Boyle v. Evolve Bank & Trust, et al.

Filing 92

ORDER granting in part 8 Motion to Dismiss. ORDER REMANDING CASE TO STATE COURT. Signed by Judge Samuel H. Mays, Jr on 07/19/2017. (Mays, Samuel)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

JAYME BOYLE,
Plaintiff,
v.
EVOLVE BANK & TRUST and
EVOLVE FINANCIAL GROUP, INC.,
Defendants.

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No. 16-02171

ORDER

Before the Court

is Defendants

Evolve Bank & Trust and

Evolve Financial Group, Inc.’s (collectively,

“Evolve”) March

31, 2016 Motion to Dismiss Plaintiff’s Second Amended Complaint
(“Evolve’s Motion”).

(ECF No. 8 at PageID 579.)

Plaintiff

Jayme Boyle responded on May 18, 2016.

(ECF No. 14 at PageID

617.)

(ECF No. 21 at PageID

Evolve replied on June 3, 2016.

935.)
Also before the Court is Boyle’s July 12, 2016 Motion to
Dismiss Evolve’s Counterclaim (“Boyle’s Motion”).
at PageID 989.)

(ECF No. 26

Evolve responded on August 18, 2016.

34 at PageID 1005.)

(ECF No.

Boyle replied on September 12, 2016.

No. 40 at PageID 1029.)

(ECF

On September 22, 2016, Evolve moved to

file a sur-reply in opposition to Boyle’s Motion.
at PageID 1082.)
motion.

(ECF No. 43

On July 17, 2017, the Court granted Evolve’s

(ECF No. 91 at 1703.)

For the following reasons, Evolve’s Motion, to the extent
it seeks dismissal of Boyle’s Dodd-Frank Act claims, is GRANTED.
This action is REMANDED to the Circuit Court of Shelby County,
Tennessee, for the Thirtieth Judicial District at Memphis.
I.

Background
On May 20, 2014, Boyle filed this action against Evolve in

the Circuit Court of Shelby County, Tennessee, for the Thirtieth
Judicial District at Memphis.

(ECF No. 1-2 at PageID 9.)

Boyle

filed an Amended Complaint on September 5, 2014.

(Id. at PageID

115.)

arising

The

Amended

Tennessee law.
Boyle
2016.

Complaint

No.

asserts

employment

asserted

claims

under

(Id. at PageID 125.)

filed

(ECF

Complaint

a

Second
1-4

at

Amended
PageID

Tennessee

contract;

state

intentional

Complaint
407.)
law

on

The

February

Second

claims

for

infliction

of

29,

Amended

breach

of

emotional

distress; negligent infliction of emotional distress; common law
retaliatory discharge; and claims under Tenn. Code Ann. § 50-1304

for

harassment,

hostile

work

environment,

retaliatory

wrongful demotion, and retaliatory or wrongful discharge.
at

PageID

claims

445.)

under

the

The

Second

Amended

Complaint

“whistleblower-protection
2

also

provision”

or

(Id.

asserts
of

the

Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank
claims”).

Act”),

15 U.S.C.

§ 78u-6(h)

(Id. at PageID 445-46.)

specifically

alleges

state

law

(the

“Dodd-Frank

Act

The Second Amended Complaint

and

Dodd-Frank

Act

claims

as

follows:
Defendants repeatedly breached Plaintiff’s employment
contract and also harassed him, humiliated him,
subjected him to a hostile work environment, demoted
him, and finally constructively discharged him, all
because he made numerous internal reports of obvious,
repeated, and continuing violations of the Truth in
Lending Act (TILA), Regulation Z, as amended (2011);
Section 1036 of the Consumer Financial Protection Act
(CFPA),
12
U.S.C.
§ 5536(a)(1)(A);
12
C.F.R.
§ 1026.36(d)(1)(i) (2011) “Compensation Rule”; Section
1036(a)(1)(A) of the Consumer Financial Protection Act
(CFPA),
12
U.S.C.
§ 5536(a)(1)(A);
12
C.F.R.
§ 1026.25(a) (2011); “Record Retention Rule”; 12
C.F.R. § 1026.36(d)(1)(iv)(1) and (2) “The 10/10
Exemption to the Compensation Rule”; and HUD 4040.1,
REV-2 “Prohibition of Capital Contributions”, asking
each and every time for Defendants to correct the
numerous violations and bring their policies and
procedures into compliance with Federal law, and then
refused to stop complaining about the numerous
violations unless Defendants conformed their conduct
to the applicable laws.
(Id. at PageID 407-08.)
On March 18, 2016, Evolve removed the action to this Court.
(ECF

No.

