Movement Mortgage, LLC v. McDonald et al

Filing 76

ORDER granting 74 Motion for Default Judgment. Judgment is ENTERED in favor of Plaintiff and against Franklin in the amount of 1,142,431.00. Signed by District Judge Robert J. Conrad, Jr on 9/27/19. (Pro se litigant served by US Mail.)(mga)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:17-cv-00716-RJC-DSC
MOVEMENT MORTGAGE, LLC,
Plaintiff,
v.
FRANKLIN FIRST FINANCIAL, LTD.,
Defendant.

)
)
)
)
)
)
)
)
)
)

ORDER

THIS MATTER comes before the Court on Plaintiff’s Motion for Default
Judgment. (Doc. No. 74.)
I.

BACKGROUND
On November 14, 2017, Plaintiff Movement Mortgage, LLC (“Plaintiff”) filed a

Complaint and Motion for Temporary Restraining Order against Defendants Mark
McDonald (“McDonald”) and Franklin First Financial, Ltd. (“Franklin”) in the
Superior Court of Mecklenburg County, North Carolina. (Doc. No. 1-1.) On December
5, 2017, a TRO was entered against McDonald. (Doc. No. 1-1.) On December 12,
2017, Franklin removed the action to the United States District Court for the Western
District of North Carolina on the basis of diversity jurisdiction under 28 U.S.C. §
1332(a)(2). (Doc. No. 1.)
With leave of Court and Defendants’ consent, Plaintiff filed its Second
Amended Complaint on July 6, 2018. (Doc. No. 38.) Defendants filed their Answer
to the Second Amended Complaint on August 15, 2018. (Doc. No. 45.) On August 29,

2018, Defendants filed a Motion to Dismiss Plaintiff’s Second Amended Complaint,
which was denied on February 5, 2019. (Doc. No. 67.)
On November 13, 2018, the Court granted Defendants’ counsel’s Motion to
Withdraw. (Doc. No. 65.) The Court ordered Franklin to secure replacement counsel
within thirty days, expressly noting that a corporation may appear in federal court
only through licensed counsel. (Doc. No. 65.)
On March 29, 2019, the Court Granted Plaintiff and McDonald’s joint motion
for dismissal with prejudice of Plaintiff’s claims against McDonald. (Doc. No. 72.)
That same day, the Court entered default against Franklin based on its failure to
secure counsel in direct contravention of the Court’s order. (Doc. No. 73.)
On April 29, 2019, Plaintiff filed the instant Motion for Default Judgment.
(Doc. No. 74.) The motion is ripe for resolution.
II.

STANDARD OF REVIEW
Rule 55 of the Federal Rules of Civil Procedure governs Plaintiff’s Motion for

Default Judgment. “Rule 55 sets forth a two-step process for obtaining a default
judgment.” Brown v. Prime Star Grp., Inc., No. 3:12-cv-165, 2012 U.S. Dist. LEXIS
141495, at *5 (W.D.N.C. Sept. 30, 2012). A plaintiff must first seek an entry of default
under Rule 55(a). L & M Cos. v. Biggers III Produce, Inc., No. 3:08-cv-309, 2010 U.S.
Dist. LEXIS 46907, at *14 (W.D.N.C. Apr. 9, 2010). Rule 55(a) states that “[w]hen a
party against whom a judgment for affirmative relief is sought has failed to plead or
otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must
enter the party’s default.” Fed. R. Civ. P. 55(a). “Upon the entry of default, the

