Property Rights Law Group, PC v. Lynch et al
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT 78 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 5/30/2014. "Defendants' motion for summary judgment is granted in part and denied i n part. Count I, the breach of contract claim, is before this court only against Lynch, as the court previously dismissed Count I as against Rodenhurst and Miller. Summary judgment is granted in Lynch's favor as to Count I except with respec t to the portions of Count I based on Lynch's alleged failure to return client files, alleged solicitation of PRLG's clients, and alleged failure to produce a final results report. The portions of Count I relating to those three alleged c ircumstances remain for further adjudication. Summary judgment is denied with respect to Count II, the Illinois Trade Secrets Act claim, and Count V, the tortious interference claim. Summary judgment is granted in favor of Defendants on Count III, the CFAA claim, and on Count IV, the defamation claim. Therefore, portions of Count I, as well as Counts II and V, remain in issue." (emt, )CERTIFICATE OF SERVICEParticipants registered to receiv e electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
PROPERTY RIGHTS LAW GROUP,
P.C., an Illinois
SANDRA D. LYNCH, JOHN KANG,
alias Lee Miller; and KEALA
CIVIL NO. 13-00273 SOM/RLP
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’
MOTION FOR SUMMARY JUDGMENT
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
This case arises from a contract between Plaintiff
Property Rights Law Group, P.C. (“PRLG”), and Defendant Sandra
PRLG, a law firm, brought suit alleging that Lynch, a
former employee of or independent contractor with PRLG, had
violated the terms of that contract when she left the firm.
also brings related claims under the Illinois Trade Secrets Act
(ITSA) and the federal Computer Fraud and Abuse Act (CFAA), as
well as claims for defamation and tortious interference with
prospective business relations.
Lynch allegedly downloaded
PRLG’s client lists and other “trade secrets,” and solicited
PRLG’s clients to join her firm, the Lynch Law Offices.
claims that Lynch was aided in these activities by co-Defendants
Keala Rodenhurst James and “John Kang,” who allegedly uses the
alias “Lee Miller.”
Defendants move for summary judgment in their favor on
all claims asserted by PRLG.
The court grants their motion in
part and denies it in part.
Robert Stone is the “Managing Partner” of PRLG, a law
firm that specializes in defending borrowers facing foreclosure
and in what PRLG calls “securitization/fraud sworn affidavits.”
PRLG Website Excerpt, ECF No. 72-2.
Although licensed to
practice in Chicago for several years, Stone has only been
licensed to practice in Hawaii since July 07, 2013.
routinely relies on a self-described “Certified Forensic
Securitization Auditor” named Teri Petit.
Petit, who says she
holds “a Series 7 securities broker license and Series 66
financial advisor's license,” claims that “her education,
licensure and experience” permit her to provide “evidence [for]
use in court to defend foreclosure cases.”
In fact, it is not clear that Petit actually holds an
active Series 7 or Series 66 license.1
See Email Correspondence
with Charles Benson, Securities Examiner at the Wisconsin
At the hearing on the present motion, Stone maintained
that Petit did in fact have these licenses. However, PRLG has
not produced any evidence that Petit is currently licensed, even
though such evidence would presumably be readily accessible.
Department of Financial Institutions, ECF No. 72-1 (stating that
“Petit has not passed the Series 66 exam” and that her “series 7
license is not valid since she has been terminated from the
industry for more than two years”).
Nor does the record clarify
what “certification” one could have as a “forensic securitization
The Federal Trade Commission describes so-called
“forensic loan audits” as a technique used by “[f]raudulent
foreclosure ‘rescue’ professionals [who] use half-truths and
outright lies to sell services that promise relief to homeowners
See The Federal Trade Commission, Forensic Loan
Audits, FTC Consumer information (Mar. 2010), https://
Typically, “[i]n exchange for an upfront fee . . . so-called
forensic loan auditors . . . backed by forensic attorneys offer
to review  mortgage loan documents to determine whether [the]
lender complied with state and federal mortgage lending laws.
The ‘auditors’ [tell clients they] can use the audit report to
avoid foreclosure, accelerate the loan modification process,
reduce [the] loan principal, or even cancel [the] loan.”
Defendants submit declarations by ten homeowners in
support of Defendants’ contention that Stone and Petit are
“fraudulent foreclosure ‘rescue’ professionals.”
declarations paint almost identical pictures of Stone and Petit’s
Stone and Petit apparently represented to prospective
clients that PRLG was a highly successful foreclosure defense
boutique that was "winning cases all across the country" and had
“never lost a case.”
Declaration of Ronald Amasol ¶ 8, ECF No.
82-2; Declaration of R. A'oPohakuku Rodenhurst Exh. 1, ECF No.
See also Declaration of Elizabeth Hagerty ¶ 3, ECF No. 82-
The homeowners say they were told that they had a “great
case” and an excellent chance of prevailing if they hired PRLG.
Declaration of Michele Yalimaiwai ¶ 8, ECF No. 82-7; Declaration
of Aurelia and Victor Chong ¶ 8, ECF No. 82-4; Declaration of
Michael Koko ¶ 14, ECF No. 82-12; Declaration of Keneti Siaosi ¶
8, ECF No. 82-13.
For example, at least one potential client
says that Stone and Petit told him that his lawsuit would be a
“slam dunk” and “complete in just 90 days.”
Declaration of David
Parker ¶ 5, ECF No. 82-10.
The homeowners all say that they were
told that if they retained
PRLG, they would get their homes
"free and clear" of any mortgage.
Declaration of Dianna Black ¶
8, ECF No. 82-3; Chong Decl. ¶ 6; Declaration of Kolani Kelly ¶
4, ECF No. 82-5.
At the hearing on the present motion, Stone
acknowledged that he told clients that his firm had “never lost a
case,” despite the numerous judgments entered against PRLG’s
Transcript of May 19, 2014, at 23-24, ECF No. 102.
Stone explained that he nonetheless considered himself not to
have “lost” a case because none of his current clients have yet
been evicted from their homes.
However, at least one former
PRLG client claims to have been evicted while being represented
by the firm.
See Amasol Decl. ¶ 24.
The homeowners say that, to obtain representation by
PRLG, they each paid $3000 for Petit’s “forensic loan audit.”
Parker Decl. ¶ 3; Hagerty Decl. ¶ 6.
Petit allegedly represented
to prospective clients that “she [was] the only person licensed
to do this type of audit.”
Parker Decl. ¶ 3.
One declarant says
that Petit claimed to have “performed extremely successful audits
all over the nation . . . which have been vital in [PRLG] never
losing a case.”
