” and an issue is
genuine when “the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
However, “[c]onclusory allegations will not suffice to create a genuine issue.” Delaware
& Hudson Ry. Co. v. Consol. Rail Corp., 902 F.2d 174, 178 (2d Cir. 1990).
On cross-motions for summary judgment, the same standard applies. See
Morales v. Quintel Entertainment, Inc., 249 F.3d 115, 121 (2d Cir. 2001). “The court
must consider each motion independently of the other and, when evaluating each, the
court must consider the facts in the light most favorable to the non-moving party.”
Natural Res. Def. Council v. Evans, 254 F. Supp. 2d 434, 438 (S.D.N.Y. 2003) (citing
Morales, 249 F.3d at 121); see also Pabon v. Wright, 459 F.3d 241, 247 (2d Cir. 2006).
In light of this command, and in light of the unique procedural posture of a motion for a
preliminary injunction, the findings of fact and conclusions of law made at the time the
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injunction issued do not bind the court when considering a motion for summary
judgment. See Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981) (“[T]he findings of
fact and conclusions of law made by a court granting a preliminary injunction are not
binding at trial on the merits.”); Everitt v. DeMarco, 704 F. Supp. 2d 122, 133 (D. Conn.
2010) (“[A]lthough it may consider the findings of fact and conclusions of law made on
the Plaintiffs' motion for an emergency order, those findings and conclusions are not
binding on the Court when deciding a motion for summary judgment.”).
III.
DISCUSSION
A.
Genworth’s Claims
1.
The Principal Defendants
a.
Breach of Contract
Genworth argues that no genuine factual dispute exists on its breach of contract
claim because the Principal Defendants6 all violated the Contract, the Confidentiality
Agreement, and the Code by (1) disclosing or misusing confidential information,
specifically Genworth’s customer lists, and (2) taking steps to build TJT while still
employed at Genworth, creating a conflict of interest. The Principal Defendants argue
that summary judgment in their favor is appropriate because no enforceable contract
exists between Genworth and the Principal Defendants; in the alternative, they argue
that the terms of any such contract are ambiguous such that summary judgment is
improper. Because triable issues exist about what the binding terms of the Contract,
6
Although Genworth casts its argument on all of the claims in terms of all the Individual
Defendants, including Bazon and Rivera, this court considers the claims against the Principal Defendants
separately from the claims against Bazon and Rivera.
11
the Confidentiality Agreement, and the Code are, summary judgment is not proper for
any party on the breach of contract claim.
In Connecticut, a breach of contract action requires the plaintiff to show (1) a
valid agreement, (2) performance by one party, (3) breach of the agreement by the
opposing party and (4) damages directly and proximately caused by the breach.
McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., 93 Conn.
App. 486, 503-04 (2006). The plaintiff has the burden “to prove a meeting of the minds
to establish its version of the claimed contract.” Bridgeport Pipe Eng’g Co. v. DeMatteo
Constr. Co., 159 Conn. 242, 246 (1970). Although typically this proof is limited to the
terms of the contract itself, the parties may use extrinsic evidence to establish, among
other things, the content of a missing contract term in a document “which indicates on
its face that it does not set forth the complete agreement.” TIE Commc’ns, Inc. v.
Kopp, 218 Conn. 281, 289 (1991) (internal quotation omitted).
As a threshold matter, the Principal Defendants’ argument that no enforceable
contract exists between them and Genworth lacks merit. All employment relationships
involve binding contracts, “otherwise, the employee would not be working.” Torosyan v.
Boehringer Ingelheim Pharm., Inc., 234 Conn. 1, 13 (1995) (internal quotation omitted).
Moreover, here, all the Defendants signed the Contract, which recites that the
employee’s agreement to its terms is in consideration of continued employment at
Genworth, then recites the terms of the employment relationship, including
acknowledgment that the employment term is at will. Genworth’s L.R. 56(a)(1) Stmt.
Ex. U, at 4-8. This document has all the necessary elements of a valid contract, and its
express terms govern.
12
Although the parties here agreed to an express contract, material factual
disputes remain about the terms of that contract. Because some of the Contract’s
relevant terms, namely those that appear in the Confidentiality Agreement, the Code,
and the Arbitration Agreement, do not appear within its four corners, see id., this court
therefore must look to extrinsic evidence to determine the content of the Contract, see
TIE Commc’ns, Inc., 218 Conn. at 289. This court concludes, based on substantial
questions about which of several successive versions of the Confidentiality Agreement
and Code apply to each of the Principal Defendants and conflicting extrinsic evidence
about Genworth’s definition of and practices governing confidential information, that
triable issues exist as to what, exactly, the parties agreed to in the Contract, the
Confidentiality Agreement, and the Code.7
First, evidence in the record supports Genworth’s claim that the Principal
Defendants expressly agreed to a version of the Confidentiality Agreement which
identifies customer information as protected. Bartle Aff. ¶ 2, Ex. A. Other evidence in
the record supports the Principal Defendants’ assertion that the version of the
Confidentiality Agreement the Principal Defendants signed and agreed to did not
specifically identify customer information as protected. Bartle Dep. at 41:1-42:17.
Whether viewed in the light most favorable to Genworth or the Principal Defendants, it
7
An question exists about how, if at all, modifications to the Confidentiality Agreement could bind
the Principal Defendants in the absence of additional consideration, see Thermoglaze, Inc. v. Morningside
Gardens Co., 23 Conn. App. 741, 745 (1991) (“A modification of an agreement must be supported by valid
consideration and requires a party to do, or promise to do, something further than, or different from, that
which he is already bound to do.”), and whether the parties intended to modify the agreements, Three S.
Dev. Co. v. Santore, 193 Conn. 174, 177-78 (1984) (“Whether the parties intended to modify their contract
is a question of fact.”). Absent meaningful briefing on this issue by the parties, this court does not address
this question further.
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is not at all clear what terms the parties agreed to incorporate into the Contract by
means of the Confidentiality Agreement, and a triable issue exists as to what the terms
of the Contract are with respect to confidentiality.
In addition, given that the Contract indicates on its face that it does not set forth
the parties’ complete agreement, the parties may rely on extrinsic evidence to
determine the terms of each version of the Confidentiality Agreement in the record,
including evidence of the treatment of such information at Genworth. See TIE
Communications, Inc., 218 Conn. at 289. Conflicting evidence exists in the record
about how Genworth defined confidential material in practice. Compare McMullan Dep.
at 221:7-222:16; July 8 Cook Decl. ¶¶ 13, 21-22 (client information not labeled
confidential, no training on what constitutes confidential materials), with Genworth’s
L.R. 56(a)(2) Stmt. (Doc. 214) Ex. 10 (the “Overkamp Dep.”), at 69:20-70:16 (regular
training conducted on confidential information and practices conformed to training);
Genworth’s L.R. 56(a)(2) Stmt. (Doc. 214) Ex. 11 (the “D’Agostino Dep.”), at 17:3-12 (all
information designed for client use is confidential client information). This conflicting
evidence also creates a triable issue with respect to the coverage of the Confidentiality
Agreements.