2

defaulted party is deemed to have admitted all well-pleaded allegations of fact
contained in the complaint.” Brown, 2012 U.S. Dist. LEXIS 141495, at *4.
“After the clerk has entered a default, the plaintiff may seek a default
judgment.” Silvers v. Iredell Cty. Dep’t of Soc. Servs., No. 5:15-cv-00083, 2016 U.S.
Dist. LEXIS 13865, at *9 (W.D.N.C. Feb. 3, 2016). Default judgment is proper “only
if the well-pleaded factual allegations in a complaint both establish a valid cause of
action and entitle the plaintiff to an award of damages or other relief.” i play. Inc. v.
D. Catton Enter., LLC, No. 1:12-cv-22, 2015 U.S. Dist. LEXIS 29870, at *6 (W.D.N.C.
Mar. 10, 2015). In so deciding, courts in this district apply the standard used to
evaluate a Rule 12(b)(6) motion to dismiss. Silvers, 2016 U.S. Dist. LEXIS 13865, at
*18–19. “If the Court determines that liability is established, it must then determine
the appropriate amount of damages.” Bogopa Serv. Corp. v. Shulga, No. 3:08-cv-365,
2011 U.S. Dist. LEXIS 17408, at *4 (W.D.N.C. Feb. 8, 2011). “The court must make
an independent determination regarding damages, and cannot accept as true factual
allegations of damages.” EEOC v. Carter Behavior Health Servs., No. 4:09-cv-122,
2011 U.S. Dist. LEXIS 129493, at *9–10 (E.D.N.C. Oct. 7, 2011). “[A] court may enter
a default judgment as to damages with or without a hearing. As long as there is an
adequate evidentiary basis in the record for an award of damages, the Court may
make such a determination without a hearing.” Bogopa Serv. Corp., 2011 U.S. Dist.
LEXIS 17408, at *5 (citation omitted).
III.

DISCUSSION
The Court has entered default against Franklin. (Doc. No. 73.) The Court thus

3

proceeds to analyzing the propriety of default judgment.
A.

The well-pleaded allegations of the Second Amended Complaint are
sufficient to establish liability.

Taking the allegations of the Second Amended Complaint as true, as the Court
must, Plaintiff is a mortgage lending company. (Doc. No. 38, ¶ 1.) McDonald was
employed as Market Leader of Plaintiff’s Plantation, Florida office from January 12,
2015 through November 6, 2017. (Doc. No. 38, ¶¶ 11, 26.) McDonald supervised sales
managers, branch managers, loan officers, and loan officer assistants originating
loans in the Plantation office. (Doc. No. 38, ¶ 14.) McDonald was responsible for the
performance of his market and increasing its profitability. (Doc. No. 38, ¶ 14.) His
responsibilities further included hiring employees, marketing Plaintiff’s services,
making strategic decisions, and developing relationships with referral sources such
as real estate agents.

(Doc. No. 38, ¶ 14.)

McDonald was also responsible for

managing Plaintiff’s relationship with realtor referral sources in the Palm Beach,
Jupiter, Treasure Coast, Port St. Lucie, and Vero Beach offices of Keller Williams
Realty (“South Florida KW Offices”). (Doc. No. 38, ¶ 15.)
As a Market Leader, McDonald understood that he had unique access to
Plaintiff’s trade secrets and confidential information. (Doc. No. 38, ¶ 18.) He agreed
that during and after his employment, he would use such information solely for
Plaintiff’s benefit and would not disclose the information to third parties without
Plaintiff’s prior written authorization. (Doc. No. 38, ¶ 18.) He also agreed that during
his employment and for twelve months thereafter, he would not solicit any of
Plaintiff’s employees, customers, or referral sources. (Doc. No. 38, ¶ 19.)
4