Rodenhurst Decl. Exh. 1, Email from Teri Petit.
Petit also allegedly told clients that she had securities
licenses and was an expert in foreclosure fraud, and that her
“evidence” had “never been challenged in a court of law.”
Rodenhurst Decl. ¶ 3 and Exhibit 1 to Decl.
The $3000 “audit” that Petit provides clients is an
affidavit signed by Petit, which purports to “explain” a client’s
mortgage documents to a court.
This “explanation” is simply an
articulation of a discredited legal theory that whenever a trust
comprising a securitized pool of mortgages is terminated, all the
homeowners whose mortgages were pooled in that trust cease to
have any loan obligations.
See Exh. 1 to Amasol Decl.; See also,
Klohs v. Wells Fargo Bank, N.A., 901 F. Supp. 2d 1253 (D. Haw.
2012) (dismissing claim brought by PRLG).
This theory is the
basis for a form Complaint that PRLG has allegedly filed in
See Memorandum in Support of Motion at 17-18.
Far from having “never lost” and rendering clients “free and
clear” of mortgage obligations, PRLG does not appear to have
prevailed in any court using this theory.
submitting a declaration in connection with the present motion
says that he or she has paid up-front fees of close to $8,000
followed by monthly payments of $1,000 for Petit’s “affidavit”
and Stone’s legal counsel.
required by PRLG.
Stone disputes that retainer fees are
See Second Declaration of Robert Stone ¶ 4.
Stone has reportedly told several clients that he would
only represent them if they stopped making mortgage payments,
because their loans were allegedly not owned by the people they
were paying, and the “court would only believe [the bank had
done] something wrong if the [clients] stopped paying.”
Decl. ¶ 6; Parker Decl. ¶ 9.
Stone and Petit also allegedly
encouraged clients not to take advantage of loan modification
opportunities, describing such modifications as a “scam” that was
unnecessary “because [Petit’s] audit would win the case.”
Hagerty Decl. ¶ 10; Koko Decl. ¶ 4; Siaosi Decl. ¶ 4; Amasol
Decl. ¶ 19.
The homeowners’ declarations state that, having taken
the homeowners’ money and demanded continuing monthly payments,
Stone and Petit then failed to update the homeowners as to the
status of their cases.
Siaosi Decl. ¶ 8.
Some clients state
that, when they asked for an accounting of how their fees were
being spent, Stone and Petit simply failed to reply.
Amasol Decl. ¶ 26.
Some clients said that Stone and Petit
just in general stopped communicating with them.
Decl. ¶ 12. Siaosi Decl. ¶ 24.
Cases were allegedly voluntarily
dismissed by PRLG without the clients’ consent.
20. Siaosi Decl. ¶ 28.
Koko Decl. ¶ 19-
Defendants point to ten cases brought by
PRLG in federal court in Hawaii and twenty-three cases brought in
federal court in Illinois, all using variants of the same legal
See Memorandum in Support of Motion at 17-18.
The contractual relationship at the center of the
present lawsuit is not a contract between PRLG and a homeowner.
Rather, it is the contract between PRLG and Sandra Lynch, an
Entered into on May 1, 2012, the contract provided
that Lynch would work as an “independent contractor” for PRLG,
“performing specifically delegated substantive legal work under
the direct supervision of” Stone.
Agreement ¶ 2, ECF No. 1-1.
The record does not reflect whether, at the time Lynch signed the
contract, she knew how PRLG was conducting its practice.
Although Stone was not at that time licensed to practice law in
Hawaii, the contract provided that Lynch and Stone would “jointly
. . . give legal opinions or advice to clients in Hawaii, . . .
sign legal papers or pleadings on behalf of clients in Hawaii,
and . . . appear in court or before other tribunals on behalf of
clients in Hawaii.”
The contract required Lynch to provide “a final results
report . . . at the conclusion of [the] Agreement” that was to be
“in such form and setting forth such information and data as is
reasonably requested by [PRLG].”
Id. ¶ 4.
Lynch also agreed not to disclose or use any of PRLG’s
“business and product processes, methods, customer lists,
accounts, legal forms, and procedures” after she left the
Id. ¶ 6.
Lynch agreed that, when the agreement
terminated, she would “immediately deliver to the Company all
such files, records, documents, specifications, information, and
other items in her possession or under her control.”
Moreover, under the contract, any work product produced by Lynch
while working for PRLG was to remain PRLG’s exclusive property.
For its part, PRLG agreed to pay Lynch a bi-weekly salary
and to cover her expenses and liability insurance.
Id. ¶¶ 2,3.
The parties do not dispute that PRLG performed its obligations
under the terms of the contract.
PRLG alleges that, on April 22, 2013, Lynch launched a
“coup” against PRLG, soliciting at least sixteen of the firm’s
clients to join “‘Lynch Law Offices,’ [a] new firm the three
Defendants were secretly setting up while Defendants Lynch and
James were on the payroll of [PRLG].”
Complaint ¶ 14, ECF No. 1.
PRLG alleges that, by this stage, Defendants “had induced two
employees to resign from PRL Group and [were] working on inducing
PRLG introduces as evidence an email from Lynch
to a co-worker stating that Lynch was leaving PRLG and that
"several of the clients [were] coming with [her]."
Rigney, ECF No 1-2.
and desist letter.
Email to John
On April 24, 2013, PRLG sent Lynch a cease
See ECF No. 1-3.
According to PRLG’s then-
attorney, Kenneth Nakasone, Lynch called him in response to the
letter and informed him that, while she “had returned seven files
to the clients who remained clients of [PRLG’s],” she intended to
keep the “electronic files of the clients who were staying with
Declaration of Kenneth Nakasone, ECF No. 1-4.
hearing on the present motion, Lynch admitted that she did not
return hard copies of certain client files, but argues that her
retention of those files was required by law.
See Transcript at
PRLG alleges that Lynch and her co-Defendants are attempting
to solicit more clients for their business by making
“intentional, material misrepresentations of fact to [PRLG’s]
Complaint ¶ 14.
PRLG states that, in addition to client files,
Defendants have failed to return other “records, reports, legal
forms, documents, specifications, information, letters,
notes, media list[s], original artwork/creative, notebooks, and
similar items relating to the business of PRL Group.”
Id. ¶ 23.
Beyond this general list, PRLG does not specify or provide any
detail regarding what these documents are.
Finally, PRLG claims that Defendants have defamed the
firm through email and by “publishing on the Facebook page of
John Kang (alias Lee Miller)  accusations that [PRLG] is
engaging in criminal activity, . . . [is] not licensed to do
business in Hawaii, and that it is professionally incompetent.”