Second, evidence in the record supports Genworth’s claims that the Principal
Defendants agreed to a version of the Code which could give rise to a binding
contractual obligation to abide by its terms. Bartle Dep. at 17:3-20; 2006 Code at 2930, 36-37. Other evidence in the record supports the Principal Defendants’ contention
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that the version of the Code they agreed to does not create any binding obligations.8
2004 Code at 2, 26, 29-30. Accordingly, whether viewed in the light most favorable to
either party, a factual dispute remains about whether the parties intended that the
Code’s terms make up part of the Principal Defendants’ binding contractual obligations
under the Contract.
b.
CUTSA
Genworth asserts that summary judgment is proper on its CUTSA claim because
the record demonstrates that there is no genuine dispute that the customer information
the Principal Defendants extracted from Genworth is a “trade secret” as defined by
Conn. Gen. Stat. Ann. § 35-51(d).9 The Principal Defendants counter that summary
judgment in their favor is appropriate because any information they removed from
Genworth is not a “trade secret” as a matter of law. Whether viewed in the light most
favorable to Genworth or the Principal Defendants, a reasonable juror could come to
either conclusion on this record, and summary judgment is not warranted.
CUTSA, Conn. Gen. Stat. Ann. § 35-51 et seq., proscribes the misappropriation
of trade secrets through improper means:
8
Even assuming that the Undated Code, lacking the disclaimer of the 2004 Code, is properly
before the court, Genworth’s attempt to rely on both the 2006 Code and the Undated Code, especially
without any evidence concerning how versions of the Code were substituted for one another, how or in
what form the Principal Defendants supposedly agreed to new versions, or how such modifications were
permissible absent indicia of additional consideration or mutual assent, creates more disputed factual
issues than it resolves. The validity and applicability of the now-three-competing versions of the Code is a
matter for trial.
9
CUTSA defines a “trade secret” as “information, including a formula, pattern, compilation,
program, device, method, technique, process, drawing, cost data or customer list that: (1) derives
independent economic value, actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value from its disclosure or
use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
Conn. Gen. Stat. Ann. § 35-51(d).
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The question of whether, in a specific case, a party has made reasonable
efforts to maintain the secrecy of a purported trade secret is by nature a
highly fact-specific inquiry. What may be adequate under the peculiar facts
of one case might be considered inadequate under the facts of another.
According to § 35–51(d)(2), the efforts need only be reasonable under the
circumstances.
Elm City Cheese Co. v. Federico, 251 Conn. 59, 80 (1999) (internal citation omitted).
Ordinarily, “whether the measures taken by a trade secret owner are sufficient to satisfy
the [Illinois Trade Secrets] Act’s reasonableness standard . . . is a question of fact for
the jury.” Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 725 (7th
Cir. 2003) (applying “is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality” language used in the Illinois
Trade Secrets Act).
Assuming without deciding that Genworth’s evidence leaves no disputed factual
issues with respect to the other elements of CUTSA liability, this court concludes that
disputed factual issues about the reasonableness of the precautions Genworth took to
maintain the secrecy of its client information preclude summary judgment. Although
Genworth has produced evidence of an extensive security protocol protecting its
physical office space and electronic records, see generally Murray Aff. (Doc. No. 1974), the Principal Defendants have produced evidence that Genworth employees
habitually removed client papers from Genworth offices, kept electronic client records
on their home computers, and retained copies of the ostensibly confidential ACT
database after leaving Genworth’s employ, see Def.’s L.R. 56(a)(1) Stmt (Doc. No. 203)
Ex. 4 (the “O’Brien Dep.”), at 32:4-36:22, 38:2-20, 40:13-41:25. Viewed in the light
most favorable to Genworth, a reasonable juror could conclude that Genworth had
16
taken sufficient steps to protect the secrecy of its customer list and contact information.
A reasonable juror, viewing the evidence in the light most favorable to the Principal
Defendants, could conclude the opposite. Given the highly fact-specific nature of this
inquiry, the matter is appropriately one for the jury, and summary judgment is not proper
for either the Principal Defendants or Genworth.
c.
Tortious Interference With Contractual Relations10
Genworth argues that the Principal Defendants tortiously interfered with
Genworth’s contractual relationships with its customers by misleading them and
fomenting the class action against Genworth. Pl.’s Mem. in Supp. of Mot. for Summ. J.
at 33-35. The Principal Defendants also move for summary judgment on this claim,
without citation to authority, on the basis that it is “plainly derivative” of Genworth’s other
claims. Def.’s Mem. in Supp. of Mot. for Summ. J. at 33-34. This court concludes that
sufficient factual disputes remain as to whether the Principal Defendants acted
tortiously such that summary judgment is not warranted for either party.
“A claim for tortious interference with contractual relations requires the plaintiff to
establish (1) the existence of a contractual or beneficial relationship, (2) the defendants'
knowledge of that relationship, (3) the defendants' intent to interfere with the
relationship, (4) the interference was tortious and (5) a loss suffered by the plaintiff that
was caused by the defendants' tortious conduct.” Appleton v. Bd. of Educ., 254 Conn.
205, 212-13 (2000) (internal quotations omitted). “[F]or a plaintiff successfully to
10
Although Genworth pleaded this claim in terms of “tortious interference with contractual and/or
advantageous business relations,” see Compl. ¶¶ 79-85, Genworth only briefed this issue in terms of
tortious interference with contractual relations, Mem. in Supp. of Genworth’s Mot. for Summ. J. at 33-35.
17
prosecute such an action it must prove that the defendant's conduct was in fact tortious.
This element may be satisfied by proof that the defendant was guilty of fraud,
misrepresentation, intimidation or molestation . . . or that the defendant acted
maliciously.” Solomon v. Aberman, 196 Conn. 359, 365 (1985).
Assuming without deciding that Genworth’s evidence leaves no disputed factual
issues with respect to the other elements of tortious interference with contractual
relations, a triable issue exists as to whether the Principal Defendants acted tortiously.
