WOLFE FINANCIAL INC., ET AL. V. RODGERS, ET AL.

Filing 89

MEMORANDUM OPINION AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE signed by MAG/JUDGE L. PATRICK AULD on 01/15/2019, that the Sparks Motion (Docket Entry 69 ) be granted in part and denied in part as fol lows: all claims against Jared Sparks and Tina Sparks be dismissed for lack of personal jurisdiction and Plaintiffs' breach of fiduciary duty, CFAA, and tortious interference claims be dismissed against Darrell Sparks. FURTHER RECOMMENDED that the Rodgers Motion (Docket Entry 67 ) and the Eli Motion (Docket Entry 71 ) be granted. FURTHER RECOMMENDED that the Counterclaim Motion (Docket Entry 76 ) be denied. (Garland, Leah)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

WOLFE FINANCIAL INC. d/b/a,
INTEGRITY MORTGAGE GROUP, et al.,
Plaintiffs,
v.
JOHN RODGERS, et al.,
Defendants.

)
)
)
)
)
)
)
)
)
)

1:17cv896

MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
This

case

comes

before

the

undersigned

United

States

Magistrate Judge for recommendations on “Defendants Darrell Sparks,
Tina Sparks, and Jared Sparks’ [sic] Motion to Dismiss Pursuant to
Fed. R. Civ. P. 12(b)(2) and 12(b)(6)” (Docket Entry 69) (the
“Sparks Motion”),1 “Defendants John Rodgers, Patrick Milligan, and
Prime Mortgage Lending, Inc.’s Motion to Dismiss Pursuant to Fed.
R. Civ. P. 12(b)(6)” (Docket Entry 67) (the “Rodgers Motion”),
“Defendants’

Rule

12(b)(6)

Motion

to

Dismiss

Second

Amended

Complaint” (Docket Entry 71) (the “Eli Motion”) filed by Eli
Global,

LLC

(“Eli”),

Greg

Lindberg

(“Lindberg”),

and

TAC

Investments, LLC (“TAC”) (collectively, the “Eli Defendants”), and
the “Motion to Dismiss Counterclaim Counts VI, VII and VIII and
Incorporated

Memorandum

of

Law”

(Docket

Entry

76)

(the

1 For legibility reasons, this Opinion omits all-cap, bold,
and underlined font in all quotations from the headings and titles
in the parties’ materials.

“Counterclaim
Integrity

Motion”)

Mortgage

(“Mathosian”)
Defendants”).

(at

filed

Group

by

Wolfe

(“Integrity”)

times,

Financial
and

collectively,

Inc.

Matthew
the

d/b/a

Mathosian

“Counterclaim

For the reasons that follow, the Court should grant

in part and deny in part the Sparks Motion; grant the Rodgers
Motion and Eli Motion; and deny the Counterclaim Motion.
BACKGROUND
Asserting breach of contract and tort claims, Counterclaim
Defendants and Marian Siemering (“Siemering”) (collectively, the
“Plaintiffs”)2

initiated

this

lawsuit

on

October

5,

2017,

against Patrick Milligan (“Milligan”), John Rodgers (“Rodgers”),
Darrell Sparks, Jared Sparks, and Tina Sparks (collectively, the
“Individual Defendants”), as well as Prime Mortgage Lending Inc.
(“Prime”)

and

Defendants”).
2.)3

Eli

Defendants

(collectively,

the

“Corporate

(See, e.g., Docket Entry 1 (the “Complaint”) at 1,

Five days later, Plaintiffs filed an Amended Complaint

against

Individual

Defendants

(collectively, the “Defendants”).

and

Corporate

Defendants

(See Docket Entry 4.)

After

Defendants filed various motions to dismiss (see Docket Entries 17,
19, 25), Plaintiffs filed a motion to amend the Amended Complaint

2 This Opinion defines “Plaintiffs,” “Individual Defendants,”
“Corporate Defendants,” and “Defendants” to match the Complaint’s
definition of those terms.
(See Docket Entry 1 at 1; see
also Docket Entry 63 at 1 (same).)
3 Citations herein to Docket Entry pages utilize the CM/ECF
footer’s pagination.
2

(Docket Entry 32) and, a few days later, a motion for temporary
restraining order and preliminary injunction (Docket Entry 35) (the
“Preliminary Injunction Motion”).

The undersigned conducted a

hearing on the Preliminary Injunction Motion (see Docket Entry 53)
and recommended its denial (see generally Docket Entry 61), which
recommendation the Court (per Chief United States District Judge
Thomas D. Schroeder) adopted (see Docket Entry 66 at 1).
The Court (per the undersigned) also granted Plaintiffs leave
to amend their pleading (see Text Order dated Apr. 27, 2018),
prompting the filing of Plaintiffs’ “Second Amended Complaint,
Injunctive Relief Requested, and Demand for Jury Trial” (Docket
Entry 63) (the “Second Amended Complaint”).

As Exhibit A to the

Second Amended Complaint, Plaintiffs submitted a “Producing Branch
Manager Employment Agreement” between Integrity and Darrell Sparks.
(Docket Entry 64 (the “Employment Agreement”) at 1; see also Docket
Entries 1-1, 4-1.)

In response, Defendants variously moved to

dismiss the Second Amended Complaint and/or certain claims therein.
(See Docket Entries 67, 69, 71.)

Prime also asserted multiple

counterclaims against Integrity and Mathosian.
73

at

11-36

Mathosian

(the “Counterclaims”).)

seek

dismissal

of

In

certain

(See Docket Entry

turn,

Integrity and

such

counterclaims.

(See Docket Entries 76, 85.)
As relevant to the various dismissal motions, the Second
Amended Complaint alleges:

3

“[A] premier mortgage lender that offers a variety of purchase
and refinancing programs” (Docket Entry 63, ¶ 17), “Integrity is
based in Asheboro, North Carolina, with branches across the United
States” (id., ¶ 18).

“[A] mortgage lender based in Apex, North

Carolina, with branches across the United States” (id., ¶ 19),
“Prime is a direct competitor to Integrity in the mortgage lending
industry” (id., ¶ 9).

“Lindberg owns Eli” (id., ¶ 22), which owns

TAC (id., ¶ 20), which “owns 50% of Prime” (id., ¶ 21).
owns the other 50% of Prime.

(See id., ¶ 7.)

Rodgers

Previously Prime

employees (id., ¶ 33), Siemering and Mathosian currently work for
Integrity (id., ¶¶ 2, 3).

A North Carolina resident, Milligan

previously worked for Prime.

(Id., ¶ 10.)

Residents of Kentucky,

Darrell, Tina, and Jared Sparks formerly worked for Integrity and
now work for Prime.

(Id., ¶¶ 11-13.)

Notwithstanding this Kentucky residence, the Court possesses
personal jurisdiction over the Sparkses because
!

they
have
specifically
directed
their
activities at this forum by virtue of their
employment with Integrity;

!

this
litigation
activities;

!

they have signed employment contracts with
Integrity, which is located in this forum;

!

they
have
Integrity;

!

they were paid by Integrity;

arises

continually

4

out

of

communicated

those

with

"

-their payroll, benefits, and medical
coverage was provided by Integrity;

!

they had an ongoing employment relationship
with Integrity; and

!

Integrity felt harm in this forum due to the
Sparks’ [sic] actions.

(Id., ¶ 15 (bullets in original).)
“On

information

and

belief,

the

Corporate

Defendants

collectively exercise actual control over Prime and Rodgers, and by
virtue

of

that

Defendants.”

control,

(Id., ¶ 23.)

exercise

control

over

the

other

Also “on information and belief[,] the

Corporate Defendants actively participated in and encouraged the
activities alleged[,] . . . . are the alter-ego of the other
defendants[,] . . . and control Prime, Rodgers, and the other
defendants.”

(Id.)

“During

the

week

of

January

16,

2017,

Milligan, while an employee of Prime, was seen at an Integrity
office in Kentucky managed by Defendant Darrell Sparks, then an
Integrity employee.

This came to Mathosian’s attention by way of

a conversation with Milligan.”

(Id., ¶ 24.)

“Mathosian learned

that Milligan was assisting Darrell Sparks (the branch manager),
Jared Sparks, and Tina Sparks, then all Integrity employees,
without

authorization,

Integrity’s
Encompass

Encompass
System.

information.”

.

.

System
These

(Id., ¶ 25.)

.

on

and
are

how

to

import

export

them

systems

for

loans

from

the

Prime

tracking

loan

into

“In other words, they were stealing

Integrity’s loans from Integrity for Prime.”
5

(Id.)

“Milligan stated to Mathosian that he was there at the request
of his manager, Rodgers, and that he was sent for two full weeks to
transition the entire Integrity branch to Prime.”

(Id., ¶ 26.)

Accordingly, Integrity decided “to terminate the Kentucky branch
and its access to Integrity’s Encompass System, on January 18,
2017.

This was a severe loss to Integrity.”

(Id., ¶ 27.)

Additionally, “[s]everal loans that were initially Integrity’s
closed at Prime.”

(Id., ¶ 28.)

“On information and belief, the

Corporate Defendants were all actively involved with and supported
this operation.”
“Plaintiffs

(Id., ¶ 29.)
enjoy

existing

business

relationships

with

borrowers as well as the expectancy of business relationships with
potential

borrowers

who

indicate

an

interest

in

engaging

Plaintiffs’ services.” (Id., ¶ 59.) “More specifically, Integrity
had contracts with at least” thirteen specified individuals (id.,
¶ 60), and, “[o]n information and belief, Defendants knew of the
contracts and intentionally induced the borrowers not to perform
the contracts” (id., ¶ 61).

“Plaintiffs and their borrowers were

and are in an economic relationship that benefitted and benefits
Plaintiffs economically, and likely would have continued to benefit
Plaintiffs in the future.”

(Id., ¶ 62.)