Complaint ¶ 29.
While the alleged excerpt from Miller’s Facebook
page does state that PRLG’s attorneys are not licensed in Hawaii,
that they are professionally incompetent and that the firm has
violated numerous “federal and state laws,” it does not in fact
say that PRLG committed any criminal violation.
Excerpt, ECF No. 1-10.
PRLG also attaches an excerpt from a website called the
“Ripoff Report,” which criticizes the firm.
Excerpt, ECF No. 1-11.
This document makes accusations similar
to those in the Facebook post.
See Ripoff Report
It does not mention any criminal
PRLG alleges that the Ripoff Report post was authored
by Defendants, but nothing on the face of the document nor any
other evidence in the record indicates that this is so.
indication of the post’s authorship is a line at the top of the
excerpt saying that it has been “Reported By: John Raney.”
Lynch contends that she “did nothing to “steal clients”
or solicit them to terminate their “relationship” with PRLG.
Memorandum in Support of Motion at 15.
She provides evidence
that PRLG’s clients sought her out after they became disgruntled
with Stone and Petit’s operation.
Several former PRLG clients
attest that Lynch neither solicited their business nor criticized
PRLG when she left the firm.
Chong Decl. ¶ 17-18; Kelly Decl. ¶
16; Siaosi Decl. ¶ 16; Yalimaiwai Decl. ¶ 21; Rodenhurst Decl. ¶
Clients who went on to hire Lynch claim they themselves
sought her out after she left PRLG.
Hagerty Decl. ¶ 16; Amasol
Decl. ¶ 25; Black Decl. ¶ 8.
PRLG contends that this court has jurisdiction under 28
U.S.C. § 1332 because the matter in controversy exceeds the sum
or value of $75,000, and the parties are citizens of different
Describing PRLG as actually a citizen of Hawaii,
Defendants argue that there is no diversity of citizenship.
“[A] corporation is typically a citizen of two states for
determining the existence of diversity jurisdiction: the state of
incorporation and the state in which it has its principal place
Breitman v. May Co. California, 37 F.3d 562, 564
(9th Cir. 1994).
It is undisputed that Plaintiff Property Rights
Law Group, P.C., is incorporated in Illinois.
however, that the entity has its principal place of business in
A corporation’s principal place of business is “the
place where a corporation's officers direct, control, and
coordinate the corporation's activities.”
559 U.S. 77, 92-93 (2010).
Hertz Corp. v. Friend,
It is normally “the place where the
corporation maintains its headquarters—-provided that the
headquarters is the actual center of direction, control, and
coordination, i.e., the ‘nerve center,’ and not simply an office
where the corporation holds its board meetings.”
Id. at 93.
To the extent Defendants are raising a factual
challenge to jurisdiction under Rule 12(b)(1) of the Federal
Rules of Civil Procedure, the challenge lacks evidentiary support
that PRLG’s “nerve center” is in Hawaii.
appear to rely principally on PRLG’s admission in its Complaint
that “PRL Group has been authorized to do business in the State
of Hawaii and has maintained a permanent branch office in the
County and City of Honolulu.”
Complaint ¶ 8.
does not, without more, render PRLG a citizen of Hawaii.
branch office in a particular state does not automatically make a
company a “citizen” of that state for the purposes of the federal
See Wachovia Bank v. Schmidt, 546 U.S. 303,
Defendants also allege that most of the cases that PRLG
handles are in Hawaii.
Even if Defendants could demonstrate that
this is so, it would not show that the Hawaii office is the
firm’s “actual center of direction, control, and coordination.”
Hertz Corp., 559 U.S. at 93.
On the present record, PRLG meets
its burden of showing that this court has diversity jurisdiction
over its lawsuit, and Defendants do not meet their burden as
movants challenging jurisdiction.
Defendants may, of course,
bring a Rule 12(b)(1) factual challenge at any stage in the
See Oregon v. Legal Servs. Corp., 552 F.3d 965, 969
(9th Cir. 2009) (“An objection that a federal court lacks subject
matter jurisdiction may be raised at any time.”).
the absence of evidence undermining PRLG’s contention that its
nerve center is in Illinois, Defendants have not as of now shown
that this court lacks subject matter jurisdiction.
In any event, PRLG also brings a claim under a federal
statute, meaning that PRLG may invoke federal question
Either diversity or federal question jurisdiction
allows this court to exercise supplemental jurisdiction over
PRLG’s pendent state law claims.
See 28 U.S.C. § 1367; see also
Bell v. Hood, 327 U.S. 678, 682-83 (1946) (noting that a federal
claim may not be dismissed for lack of subject matter
jurisdiction unless it “clearly appears to be immaterial and made
solely for the purpose of obtaining jurisdiction or where such a
claim is wholly insubstantial and frivolous.”);
Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir.
Safe Air for
2004)(“[J]urisdictional dismissals in cases premised on
federal-question jurisdiction are exceptional.”) (internal
quotation marks omitted).
SUMMARY JUDGMENT STANDARD.
Summary judgment shall be granted 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.”
R. Civ. P. 56(a).
See Addisu v. Fred Meyer, Inc., 198 F.3d 1130,
1134 (9th Cir. 2000).
The movants must support their position
that a material fact is or is not genuinely disputed by either
“citing to particular parts of materials in the record, including
depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including those made
for the purposes of the motion only), admissions, interrogatory
answers, or other materials”; or “showing that the materials
cited do not establish the absence or presence of a genuine
dispute, or that an adverse party cannot produce admissible
evidence to support the fact.”
Fed. R. Civ. P. 56(c).
the principal purposes of summary judgment is to identify and
dispose of factually unsupported claims and defenses.
Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
Summary judgment must be granted against a party that
fails to demonstrate facts to establish what will be an essential
element at trial.
See id. at 323.
The burden initially falls on
the moving party to identify for the court those “portions of the
materials on file that it believes demonstrate the absence of any
genuine issue of material fact.”
T.W. Elec. Serv., Inc. v. Pac.
Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987)
(citing Celotex Corp., 477 U.S. at 323).
“When the moving party
has carried its burden under Rule 56(c), its opponent must do
more than simply show that there is some metaphysical doubt as to
the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986) (footnote omitted).
The nonmoving party may not rely on the mere
allegations in the pleadings and instead must set forth specific
facts showing that there is a genuine issue for trial.
Elec. Serv., 809 F.2d at 630.
At least some “‘significant
probative evidence tending to support the complaint’” must be
Id. (quoting First Nat’l Bank of Ariz. v. Cities Serv.