Genworth identifies three types of tortious acts by the Principal Defendants to support
its tortious interference claim: (1) misrepresentation to Genworth’s customers that
Genworth no longer had a relationship with Brinker, (2) provision of material assistance
to the class action plaintiffs and their counsel and sending unsolicited communications
to Genworth clients informing them about the class action, and (3) disclosure of
confidential information to class counsel. Sufficient factual disputes exist as to whether
this evidence establishes the Defendant’s tortious conduct to preclude summary
judgment in Genworth’s favor on this claim.11
First, Genworth has produced evidence that the Principal Defendants misled
Genworth’s clients by insinuating that Genworth and Brinker no longer had any
affiliation. See Genworth’s L.R. 56(a)(1) Stmt. Ex. HH (e-mail from Cook to a third party
advising the third-party to ask a third unnamed individual why a link to Genworth for
money management services no longer appeared on Brinker’s website), Ex. JJ (internal
Genworth notes about conversations with clients who understood from the Principal
11
Viewed in the light most favorable to Genworth, the evidence in the record clearly creates a
factual dispute such that summary judgment in the Principal Defendants’ favor is improper.
18
Defendants that Brinker’s relationship with Genworth had changed and possibly ended).
Other evidence suggests that they conveyed only truthful information about the
undisputed change in Brinker’s relationship with Genworth from exclusive to nonexclusive, see Genworth’s L.R. 56(a)(1) Stmt. ¶¶ 51-52; Genworth and Ahluwalia’s L.R.
56(a)(1) Stmt. ¶ 8, and the undisputed alteration of Brinker’s website to exclude a link to
Genworth, see Genworth’s L.R. 56(a)(1) Stmt. Ex. JJ, at 2, Ex. II at 1. Whether viewed
in the light most favorable to the Principal Defendants or to Genworth, this evidence
creates a triable issue about whether the Principal Defendants tortiously misled any of
Genworth’s clients about Genworth’s relationship with Brinker.
Second, Genworth has presented evidence that the Principal Defendants
instigated the class action, provided material assistance to the class action plaintiffs
and their counsel, and sent unsolicited communications to Genworth clients informing
them about the class action. Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 197) Ex. E, at
407:10-410:5, Ex. EE (e-mail communications between McMullan and class counsel
about draft documents in the class action, about which McMullan recommended
changes “to have more bite”), Ex. FF (e-mail from McMullan to class counsel discussing
analysis McMullan performed on a potential plaintiff’s Genworth investments), Ex. GG
(unsolicited communication to Genworth client about class action enclosing press
release issued by class counsel). Viewed in the light most favorable to the Principal
Defendants, a reasonable juror could conclude from this evidence that the Principal
Defendants engaged in aggressive business practices without the malice, intimidation,
or molestation necessary to establish tortious interference. See Landmark Inv. Grp.,
LLC v. Calco Const. & Dev. Co., No. HHB-CV-09-6002117-S, 2011 WL 5925162, at *7
19
(Conn. Super. Nov. 4, 2011) (denying prejudgment remedy on basis of tortious
interference claim because “[the defendant]'s action[s] were nothing more that [sic]
aggressive business practices.”). But, viewed in the light most favorable to Genworth, a
reasonable juror could conclude that this conduct did constitute sufficiently tortious
conduct to support liability.
Finally, Genworth asserts that the Principal Defendants provided confidential
information to class counsel. Genworth cites Judge Bryant’s Order granting the
preliminary injunction finding that the Principal Defendants had done so. Ruling on
Motion for Preliminary Injunction at 14-15 (Doc. No. 101). Judge Bryant’s findings of
fact are not binding on this court on these motions for summary judgment, Univ. of Tex.
v. Camenisch, 451 U.S. 390, 395 (1981); Everitt v. DeMarco, 704 F. Supp. 2d 122, 133
(D. Conn. 2010), and are not evidence. Although the evidence cited in Judge Bryant’s
Ruling, viewed in the light most favorable to Genworth, establishes that the Principal
Defendants provided confidential information to class counsel, viewed in the light most
favorable to the Principal Defendants it would permit a reasonable juror to conclude
otherwise. See Baum Aff. (Doc. No. 76), Ex. E.12 Genworth also cites McMullan’s
deposition testimony for this factual content. Genworth’s L.R. 56(a)(1) Stmt. (Doc. No.
197) Ex. E, at 407:10-410:5. Viewed in the light most favorable to the Principal
Defendants, this evidence if credited by a jury may establish that McMullan provided
12
Again, for reasons that are not immediately clear, Genworth did not submit this exhibit as part of
the summary judgment briefing process. Because they have already been submitted in this litigation and
Judge Bryant relied upon them in her preliminary injunction ruling, this court may consider them here. See
Clinkscales v. Chevron U.S.A., 831 F.2d 1565, 1570 (11th Cir. 1987) ("The affidavits appended to
appellant's motion for a preliminary injunction were, however, part of the written record before the district
judge at the time he ruled on the summary judgment motions. These affidavits were therefore properly
before the district court.").
20
material assistance to class counsel, not necessarily tortious conduct. Accordingly,
whether McMullan provided confidential information to class counsel is an issue for the
jury.
Triable issues therefore exist as to whether the Principal Defendants acted
tortiously to establish a tortious interference claim. Summary judgment is not proper for
either the Principal Defendants or Genworth.
d.
CUTPA
Both Genworth and the Principal Defendants argue that no material facts remain
in dispute as to Genworth’s CUTPA claim and that summary judgment is proper for
both of them. Because disputed factual issues exist with respect to Genworth’s claim
based on both an unfairness theory and a deception theory, summary judgment is not
proper for the Principal Defendants or for Genworth.
“No person shall engage in unfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce.” Conn. Gen. Stat. Ann. §
42–110b(a). “[W]hether a defendant's acts constitute . . . deceptive or unfair trade
practices under CUTPA, is a question of fact for the trier.” Tallmadge Bros., Inc. v.
Iroquois Gas Transmission Sys., 242 Conn. 479, 505 (2000).
i.
CUTPA coverage
The Principal Defendants argue that Genworth’s CUTPA claims fail as a matter
of law to the extent that (1) Genworth seeks CUTPA relief for wrongs arising out of the
former employer-employee relationship with the Principal Defendants, and (2) the
CUTPA claim impermissibly duplicates the tortious interference and CUTSA claims.
Neither argument has merit. See Smith v. Snyder, 267 Conn. 456, 462-66 (2004)
21
(defendant liable for both CUTPA and CUTSA violations); Larsen Chelsey Realty Co. v.
Larsen, 232 Conn. 480, 493-94 (1995) (actions of employee taken outside employment
relationship and in furtherance of competition with employer fall within CUTPA’s ambit);
Sportsmen’s Boating Corp. v. Hensley, 192 Conn. 747, 756-57 (1984) (defendant liable
for both tortious interference and CUTPA). Genworth may therefore seek the remedies
authorized by CUTPA, and summary judgment in the Principal Defendants’ favor on this
basis is denied.
ii.