“But for Defendants’

actions, the borrowers would have entered into future contracts
with Plaintiffs.”

(Id., ¶ 63.)

“Defendants were aware of the

relationships that Plaintiffs enjoyed with Plaintiffs’ borrowers”

6

(id., ¶ 64) and “intentionally interfered with these existing and
prospective relationships by diverting borrowers to Prime, in many
cases, on information and belief, without the borrowers’ knowledge
that this was occurring” (id., ¶ 65).
Defendants

induced

and/or

caused

a

“Through their actions,
termination

of

these

relationships or expected relationships” (id., ¶ 66), harming
Plaintiffs through “loss of business and goodwill” (id., ¶ 67).
“In addition, Plaintiffs had the reasonable expectation of future
business with the same borrowers” (id., ¶ 68), and “Defendants’
actions induced the borrowers not to enter into contracts with
Plaintiffs

that

would

have

resulted

but

for

Defendants’

interference” (id., ¶ 69).
Further, clients and potential clients
provide[] Integrity with a wide variety of personal
confidential information such as income and prior
mortgage information, Social Security numbers, dates of
birth, contact information, sensitive credit history,
bank account numbers, mortgage amounts, tax returns,
employment history, and all of the financial information
that is necessary to facilitate a home loan. Integrity’s
potential clients provide such information to Integrity
with the understanding that Integrity will protect this
highly private information. Integrity and its employees
are required to maintain the privacy of this information
by extremely strict federal laws that carry substantial
penalties if violated, such as the Gramm-Leach-Bliley
Act. This information, thus, becomes a trade secret of
Integrity (the “Trade Secrets”).
Integrity does not release, share, or disclose such
Trade Secrets to the general public. Integrity maintains
the secrecy of the Trade Secrets and derives an economic
and
competitive
advantage
from
maintaining
the
non-disclosure of such information.
If a competitor
obtained this information, as Prime did, it could and did
7

undercut Integrity on Integrity’s loans and divert
Integrity’s clients by aggressively pursuing those
clients based on the information kept by Integrity.
(Id., ¶¶

30,

Individual

31

(internal

disclosed

Defendants
these

paragraph

improperly

Trade

Secrets

and

to

number

omitted).)

unlawfully

Prime,

with

“The

accessed
the

and

Corporate

Defendants’ assistance, and Prime utilized such Trade Secrets to
Plaintiffs’ detriment.”

(Id., ¶ 50.)

Finally, “Darrell Sparks, Tina Sparks, and Jared Sparks all
had contractual and employment agreements with Integrity that
required them to work only for Integrity and to be loyal to
Integrity alone.

See Exhibit A.”

(Id., ¶ 71; see also id., ¶ 72

(“Their activity breached these contracts and caused damage to
Plaintiffs.”).) “At Integrity, Tina Sparks managed marketing, sent
out flyers, promoted the business with realtors, and assisted with
various office tasks such as ordering office supplies.”
¶ 76.)

(Id.,

Jared Sparks worked as a mortgage loan processor at

Integrity.

(Id., ¶ 77.)

“His duties and responsibilities” (id.)

consisted of:
!

Performing a general evaluation of applications
(financial documents, mortgage type, etc.)

!

Ordering needed third party verifications to help
substantiate income and job history working with
various Integrity vendors to accomplish this

!

Gathering all important data from client (assets,
debts etc.) — copies of W2s, pay stubs, bank
statements, IDs, etc.

8

(Id. (bullets in original).)
officer” at Integrity.

Darrell Sparks served as “a loan

(Id., ¶ 75.)

In that capacity,

his duties and responsibilities were as follows:
!

Evaluating credit worthiness by processing loan
applications and documentation within specified
limits.
This involved pulling the applicant’s
credit through IMG vendors

!

Interviewing applicants to determine financial
eligibility and feasibility of granting loans

!

Determining all applicable ratios and metrics and
setting up debt payment plans

!

Communicating with clients either to request or to
provide information

!

Justifying decisions
reporting on them

!

This involved constant communication with the home
office (Asheboro Team) and underwriters to fully
comprehend the creditworthiness of the borrower(s)
as determined by the loan officer

!

Completing loan contracts and counseling clients on
policies and restrictions

!

Updating job knowledge on types of loans and other
financial services

!

Maintaining and updating account records

!

Assessing customer needs, exploring all options and
introducing different types of loans

!

Developing referral networks, suggesting alternate
channels and cross-selling products and services to
accomplish quotas

!

Going
the
“extra
mile”
to
build
trust
relationships, customer loyalty and satisfaction
throughout the underwriting process

(approvals/rejections)

9

and

!

Operating in compliance with laws and regulations
and adhering to lending compliance guidelines, as
dictated and managed by the corporate compliance
team

!

Helping to schedule closings and request closing
documents from the closers in the Asheboro office

!

Quoting rates and locking loans with the corporate
lockdesk per the borrowers [sic] direction

!

Submitting payroll, approving hourly
[sic] time, submitting expense reports

!

Managing the pipeline to ensure that loans progress
through the system properly

(Id.,

¶

75

(bullets

in

original).)

“By

employees

virtue

of

these

responsibilities, each of the Sparks[es] had such control that
Integrity was subject to domination by each of the Sparks[es].”
(Id., ¶ 78.)

“Darrell Sparks, Tina Sparks, and Jared Sparks all

had a fiduciary duty with Integrity to work only for it and a duty
to be loyal to it alone due to their responsibility and positions
at Integrity, and due to their employment agreements.”
¶ 79.)

(Id.,

“Their activity breached these fiduciary duties and duties

of loyalty and caused damage to Plaintiffs.”

(Id., ¶ 80.)

DISCUSSION
I. Sparks Motion
Darrell, Jared, and Tina Sparks seek dismissal of the Second
Amended Complaint for lack of personal jurisdiction pursuant to
Rule

12(b)(2)

“Rules”).

of

the

Federal

Rules

of

(See Docket Entry 69 at 1, 2.)

Civil

Procedure

(the

“To the extent the Court

does have personal jurisdiction over the Sparks[es],” though, they
10

seek Rule 12(b)(6) dismissal of Plaintiffs’ claims for “tortious
interference (Count IV), breach of fiduciary duty and loyalty
(Count VI), and violations of the Computer Fraud and Abuse Act
(‘CFAA’) (Count [VIII]).”

(Id. at 2.)

Plaintiffs oppose the Rule

12(b)(2) request as well as the Rule 12(b)(6) request on the
tortious interference claim as to all three Sparkses and on the
fiduciary duty claim as to Darrell and Jared Sparks.
Entry 87 at 1-5.)

(See Docket

However, Plaintiffs agree to dismissal of their

fiduciary duty claim (Count VI) against Tina Sparks and their CFAA
claim (Count VIII) against all three Sparkses.

(See id. at 5, 6.)

A. Personal Jurisdiction Challenge
i.

Relevant Standards

In response to a defendant’s Rule 12(b)(2) challenge, the
plaintiff

must

ultimately

prove

the

existence

of

personal

jurisdiction by a preponderance of the evidence. Carefirst of Md.,
Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th
Cir. 2003).

If a court considers a pretrial personal jurisdiction

challenge without conducting an evidentiary hearing, though, the
plaintiff need only “mak[e] a prima facie showing in support of
[the] assertion of jurisdiction.”

Universal Leather, LLC v. Koro

AR,

(4th

S.A.,

773

F.3d

553,

558

Cir.

2014).

In

such

circumstances, the “[C]ourt must construe all relevant pleading
allegations in the light most favorable to the plaintiff, assume
credibility,

and

draw

the

most

11

favorable

inferences

for

the

existence

of

omitted).

The Court must also construe all “conflicting facts in

the

parties’

jurisdiction.”

affidavits

Id.

and

favorable to [the plaintiff].”

(internal

declarations

in

quotation

the

marks

light

most

Id. at 560.

The Court may exercise jurisdiction over the Sparkses if
(1) North Carolina’s long-arm statute authorizes it and (2) the
exercise of jurisdiction comports with due process under the
Fourteenth Amendment.

Christian Sci. Bd. of Dirs. of First Church

of Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001).
Moreover,
[t]he North Carolina Supreme Court has held that
[North Carolina General Statute Section] 1-75.4(1)(d)
permits the exercise of personal jurisdiction over a
defendant to the outer limits allowable under federal due
process.
See Dillon v. Numismatic Funding Corp., 291
N.C. 674, 231 S.E.2d 629, 630 (1977) (“[I]t is apparent
that the [North Carolina] General Assembly intended to
make available to the North Carolina courts the full
jurisdictional powers permissible under federal due
process.”); see also Combs[ v. Bakker, 886 F.2d 673,] 676
n.3 [(4th Cir. 1989)] (same).
Universal Leather, 773 F.3d at 558 (footnote omitted) (second and
third sets of brackets in original).

Accordingly, if a plaintiff

asserts jurisdiction under Section 1-75.4(1)(d), the United States
Court

of

Appeals

for

the

Fourth

Circuit

has

held

that

the

“two-prong test merges into the single question whether [the
plaintiff] has made a prima facie showing that [the defendant] had
sufficient contacts with North Carolina to satisfy constitutional
due process.”

Id. at 558-59.

12

“This does not of course relieve the plaintiffs of the burden
ultimately

to

preponderance

prove
of

the

existence

evidence,

whether

of
in

statutory
a

grounds

separate

by a

evidentiary

hearing adequate to resolve dispositive factual questions, or as an
incident to trial on the merits.”

Combs, 886 F.2d at 677.