Co., 391 U.S. 253, 290 (1968)); see also Addisu, 198 F.3d at 1134
(“A scintilla of evidence or evidence that is merely colorable or
not significantly probative does not present a genuine issue of
“[I]f the factual context makes the non-moving
party’s claim implausible, that party must come forward with more
persuasive evidence than would otherwise be necessary to show
that there is a genuine issue for trial.”
Cal. Arch’l Bldg.
Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468
(9th Cir. 1987) (citing Matsushita Elec. Indus. Co., 475 U.S. at
Accord Addisu, 198 F.3d at 1134 (“There must be enough
doubt for a ‘reasonable trier of fact’ to find for plaintiffs in
order to defeat the summary judgment motion.”).
In adjudicating summary judgment motions, the court
must view all evidence and inferences in the light most favorable
to the nonmoving party.
T.W. Elec. Serv., 809 F.2d at 631.
Inferences may be drawn from underlying facts not in dispute, as
well as from disputed facts that the judge is required to resolve
in favor of the nonmoving party.
When “direct evidence”
produced by the moving party conflicts with “direct evidence”
produced by the party opposing summary judgment, “the judge must
assume the truth of the evidence set forth by the nonmoving party
with respect to that fact.”
Breach of Contract (Count I).
This court begins its analysis of Defendants’ motion
with respect to Count I, the breach of contract claim, with the
threshold issue of what law applies to that claim.
court sitting in diversity must apply the forum state's choice of
Jorgensen v. Cassiday, 320 F.3d 906, 913 (9th Cir.
See also MRO Commc'ns, Inc. v. Am. Tel. & Tel. Co., 197
F.3d 1276, 1282 (9th Cir. 1999) (“In a federal question action
where the federal court is exercising supplemental jurisdiction
over state claims, the federal court applies the choice-of-law
rules of the forum state.”).
Under Hawaii law, “[w]hen the
parties choose the law of a particular state to govern their
contractual relationship and the chosen law has some nexus with
the parties or the contract, that law will generally be applied.”
Airgo, Inc. v. Horizon Cargo Transp., Inc., 66 Haw. 590, 595, 670
P.2d 1277, 1281 (1983).
The contract between Lynch and PRLG includes a choice
of law provision specifying that Illinois law applies.
record does not reflect precisely where the contract was signed,
PRLG has its nerve center in Illinois, Lynch was interviewed for
her job in Illinois, and Stone and Petit appear to reside in
These facts create a sufficient nexus with Illinois
for the application of Illinois law to PRLG’s contract claim.
See Picardy v. Sky River Mgmt., LLC, 129 Haw. 106, 294 P.3d 1092
(Ct. App. 2013) (applying Nevada law because it was specified in
contract’s choice of law provision and one party was
“headquartered in Nevada; the majority of its employees [were]
located in Nevada; [plaintiff] interviewed for the job in Nevada;
and . . . [some defendants] reside[d] in Nevada.”).
Under Illinois law, the elements of a breach of
contract claim are “(1) the existence of a valid and enforceable
contract; (2) performance by the plaintiff; (3) breach of the
contract by the defendant; and (4) resultant injury to the
Gonzalzles v. Am. Exp. Credit Corp., 315 Ill. App.
3d 199, 206, 733 N.E.2d 345, 351 (2000).
“A defendant's failure
to comply with a duty imposed by the contract gives rise to the
This court has already dismissed PRLG’s breach of
contract claim against all Defendants other than Lynch.
remaining breach of contract claim therefore relates to Lynch’s
Lynch first argues that summary judgment should be
granted in her favor on the breach of contract claim because the
evidence PRLG relies on is insufficient to establish that she
breached her contract.
See Celotex Corp., 477 U.S. at 325
(“[T]he burden on the moving party may be discharged by
‘showing’--that is, pointing out to the district court--that
there is an absence of evidence to support the nonmoving party's
While PRLG’s Complaint and briefing are less than clear
in tying Lynch’s alleged actions to particular contractual
provisions, the court concludes that, based on the evidence in
the record, there are at least questions of fact regarding three
ways in which Lynch may have violated her contract with PRLG.
First, Lynch may have violated the contract’s
confidentiality provision by keeping certain “client files” after
leaving the firm.
The contract states, “All files . . .
relating to the business of the Company, whether prepared by the
Contractor or otherwise coming into her possession, shall remain
the exclusive property of the Company” and “[t]he Contractor
shall not retain any copies . . . without the Company's prior
Agreement ¶ 6, ECF No. 1-1.
PRLG’s lawyer at the time, says that Lynch told him “that she had
scanned and uploaded all client files electronically . . .[and]
admitted that she [kept] some of the electronic files for clients
that she was keeping, but deleted others."
Nakasone Decl. ¶ 6.
Nakasone further states that Lynch's declared reason for not
returning the files was fear that returning them would constitute
aiding and abetting an unlawful operation.
Id. ¶ 7.
not dispute that she kept the files of clients who left PRLG to
be represented by her firm.
This retention of files is at least
arguably a breach of her agreement to return “all files” to PRLG
upon leaving the firm.
A second way in which Lynch may have violated the
contract is by contacting PRLG’s clients, either before or soon
after her termination, to solicit business for her own firm.
contract prohibits Lynch from using "in any manner, either during
the term of this Agreement or at any time thereafter, except as
required in the course of [her] engagement with the Company," any
of the firm's "various trade secrets, innovations, processes,
information, records, and specifications."
Agreement ¶ 6.
undisputed that several of PRLG’s former clients left the firm to
join Lynch’s firm.
Lynch also sent a letter to a co-worker on
April 22, 2013, in which she said that at least sixteen of PRLG’s
clients were “coming with [her].”
There is a question of fact as
to whether Lynch “used” “information” and “records” to obtain
For example, Lynch may have only discovered these
individuals’ addresses and their need for counsel through her
work with PRLG.
Such “use” of confidential information may have
violated the contract.
Finally, in addition to possibly having breached the
contract’s confidentiality provision, Lynch may have breached its
“work product” provision.
The contract required Lynch to provide
“a final results report” upon leaving the firm “in such form and
setting forth such information and data as is reasonably
requested by [PRLG].”
Agreement ¶ 4.
At the hearing on the
present motion, Lynch admitted that she did not provide PRLG with
such a report when she left the firm.
Transcript at 33.
Because a reasonable fact-finder could determine by a
preponderance of the evidence that Lynch violated the contract in
the above three ways, summary judgment is denied as to those
particular grounds for the breach of contract claim.
The record does not, however, support any contractual
breaches beyond these three specific possible violations.