Unfair Acts
In order to establish CUTPA liability based on the unfair acts prong, a “claimant's
evidence must establish that the conduct at issue falls within one of three criteria. A
court must decide whether the conduct (1) offends public policy, (2) is immoral,
unethical, oppressive or unscrupulous or (3) causes substantial injury to consumers,
competitors or other businessmen.” Johnson Elec. Co. v. Salce Contracting Assocs.,
72 Conn. App. 342, 356 (2002).
Genworth claims that the Principal Defendants violated CUTPA’s unfairness
provision in three separate ways: (1) the Principal Defendants’ theft of confidential
information and trade secrets violated public policy and was immoral, unethical,
oppressive, or unscrupulous; (2) the Principal Defendants’ actions caused substantial
injury to a competitor, Genworth; and (3) the Principal Defendants provided confidential
information to incite the class action, then used its existence as a marketing tool to
attempt to woo existing Genworth clients. This court concludes that, on this record,
none of this conduct establishes CUTPA liability as a matter of law; such that summary
judgment therefore is not proper.
22
First, this court has already concluded that questions of fact remain about the
status of the client information the Principal Defendants used to set up their competing
enterprise as contractually protected confidential information or statutorily protected
trade secrets. See supra at 11-17. Accordingly, this court concludes that genuine
issues of material fact remain about whether the Principal Defendants committed theft
of confidential information or trade secrets which also preclude summary judgment in
Genworth’s favor based on this theory of a CUTPA violation.
Second, material factual questions remain about whether the Principal
Defendants caused Genworth substantial injury by competing and persuading former
Genworth clients to move to TJT using actionable tactics. A CUTPA claim resting on
the theory that the challenged conduct causes substantial injury “must be substantial; it
must not be outweighed by any countervailing benefits to consumers or competition that
the practice produces; and it must be an injury that consumers themselves could not
reasonably have avoided.” McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558,
569-70 (1984) (internal citations omitted). Although Genworth has produced evidence
of substantial harm, Genworth has not presented any evidence that this harm
outweighs the countervailing benefits of a more competitive market for its services.
Accordingly, substantial harm to Genworth, unaccompanied by any improper conduct
by the Principal Defendants, cannot support CUTPA liability.
Finally, this court has already concluded that factual disputes remain about
23
whether the Principal Defendants provided confidential information to class counsel.13
See supra at 19-21. This is the only theory of unfairness liability put forth by Genworth,
and therefore summary judgment for Genworth is not appropriate.
iii.
Deceptive Acts
Genworth also argues that the Principal Defendants violated CUTPA’s deceptive
provision by (1) abusing McMullan’s position with Genworth to convince Brinker to
convert his relationship with Genworth to a non-exclusive one, then misleading
Genworth’s clients about the change in Brinker’s status, and (2) sending Genworth
client information about the class action without disclosing their role in assisting its
filing.
A CUTPA claim based on deception requires proof of three elements: “First,
there must be a representation, omission, or other practice likely to mislead consumers.
Second, the consumers must interpret the message reasonably under the
13
Genworth does not appear to argue that the Principal Defendants’ role in the class action in and
of itself gives rise to CUTPA liability on an unfairness theory. It is clear, based on the doctrine announced
in California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508 (1972), United Mine Workers v.
Pennington, 381 U.S. 657 (1965), and E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365
U.S. 127 (1961) (the “Noerr-Pennington Doctrine”), that “the filing of a single non-sham lawsuit . . . cannot
form the basis of a claim under CUTPA .” Suburban Restoration Co. v. ACMAT Corp., 700 F.2d 98, 102
(2d Cir. 1983); see also Zeller v. Consolini, 59 Conn. App. 545, 554 (2000). Three United States Courts of
Appeals have extended the Noerr-Pennington Doctrine to parties who finance or otherwise aid litigation by
third parties to advance their own objectives. Baltimore Scrap Corp. v. David J. Joseph Co.,
237 F.3d 394, 400-401 (4th Cir. 2001); Liberty Lake Investments, Inc. v. Magnuson, 12 F.3d 155, 157-59
(9th Cir. 1993); Opdyke Inv. Co. v. City of Detroit, 883 F.2d 1265, 1273 (6th Cir. 1989). One Connecticut
Superior Court judge has held, in the analogous abuse of process context and without citation to the
Noerr-Pennington Doctrine, that abuse of process liability does not arise from aiding a third-party’s nonsham, non-frivolous lawsuit in order to use the lawsuit as a marketing tool. Fiondella, Inc. v. Reiner,
Reiner & Bendett, No. HHDCV085025357S, 2009 WL 5342490, at *5-7 (Conn. Super. Dec. 4, 2009). Had
Genworth raised the argument that the Principal Defendants’ participation in the class action, without
more, violated CUTPA, this court would have to determine whether the Noerr-Pennington Doctrine shields
the Principal Defendants’ conduct with respect to the class action unless the class action is a “sham.” See
Zeller, 59 Conn. App. at 554. Because Genworth does not raise this argument, this court does not resolve
the matter.
24
circumstances. Third, the misleading representation, omission, or practice must be
material-that is, likely to affect consumer decisions or conduct.” Caldor, Inc. v. Heslin,
215 Conn. 590, 597 (1990) (internal citations omitted).
First, this court has already concluded that disputed issues sufficient to preclude
summary judgment remain with respect to whether the Principal Defendants
misrepresented their understanding of Brinker’s relationship with Genworth to Genworth
clients.14 See supra at 18-19. Given the fact-specific nature of inquiries into how
reasonable people would interpret the representations made by the Principal
Defendants to Genworth clients, especially when fact questions remain about the
content of the representations, this question is properly for the jury as well.
Second, a genuinely disputed factual issue exists about whether the Principal
Defendants’ omission of their role in the class action when disclosing the class action to
Genworth clients was material. Although it seems likely that a typical Genworth client
would view the information differently knowing that the Principal Defendants had a hand
in the filing of the class action and might make a different decision about moving his or
her assets to TJT as a result, a reasonable juror, on this record, might nonetheless
conclude otherwise. Summary judgment is not proper.
e.
CFAA
Genworth argues that it is entitled to summary judgment on its claim for CFAA
civil damages because no genuine issue of fact exists about whether Cook and
14
The Principal Defendants’ solicitation of Brinker by abusing their position at Genworth in order
to gain access to him cannot support CUTPA liability as a deceptive practice. Genworth has come
forward with no evidence that the Principal Defendants’ misrepresented their employment status with
Genworth to Brinker or otherwise misled him.