As

such, if, “even under [Section] 1-75.4(1)(d)’s very broad terms,
the

facts

provision

of

th[e]

cannot

jurisdiction.”

case

fail

“authorize[]

to
the

invoke

jurisdiction,”

exercise

of

[the

that

Court’s]

Skinner v. Preferred Credit, 361 N.C. 114, 119-20,

638 S.E.2d 203, 208-09 (2006) (explaining that, although “[t]his
Court has stated that the enactment of [Section] 1-75.4(1)(d) was
‘intended to make available to the North Carolina courts the full
jurisdictional powers permissible under federal due process[,]’
. . . . by its plain language the statute requires some sort of
‘activity’ to be conducted by the defendant within this state,” and
finding that the proffered activities failed to satisfy Section 175.4(1)(d) (quoting Dillon, 291 N.C. at 676, 231 S.E.2d at 630));
see also id. at 129-30, 638 S.E.2d at 214-15 (Timmons-Goodson, J.,
dissenting) (explaining that “[t]his Court last addressed whether
a defendant was engaged in substantial activity in this state
pursuant to [Section] 1-75.4(1)(d) in Dillon” and that, “if the
defendant in Dillon engaged in substantial activity in North
Carolina . . ., there is substantial activity in the instant
case”); id. at 133, 638 S.E.2d at 216 (stating, in regard to the

13

first step of the jurisdictional analysis, “I would hold that both
[Sections] 1–75.4(1)(d) and (6)(b) allow courts of this state to
assert in personam jurisdiction over [the] defendant,” and then
noting that “the second inquiry in the jurisdictional analysis is
whether

the

exercise

of

in

personam

jurisdiction

over

[the]

defendant by courts of this state would violate due process of law
under the United States Constitution”).
Indeed, “[a] determination that the long-arm statute does not
authorize

jurisdiction

ends

the

inquiry.”

Stanton

Barrett

Motorsports, LLC v. Innovative Techs. Corp. of Am., No. COA 08-983,
195 N.C. App. 460, 673 S.E.2d 166 (table), 2009 WL 368577, at *2
(2009)

(unpublished)

(internal

quotation

marks

omitted);

see

also Vision Motor Cars, Inc. v. Valor Motor Co., 981 F. Supp. 2d
464, 472 (M.D.N.C. 2013) (“Absent any evidence that any defendant
was engaged in solicitation or services activities at any point in
North Carolina, the plaintiff’s action is not authorized by North
Carolina’s long-arm statute.
jurisdiction
dismissed.”).

over

the

However,

Therefore, the Court lacks personal

defendants
if

the

and

the

long-arm

action

statute

will

be

authorizes

jurisdiction, then the analysis turns to whether exercise of
jurisdiction comports with due process.

See Brown v. Ellis, 363

N.C. 360, 363, 678 S.E.2d 222, 223 (2009) (“To ascertain whether
North Carolina may assert personal jurisdiction over a nonresident
defendant, we employ a two-step analysis.

14

Jurisdiction over the

action must first be authorized by [Section] 1-75.4.

‘Second, if

the long-arm statute permits consideration of the action, exercise
of jurisdiction must not violate the Due Process Clause of the
Fourteenth Amendment to the U.S. Constitution.’” (citation omitted)
(quoting Skinner, 361 N.C. at 119, 638 S.E.2d at 208 (majority
opinion))); see also Johnston Cty. v. R.N. Rouse & Co., 331 N.C.
88, 95-96, 414 S.E.2d 30, 35 (1992) (“As we recognized in Dillon,
resolving the question of the existence of in personam jurisdiction
involves a two-step inquiry.

A court attempting to exercise

personal jurisdiction over a nonresident defendant must first
determine whether a statute, such as [Section] 1–75.4(5), permits
the court to entertain an action against the defendant.

If there

is a statute authorizing the court to act, the court must further
determine whether the nonresident defendant has sufficient, minimum
contacts with the state so that maintenance of the suit within the
courts of North Carolina will not offend traditional notions of
fair play and substantial justice.”

(citations and internal

quotation marks omitted)).
As to that second step, “[a] court’s exercise of jurisdiction
over a nonresident defendant comports with due process if the
defendant has ‘minimum contacts’ with the forum, such that to
require the defendant to defend its interests in that state ‘does
not

offend

justice.’”

traditional

notions

of

fair

play

and

substantial

Carefirst, 334 F.3d at 397 (quoting International Shoe

15

Co. v. Washington, 326 U.S. 310, 316 (1945)).

To satisfy the

minimum contacts test, the plaintiff must “show that the defendant
‘purposefully directed his activities at the residents of the
forum’ and that the plaintiff’s cause of action ‘arise[s] out of’
those activities.”

Consulting Eng’rs Corp. v. Geometric Ltd., 561

F.3d 273, 277 (4th Cir. 2009) (brackets in original) (quoting
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)).
test

“ensure[s]

jurisdiction

that

solely

the

as

a

defendant

is

result

random,

of

not

‘haled

This

into

fortuitous,

a
or

attenuated contacts,’” and thus “protects a defendant from having
to defend himself in a forum where he should not have anticipated
being sued.”

Id. (quoting Burger King, 471 U.S. at 475).

“In judging minimum contacts, a court properly focuses on the
relationship among the defendant, the forum, and the litigation.”
Calder v. Jones, 465 U.S. 783, 788 (1984) (internal quotation marks
omitted).

Two methods for achieving personal jurisdiction exist:

(1) “specific jurisdiction,” in which the defendant’s qualifying
contacts

with

North

Carolina

constitute

the

basis

for

the

litigation, and (2) “general jurisdiction,” which occurs when a
defendant’s “affiliations with [North Carolina] are so ‘continuous
and systematic’ as to render [it] essentially at home in [North
Carolina].”
U.S.

915,

Goodyear Dunlop Tires Operations, S.A. v. Brown, 564
919

(2011).

Here,

16

Plaintiffs

rely

on

specific

jurisdiction for their claims against the Sparkses.

(See Docket

Entry 87 at 2.)
“In determining whether specific jurisdiction exists, [courts]
consider (1) the extent to which the defendant has purposefully
availed itself of the privilege of conducting activities in the
state; (2) whether the plaintiffs’ claims arise out of those
activities directed at the state; and (3) whether the exercise of
personal jurisdiction would be constitutionally ‘reasonable.’”
Carefirst, 334 F.3d at 397.

In analyzing specific jurisdiction, a

court must focus on the nature and quality of the defendant’s
contacts with the forum.

Id.

Notably, however, a court “should

not ‘merely . . . count the contacts and quantitatively compare
this case to other preceding cases.’

Even a single contact may be

sufficient to create jurisdiction when the cause of action arises
out of that single contact, provided that the principle of ‘fair
play and substantial justice’ is not thereby offended.”

Id.

(ellipsis in original) (citation omitted).
“The purposeful-availment test is flexible, and [the] analysis
proceeds on a case-by-case basis.”

Tire Eng’g & Distribution, LLC

v. Shandong Linglong Rubber Co., 682 F.3d 292, 302 (4th Cir. 2012).
In the contractual context, purposeful availment occurs if “the
contract has a substantial connection with the forum state.

The

parties’ negotiations, contemplated future consequences, the terms
of the contract, and the parties’ actual course of dealing, must be

17

considered

in

determining

whether

the

defendant

established minimum contacts in the forum state.”

purposefully

Tubular Textile

Mach. & Compax Corp. v. Formosa Dyeing & Finishing, Inc., No.
4:96cv391,

1997

WL

33150812,

at

*4

(M.D.N.C.

Jan.

29,

1997)

(citation omitted) (first citing McGee v. International Life Ins.
Co., 355 U.S. 220, 223 (1957); then citing Burger King, 471 U.S. at
479).

In this regard, “[i]t is well established that where a

defendant

deliberately

creates

continuing

obligations

between

[him]self and a forum entity, [he] has availed [him]self of the
privilege of conducting business there, and where [his] ‘activities
are shielded by the “benefits and protections” of the forum’s laws
it is presumptively not unreasonable to require [him] to submit to
the burdens of litigation in that forum as well.’”

Id. at *5

(quoting Burger King, 471 U.S. at 476).
Additionally, in the context of intentional torts, courts may
assess purposeful availment through the so-called “‘effects test.’”
Carefirst, 334 F.3d at 397-98 & n.7.
plaintiff

must

show

“that:

(1)

the

Under this test, the
defendant

committed

an

intentional tort; (2) the plaintiff felt the brunt of the harm in
the forum, such that the forum can be said to be the focal point of
the harm; and (3) the defendant expressly aimed his tortious
conduct at the forum, such that the forum can be said to be the
focal point of the tortious activity.”

18

Id. at 398 n.7.

ii. Analysis
Here, Plaintiffs identify no portion of the long-arm statute
that provides jurisdiction over the Sparkses. (See Docket Entry 87
at 1-3.)

Instead, Plaintiffs assert that

North Carolina’s long-arm statute “runs coextensive with
the federal Due Process Clause, thereby collapsing the
two-step process ‘into a single inquiry’ as to whether
the nonresident defendant has such ‘minimal contacts’
with North Carolina that exercising jurisdiction over the
defendant does not offend ‘traditional notions of fair
play and substantial justice.’” Wright v. Zacky & Sons
Poultry, LLC, 105 F. Supp. 3d 531, 536 (M.D.N.C. 2015)
(citing Christian Sci.[, 259 F.3d 209]). The facts laid
out in Plaintiffs’ Second Amended Complaint are
sufficient to establish that the Sparks[es] have
sufficient minimum contacts with North Carolina to
support specific jurisdiction for Plaintiffs’ counts
against the Sparks[es].
(Id. at 2.)

Thus, Plaintiffs appear to rely on Section 1-

75.4(1)(d)

the

as

contentions.

statutory

This

grounds

provision

for

their

authorizes

jurisdictional

the

exercise

of

jurisdiction “[i]n any action, whether the claim arises within or
without [North Carolina], in which a claim is asserted against a
party who when service of process is made upon such party[] . . .
[i]s engaged in substantial activity within [North Carolina],
whether

such

otherwise.”

activity

is

wholly

interstate,

intrastate,

or

N.C. Gen. Stat. § 1-75.4(1)(d).