Complaint contains other general allegations regarding the
disclosure or use of various firm documents.
largely recite the broad terms used in the contract without
identifying the particular documents allegedly “used” or
What details are included in the record do not show
that anything other than, at most, client files may have been
For example, PRLG alleges that Lynch downloaded
and kept "e-mails of the firm's clients . . . [and] the templates
for the pleadings in all PRL Group's cases."
But the only basis
PRLG appears to have for this accusation is an email sent by
Lynch to Keala Rodenhurst, who was then also working for PRLG,
discussing how to "upload" documents onto the firm's shared
See Rodenhurst Email, ECF No. 1-6.
This email appears to
be discussing putting documents onto the firm's shared drive,
rather than taking them off.
Even if it was discussing
"downloading" documents, the email is clearly dated January 24,
2013, almost three months before Lynch left the firm.
authorized at the time to use the firm’s shared drive and,
presumably, to discuss the operation of that drive with
Nothing in that email supports the conclusion that
Lynch retained firm documents, other than client files, after her
PRLG also accuses Lynch of downloading and retaining
“client lists” to aid in her solicitation of the firm’s clients.
But the record does not support the reasonable inference that
Lynch downloaded any such lists.
Stone intimates that he has
personal knowledge of the downloading of such lists, see First
Declaration of Robert Stone ¶ 8, ECF No, but provides no
indication of the source of such knowledge.
He does not, for
example, say he reviewed computer records showing who accessed
and downloaded materials from the PRLG’s shared drive.
simply reproduces the firm's client list with the title "PRL
Group's Clients Solicited By Defendant Lynch."
ECF No. 1-5.
That document does not show that Lynch did anything.
Stone also declares that Lynch disclosed confidential
materials to her co-Defendants.
See First Stone Decl. ¶ 9.
Stone does not explain how he gained personal knowledge of such
disclosures to third parties.
See Fed. R. Civ. P. 56(c)(4) ("An
affidavit or declaration used to support or oppose a motion must
be made on personal knowledge . . . and show that the affiant or
declarant is competent to testify on the matters stated."); see,
e.g., Wicker v. Oregon ex rel. Bureau of Labor, 543 F.3d 1168,
1178 (9th Cir. 2008) ("The affiants' assertions about a meeting
which they apparently did not attend and about which they had no
personal knowledge are not the proper subject of an affidavit.").
Stone may be concluding from the email Lynch sent to
Keala Rodenhurst regarding the “uploading” of documents that
Lynch must have actually wrongfully disclosed confidential
information about clients through uploaded documents.
But at the
time of the email, Lynch and Rodenhurst were both doing work for
PRLG and had legitimate access to firm materials.
nothing inherently nefarious about a discussion between coworkers about uploading documents.
Nor does that mail suggest
that Lynch was sharing materials with co-Defendant Lee Miller,
who was apparently not working for PRLG.
Instead, the email
indicates only that Miller helped show her a way of uploading
While this court draws reasonable inferences in PRLG’s
favor, no reasonable fact-finder could conclude based only on
that email and Stone’s declaration that Lynch engaged in the
unauthorized sharing of any confidential materials.
In short, there are questions of fact regarding whether
Lynch violated the contract in three ways: first, Lynch may have
violated the nonretention provision by keeping client files;
second, Lynch may have “used” confidential information to solicit
clients; and third, Lynch may have violated the work product
provision by failing to provide a “final results report” upon
leaving the firm.
With respect to these three ways in which
Lynch may have violated the contract, summary judgment is denied.
However, because PRLG is unable to provide any affirmative
evidence in support of any other contractual breaches, summary
judgment is granted in Lynch’s favor on any breach of contract
claim not premised on the three circumstances described above.
See F.T.C. v. Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009) (“to
avoid summary judgment, a non-movant must show a genuine issue of
material fact by presenting affirmative evidence from which a
jury could find in his favor"); see also UA Local 343 United
Ass'n of Journeymen & Apprentices of Plumbing & Pipefitting
Indus. of U.S. & Canada, AFL-CIO v. Nor-Cal Plumbing, Inc., 48
F.3d 1465, 1471 (9th Cir. 1994) (“[A nonmovant’s] burden of
contradicting appellees' evidence is not negligible . . . .
the evidence is merely colorable or is not significantly
probative summary judgment may be granted.”) (internal quotation
Lynch argues that, even if there is a question of fact
regarding whether she has breached the contract, summary judgment
should be granted in her favor based on her affirmative defense
that the contract with PRLG was "void, unenforceable, and against
A defendant bears the burden of proof when
asserting an affirmative defense and “must establish beyond
peradventure all of the essential elements of the . . . defense
to warrant [summary] judgment in [their] favor.”
Martin v. Alamo
Cmty. College Dist., 353 F.3d 409, 412 (5th Cir. 2003) (internal
quotation marks and emphasis omitted); see also Clark v. Capital
Credit & Collection Servs., 460 F.3d 1162, 1177 (9th Cir. 2006)
(at summary judgment stage, defendant has burden of proof with
respect to affirmative defense).
Lynch does not carry this
Lynch argues that her contract with PRLG is void
because Stone and Petit engaged in the "unauthorized practice of
law in Hawaii." Memorandum in Support of Motion at 12.
says that Stone and Petit "practiced law" in Hawaii by "preparing
complaints" for certain clients and "contacting, engaging, and
accepting fees for services from Hawaii homeowners."
Id. at 14.
Lynch argues that this conduct violates section 605-14 of Hawaii
Revised Statutes, which prohibits the "unauthorized practice of
law," and section 605-2 of Hawaii Revised Statutes, which states
that "no person shall be allowed to practice in any court of the
State unless that person has been duly licensed so to do by the
Lynch fails to meet her summary judgment burden as to
this affirmative defense.
As an initial matter, Lynch does not
show that Stone's out-of-court representation of Hawaii clients
before he passed the Hawaii bar examination necessarily violated
Stone is not alleged to have appeared in any judicial
proceeding in Hawaii or to have signed any document filed in a
court in Hawaii before passing the Hawaii bar examination.
commonplace for attorneys to work on cases outside of the
jurisdictions they practice in, and to solicit local counsel or
seek admission pro hac vice only as needed (e.g., when
representing clients in a court in another jurisdiction).
points to no authority suggesting that this common occurrence
constitutes the unauthorized practice of law.