25
McFadden intentionally accessed Genworth computers without or in excess of
authorization to do so. This court disagrees and concludes that genuine factual
disputes exist about the amount of statutorily compensable losses Genworth suffered
such that summary judgment on this claim is inappropriate.
As relevant here, the CFAA prohibits “intentionally access[ing] a computer
without authorization or exceed[ing] authorized access, and thereby obtain[ing] ...
information from any protected computer.” A “protected computer” is defined as one
that “is used in or affecting interstate or foreign commerce or communication.” 18
U.S.C. § 1030(e)(2)(B). Genworth here pursues civil liability pursuant to § 1030(g)
under a theory that the Principal Defendants’ actions caused “loss to 1 or more persons
during any 1-year period . . . aggregating at least $5,000 in value.” 18 U.S.C. §
1030(c)(4)(A)(i)(I).
Losses that may be included to meet the $5,000 threshold include “any
reasonable cost to any victim, including the cost of responding to an offense,
conducting a damage assessment, and restoring the data, program, system, or
information to its condition prior to the offense, and any revenue lost, cost incurred, or
other consequential damages incurred because of interruption of service.” 18 U.S.C.
1030(e)(11) (emphasis added). This section has been interpreted to mean “any
remedial costs of investigating the computer for damage, remedying the damage and
any costs incurred because the computer cannot function while or until repairs are
made.” Nexans Wires S.A. v. Sark-USA, Inc., 319 F. Supp. 2d 468, 474 (S.D.N.Y.
2004), aff'd 166 F. App'x 559 (2d Cir. 2006).
As to its “loss[es],” Genworth has submitted an affidavit of its Chief Information
26
Officer attesting to the various measures Genworth took to assess and remedy
McFadden’s access to Genworth systems after he left Genworth’s employ.15 August 9
Murray Aff. (Doc. No. 214-2) ¶¶ 1-6. Although many of these steps seem plausible,
Genworth fails to set forth evidence that would require a finding by a reasonable juror
that these were, or even what specific steps were, reasonable. Id. While a jury could
credit this evidence in its entirety and conclude that Genworth sustained more than
$5,000 in qualifying losses, viewing this evidence in the light most favorable to the
Principal Defendants, a jury could also plausibly conclude that some of these steps
were unreasonable such that Genworth incurred less than $5,000 in losses.16
Summary judgment is therefore improper on Genworth’s CFAA claim for either
Genworth or the Principal Defendants.
f.
SCA
The Principal Defendants move for summary judgment on Genworth’s SCA
claim, arguing that there is no genuine factual dispute about whether any access to
15
Genworth did not discuss these measures or cite to Murray’s August 9 Affidavit in either of its
Local Rule 56 statements. See generally Genworth’s L.R. 56(a)(1) Stmt.; Genworth’s L.R. 56(a)(2) Stmt.
The Principal Defendants identified the costs to Genworth for responding to any unauthorized computer
access as a disputed issue of material fact in their Local Rule 56(a)(2) Statement but cited no evidence to
support this claim. Def.’s L.R. 56(a)(2) Stmt. (Doc. No. 210), Disputed Issues of Material Fact ¶ 5.
Although all parties’ lack of compliance with Local Rule 56 would suffice to deny both motions for
summary judgment as to this claim, this court examines Murray’s Affidavit on the merits.
16
In addition, this evidence calculates the “loss” incurred as part of the investigation and
remediation in terms of the total cost of the time expended by various persons and “resources” involved in
the investigation and remediation based on the average hourly compensation of salaried employees or
contractors. August 9 Murray Aff. ¶ 6. Genworth cites no authority holding that expenditures of this type
are recoverable “loss[es]” as defined by the CFAA. The Principal Defendants have not argued that these
expenditures are not recoverable. Accordingly, absent meaningful briefing on this subject, this court
assumes without deciding that Genworth may recover these expenditures.
27
Genworth’s electronic communications was authorized.17 Genworth counters that
summary judgment is inappropriate in the Principal Defendants’ favor because factual
disputes exist about the scope of the Principal Defendants’ authorization. This court
agrees and concludes that summary judgment is not appropriate.
“[W]hoever (1) intentionally accesses without authorization a facility through
which an electronic communication service is provided; or (2) intentionally exceeds an
authorization to access that facility; and thereby obtains, alters, or prevents authorized
access to a wire or electronic communication while it is in electronic storage in such
system shall be punished.” 18 U.S.C. § 2701(a). “[A]ny provider of electronic
communication service, subscriber, or other person aggrieved by any violation of this
chapter in which the conduct constituting the violation is engaged in with a knowing or
intentional state of mind may, in a civil action, recover from the person or entity.” 18
U.S.C. § 2707(a).
Genworth bases its SCA claim on two theories: (1) the Principal Defendants
exceeded their authorization by accessing electronic client information for their own
purposes while still employed at Genworth, and (2) the Principal Defendants accessed
electronic client information without authorization by logging in to websites using
Genworth-provided log-in information after they had left Genworth’s employ.
As support for its first theory of SCA liability, Genworth relies on the limited
authorization granted to the Principal Defendants in the Confidentiality Agreement and
17
Although Genworth brought a claim for civil damages based on the Principal Defendants’
purported violations of 18 U.S.C. § 2701(a), as authorized by 18 U.S.C. § 2707(a), Compl. ¶¶ 73-78,
Genworth offers no argument that summary judgment on this claim is appropriate.
28
the Code. Viewed in the light most favorable to Genworth, a reasonable juror could
conclude that the Principal Defendants had exceeded their authorization while still
employed at Genworth.18
On its second theory of SCA liability, Genworth relies on evidence that
McFadden “accessed ‘Genworth’s non-public website’ and ‘the Charles Schwab
website’ using a Genworth password and login after he resigned.” Genworth’s L.R.
56(a)(1) Stmt. (Doc. No. 197) ¶ 156. No factual dispute exists about whether
McFadden did so using log-in information which had not been disabled. See id.; Def.’s
L.R. 56(a)(2) Stmt. (Doc. No. 210) ¶ 156. However, access after a contractual
relationship has ended—using log-in information provided during the course of the
contractual relationship which has not been disabled—is not per se prohibited by the
SCA. Sherman & Co. v. Salton Maxim Housewares, Inc., 94 F. Supp. 2d 817, 820-21
(E.D. Mich. 2000). Instead, in order to pursue an SCA claim, a plaintiff must show that
access was “restricted by technical means or by [some] express limitation.” Id. at 821.
Because of the material dispute about what contractual limitations existed on the
Principal Defendants’ ability to access non-public client information after they left
Genworth, summary judgment is not proper in the Principal Defendants’ favor on this
claim.19
18
Again, Genworth does not argue that it is entitled to summary judgment on the SCA claim.