Even “constru[ing] all relevant pleading allegations in the
light most favorable to [Plaintiffs] . . . and draw[ing] the most
favorable inferences for the existence of jurisdiction,” Universal
Leather, 773 F.3d at 558 (internal quotation marks omitted),
19

however, Plaintiffs fail to satisfy the “plain language [of] the
statute[, which] requires some sort of ‘activity’ to be conducted
by the defendant within this state,” Skinner, 361 N.C. at 119, 638
S.E.2d

at

208,

“when

service

of

process

is

[defendant],” N.C. Gen. Stat. § 1-75.4(1)(d).

made

upon

such

Here, Plaintiffs

seek to establish the requisite North Carolina connections of the
Sparkses by focusing on their employment with Integrity.
Docket Entry 63, ¶¶ 11-13, 15, 24-27, 71-81.)4

(See

Yet, Plaintiffs

terminated the Sparkses’ employment “on January 18, 2017” (id.,
¶ 27; see also id., ¶¶ 11-13 (describing the Sparkses as “former
employee[s] of Integrity”)), and did not achieve service of process
on the Sparkses until October 2017 (see Docket Entry 8 at 1).5
Accordingly, “even under [Section] 1-75.4(1)(d)’s very broad terms,
the facts of this case fail to invoke jurisdiction.”

Skinner, 361

N.C. at 120, 638 S.E.2d at 209.

4 The Second Amended Complaint alleges that the Sparkses now
work for Prime, a North Carolina corporation, but provides no
further allegations regarding that employment or any resulting
interactions with North Carolina. (See generally Docket Entry 63.)
Notably, though, the Sparkses specifically aver that they “do not
conduct any business in North Carolina, do not solicit any business
in North Carolina, and do not have any customers in North Carolina”
(Docket Entry 70-1, ¶ 4; Docket Entry 70-2, ¶ 4; Docket Entry 70-3,
¶ 4), and they generally disclaim any North Carolina connections.
(See Docket Entries 70-1, 70-2, 70-3.) Hence, even assuming that
Plaintiffs sought to rely on such employment, they have not shown
that the Sparkses’ employment with Prime satisfies the requirements
of Section 1-75.4(1)(d).
5
Indeed, Plaintiffs did not initiate this lawsuit until
October 2017. (See Docket Entry 1 at 14.)
20

Nevertheless, as to Darrell Sparks, another provision of the
long-arm

statute

appears

potentially

relevant.

The

“Local

Services, Goods or Contracts” provision authorizes jurisdiction
“[i]n any action which,” inter alia:
a. Arises out of a promise, made anywhere to the
plaintiff or to some third party for the plaintiff’s
benefit, by the defendant to perform services within this
State or to pay for services to be performed in this
State by the plaintiff; or
b. Arises out of services actually performed for the
plaintiff by the defendant within this State, or services
actually performed for the defendant by the plaintiff
within this State if such performance within this State
was authorized or ratified by the defendant; . . . .
N.C. Gen. Stat. § 1-75.4(5). Plaintiffs submitted Darrell Sparks’s
Employment Agreement (see Docket Entry 64), which specifies that
his duties include “[i]dentifying potential mortgagors, acquiring
a full understanding of, and analyzing, their respective financial
needs, based on their individual financial health, economic goals
and credit history” (id. at 12) as well as “[o]verseeing the loan
transaction from initiation, through processing, approval, closing
and recording” (id. at 13).

According to the Second Amended

Complaint, these activities “involved [Darrell Sparks’s] constant
communication with the home office (Asheboro Team) and underwriters
to fully comprehend the creditworthiness of the borrower(s) as
determined by [Darrell Sparks],” as well as his “request[ing]
closing

documents

from

the

closers

21

in

the

Asheboro

office.”

(Docket Entry 63, ¶ 75.)6

Construed “in the light most favorable

to [Plaintiffs] . . . and draw[ing] the most favorable inferences
for the existence of jurisdiction,” Universal Leather, 773 F.3d at
558 (internal quotation marks omitted), these allegations appear to
satisfy Section 1-75.4(5)(a) and/or Section 1-75.4(5)(b).7
As such, Plaintiffs make a prima facie showing that North
Carolina’s long-arm statute authorizes jurisdiction over Darrell

6 Conversely, the Second Amended Complaint does not allege
that the duties of Jared or Tina Sparks included any interaction
with North Carolina. (See id., ¶¶ 76, 77.)
7
Neither Darrell Sparks nor Plaintiffs addressed the
substance of the Employment Agreement and the impact of its
provisions on the jurisdictional analysis. (See Docket Entries 69,
70, 70-1, 83, 87.) It bears noting, though, that in the Employment
Agreement, Darrell Sparks consented to the exercise of personal
jurisdiction in North Carolina for disputes regarding the
Employment Agreement.
(See Docket Entry 64 at 8 (“Unless
prohibited by applicable law, or otherwise agreed to by the
Parties, the Parties expressly agree and consent that the courts of
Randolph County, State of North Carolina shall have exclusive
jurisdiction over all actions arising from, out of, or with respect
to this Agreement.”).) Where “a party has validly consented to the
jurisdiction of a court, it is not necessary to conduct th[e usual]
two-step [jurisdictional] determination because the person has
waived any right to object to the court’s exercise of in personam
jurisdiction.” Johnston Cty., 331 N.C. at 96, 414 S.E.2d at 35
(citing Burger King, 471 U.S. at 472 n.14). Regardless of whether
or not Darrell Sparks waived his ability to object to jurisdiction
in the United States District Court for the Middle District of
North Carolina, which encompasses Randolph County, see 28 U.S.C.
§ 113(b), this jurisdictional consent provision further supports
the Court’s exercise of jurisdiction over him. See Retail Inv’rs,
Inc. v. Henzlik Inv. Co., 113 N.C. App. 549, 552-53, 439 S.E.2d
196, 198 (1994) (explaining that “[a] defendant may . . . consent
to personal jurisdiction and in such event, the two step inquiry is
unnecessary to the exercise of personal jurisdiction over the
defendant,” and affirming denial of jurisdictional dismissal
motions given jurisdictional consent provision in relevant
agreement).
22

Sparks, but not over Tina and Jared Sparks. Accordingly, the Court
should dismiss this action as to Tina and Jared Sparks under Rule
12(b)(2).

See Vision Motor, 981 F. Supp. 2d at 472 (“[T]he

plaintiff’s action is not authorized by North Carolina’s long-arm
statute. Therefore, the Court lacks personal jurisdiction over the
defendants and the action will be dismissed.”); Stanton Barrett,
2009

WL

368577,

at

*2-3

(affirming

dismissal

for

lack

of

jurisdiction where “exercise of personal jurisdiction was not
authorized by N.C. Gen. Stat. § 1-75.4,” without “reach[ing] the
issue of due process,” id., 2009 WL 368577, at *2).
“In the alternative, the Court [should] find[] that asserting
personal jurisdiction over [Jared and Tina Sparks] would not
comport with due process.”
Turning

first

to

the

Vision Motor, 981 F. Supp. 2d at 473.

contractual

purposeful-availment

test,

Plaintiffs neither submitted any employment agreement for Jared or
Tina Sparks (see Docket Entries 1-1, 4-1, 64) nor alleged that any
employment agreement with them contained a North Carolina choiceof-law, forum-selection, or consent-to-jurisdiction provision (see
generally Docket Entry 63).

Moreover, as detailed in the Second

Amended Complaint, Jared and Tina Sparks did not interact with
North

Carolina

Integrity.

in

fulfilling

their

employment

duties

with

(See id., ¶¶ 76, 77.)

Thus, the record reflects that the only connection to North
Carolina of Jared and Tina Sparks remains the fortuitous fact that

23

their (current and previous) employer qualifies as a North Carolina
resident (see id., ¶¶ 1, 8).8

That connection fails to justify the

exercise of jurisdiction over Jared and Tina Sparks. See Walden v.
Fiore, 571 U.S. 277, 285-86 (2014) (“[O]ur ‘minimum contacts’
analysis looks to the defendant’s contacts with the forum State
itself, not the defendant’s contacts with persons who reside
there. . . .

[T]he plaintiff cannot be the only link between the

defendant and the forum. . . .

[A] defendant’s relationship with

8
Plaintiffs argue that specific jurisdiction over “the
Sparks[es]” exists because “they were paid by Integrity” and “their
payroll, benefits, and medical coverage was provided by Integrity.”
(Id., ¶ 15.)
In this regard, though, “the [Second Amended
Complaint] is significant for what it does not say. [Plaintiffs]
ha[ve] not alleged that [they paid the Sparkses and provided their
benefits and medical coverage from within North Carolina], despite
this fact being within the direct knowledge of [Plaintiffs].”
Pan-American Prods. & Holdings, LLC v. R.T.G. Furniture Corp., 825
F. Supp. 2d 664, 682 (M.D.N.C. 2011). Given that Integrity has
“branches across the United States” (Docket Entry 63, ¶ 18), the
Sparkses worked only at “an Integrity office in Kentucky” (id.,
¶ 24; see id., ¶¶ 24-27; see also Docket Entry 70-1, ¶ 6; Docket
Entry 70-2, ¶ 6; Docket Entry 70-3, ¶ 6), and the Second Amended
Complaint does not suggest that payroll processing or any other
human resource functions occurred in North Carolina (see Docket
Entry 63, ¶¶ 15, 75), the Court cannot infer that Plaintiffs paid
the Sparkses (or provided any other benefits) from within North
Carolina.
This case thus differs from the remote-employment
decision upon which Plaintiffs rely (see Docket Entry 87 at 2-3
(discussing Numeric Analytics, LLC v. McCabe, 161 F. Supp. 3d 348
(E.D. Pa. 2016))). In that case, evidence established that all
“back office personnel management,” email, timekeeping, and billing
customers “occurred in Pennsylvania,” the only location where the
plaintiff possessed an office, and “[the p]laintiff paid [the
d]efendants’ salaries using a Pennsylvania bank,” thereby
justifying Pennsylvania jurisdiction over employees who worked
remotely, although even with all those facts, the court “believe[d]
the question [wa]s close.” Numeric Analytics, 161 F. Supp. 3d at
355.
24

a plaintiff or third party, standing alone, is an insufficient
basis for jurisdiction.”).