In July 2017, McDonald began talking to Franklin about employment
opportunities. (Doc. No. 38, ¶ 21.) On July 26, 2017, Franklin submitted a new hire
report for McDonald to the North Carolina State Directory of New Hires stating that
McDonald’s hire date was August 1, 2017. (Doc. No. 38, ¶ 21.) On October 6, 2017,
while still employed by Plaintiff, McDonald entered into a Division Branch Manager
Agreement with Franklin stating that his employment with Franklin began that day.
(Doc. No. 38, ¶ 22.)
On October 25, 2017, the South Florida KW Offices informed Plaintiff that they
would not be renewing any agreements with Plaintiff. (Doc. No. 38, ¶ 23.) Plaintiff
alleges that Franklin acquired the accounts with the South Florida KW Offices by
offering to pay 20% more than Plaintiff. (Doc. No. 38, ¶ 24.) Plaintiff further alleges
that Franklin knew the rates Plaintiff paid the South Florida KW Offices because
McDonald shared confidential, proprietary, and trade secret information with
Franklin while still employed by Plaintiff. (Doc. No. 38, ¶ 25.)
McDonald resigned from Plaintiff with no advance notice on November 6, 2017.
(Doc. No. 38, ¶ 26.)

In the weeks preceding and subsequent to McDonald’s

resignation, Franklin solicited approximately fifteen employees who worked under
McDonald in the Plantation office. (Doc. No. 38, ¶ 34.)
Unbeknownst to Plaintiff at the time, from September 16 to November 20,
2017, Loan Officer Patricia Moste (“Moste”) downloaded a large volume of files, many
of which were confidential and/or trade secrets, to removable flash drives. (Doc. No.
38, ¶ 44.) Plaintiff alleges that Moste downloaded this information in coordination

5

with McDonald. (Doc. No. 38, ¶¶ 45, 49.) Additionally, Plaintiff alleges that Moste
transferred documents to Franklin’s file sharing site with the assistance of
McDonald.

(Doc. No. 38, ¶¶ 52–53.)

On December 12, 2017, Moste left her

employment with Plaintiff and began working at Franklin. (Doc. No. 38, ¶ 54.)
Plaintiff’s Second Amended Complaint asserts claims against Franklin for
misappropriation of trade secrets, unfair and deceptive trade practices, and tortious
interference with contract and prospective economic advantage. (Doc. No. 38, at 18–
26.) In denying Defendants’ Rule 12(b)(6) motion to dismiss, this Court concluded
that the allegations of the Second Amended Complaint are sufficient to establish
liability.

(Doc. Nos. 63, 67); Silvers, 2016 U.S. Dist. LEXIS 13865, at *18–19

(applying the Rule 12(b)(6) motion to dismiss standard in determining whether there
is a sufficient basis on which default judgment may be entered). Having concluded
that liability is established, the Court next turns to the issue of damages.
B.

Plaintiff has established lost profits with reasonable certainty.

Plaintiff seeks lost profit damages in the amount of $1,142,431.00. (Doc. No.
74.) As an initial matter, the Court notes that Plaintiff assumes North Carolina law
applies to its claims; however, in the Magistrate Judge’s Memorandum and
Recommendation on Defendants’ motion to dismiss, which this Court adopted, the
Magistrate Judge concluded that it was premature to decide whether North Carolina
or Florida law applies to Plaintiff’s claims. (Doc. No. 63, at 6.) Nevertheless, as there
is no distinction between North Carolina and Florida law on lost profit damages, the
Court concludes that it need not decide which law applies to Plaintiff’s claims.