Even if it had, this court would conclude that the material factual disputes remaining about the terms of
the Confidentiality Agreement and the Code which bound the Principal Defendants would preclude
summary judgment in Genworth’s favor.
19
Again, the same material factual disputes about the terms of the Principal Defendants’
contractual obligations would preclude summary judgment on this claim had Genworth argued that
summary judgment in its favor was proper.
29
2.
Bazon and Rivera
This court concludes that, whether viewed in the light most favorable to
Genworth or Bazon and Rivera, a reasonable juror could find for either Genworth or
Bazon and Rivera on all of Genworth’s claims. Summary judgment is therefore
inappropriate on Genworth’s claims as against Bazon and Rivera.
Genworth has produced evidence that Bazon and Rivera spoke to the McMullan,
Cook, and McFadden about leaving Genworth for TJT while all of them still worked at
Genworth. Genworth’s L.R. 56(a)(2) Stmt. (Doc. No. 214) Ex. 13 (the “Rivera Dep.”), at
22:9-17, Ex. 20 (the “Cook Dep.”), at 231:11-19, Ex. 23 (the “Bazon Dep.”) at
114:24-115:6, Ex. 27. Genworth has also produced evidence of two emails: one from
Rivera to McFadden on July 29, 2009, the morning of Rivera’s last day at Genworth,
Rivera Depo. at 20:1-22:12, and the other from Bazon to McFadden on August 3, 2009,
which referred to certain Genworth client documents having been sent to Charles
Schwab two days earlier. Rivera’s July 29 e-mail had four documents pertaining to a
Genworth client attached and, despite not being addressed to Bazon, said, in part,
“Karen please sent [sic] to Tim on Monday . . . thanks.” Genworth’s L.R. 56(a)(2) Stmt.
(Doc. No. 214) Ex. 31. Bazon’s Monday, August 3 e-mail contains indicia that Rivera’s
July 29 e-mail was forwarded to Bazon, and it also had four similarly titled documents
attached. Genworth’s L.R. 56(a)(2) Stmt. (Doc. No. 214) Ex. 30. The client in question
appears to have ultimately become a TJT client. Genworth’s L.R. 56(a)(2) Stmt. (Doc.
No. 214) Ex. 2 (the “McFadden Dep.”), at 205:6-10.
Viewed in the light most favorable to Genworth, this evidence suggests that
Bazon and Rivera, knowing that they would soon leave Genworth and begin working for
30
TJT, were already taking direction from McMullan, Cook, and McFadden and helping to
establish TJT before leaving Genworth. It further suggests that Bazon and Rivera did
so by helping the Principal Defendants electronically access confidential information for
non-Genworth purposes in excess of their authorization to do so, use that information
for non-Genworth purposes in violation of the Contract, CUTSA, and CUTPA, and
tortiously interfere with Genworth’s contracts with this client. A reasonable juror could
therefore conclude that Bazon and Rivera are liable to Genworth on some or all of
Genworth’s claims.
However, viewed in the light most favorable to Bazon and Rivera, this evidence
could permit a reasonable juror to conclude that Bazon and Rivera performed the tasks
referred to in these two e-mails on Genworth’s behalf and with proper authorization.
Although the fact that the client in question ultimately became a TJT client creates an
inference that Bazon and Rivera acted as part of a scheme to solicit this client for TJT
purposes, the evidence does not establish as much conclusively, and a reasonable
juror could decline to draw the inference. If Bazon and Rivera instead acted at the
direction of Genworth and the client, then they would have acted within the scope of
their authorization to access this information, used the information for a permissible
purpose, and done nothing to interfere with Genworth’s contractual relations with the
client. A reasonable juror could therefore conclude that Bazon and Rivera are not liable
to Genworth on any of the claims Genworth pursues against them.
Because a reasonable juror could come to different conclusions about Bazon
and Rivera’s liability to Genworth based on this evidence, genuine issues of fact exist
with respect to Genworth’s claims as asserted against Bazon and Rivera. Summary
31
judgment is therefore not appropriate for Genworth or for Bazon and Rivera.
B.
Principal Defendants’ Counterclaims and Third-Party Claims
The Principal Defendants have counterclaimed against Genworth and brought
third-party claims against Genworth’s CEO, Ahluwalia. Genworth and Ahluwalia have
moved for summary judgment. Although the Principal Defendants state several
substantive claims, the gravamen of each is the same series of acts:20 (1) Cordes’
statement to Zandy that McMullan had “stolen” records; (2) Cordes’ threats to sue
Zandy and Brinker if Brinker did not repudiate his contract with TJT; (3) Ahluwalia’s email and letter to certain Genworth clients stating that TJT and McMullan “are not
affiliated with . . . Bob Brinker,” Ahluwalia Letter at 1; (4) Genworth’s continuing, after
discovering that the contract between Brinker and TJT was still operative, to claim an
“exclusive” relationship with him on its website and its representations to clients that
TJT had no relationship with Brinker.
Viewed in the light most favorable to the Principal Defendants, sufficient factual
disputes exist to preclude summary judgment on the Principal Defendants’ defamation,
disparagement, CUTPA, and tortious interference with or business expectancies claims.
No such disputes exist as to the Principal Defendants’ claim for tortious interference
with contractual relations, and summary judgment is proper for Genworth and Ahluwalia
on that claim.
1.
Defamation
“To establish a prima facie case of defamation, the plaintiff must demonstrate
20
Because the Principal Defendants do not move for summary judgment on these claims, the
facts here are stated in the light most favorable to them.
32
that: (1) the defendant published a defamatory statement; (2) the defamatory statement
identified the plaintiff to a third person; (3) the defamatory statement was published to a
third person; and (4) the plaintiff's reputation suffered injury as a result of the
statement.” Cweklinsky v. Mobil Chem. Co., 267 Conn. 210, 217 (2004).
Here, the evidence viewed in the light most favorable to the Principal Defendants
establishes that Cordes’ statement to Zandy and the Ahluwalia Letter satisfy the
elements of a prima facie case for defamation. Genworth argues that it is nonetheless
entitled to summary judgment because (1) Cordes’ statement to Zandy was true, (2) the
statements in the Ahluwalia Letter were made innocently, without negligence, and (3)
the Principal Defendants’ have not shown any damages. None of these arguments
succeeds in this stage.
a.
Truth
First, genuine issues of material fact remain about whether Cordes’ statement
that McMullan had “stolen” records was true. Under Connecticut law, truth of the
allegedly defamatory statement is an absolute defense in a civil action for libel.