Plaintiffs therefore fail to satisfy

the contractual purposeful-availment test as to Jared and Tina
Sparks.
Plaintiffs

similarly

fail

to

satisfy

the

tort-related

purposeful-availment test as to Jared and Tina Sparks. Put simply,
the

record

lacks

any

indication

that

Jared

and

Tina

Sparks

“expressly aimed [their] tortious conduct at [North Carolina], such
that [North Carolina] can be said to be the focal point of the
tortious activity.”

Carefirst, 334 F.3d at 398 n.7.

In this

regard, the Second Amended Complaint alleges only that, at their
office in Kentucky, the Sparkses worked with Milligan “to export
loans from Integrity’s Encompass System and import them into the
Prime Encompass System.”
27.)

(Docket Entry 63, ¶ 25; see id., ¶¶ 24,

Nothing in the current record indicates that this activity

involved North Carolina,9 let alone that North Carolina constituted
“the focal point of the tortious activity,” Carefirst, 334 F.3d at
398 n.7.

(See generally Docket Entry 63.)

That “Integrity felt

harm in this forum due to the Sparks’ [sic] actions” (id., ¶ 15)
does not change this analysis.

See Walden, 571 U.S. at 290

(“Calder made clear that mere injury to a forum resident is not a

9 Notably, Plaintiffs did not provide potentially relevant
information regarding Integrity’s Encompass System, including, for
instance, where it houses the Encompass System or how individuals
access said system. (See Docket Entry 63.)
25

sufficient connection to the forum. . . .

The proper question is

not where the plaintiff experienced a particular injury or effect
but whether the defendant’s conduct connects him to the forum in a
meaningful way.”).
In sum, because Plaintiffs have not established that due
process permits the exercise of jurisdiction over Jared and Tina
Sparks, the Court should dismiss them under Rule 12(b)(2).
Conversely, the record reflects that Darrell Sparks entered
into a contract with a North Carolina corporation (see Docket Entry
64 at 1; Docket Entry 63, ¶ 1) that contained a North Carolina
choice-of-law

provision,

a

North

Carolina

forum-selection

provision, and a North Carolina consent-to-jurisdiction provision.
(See Docket Entry 64 at 8.)10

To fulfill his duties under this

contract, for nearly two years (compare id. at 1 (specifying
effective date of April 1, 2015), with Docket Entry 63, ¶ 27

10 More specifically, Section 6.6 of the Employment Agreement
states:
To the maximum extent permitted under applicable law,
th[e Employment] Agreement shall be governed by and
construed in accordance with the substantive laws of
Federal law and the laws of the State of North Carolina,
without regard to provisions related to choice of law or
forum. Unless prohibited by applicable law, or otherwise
agreed to by the Parties, the Parties expressly agree and
consent that the courts of Randolph County, State of
North Carolina shall have exclusive jurisdiction over all
actions arising from, out of, or with respect to th[e
Employment] Agreement. . . .
(Id.)
26

(identifying termination date of January 18, 2017)), Darrell Sparks
engaged in “constant communication with the home office (Asheboro
Team)” and “[h]elp[ed] to schedule closings and request[ed] closing
documents from the closers in the Asheboro office” (Docket Entry
63, ¶ 75).

As such, “the [Employment] Agreement has a substantial

connection to North Carolina, and [Darrell Sparks] can fairly be
said to have purposefully availed [himself] of the privilege of
conducting activities in North Carolina.”

Epic Tech, LLC v. STHR

Grp., LLC, No. 1:15cv252, 2015 WL 8179513, at *8 (M.D.N.C. Dec. 7,
2015), report and recommendation adopted, No. 1:15-CV-252, 2015 WL
9592522 (M.D.N.C. Dec. 31, 2015); see also Tubular Textile, 1997 WL
33150812, at *5 (“It is well established that where a defendant
deliberately creates continuing obligations between [him]self and
a forum entity, [he] has availed [him]self of the privilege of
conducting business there, and where [his] ‘activities are shielded
by the “benefits and protections” of the forum’s laws it is
presumptively not unreasonable to require [him] to submit to the
burdens of litigation in that forum as well.’” (quoting Burger
King, 471 U.S. at 476)).

27

Upon satisfaction of the purposeful-availment test,11 the
question turns to whether Plaintiffs’ “claims arise out of those
activities directed at the state.”

Carefirst, 334 F.3d at 397.

“The analysis here is generally not complicated.”

Tire Eng’g, 682

F.3d at 303. Plaintiffs’ claims relate to Darrell Sparks’s alleged
“stealing Integrity’s loans from Integrity for Prime” (Docket Entry
63,

¶

25),

in

violation

of

the

provision

in

his

Employment

Agreement that “required [him] to work only for Integrity and to be
loyal to Integrity alone” (id., ¶ 71; see also Docket Entry 64 at
1 (detailing “Duty of Loyalty”)).
factor.

This satisfies the second

See, e.g., Burger King, 471 U.S. at 479 (finding exercise

of jurisdiction comported with due process where “this franchise

11 “A court . . . may exercise pendent personal jurisdiction
over any claim that arises out of a common nucleus of operative
facts as the claim over which the court has personal jurisdiction.”
Pan-American, 825 F. Supp. 2d at 678 (internal quotation marks
omitted).
Here, Plaintiffs’ claims against Darrell Sparks all
derive from his alleged involvement in the transmission of
information from Integrity’s Encompass System and the resulting
loss of client relationships (see, e.g., Docket Entry 63 at 2
(detailing Plaintiffs’ statement of the case)), and thus their tort
claims against Darrell Sparks arise from “a common nucleus of
operative facts,” Pan-American, 825 F. Supp. 2d at 678, with their
breach of contract claim.
Accordingly, the Court need not
separately analyze the existence of jurisdiction for Plaintiffs’
tort claims against Darrell Sparks. See North Carolina Mut. Life
Ins. Co. v. McKinley Fin. Serv., Inc., 386 F. Supp. 2d 648, 656
(M.D.N.C. 2005) (exercising jurisdiction over two additional claims
even though the “[third-party plaintiff] made no argument as to
[the third-party defendant’s] personal jurisdiction with relation
to any other claim than to tortious interference with contract,”
explaining that it found that such claims “arise[] within the same
common nucleus of operative fact”).
28

dispute grew directly out of ‘a contract which had a substantial
connection with that State’” (emphasis in original)).
That leaves only a final examination of whether exercise of
personal jurisdiction remains constitutionally reasonable.
Carefirst, 334 F.3d at 397.

See

This element “ensures that litigation

is not so gravely difficult and inconvenient as to place the
defendant at a severe disadvantage in comparison to his opponent.
The burden on the defendant, interests of the forum state, and the
plaintiff’s
inquiry.”

interest

in

obtaining

relief

guide

[the

Court’s]

Tire Eng’g, 682 F.3d at 303 (citation and internal

quotation marks omitted).
The exercise of personal jurisdiction over Darrell Sparks
qualifies as constitutionally reasonable.

To begin, and notably,

Darrell Sparks does not contend that litigating this matter in
North

Carolina

will

impose

any

constitutionally unreasonable one.
83.)

burden

on

him,

let

alone

a

(See Docket Entries 70, 70-1,

Moreover, any generalized concern about the inconvenience or

cost of litigating in North Carolina rather than Kentucky would not
defeat jurisdiction.

See Burger King, 471 U.S. at 477 (“[W]here a

defendant who purposefully has directed his activities at forum
residents

seeks

to

defeat

jurisdiction,

he

must

present

a

compelling case that the presence of some other considerations
would render jurisdiction unreasonable.”).

In this regard, the

United States Supreme Court long ago concluded that, “because

29

modern transportation and communications have made it much less
burdensome for a party sued to defend himself in a State where he
engages in economic activity, it usually will not be unfair to
subject him to the burdens of litigating in another forum for
disputes

relating

to

such

activity.”

Id.

at

474

(internal

quotation marks omitted).
Put simply, “[a]lthough defending a lawsuit in North Carolina
[i]s,

without

doubt,

inconvenient

for

[Darrell

Sparks],

the

inconvenience [i]s not so grave as to offend constitutional due
process principles.”

Christian Sci., 259 F.3d at 217; see also

Consulting Eng’rs, 561 F.3d at 278 (“[B]ecause [the defendant’s]
activities are shielded by the benefits and protections of the
forum’s laws it is presumptively not unreasonable to require him to
submit to the burdens of litigation in that forum as well.”
(brackets in original) (quoting Burger King, 471 U.S. at 476)).
This appears particularly true here given that the same counsel
represents both Rodgers, Milligan, and Prime (collectively, the
“Rodgers Defendants”) as well as Darrell Sparks (see Docket Entry
10 at 1), enabling him to “join in and fully adopt the arguments
and legal authority set forth [in Rodgers Defendants’ briefing]”
(Docket Entry 70 at 19; see also Docket Entry 83 at 11 (same)) in
support of his own motions, thereby reducing the cost, burden, and
inconvenience of litigation.

30

Finally,

North

Carolina

surely

possesses

an

interest

in

assuring redress for its injured resident corporation, especially
regarding the breach of an agreement that contains North Carolina
choice-of-law,
provisions.

forum-selection,

and

consent-to-jurisdiction

See Burger King, 471 U.S. at 482-83 (concluding that

a state has a “‘legitimate interest in holding [the defendant]
answerable on a claim related to’ the contacts he had established
in that State”).