There are, in addition, disputed issues of fact
regarding exactly what, if anything, Stone was doing with respect
to Hawaii clients at the time Lynch left the firm.
has not “rendered any legal services ‘within the jurisdiction,’”
and therefore has not violated section 605-14, if “Hawai‘i
counsel [are] at all times ‘in charge’ of clients’
Fought & Co. v. Steel Eng'g & Erection, Inc.,
87 Haw. 37, 48, 951 P.2d 487, 498 (1998).
Stone claims that
Hawaii counsel was “in charge” of representation in all the cases
he worked on in Hawaii before he contracted with Lynch, see
Second Stone Decl. ¶ 3, and that Lynch herself, who is licensed
in Hawaii, managed the cases she worked on for PRLG.
does not make clear precisely what involvement Stone had in any
of these cases.
Defendants simply do not establish that they are
entitled to summary judgment on this affirmative defense.
Finally, even if Stone unlawfully represented clients
in Hawaii, that would not necessarily demonstrate that Lynch was
either compelled by law to violate the terms of her contract or
free to ignore those terms.
Only if continued performance under
the contract would itself have violated Hawaii law would Lynch be
excused from compliance with its provisions.
See, e.g., Douthart
v. Congdon, 197 Ill. 349, 354, 64 N.E. 348, 349 (1902).
assuming Stone unlawfully represented Hawaii clients in the past,
or was intending to do so in the future, Lynch herself would not
necessarily have facilitated the violation of any law by
returning client files, producing a final results report, or
refraining from soliciting clients.
Given the lack of evidence
as to the contents of the client files in issue and as to the
nature of Lynch’s interactions with PRLG’s clients as she left
the firm, this court cannot determine whether Lynch could have
lawfully performed under the contract, irrespective of whatever
wrongdoing Stone may have engaged in.
Lynch also asserts the defense of unclean hands,
arguing that because PRLG was perpetrating a fraud against its
clients, it should be barred from recovering on the basis of its
contract with Lynch.
Under Illinois law, "[t]he doctrine of
unclean hands applies if a party seeking equitable relief is
guilty of misconduct, fraud, or bad faith toward the party
against whom relief is sought and if that misconduct is connected
with the transaction at issue in the litigation."
Zahl v. Krupa,
365 Ill. App. 3d 653, 658, 850 N.E.2d 304, 309 (Ill. App. Ct.
2006) (emphasis added).
Notwithstanding any evidence suggesting
that PRLG may have engaged in "misconduct, fraud, or bad faith"
against its clients, the court cannot discern any evidence that
PRLG perpetrated a fraud against Lynch in either the formation or
the performance of the contract.
Absent evidence that Lynch
herself was defrauded, her unclean hands defense is unavailing.
The court is not denying that there is significant
evidence in the record indicating that PRLG falsely represented
itself to clients.
In addition to the ten homeowners’
declarations, Stone himself acknowledged at the hearing on the
present motion that his firm tells clients the firm has “never
lost a case.”
Transcript at 23-24.
Stone suggested that this
statement is true because his services allow clients to remain in
their homes for long periods without making mortgage payments,
even if judgments are ultimately entered against them in the
cases filed by PRLG.
However, PRLG’s statements to clients
do not appear to be limited to telling clients that they will be
able to remain in their homes during litigation.
tells clients that PRLG has special strategies that win cases and
allow clients to own their home free and clear of any mortgage
It is highly doubtful that an ordinary consumer
would interpret an assertion that PRLG has never lost a case as
meaning that PRLG enables the consumer to delay foreclosure,
which will ultimately occur and possibly be accompanied by a
deficiency judgment if the foreclosure sale does not yield
proceeds sufficient to satisfy the mortgage and related expenses.
To the extent PRLG was committing fraud through alleged
misrepresentations, Lynch may have been understandably reluctant
to continue to do PRLG’s bidding and to possibly expose herself
to personal liability for the firm’s actions.
explained above, Lynch herself may not have been the victim of
any fraud that could support her affirmative defense, she
possibly could argue that returning files and writing a final
results report would have aided and abetted PRLG in violating,
for example, section 480-2 of Hawaii Revised Statutes, which
prohibits unfair and deceptive trade practices.
And a section
480-2 violation could also void PRLG’s agreements with its
clients, thereby possibly opening the door for Lynch to be
allowed to solicit their business.
See Haw. Rev. Stat. § 480-12
(“Any contract or agreement in violation of this chapter is void
and is not enforceable at law or in equity.”).
However, that is
not an argument that Lynch raises in her motion.
She points to
no consumer protection or other law that she would have violated
by continuing to perform work for PRLG.
At most, Lynch refers to a “violation of consumer
protection statutes” in her Answer to the Complaint, but she
gives PRLG no notice that any such statute is the basis of her
summary judgment motion.
Therefore, while that argument has not
been waived, the court does not consider it to be before the
court on the present motion.
See, e.g., W. Reserve Oil & Gas Co.
v. New, 765 F.2d 1428, 1432 n.1 (9th Cir. 1985) (noting that
issues not raised by the parties are not before the court).
the extent Lynch relies on her affirmative defenses in seeking
summary judgment on Count I, her motion is denied.
Illinois Trade Secrets Act (Count II).
The court turns next to Count II, which alleges a
violation of the Illinois Trade Secrets Act.
As with Count I,
the court begins its analysis by examining which law applies.
While, under Hawaii’s choice of law rules, Illinois law
applies to PRLG’s contract claim, it does not follow that
Illinois law necessarily governs this entire case.
specifies only that Illinois law “shall govern the validity of
th[e] Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties hereto.”
Agreement ¶ 12.
It does not state that Illinois law governs all
claims brought by a party.
Hawaii’s choice of law rules require
only “some nexus” between the parties and a chosen law when the
parties have specifically agreed to the application of that law.
Airgo, 670 P.2d at 1281.
But considerably more is required for
When the parties have not agreed to the application of
a particular state’s law, Hawaii’s choice of law rules require a
“flexible approach [that] places primary emphasis on deciding
which state would have the strongest interest in seeing its laws
applied to the particular case.”
Del Monte Fresh Produce
(Hawaii), Inc. v. Fireman's Fund Ins. Co., 117 Haw. 357, 364, 183
P.3d 734, 741 (2007) (internal quotation marks omitted).
must therefore weigh “the interests of the states and applicable
public policy reasons [to] determine whether Hawaii law or
another state's law should apply.”
If all the conduct
relevant to a noncontractual claim occurred in Hawaii, then it
may be that it is Hawaii law that applies to that claim, in which
event a claim based on Illinois law would not be cognizable.
Having said that, the court declines to make such a determination
on the present record.
As the moving parties, Defendants must
carry their burden of persuasion.