Goodrich v. Waterbury Republican-American, 188 Conn. 107, 112 (1982). Although the
common law rule required the defendant to prove the literal truth of the statement, “the
modern rule is that only a substantial proof need be shown to constitute the
justification.” Id. at 112-13 (citing Johnson v. Whipple, 117 Conn. 599, 601-602 (1933);
Stow v. Converse, 4 Conn. 17, 33 (1821)). If the defendant
succeeds in proving that ‘the main charge, or gist, of the libel’ is true, he
need not justify statements or comments which do not add to the sting of the
charge or introduce any matter by itself actionable. The issue is whether the
libel, as published, would have a different effect on the reader than the
pleaded truth would have produced.
33
Goodrich, 188 Conn. at 113 (internal quotations omitted)
This court has already concluded that a factual dispute exists as to Genworth’s
claims that McMullan misappropriated trade secrets or used confidential information
inappropriately. See supra at 19-21. Genworth has not identified any of McMullan’s
conduct other than the conduct underlying these claims which might establish the truth
of Cordes’ statement. It follows that a factual dispute exists as to whether Cordes’
statement was, in fact, true, and summary judgment is inappropriate on this basis.
b.
Negligence
A genuine factual dispute also exists as to whether the statements in the
Ahluwalia Letter about the absence of a relationship between TJT and Brinker were
made with negligence. Where the plaintiff is a private individual, not a public figure, he
need only show that the defendant made the defamatory statement with negligence, not
actual malice. Miles v. Perry, 11 Conn. App. 584, 589 (1987).
Here, evidence in the record shows that Genworth knew of the possibility that
Brinker had a relationship with TJT; Cordes admits that the purpose of his visit to Zandy
was to determine the validity of that information. Cordes Aff. (Doc. No. 200-1) ¶¶ 4-5.
Viewing the evidence pertaining to the unpleasant encounter between Cordes and
Zandy in the light most favorable to the Principal Defendants, a reasonable juror could
conclude that Cordes had reason to doubt Zandy’s information because it was procured
by intimidation and duress. Zandy Dep. at 96:2-99:11; Brinker Dep. at 124:5-131:11.
Cordes himself evidenced some such doubt when he e-mailed Zandy after their
meeting to request written confirmation from Zandy and Brinker of the absence of an
agreement between Brinker and TJT. Genworth’s Reply Mem. in Supp. of Mot. for
34
Summ. J. (Doc. No. 232) Ex. T, at 2. Construing this evidence in the light most
favorable to Genworth, a reasonable jury could conclude that the decision to send the
Ahluwalia Letter was made negligently. Summary judgment on this basis is not proper.
c.
Damages
Finally, Genworth argues that summary judgment is appropriate on the
defamation claim because the Principal Defendants have shown no evidence of
damages. The Principal Defendants counter that Genworth’s statements were
defamatory per se obviating the need for proof of specific pecuniary harm. This court
agrees with the Principal Defendants.
When the defamatory words are actionable per se, the law conclusively
presumes the existence of injury to the plaintiff's reputation. He is required
neither to plead nor to prove it. . . . The individual plaintiff is entitled to
recover, as general damages, for the injury to his reputation and for the
humiliation and mental suffering which the [defamation] caused him.
Monroe v. Crandall, 3 Conn. App. 213, 221 (1985) (internal quotations omitted).
“Slander is actionable per se if it charges incompetence or dishonesty in office, or
charges a professional person with general incompetence . . . . [S]lander is also
actionable per se if it charges a crime involving moral turpitude or to which an infamous
penalty is attached.” Miles, 11 Conn. App. at 602 (internal citations and quotations
omitted).
Here, Cordes’ statement that McMullan stole records charges a crime of moral
turpitude, and “[a]n oral statement that one has stolen something has been held by [the
Connecticut] courts to be actionable per se.” DeVito v. Schwartz, 66 Conn. App. 228,
231 (2001). Read in the context of the August 2009 war of words between Genworth
and TJT, the Ahluwalia Letter plainly asserts that the Principal Defendants dishonestly
35
claimed to Genworth clients to have an advisory relationship with Brinker. Accordingly,
summary judgment is not proper based on the Principal Defendants’ failure to adduce
specific evidence of economic harm resulting from these statements.
2.
Disparagement
“Defamation or disparagement of a business' goods and services may be
considered trade libel . . . and is recognized by Connecticut and New York courts as a
species of defamation.” QSP, Inc. v. Aetna Cas. & Sur. Co., 256 Conn. 343, 358
(2001). “More specifically, however where a statement impugns the basic integrity or
creditworthiness of a business, an action for defamation lies and injury is conclusively
presumed.” Id. At 358 n.15 (quoting Ruder & Finn, Inc. v. Seaboard Sur. Co., 422
N.E.2d 518, 522 (1981)). As with the Principal Defendants’ defamation claim, the
Ahluwalia Letter, read in context, clearly impugns the integrity of the Principal
Defendants. Because factual disputes exist about whether Genworth and Ahluwalia
published these statements negligently, summary judgment is also improper on the
Principal Defendants’ disparagement claim.
3.
CUTPA
A CUTPA claim based on deception21 requires proof of three elements: “First,
there must be a representation, omission, or other practice likely to mislead consumers.
Second, the consumers must interpret the message reasonably under the
circumstances. Third, the misleading representation, omission, or practice must be
21
Neither the Principal Defendants’ counterclaim and third-party complaint nor its response to
Genworth’s Motion for Summary Judgment on the counterclaims and third-party claims expressly
delineates the CUTPA claim as one based on “deception” or “unfairness.” Given that the claim clearly
arises out of the same allegedly false statements as the defamation and disparagement claims, this court
construes the claim as one based on allegedly deceptive conduct.
36
material-that is, likely to affect consumer decisions or conduct.” Caldor, Inc. v. Heslin,
215 Conn. 590, 597 (1990) (internal quotations omitted).
The Principal Defendants’ evidence—that Genworth and Ahluwalia never
retracted the statements in the Ahluwalia Letter, that Genworth failed to remove all
references on Genworth’s website to Genworth’s “exclusive” relationship with Brinker,
and that Genworth personnel continued to represent to clients that TJT had no
relationship with Brinker—all create genuine factual disputes as to these elements. A
reasonable juror could conclude that both the failure to retract and the persistence of
the false statements on the website and by Genworth personnel were likely to mislead,
that at least some Genworth clients were misled, and that the representations affected
their decisions. Summary judgment on this basis is not appropriate.
b.
Ascertainable loss
Under CUTPA, a plaintiff must prove that he has suffered an ascertainable loss
due to a CUTPA violation.