Simply put, “exercise of specific personal

jurisdiction over [Darrell Sparks] is consistent with traditional
notions of fair play and substantial justice.” Christian Sci., 259
F.3d at 218 (internal quotation marks omitted).
In short, Plaintiffs have made a sufficient showing that
personal jurisdiction over Darrell Sparks exists.

Therefore, the

Court should deny his Rule 12(b)(2) dismissal request.
B. Rule 12(b)(6) Challenge
In light of the foregoing, the analysis turns to Darrell
Sparks’s Rule 12(b)(6) challenges.

As noted above, Darrell Sparks

seeks dismissal of Plaintiffs’ breach of fiduciary duty claim,
tortious interference claim, and CFAA claim (see Docket Entry 69 at
2), and Plaintiffs consent to the dismissal of their CFAA claim
(see Docket Entry 87 at 5). However, Plaintiffs oppose the request
to dismiss the breach of fiduciary duty and tortious interference
claims.

(See id. at 4-6.)

sufficient

facts

“to

In Plaintiffs’ view, they allege

establish

31

a

fiduciary duty

and

duty

of

loyalty” (id. at 4) and properly state a claim for tortious
interference (see id. at 5).

Plaintiffs’ arguments lack merit.

i. Relevant Standards
In reviewing a Rule 12(b)(6) motion, the Court must “accept
the facts alleged in the complaint as true and construe them in the
light most favorable to the plaintiff.” Coleman v. Maryland Ct. of
App., 626 F.3d 187, 189 (4th Cir. 2010), aff’d sub nom., Coleman v.
Court of App. of Md., 566 U.S. 30 (2012).

The Court must also

“draw all reasonable inferences in favor of the plaintiff.”

E.I.

du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440
(4th Cir. 2011) (internal quotation marks omitted).

It “do[es]

not, however, accept as true a legal conclusion couched as a
factual allegation” nor does it “accept unwarranted inferences,
unreasonable conclusions, or arguments.” SD3, LLC v. Black & Decker
(U.S.) Inc., 801 F.3d 412, 422 (4th Cir. 2015), as amended on reh’g
in part (Oct. 29, 2015) (internal quotation marks omitted).

It

“can further put aside any naked assertions devoid of further
factual enhancement.”

Id. (internal quotation marks omitted).

To avoid Rule 12(b)(6) dismissal, a complaint must contain
sufficient factual allegations “to ‘state a claim to relief that is
plausible on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). To qualify as plausible, a claim needs sufficient factual
content to support a reasonable inference of the defendant’s

32

liability for the alleged misconduct.
pleads

facts

that

are

merely

Id.

consistent

“Where a complaint
with

a

defendant’s

liability, it stops short of the line between possibility and
plausibility of entitlement to relief.”
marks omitted).

Id. (internal quotation

This standard “demands more than an unadorned,

the-defendant-unlawfully-harmed-me accusation.”

Id.

In other

words, “the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal
conclusions.

Threadbare recitals of the elements of a cause of

action, supported by mere conclusory statements, do not suffice.”
Id.

“At bottom, determining whether a complaint states . . . a

plausible claim for relief . . . will ‘be a context-specific task
that

requires

the

reviewing

experience and common sense.’”

court

to

draw

on

its

judicial

Francis v. Giacomelli, 588 F.3d

186, 193 (4th Cir. 2009) (quoting Iqbal, 556 U.S. at 679).
ii. Analysis
As an initial matter, to the extent that Plaintiffs seek to
assert a claim for breach of the duty of loyalty distinct from
their breach of fiduciary duty claim (see Docket Entry 63, ¶ 79;
Docket Entry 87 at 4, 5), such efforts fail.

North Carolina does

not “recogniz[e] an independent tort claim for a breach of duty of
loyalty.”

Dalton v. Camp, 353 N.C. 647, 653, 548 S.E.2d 704, 709

33

(2001).12 Further, to the extent that “[t]he Sparks[es]’ employment
contracts require them to be loyal” (Docket Entry 87 at 5), the
Second Amended Complaint already contains a breach of contract
claim for the asserted breach of the Sparkses’ “contractual and
employment agreements with Integrity that required them to work
only for Integrity and to be loyal to Integrity alone” (Docket
Entry 63, ¶ 71).

(See id., ¶¶ 70-73.)

Accordingly, Plaintiffs

cannot pursue an independent claim for breach of the duty of
loyalty.
Additionally, as a general matter, North Carolina does not
recognize

the

existence

employee-employer context.

of

a

fiduciary

relationship

in

the

See Dalton, 353 N.C. at 651-52, 548

S.E.2d at 707-08. Only when an employer reposes such confidence in
an employee that the employee exercises domination and influence
over the employer can a fiduciary relationship form.
651, 548 S.E.2d at 707-08.

See id. at

In other words, in the absence of “a

legal relationship which imposes a de jure fiduciary relationship,”
Lockerman v. South River Elec. Membership Corp., 794 S.E.2d 346,
351 (N.C. Ct. App. 2016), “[o]nly when one party figuratively holds
all the cards — all the financial power or technical information,
for example — have North Carolina courts found that the special

12 The parties treat Plaintiffs’ state-law claims as arising
under North Carolina law. (See Docket Entries 68, 70, 72, 77, 80,
82, 83, 86, 87 (relying on North Carolina law for state-law
claims).)
34

circumstance of a fiduciary relationship has arisen,” id. at 352
(internal quotation marks omitted).
The “loan officer . . . duties and responsibilities” that
Plaintiffs

identify

circumstances.

for

Darrell

Sparks

do

(See Docket Entry 63, ¶ 75.)

not

reflect

such

Nor does the mere

allegation that Darrell Sparks served as “the branch manager” (id.,
¶ 25) of “an Integrity office in Kentucky” (id., ¶ 24) suffice,
particularly given the allegation that “Integrity is based in . . .
North Carolina, with branches across the United States” (id.,
¶ 18).

As the North Carolina Supreme Court has explained:

In applying this Court’s definition of fiduciary
relationship to the facts and circumstances of the
instant case — in which employee [defendant] served as
production
manager
for
a
division
of
employer
[plaintiff’s] publishing business — we note the
following: (1) the managerial duties of [the defendant]
were such that a certain level of confidence was reposed
in him by [the plaintiff]; and (2) as a confidant of his
employer, [the defendant] was therefore bound to act in
good faith and with due regard to the interests of [the
employer].
In our view, such circumstances, as shown
here, merely serve to define the nature of virtually all
employer-employee relationships; without more, they are
inadequate to establish [the defendant’s] obligations as
fiduciary in nature.
No evidence suggests that his
position in the workplace resulted in “domination and
influence on the [plaintiff],” an essential component of
any fiduciary relationship. [The defendant] was hired as
an at-will employee to manage the production of a
publication. His duties were those delegated to him by
his employer, such as overseeing the business’s
day-to-day operations by ordering parts and supplies,
operating within budgetary constraints, and meeting
production deadlines. In sum, his responsibilities were
not unlike those of employees in other businesses and can
hardly be construed as uniquely positioning him to
exercise dominion over [the plaintiff]. Thus, absent a
finding that the employer in the instant case was somehow
35

subjugated to the improper influences or domination of
his employee — an unlikely scenario as a general
proposition and one not evidenced by these facts in
particular — we cannot conclude that a fiduciary
relationship existed between the two.
Dalton, 353 N.C. at 651-52, 548 S.E.2d at 708 (citation omitted).
Given

the

absence

of

factual

allegations

reflecting

Darrell

Sparks’s domination and influence over Integrity, the Court should
dismiss Plaintiffs’ breach of fiduciary duty claim against him.
Finally, adopting the arguments in support of the Rodgers
Motion (see Docket Entry 70 at 18, 19; Docket Entry 83 at 11),
Darrell Sparks moves to dismiss Plaintiffs’ tortious interference
claim.

Although framed as one claim (see Docket Entry 63 at 10

(“Count IV - Common Law Tortious Interference”)), Plaintiffs’
tortious interference claim actually asserts two distinct causes of
action:

“one for tortious interference with current business

relations

and

one

for

tortious

interference

with

prospective

business relations,” Superior Performers, Inc. v. Phelps, 154 F.
Supp. 3d 237, 248 (M.D.N.C. 2016).
¶ 59.)

(See, e.g., Docket Entry 63,

Notwithstanding sometimes imprecise language, “under North

Carolina

law,

claims

for

tortious

interference

with

business

relations and prospective business relations are understood to be
claims for tortious interference with contract and prospective
contract, respectively.”

Superior Performers, 154 F. Supp. 3d at

248.
As to the former,

36

[t]he tort of interference with contract has five
elements: (1) a valid contract between the plaintiff and
a third person which confers upon the plaintiff a
contractual right against a third person; (2) the
defendant knows of the contract; (3) the defendant
intentionally induces the third person not to perform the
contract; (4) and in doing so acts without justification;
(5) resulting in actual damage to plaintiff.
United Labs., Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d
375, 387 (1988).
Coordinately,
[t]o state a claim for tortious interference with
prospective business relations, a plaintiff “must allege
facts to show that the defendants acted without
justification in ‘inducing a third party to refrain from
entering into a contract with them which contract would
have ensued but for the interference’” and that the
defendants’ conduct proximately caused “measurable
damages[.]” Walker v. Sloan, 137 N.C. App. 387, 393,
394, 529 S.E.2d 236, 242 (2000) (quoting Cameron v. New
Hanover Mem’l Hosp., 58 N.C. App. 414, 440, 293 S.E.2d
901, 917 (1982)). A plaintiff “must allege actual loss”
of a “prospective contractual relationship, . . . a
fundamental element of a tortious interference claim.”
AECOM Tech. Corp. v. Keating, No. [11cvs9225,] 2012 WL
370296, at *5 (N.C. Special Super. Ct. Feb. 6, 2012)
(unpublished) (citing Dalton[, 353 N.C. at 654, 548
S.E.2d at 709–10]); see also DaimlerChrysler Corp. v.
Kirkhart, 148 N.C. App. 572, 585, 561 S.E.2d 276, 286
(2002) (finding that the plaintiff failed to establish a
likelihood of success on the merits of its tortious
interference with prospective advantage claim when it
“failed to identify any particular contract that a third
party has been induced to refrain from entering into”
with the plaintiff). It is not enough to allege that the
plaintiff had “an expectation of a continuing business
relationship” with a third party. Dalton, 353 N.C. at
655, 548 S.E.2d at 710; see also Sports Quest, Inc.[ v.
Dale Earnhardt, Inc., Nos. 02cvs140, 01cvs2200], 2004 WL
742918, at *5 [(N.C. Special Super. Ct. Mar. 12, 2004)]
(stating that the plaintiff’s “expectation of future
contracts with current customers” is insufficient).