6

Under North Carolina and Florida law, the party seeking lost profit damages
must prove such damages with reasonable certainty. McNamara v. Wilmington Mall
Realty Corp., 466 S.E.2d 324, 329 (N.C. Ct. App. 1996); Sostchin v. Doll Enters., Inc.,
847 So. 2d 1123, 1128 (Fla. Dist. Ct. App. 2003). “While the reasonable certainty
standard requires something more than hypothetical or speculative forecasts, it does
not require absolute certainty.” Plasma Ctrs. of Am., LLC v. Talecris Plasma Res.,
Inc., 731 S.E.2d 837, 843 (N.C. Ct. App. 2012) (quotation marks omitted); see Del
Monte Fresh Produce Co. v. Net Results, Inc., 77 So. 3d 667, 675 (Fla. Dist. Ct. App.
2011) (“Under Florida law, an inability to establish the amount of lost profits with
absolute exactness will not defeat recovery.” (quotation marks omitted).) “Moreover,
there is no bright-line rule in determining what amount of evidence is sufficient to
establish lost profits: ‘[Courts] have chosen to evaluate the quality of evidence of lost
profits on an individual case-by-case basis in light of certain criteria to determine
whether damages have been proven with reasonable certainty.’” Byrd’s Lawn &
Landscaping, Inc. v. Smith, 542 S.E.2d 689, 693 (N.C. Ct. App. 2001) (quoting Iron
Steamer, Ltd. v. Trinity Restaurant, Inc., 431 S.E.2d 767, 770 (N.C. Ct. App. 1993));
see Whitby v. Infinity Radio, Inc., 951 So. 2d 890, 898 (Fla. Dist. Ct. App. 2007)
(stating that the reasonable certainty standard is met as long as “the competent
evidence is sufficient to satisfy the mind of a prudent, impartial person as to the
amount”).
Here, Plaintiff has submitted profit and loss data for its Southeast Florida
Region, which is the region over which McDonald was Market Leader from January

7

12, 2015 through November 7, 2017. (Doc. No. 75-2.) The profit and loss data covers
the time period from March 2015 through October 2018 and, thus, includes the
twelve-month time period following the end of McDonald’s employment during which
he was prohibited from soliciting Plaintiff’s employees, customers, and referral
sources (November 2017–October 2018). (Doc. No. 75-2.) Plaintiff’s Net Income
Before Taxes (“NIBT”) for the Southeast Florida Region for the twelve months
immediately preceding McDonald’s departure from Plaintiff (November 2016–
October 2017) was $1,142,431.00—the amount that Plaintiff seeks to recover in lost
profit damages. (Doc. No. 75-2.) Plaintiff’s NIBT for the Southeast Florida Region
for the twelve months immediately following McDonald resigning and joining
Franklin (November 2017–October 2018) was -$39,947.00. (Doc. No. 75-2.)
In addition to profit and loss data, Plaintiff has submitted an affidavit of
Matthew Schoolfield, its Southeast Regional Director. (Doc. No. 75-3.) Schoolfield is
responsible for managing all of Plaintiff’s loan offices in Mississippi, Alabama,
Georgia, Louisiana, and Florida. (Doc. No. 75-3, ¶ 5.) McDonald reported directly to
Schoolfield. (Doc. No. 75-3, ¶ 6.) Schoolfield avers that as compared to Plaintiff’s
NIBT for the Southeast Florida Region from November 2016 through October 2017,
he would have expected Plaintiff’s NIBT from November 2017 through October 2018
to either remain the same or increase if McDonald and his team had not left for
Franklin.

(Doc. No. 75-3, ¶ 11.)

After McDonald resigned without notice on

November 7, 2017, Schoolfield tried to replace McDonald and his team by intensifying
recruiting and hiring efforts in the Southeast Florida Region. (Doc. No. 75-3, ¶ 12.)

8

Schoolfield also increased communication efforts and took in-person meetings in the
Southeast Florida Region to repair any internal reputational and public relations
damage done by McDonald and Franklin. (Doc. No. 75-3, ¶ 12.) Schoolfield attributes
Plaintiff’s loss of NIBT in the Southeast Florida Region from November 2017 through
October 2018 to Franklin’s solicitation of McDonald and his team. (Doc. No. 75-3, ¶
13.)
The Court concludes that the above evidence is sufficient to establish Plaintiff’s
lost profits with a reasonable degree of certainty. Based on the foregoing, the Court
concludes that Plaintiff is entitled to lost profit damages in the amount of
$1,142,431.00.
IV.

CONCLUSION

IT IS THEREFORE ORDERED that:
1.

Plaintiff’s Motion for Default Judgment, (Doc. No. 74), is GRANTED;
and

2.

Judgment is ENTERED in favor of Plaintiff and against Franklin in the
amount of $1,142,431.00.

Signed: September 27, 2019

9