An ascertainable loss is a loss that is capable of being discovered, observed
or established. . . . The term loss necessarily encompasses a broader
meaning than the term damage, and has been held synonymous with
depravation, detriment and injury. . . . To establish an ascertainable loss, a
plaintiff is not required to prove actual damages of a specific dollar amount.
. . . [A] loss is ascertainable if it is measurable even though the precise
amount of the loss is not known.
Artie’s Auto Body, Inc. v. Hartford Fire Ins., 287 Conn. 208, 218 (2008) (internal
citations and quotations omitted).
Here, the Principal Defendants have presented evidence from Genworth’s
internal database for tracking interactions with clients. This evidence shows that at
least two Genworth clients understood that McMullan, Cook, and McFadden had left
37
Genworth to start TJT, that TJT was claiming to have a relationship with Brinker, and
that Genworth personnel told the clients there was no such relationship after Genworth
knew that this information was false. App. to Def.’s L.R. 56(a)(2) Stmt. (Doc. No. 208)
Exs. 22, 23. Read in the light most favorable to the Principal Defendants, this evidence
also shows that these representations had a material effect on the clients’ decision to
remain with Genworth instead of moving to TJT. See id. This evidence therefore
creates a genuine factual dispute about whether the Principal Defendants suffered an
ascertainable loss sufficient to support a CUTPA claim, and summary judgment is not
appropriate.
4.
Tortious Interference with Contractual Relations
The Principal Defendants assert that Genworth and Ahluwalia tortiously
interfered with the Principal Defendants’ contracts with (1) Brinker, and (2) at least one
TJT client who decided to return to Genworth. Even assuming that all the other
elements of tortious interference with contractual relations are met, no genuine dispute
exists that the Principal Defendants suffered no actual loss based on this interference.
Summary judgment is proper in Genworth’s favor as to this claim.
Again, “[a] claim for tortious interference with contractual relations requires the
plaintiff to establish (1) the existence of a contractual or beneficial relationship, (2) the
defendants' knowledge of that relationship, (3) the defendants' intent to interfere with
the relationship, (4) the interference was tortious and (5) a loss suffered by the plaintiff
that was caused by the defendants' tortious conduct.” Appleton v. Bd. of Educ., 254
Conn. 205, 212-13 (2000) (internal quotations omitted).
Here, the Principal Defendants suffered no loss based on any interference with
38
their contract with Brinker. Although Zandy persuaded Brinker to vitiate the contract
after the incident with Cordes, Zandy Dep. at 106:7-11, 113:3-22, the evidence reveals
that Zandy and McMullan concluded that the agreement to rescind the contract was
invalid. Genworth’s L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. L. The contractual
relationship between TJT and Brinker continued through 2010 and ended for unrelated
reasons. Genworth’s Reply Mem. in Supp. of Mot. for Summ. J. (Doc. No. 232) Ex. W
(the “McMullan Dep.”), at 305:9-307:19. Because TJT’s contract with Brinker continued
to exist after any purported tortious interference and the relationship ended for
unrelated reasons, the Principal Defendants could not have suffered any actual loss
based on any such interference.
Similarly, the Principal Defendants have not produced admissible evidence
sufficient to raise a genuine factual dispute about whether any clients, who moved from
Genworth to TJT, switched back as a result of Genworth’s alleged tortious interference
with TJT’s contracts with such clients. The Principal Defendants rely on McMullan’s
declaration that one client signed such a contract, then rescinded the agreement after
Genworth committed alleged acts of tortious interference. App. to Def.’s Mem. in Opp.
to Genworth’s Mot. for Summ. J. (Doc. No. 209) Ex. 3 (the “August 3 McMullan Decl.”),
¶ 42. The statement about the reason for the client’s change of heart is inadmissible
hearsay, and this court cannot consider it on summary judgment. See Fed. R. Evid.
801; Fed. R. Civ. P. 56(c)(2), (4). Furthermore, the exhibit which purports to be the
contract signed by this client and later rescinded is not evidence that any rescindment
ever took place and is certainly not evidence of the basis for any such rescindment.
App. to Def.’s L.R. 56(a)(2) Stmt. (Doc. No. 208) Ex. 27.
39
The Principal Defendants having presented no admissible evidence that they
suffered any actual loss resulting from Genworth’s purported tortious interference with
its contractual relationships, this court concludes that no genuine factual dispute exists
about whether such actual loss occurred. Summary judgment is proper on the Principal
Defendants’ tortious interference with contractual relations claim.
5.
Common Law Unfair Competition / Tortious Interference with
Business Expectancy
Connecticut “recognizes under the umbrella term of ‘unfair competition’ such
causes of action as tortious interference with business expectancy . . . and ‘unjustifiable
interference with any [person's] right to pursue his [or her] lawful business or
occupation.’” Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 501 n.23 (1995).
Because the Principal Defendants do not argue that Genworth unjustifiably interfered
with their right to pursue their lawful business, this court construes the Principal
Defendants’ common law unfair competition claim as a tortious interference with a
business expectancy claim.
It is well established that the elements of a claim for tortious interference with
business expectancies are: (1) a business relationship between the plaintiff
and another party; (2) the defendant's intentional interference with the
business relationship while knowing of the relationship; and (3) as a result
of the interference, the plaintiff suffers actual loss. . . . Unlike other torts in
which liability gives rise to nominal damages even in the absence of proof of
actual loss, . . . it is an essential element of the tort of unlawful interference
with business relations that the plaintiff suffered actual loss.
Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 27 (2000).
Here, as with the Principal Defendants’ CUTPA claim, the Principal Defendants
have presented evidence which, viewed in the light most favorable to them,
demonstrates that Genworth knew TJT had solicited certain of its clients, that Genworth
40
misled them as to the absence of a relationship between TJT and Brinker, and that the
clients acted on the misrepresentations by not moving to TJT. App. to Def.’s L.R.
56(a)(2) Stmt. (Doc. No. 208) Exs. 22, 23. This evidence therefore creates a genuine
factual dispute on the merits of the Principal Defendants’ tortious interference with a
business expectancy claim, and summary judgment is not proper.
IV.
CONCLUSION
For these reasons, Genworth’s Motion for Summary Judgment (Doc. No. 195) is
denied, Genworth’s and Ahluwalia’s Motion for Summary Judgment (Doc. No. 198) is
granted in part with respect to the tortious interference with contractual relations claim
and denied in part as to all other claims; and the defendants’ Motion for Summary
Judgment (Doc. No. 201) is denied.
SO ORDERED.
Dated at Bridgeport, Connecticut, this 30th day of March, 2012.
__/s/ Janet C. Hall _______
Janet C. Hall
United States District Judge
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