37

Superior Performers, 154 F. Supp. 3d at 249 (ellipsis and second
set of brackets in original).
Viewed in the light most favorable to Plaintiffs, the Second
Amended Complaint offers the following factual allegations13 in
support of Plaintiffs’ combined tortious interference claims:
Certain

Defendants

“export[ed]

loans

from

Integrity’s

Encompass System and import[ed] them into the Prime Encompass
System” (Docket Entry 63, ¶ 25), with a goal of “transition[ing]
the entire Integrity branch to Prime” (id., ¶ 26).

“Several loans

that were initially Integrity’s closed at Prime, the number which
will be determined at trial.”

(Id., ¶ 28.)

“A client who is using

or considering using Integrity’s services provides Integrity with
a wide variety of personal confidential information” (id., ¶ 30),
and, “[i]f a competitor obtained this information, as Prime did, it
could and did undercut Integrity on Integrity’s loans and divert
Integrity’s clients by aggressively pursuing those clients based on
the information kept by Integrity” (id., ¶ 31).
business . . . is and was substantial.”

(Id., ¶ 32.)

“The loss of
“Plaintiffs

13
Plaintiffs also allege, without factual development,
various elements of these torts.
(See, e.g., Docket Entry 63,
¶¶ 63 (“But for Defendants’ actions, the borrowers would have
entered into future contracts with Plaintiffs.”), 66 (“Through
their actions, Defendants induced and/or caused a termination of
these relationships or expected relationships.”).) However, the
Court may “discount such unadorned conclusory allegations” in
ruling on a Rule 12(b)(6) motion.
Francis, 588 F.3d at 193
(explaining “that naked assertions of wrongdoing necessitate some
factual enhancement within the complaint to cross the line between
possibility and plausibility of entitlement to relief” (internal
quotation marks omitted)).
38

enjoy existing business relationships with borrowers as well as the
expectancy of business relationships with potential borrowers who
indicate an interest in engaging Plaintiffs’ services.”
¶ 59.)

“More specifically, Integrity had contracts with at least

the following borrowers:
¶ 60.)

(Id.,

[thirteen named individuals].”

(Id.,

“Defendants intentionally interfered with these existing

and prospective relationships by diverting borrowers to Prime, in
many cases, on information and belief, without the borrowers’
knowledge that this was occurring.”

(Id., ¶ 65.)

These allegations fail to plausibly allege either kind of
tortious interference claim.

Both versions of this claim require

that a defendant induce a third party to either not form or honor,
as appropriate, a contract with the plaintiff.
Performers, 154 F. Supp. 3d at 248-49.
Second

Amended

Complaint

sufficiently

See Superior

Even assuming that the
identifies

the

alleged

contracts at issue, it lacks the necessary “factual enhancement,”
Francis, 588 F.3d at 193 (internal quotation marks omitted),
regarding Defendants’ actions vis-à-vis the relevant third parties.
In other words, Plaintiffs pin their tortious interference
claims on certain Defendants’ alleged exporting of Integrity’s
loans to Prime’s system (see Docket Entry 63, ¶¶ 24-27; see also
Docket Entry 86 at 1-4) and the fact that “[s]everal loans that
were initially Integrity’s closed at Prime” (Docket Entry 63,
¶ 28).

However, the Second Amended Complaint also asserts that

39

this “diverting borrowers to Prime, in many cases . . ., [happened]
without the borrowers’ knowledge that this was occurring” (id.,
¶ 65 (emphasis added)) and it contains no factual assertions
regarding Defendants’ interactions with the relevant borrowers that
induced such borrowers to cease honoring their existing contracts
or

entering

into

new

generally Docket Entry 63).
regarding

Defendants’

contracts

with

Plaintiffs

(see

The absence of any factual assertions

inducement

of

relevant

Plaintiffs’ tortious interference claim.

borrowers

dooms

See Dalton, 353 N.C. at

655, 548 S.E.2d at 710 (explaining that two obstacles undermine the
plaintiff’s tortious interference claim, including that “there is
no evidence suggesting that [the defendant] induced, no less
maliciously induced, [the third party] into entering a contract,”
and concluding that, “[t]he absence of evidence supporting two
essential elements of a party’s allegation of interference with
prospective advantage — intervenor’s inducement of a third party
and a showing that a contract would have ensued — exposes a fatal
weakness in that claim”).
In sum, Plaintiffs fail to plausibly allege that Defendants
tortiously interfered with Plaintiffs’ contracts or prospective
contracts.

Accordingly, the Court should also grant Darrell

Sparks’s request to dismiss this claim.

40

II. Rodgers Motion
Rodgers

Defendants

also

certain of Plaintiffs’ claims.

seek

Rule

12(b)(6)

dismissal

of

In particular, Rodgers Defendants

move to dismiss Plaintiffs’ tortious interference claim, their
“defamation claim against Rodgers” (Docket Entry 67, ¶ 2), and
their CFAA claim.

(See id., ¶¶ 1-3.)

Plaintiffs consent to the

dismissal of their defamation claim and their CFAA claim.

(See

Docket Entry 86 at 4; see also id. at 2 n.1; Docket Entry 81 at 2.)
Moreover,

for

the

reasons

stated

above,

Plaintiffs’

interference claim falls short under Rule 12(b)(6).

tortious

Accordingly,

the Court should grant the Rodgers Motion and dismiss Plaintiffs’
defamation claim against Rodgers and their tortious interference
and CFAA claims against all Rodgers Defendants.
III. Eli Motion
Eli Defendants similarly seek Rule 12(b)(6) dismissal of all
claims against them.

(See Docket Entry 71 at 1.)

According to Eli

Defendants, they
have been named in the lawsuit for no other reason than
their alleged direct and indirect ownership interest in
Defendant Prime. Plaintiffs do not make a single factual
allegation to support any claim or theory of liability
against [Eli] Defendants, but instead make only
conclusory
assertions,
and
even
then, only “on
information and belief.”
(Docket Entry 72 at 3 (emphasis in original) (citation omitted).)
In response, Plaintiffs maintain that the Second Amended
Complaint “properly alleges [Eli] Defendants’ indirect liability.”

41

(Docket Entry 77 at 2.)

More specifically, Plaintiffs contend (in

full) that:
[t]he Second Amended Complaint contains a number of
specific allegations regarding [Eli] Defendants’ conduct,
including that:
!

“[T]he
Corporate
Defendants[14]
collectively
exercise actual control over Prime and Rodgers,
and by virtue of that control, exercise control
over the other Defendants.” ([Docket Entry 63],
¶ 23).

!

“[T]he Corporate Defendants actively participated
in and encouraged the activities alleged herein.”
([Id.], ¶ 23).

!

“The Corporate Defendants are the alter-ego of
the other defendants and discovery in this case
will show that this is the case and that the
Corporate Defendants controlled and control
Prime, Rodgers, and the other defendants.”
([Id.], ¶ 23).

!

“The Sparks[es], with the active participation
and
instruction
of
the
other
Defendants,
including the Corporate Defendants and Rodgers
and
Prime,
without
authorization,
and/or
exceeding authorization, far exceeded the scope
of their allowed access and intentionally
accessed Integrity’s Encompass System, which is
a protected computer, knowingly causing the
transmission of certain information.”
([Id.],
¶ 90).

[Eli] Defendants do not directly address these new
allegations and instead attempt to dismiss them wholesale
as merely “one paragraph of legal conclusions.” Instead,
the Second Amended Complaint alleges, at the very least,
that [Eli] Defendants (1) “collectively exercise actual
control
over
Prime
and
Rodgers,”
(2) “actively
participated in and encouraged the activities alleged
herein,” and (3) “are the alter-ego of the other
14
It bears emphasis that the Second Amended Complaint
defines “Corporate Defendants” to include Prime in addition to Eli
Defendants. (See Docket Entry 63 at 1.)
42

defendants.” The Second Amended Complaint also alleges
that (4) the Sparks[es]’ improper computer access was
done “with the active participation and instruction” of
[Eli]
Defendants.
Accordingly,
Plaintiffs
have
sufficiently
alleged
[Eli]
Defendants’
indirect
liability.
(Docket Entry 77 at 2 (bullets and certain sets of brackets in
original).)
As Plaintiffs’ opposition makes clear, they offer only naked
allegations

of

wrongdoing

and

legal

conclusions

factual assertions against Eli Defendants.

fashioned

as

See, e.g., SD3, LLC,

801 F.3d at 423 (“[The plaintiff] nakedly alleges only that all of
the corporate subsidiaries are ‘dominated by, and [are] alter
ego[s] of,’ these corporate parents.