At the very least, that means
they must articulate and support their arguments.
not carry that burden with respect to Count II.
At most, Defendants vaguely suggest that Illinois law
is inapplicable when they say, “The Northern District of Illinois
(if the Court finds that it must apply Illinois law, which
Defendants dispute) held in National Presto Industries, Inc. v.
Hamilton Beach, No. 88 C 10567, 1990 WL 208594 (N.D. Ill. Dec.
10, 1990), it could not prohibit the copying of a product once it
enters the public domain.”
Memorandum in Support of Motion at
Defendants say absolutely nothing about why they dispute the
application of Illinois law.
They therefore do not obligate PRLG
to respond by showing that Illinois law does indeed apply.
Throwaway parentheticals are not an appropriate way of raising
This court concludes that the choice of law issue has
not been properly raised on the present record.
This does not
mean that the issue can never be resolved before judgment.
just not an issue that this court will analyze on its own in
deciding this motion.
Absent a threshold determination as to whether Illinois
law applies, this court does not reach the merits of Count II.
No claim is asserted under Hawaii’s Trade Secrets Act, so this
court does not examine that alternative basis for a claim.2
Summary judgment is denied as to Count II.
Computer Fraud and Abuse Act (Count III).
Count III asserts a claim under the CFAA, which creates
a private right of action for “[a]ny person who suffers damage or
loss” when an individual “intentionally accesses a protected
computer without authorization, and as a result of such conduct,
recklessly causes damage.”
See 18 U.S.C. §§ 1030(g),
This court has previously ruled that it would
Hawaii’s Trade Secrets Act bars the “Disclosure or use of
a trade secret of another without express or implied consent” and
defines trade secret as “information, including a formula,
pattern, compilation, program device, method, technique, or
process that (1) Derives independent economic value, actual or
potential, from not being generally known . . . and (2) Is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy.” Haw. Rev. Stat. § 482B-2. The Hawaii
Trade Secrets Act, modeled after the Uniform Trade Secrets Act,
is not identical to Illinois’ trade secrets statute. See U.S.
Gypsum Co. v. LaFarge N. Am., Inc., 508 F. Supp. 2d 601, 623
(N.D. Ill. 2007) (“Although patterned after UTSA, there is
substantial variance between ITSA and the uniform version.”). In
particular, unlike the Illinois statute, Hawaii’s Act does not
explicitly include “customer lists” as a covered trade secret.
allow a claim based on accessing a “cloud” platform to proceed as
asserting a CFAA violation based on accessing a “protected
Order Granting in Part and Denying in Part Motion to
Dismiss, ECF No. 71 at 9.
Defendants now contend that accessing
the “cloud” is not accessing a “protected computer” under the
One way in which a computer may receive CFAA protection
is by being “used in interstate or foreign commerce.”
undisputed that PRLG’s cloud platform was connected to the
An internet connection is sufficient for a computer to
be “used in interstate or foreign commerce.”
See United States
v. Trotter, 478 F.3d 918, 921 (8th Cir. 2007) (noting that
computer in question was “protected” because, by being connected
to the internet, it met CFAA’s requirement that it be used in
interstate or foreign commerce).
Cf. United States v. Sutcliffe,
505 F.3d 944, 953 (9th Cir. 2007) (in case not involving CFAA,
agreeing with Eighth Circuit that “[a]s both the means to engage
in commerce and the method by which transactions occur, ‘the
Internet is an instrumentality and channel of interstate
commerce.’”) (quoting Trotter, 478 F.3d at 921).
PRLG’s “cloud” constitutes accessing a “protected computer”
within the meaning of the CFAA.
Nevertheless, PRLG’s CFAA claim cannot survive the
present summary judgment motion.
As discussed above, there is no
evidence before the court that Lynch accessed PRLG’s cloud
Presumably, Lynch was authorized to
access the firm’s cloud shared drive while she was still working
Other than Stone’s allegation, which again lacks any
indicia of personal knowledge, nothing in the record suggests
that Lynch accessed the cloud after she left the firm.
Lynch intended to harm PRLG while using the shared drive to
download materials while she worked for PRLG, that alone would
not establish that she acted “without authorization.”
Holdings LLC v. Brekka, 581 F.3d 1127, 1133 (9th Cir. 2009) (“No
language in the CFAA supports [the] argument that authorization
to use a computer ceases when an employee resolves to use the
computer contrary to the employer's interest.”).
Summary judgment is granted in Defendants’ favor on
PRLG’s CFAA claim.
Defamation (Count IV).
In Count IV, PRLG alleges that Defendants have defamed
While the Hawaii Supreme Court has not articulated a
particular choice of law rule with regard to defamation claims,
in weighing "the interests of the states and applicable public
policy reasons,” Del Monte Fresh Produce, 183 P.3d at 741, this
court determines that Hawaii law should apply.
defamatory statements targeted consumers in Hawaii, and almost
exclusively discuss PRLG’s practices in Hawaii.
never center is in Illinois, and this consideration is due some
weight, the other parties to the suit are Hawaii residents and
almost all the underlying conduct relevant to the defamation
claim occurred in Hawaii, where PRLG allegedly does most of its
See Restatement (Second) of Conflict of Laws § 150
(1971) (choice of law for defamation claims based on “aggregate
communication are determined by the local law of the state which,
with respect to the particular issue, has the most significant
relationship to the occurrence and the parties”).
To sustain a claim for defamation under Hawaii law, a
claimant must show: “(1) a false and defamatory statement
concerning another; (2) an unprivileged publication to a third
party; (3) fault amounting at least to negligence on the part of
the publisher [actual malice where the plaintiff is a public
figure]; and (4) either actionability of the statement
irrespective of special harm or the existence of special harm
caused by the publication.”
Gonsalves v. Nissan Motor Corp. in
Hawaii, Ltd., 100 Haw. 149, 171, 58 P.3d 1196, 1218 (2002).
Count IV identifies as defamatory an email dated April
22, 2013, from Lynch to John Edward Rigney.
See Exhibit B to
The email states:
John: I have tendered my resignation to the
firm. I went to the bank after some clients
complained, and found that Teri and Mr. Stone
had cleaned out the trust account, and have
done so on a regular basis since October.