That allegation offers only

a legal conclusion, and [the plaintiff] has alleged no facts
suggesting the kind of unity of interests that we usually require
a party to plead before permitting them to advance an alter ego
theory.” (emphasis

and

second

and

original) (citation omitted)).

third

sets

of

brackets

in

As the Fourth Circuit has noted,

“[u]nadorned conclusory allegations like the[ ones Plaintiffs offer
here] are akin to no allegations at all.”
marks

omitted).

wrongdoing

Accordingly,

necessitate

some

Id. (internal quotation

because

factual

“naked

assertions

enhancement

within

of
the

complaint to cross the line between possibility and plausibility of
entitlement

to

relief,”

Francis,

588

F.3d

at

193

(internal

quotation marks omitted), and the Second Amended Complaint lacks
such factual enhancement as to Eli Defendants (see generally Docket
43

Entry 63), Plaintiffs’ claims against Eli Defendants cannot survive
Rule 12(b)(6) scrutiny.
Therefore, the Court should grant the Eli Motion and dismiss
all claims against Eli Defendants.
IV.

Counterclaim Motion

As a final matter, Counterclaim Defendants seek dismissal of
counterclaims related to certain “Monthly Incentive Bonus payments”
that Mathosian allegedly misappropriated from Prime during his
employment (Docket Entry 73 at 17, ¶ 30).
1

n.1;

see

Counterclaim

generally

Docket

Defendants

Entry

seek

(See Docket Entry 85 at

76.)

dismissal

More
of

specifically,

the

conversion

counterclaim (Count VI) and the equitable restitution based on
unjust enrichment counterclaim related to bonus payments from 2012
through 2016 (Count VIII).

(See Docket Entry 85 at 1 n.1; see also

Docket Entry 73 at 31, 33.)

However, Counterclaim Defendants’

dismissal requests lack merit.
As a preliminary matter, in requesting dismissal of these
counterclaims, Counterclaim Defendants failed to comply with this
Court’s Local Rules.

In particular, Local Rule 7.3(a) specifies

that “[e]ach motion shall be set out in a separate pleading” and,
subject to some exceptions not relevant here, “shall be accompanied
by a brief.”

M.D.N.C. LR 7.3(a).

satisfy these requirements.

The Counterclaim Motion fails to

(See, e.g., Docket Entry 76 at 1

(“Motion to Dismiss Counterclaim Counts VI, VII and VIII and

44

Incorporated Memorandum of Law”).)15
its denial.
In

This failure alone justifies

See M.D.N.C. LR 83.4(a).

addition,

Counterclaim

justify Rule 12(b)(6) dismissal.

Defendants’

arguments

fail

to

In regard to the conversion

counterclaim, Counterclaim Defendants contend that “Prime has not
alleged demand or refusal, wrongful taking or disposal and, as a
result, Prime has failed to state a claim for conversion.” (Docket
Entry 76 at 3.)

However, the Counterclaims allege that, inter

alia:
28. During each month of his employment with Prime,
Mathosian calculated his Monthly Incentive Bonus and
notified Prime of the amount he was owed. Each month,
Prime paid Mathosian the Monthly Incentive Bonus that
Mathosian represented to Prime he was owed under the
terms of his Employment Agreement.
29. On several occasions over the course of Mathosian’s
four-year employment with Prime, Mathosian intentionally
misrepresented the Monthly Incentive Bonus amount that he
was owed, causing Prime to overpay Mathosian on multiple
occasions.
30. Through this scheme, over the course of Mathosian’s
employment at Prime, Mathosian misappropriated over
$14,000 from Prime in Monthly Incentive Bonus payments.
(Docket Entry 73 at 17.)
As such, the Counterclaims sufficiently plead Mathosian’s
“wrongful taking” of the allegedly misappropriated payments.

See,

e.g., White v. Consolidated Planning, Inc., 166 N.C. App. 283, 311,

15 Although styled as seeking dismissal of Count VII, “the
substance of [the Counterclaim] Motion only addressed Counts VI and
VIII. Accordingly, [Counterclaim Defendants] . . . are not seeking
dismissal of Count VII.” (Docket Entry 85 at 1 n.1.)
45

603

S.E.2d

147,

165–66

(2004)

(“Here,

[the

misappropriating

individual] did not rightfully come into personal possession of
plaintiff’s funds; the ‘wrongful taking’ and [said individual’s]
possession of the funds were simultaneous. The conversion occurred
when [this individual] exercised unlawful dominion over the funds
. . . .”).16

Further, “[i]n the case of a conversion by wrongful

taking it is not necessary to prove a demand and refusal.

So the

wrongful assumption of the property and right of disposing of goods
may be a conversion in itself, and render a demand and refusal
unnecessary.”

Trustees of Univ. of N.C. v. State Nat’l Bank, 96

N.C. 280, 3 S.E. 359, 361 (1887) (emphasis in original) (internal
quotation marks omitted).
arguments

fail

to

Accordingly, Counterclaim Defendants’

justify

dismissal

of

the

conversion

counterclaim.17
16 Counterclaim Defendants attempt to distinguish White on
the grounds that the misappropriation there occurred without the
plaintiffs’ knowledge or permission. (Docket Entry 85 at 2, 3.)
In Counterclaim Defendants’ view, “[a]s Prime paid Mathosian
voluntarily, there is no question that such payments were with its
permission. Thus, Prime cannot escape its allegations of voluntary
payment by tacking on a naked allegation that such payments
amounted to a ‘wrongful taking.’”
(Id. at 3.)
This argument
misses the mark. To begin, the Counterclaims contain more than a
“naked allegation” of wrongful taking. (See, e.g., Docket Entry 73
at 17, ¶¶ 28-30.) Moreover, according to the Counterclaims, Prime
voluntarily (i.e., knowingly) paid Mathosian the amount it believed
(per his representation) that it owed him; it did not voluntarily
(over)pay him the amount owed plus an extra $14,000.
17
In their reply, Counterclaim Defendants raise for the
first time an argument concerning Prime’s alleged “fail[ure] to
identify or describe the specific funds that were allegedly
converted.” (Docket Entry 85 at 3.) However, “[t]he ordinary rule
(continued...)
46

Counterclaim Defendants further seek dismissal of the second
equitable

restitution

counterclaim

(Count

VIII)

because

it

purportedly fails to plead in the alternative that Mathosian’s
“employment contract is invalid.”
also Docket Entry 76 at 3.)

(Docket Entry 85 at 3, 4; see

In making this argument, Counterclaim

Defendants maintain that, “[u]nlike Count VII, where Prime alleges,
in the alternative, ‘to the extent Mathosian’s Employment Agreement
is not valid and enforceable,’ there is no such language in Count
VIII.”

(Docket Entry 85 at 4.)

However, as the first paragraph in

Count VIII, “Prime repeats and realleges the allegations set forth
in Paragraphs 1 through 138 of its Counterclaim as if fully set
forth herein.”

(Docket Entry 73 at 33, ¶ 139.) Accordingly, Count

VIII incorporates by reference the allegations in Count VII that,
“[a]lternatively to Counts I and III, to the extent Mathosian’s
Employment Agreement is not valid or enforceable, Prime seeks
17(...continued)
in federal courts is that an argument raised for the first time in
a reply brief or memorandum will not be considered.” Clawson v.
FedEx Ground Package Sys., Inc., 451 F. Supp. 2d 731, 734 (D. Md.
2006); see also Hunt v. Nuth, 57 F.3d 1327, 1338 (4th Cir. 1995)
(explaining that “courts generally will not address new arguments
raised in a reply brief because it would be unfair to the [other
party] and would risk an improvident or ill-advised opinion on the
legal issues raised”); HSK v. Provident Life & Accident Ins. Co.,
128 F. Supp. 3d 874, 884 (D. Md. 2015) (“To the extent [the
plaintiff] suggests that [the defendant’s] non-compliance with the
settlement agreement is an independent basis for liability, that
argument is procedurally improper. By waiting to raise it until
his reply brief, [the plaintiff] deprived [the defendant] of an
opportunity to respond, and deprived this court of the benefit of
any such response.”).
As such, the Court should decline to
consider Counterclaim Defendants’ identification contention in
ruling on the Counterclaim Motion.
47

equitable restitution . . .” (id. at 32, ¶ 130) and that, “[t]o the
extent Mathosian does not have a valid and enforceable Employment
Agreement with Prime, Prime has conferred upon Mathosian a benefit
which was not required by contract or legal duty” (id. at 33,
¶ 134).

Thus, because Count VIII pleads in the alternative the

invalidity

of

Mathosian’s

employment

agreement,

Counterclaim

Defendants’ dismissal arguments fall short.
In sum, Counterclaim Defendants have not shown grounds for
dismissal

of

counterclaims.

the

conversion

and

second

equitable

restitution

The Court should therefore deny the Counterclaim

Motion.
CONCLUSION
The Court lacks jurisdiction over Jared and Tina Sparks, but
Plaintiffs have made a prima facie showing that jurisdiction exists
over Darrell Sparks.

Nevertheless, Plaintiffs have not plausibly

alleged breach of fiduciary duty or tortious interference claims
against Darrell Sparks or Rodgers Defendants.

Plaintiffs further

failed to plausibly allege any claims against Eli Defendants.

In

addition, Plaintiffs have consented to dismissal of their CFAA and
defamation claims against Darrell Sparks and Rodgers Defendants.
Finally, Counterclaim Defendants’ challenge to the conversion and
second equitable restitution counterclaims lack merit.
IT IS THEREFORE RECOMMENDED that the Sparks Motion (Docket
Entry 69) be granted in part and denied in part as follows:

48

all

claims against Jared Sparks and Tina Sparks be dismissed for lack
of personal jurisdiction and Plaintiffs’ breach of fiduciary duty,
CFAA, and tortious interference claims be dismissed against Darrell
Sparks.
IT IS FURTHER RECOMMENDED that the Rodgers Motion (Docket
Entry 67) and the Eli Motion (Docket Entry 71) be granted.
IT IS FURTHER RECOMMENDED that the Counterclaim Motion (Docket
Entry 76) be denied.
This 15th day of January, 2019.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge

49