Between May, 2012 when they opened this firm
(and Teri has been running it, no doubt this
time), no retainer funds were deposited until
October, and then it was only $5,000. It was
left in there for about 50 days, then
transferred out. From that point on, they
revoked my access and Teri has been
electronically moving all money out. She
told me there was no money coming in, yet I
have tracked (through clients) almost
$190,000 that should have gone into the trust
account. As for me, it falls to me, as the
only licensed attorney in the PRLG firm and I
will deal with the consequences. Mr. Stone
claims he is being admitted this week to the
Hawaii bar. They hired a new attorney and
did not tell me. Likely the new attorney
will get Stone admitted pro hac vice. Guess
now we know why he came here. Several of the
clients are coming with me, at last count
there were 16 of them. Ms. Petit will take a
fall as well, for her false affidavits and
solicitation of clients here. Best of luck!
Contact me here if you want and I will call
when I can.
PRLG does not identify any particular statement in
Lynch's email as false.
The court cannot tell whether PRLG is
saying it did not withdraw funds from the client trust account as
described by Lynch.
Without evidence that the email assertions
are false, PRLG cannot sustain a defamation claim based on the
Not is it clear what position John Edward Rigney has.
If, for example, he works for PRLG, it is hard to understand how
Lynch could be said to have published her allegedly defamatory
email to a third party.
In short, PRLG fails to show how, at
trial, it would meet its burden of establishing each element of
its defamation claim in connection with Lynch's email.
PRLG also claims that Defendants defamed the firm by
“publishing on the Facebook page of John Kang (alias Lee Miller)
 accusations that [Stone and Petit are] engaging in criminal
activity, . . . [are] not licensed to do business in Hawaii, and
that [they are] professionally incompetent.”
Complaint ¶ 29.
PRLG also appears to accuse Defendants of defaming PRLG through
the “Ripoff Report” post.
Defendants argue that PRLG “provides
no factual basis that any of these statements are false, that
they were made with malice or that they were even made by
Memorandum in Support of Motion at 24.
As an initial matter, there is no evidence in the
record that any Defendant authored the “Ripoff Report” post.
Given the lack of evidence in this regard, summary judgment is
granted with respect to the portion of the defamation claim
against all three Defendants relating to the Ripoff Report.
As to the Facebook post, there is no evidence that
Lynch or Rodenhurst played any part in that publication.
and Rodenhurst are entitled to summary judgment on the portion of
the defamation claim relating to the Facebook post.
the Facebook-related defamation claim against Miller.
reasonable fact-finder could say, based on the present record,
that the statements allegedly posted on Facebook are false.
While PRLG says that the post accuses them of criminal activity,
the excerpt in the record makes no mention of a criminal
Instead, it says that PRLG may have violated many
“federal and state laws” and restates many of the allegations
made against PRLG contained in the homeowners’ declarations.
Those declarations actually support the gist of the Facebook
See Wilson v. Freitas, 121 Haw. 120, 128, 214 P.3d
1110, 1118 (Haw. Ct. App. 2009) (“The literal truth of every word
or detail of the challenged statement is not required; the
statement need only be substantially true.”).
PRLG provides no
evidence in support of its assertion that the posting is false.
Brinson v. Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir.
1995) (nomovant “may not rest upon mere allegations of denials of
pleadings, . . . [their] response must set forth specific facts
showing that there is a genuine issue for trial.”).
Because PRLG will have the burden of proving at trial
every element of its Facebook-related claim against Miller, it is
incumbent on PRLG, in opposing the present summary judgment
motion, to show how it will meet that burden.
PRLG does not
bother to offer evidence refuting each allegedly defamatory
PRLG instead refers vaguely to evidence that will be
produced at trial.
That is insufficient to defeat summary
Moreover, even if the statements on the Facebook page
are false, liability would only attach if the publication were at
See, e.g., Obsidian Fin. Grp., LLC v. Cox, 740
F.3d 1284, 1292 (9th Cir. 2014) (“Because [a] blog post addressed
a matter of public concern . . . [the defendant could not be]
liable for defamation unless [the court] found that [defendant]
Quite apart from what appears to be
evidence supporting a good-faith belief that the statements
contained in the Facebook post are true, PRLG fails to show that
the publication was at least negligent.
Summary judgment is therefore granted in Miller’s favor
on PRLG’s Facebook-related defamation claim.
Tortious Interference (Count V).
PRLG’s fifth claim is labeled in the Complaint simply
as “tortious interference.”
In its order granting in part and
denying in part Defendants' motion to dismiss, this court called
Count V a “tortious interference with prospective business
Under Hawaii law, to prevail on such a claim
PRLG must show:
(1) the existence of a valid business
relationship or a prospective advantage or
expectancy sufficiently definite, specific,
and capable of acceptance in the sense that
there is a reasonable probability of it
maturing into a future economic benefit to
the plaintiff; (2) knowledge of the
relationship, advantage, or expectancy by the
defendant; (3) a purposeful intent to
interfere with the relationship, advantage,
or expectancy; (4) legal causation between
the act of interference and the impairment of
the relationship, advantage, or expectancy;
and (5) actual damages.
Robert’s Hawaii School Bus, Inc. v. Laupahoehoe Trans. Co., 91
Haw. 224, 257, 982 P.2d 853,888 (1999).
The Complaint refers to existing clients that allegedly
“cancelled their contracts” with PRLG based on statements by
Although PRLG refers to defamatory statements in
this connection, PRLG may not be intending to limit itself to the
statements that form the basis of the defamation claim.
may, for example, be complaining that, in inducing clients to
retain her instead of PRLG, Lynch, aided by her co-Defendants,
induced clients to stop paying the monthly $1000 fee to PRLG.
Under such a theory, PRLG might colorably argue that clients
might have stayed with PRLG but for Defendants’ solicitation.
Because this court has ruled earlier in this order that
there are questions of fact as to whether Lynch breached her
contract with PRLG, and because those possible breaches may be
tied to the alleged tortious interference claim against all three
Defendants, this court denies summary judgment as to Count V.
Defendants’ motion for summary judgment is granted in
part and denied in part.
Count I, the breach of contract claim,
is before this court only against Lynch, as the court previously
dismissed Count I as against Rodenhurst and Miller.
judgment is granted in Lynch's favor as to Count I except with
respect to the portions of Count I based on Lynch's alleged
failure to return client files, alleged solicitation of PRLG's
clients, and alleged failure to produce a final results report.
The portions of Count I relating to those three alleged
circumstances remain for further adjudication.
Summary judgment is denied with respect to Count II,
the Illinois Trade Secrets Act claim, and Count V, the tortious
Summary judgment is granted in favor of Defendants on
Count III, the CFAA claim, and on Count IV, the defamation claim.
Therefore, portions of Count I, as well as Counts II
and V, remain in issue.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, May 30, 2014.
/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge
Property Rights Law Group, P.C. v. Sandra Lynch, et al., Civ No. 13-00273 SOM/RLP,
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
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