1

at

PageID

1.)

As

grounds

for

removal,

Evolve

asserted that, under 15 U.S.C. § 78aa, the district courts of
the

United

arising

States

under

the

have

exclusive

jurisdiction

whistleblower-protection

over

provision

claims
of

the

Dodd-Frank Act, and that, under 28 U.S.C. § 1331, the Court has

3

subject-matter

jurisdiction

over

this

action

Dodd-Frank Act claims raise a federal question.
PageID 2-3.)
jurisdiction
§ 1367(a).

because

Boyle’s

(Id. ¶¶ 7, 9 at

Evolve asserted that the Court has supplemental
over

Boyle’s

state

law

claims

under

28

U.S.C.

(Id. ¶ 10 at PageID 3.)

On June 20, 2016, Evolve filed its Answer to the Second
Amended Complaint in which it asserts a counterclaim against
Boyle for breach of contract and for misappropriation under the
Tennessee Uniform Trade Secrets Act (the “TUTSA”), Tenn. Code
Ann. §§ 47-25-1701, et seq. (the “Counterclaim”).
at PageID 947, 964, 968-70.)

(ECF No. 22

The Counterclaim alleges

that

“Boyle was a former employee of Evolve who resigned in May 2013
to join Perl [Mortgage, Inc.] in creating a Memphis branch with
Jeff

Kuehn

(‘Kuehn’),

production officers.”

a

former

manager

of

(Id. at PageID 964.)

the

Evolve

loan

The Counterclaim

alleges that “Boyle and Kuehn misappropriated confidential and
trade secret information concerning Evolve’s loan customers and
potential customers for use at Perl,” to Evolve’s detriment.
(Id.)

Evolve asserts that

the Counterclaim is a compulsory

counterclaim under Federal Rule of Civil Procedure 13 and that
the Court has supplemental jurisdiction over the Counterclaim
under 28 U.S.C. § 1367(a).

(Id. at PageID 964.)

4

Evolve and Boyle respectively move to dismiss all claims
asserted by the opposing party.

(ECF No. 8-1 at PageID 582; ECF

No. 26 at PageID 989-90.)
II.

Jurisdiction
The Court has federal-question jurisdiction

Dodd-Frank Act claims under 28 U.S.C. § 1331.

over Boyle’s
“The district

courts of the United States and the United States courts of any
Territory or other place subject to the jurisdiction of the
United

States

shall

have

exclusive

jurisdiction”

alleging violations of the Dodd-Frank Act.

over

claims

15 U.S.C. § 78aa(a).

The Court has supplemental jurisdiction over Boyle’s state law
claims under 28 U.S.C. § 1367 because they derive from a “common
nucleus of operative fact.”

See 28 U.S.C. § 1367; United Mine

Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966).1
III. Standard of Review
In addressing a motion to dismiss for failure to state a
claim under Federal Rule of Civil Procedure 12(b)(6), the court
must construe the complaint in the light most favorable to the
plaintiff and accept all well-pled factual allegations as true.
League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523,
527

(6th

Cir.

2007).

A

plaintiff

1

can

support

a

claim

“by

The parties contest whether the Court has supplemental
jurisdiction over Evolve’s Counterclaim under § 1367.
(Compare
ECF No. 22 at PageID 964 with ECF No. 26 at PageID 989-90.) For
the reasons discussed below, the Court need not address that
dispute.
5

showing any set of facts consistent with the allegations in the
complaint.”

Bell

Atl.

Corp.

v.

Twombly,

550

U.S.

544,

563

(2007).
This standard requires more than bare assertions of legal
conclusions.

Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478,

488 (6th Cir. 2009).

“[A] formulaic recitation of the elements

of a cause of action will not do.”
To

survive

a

motion

to

dismiss,

Twombly, 550 U.S. at 555.
a

complaint

must

contain

sufficient facts “to ‘state a claim to relief that is plausible
on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Twombly, 550 U.S. at 570).

“The plausibility standard

is not akin to a ‘probability requirement,’ but it asks for more
than a sheer possibility that a defendant has acted unlawfully.”
Id. (citing Twombly, 550 U.S. at 556).

“Threadbare recitals of

the elements of a cause of action, supported by mere conclusory
statements,
plaintiff

do

with

not
no

suffice.”
facts

and

Id.
“armed

(citation
with

omitted).

nothing

more

conclusions” cannot “unlock the doors of discovery.”
678-79.

To

survive

a

motion

to

dismiss,

a

A
than

Id. at

complaint

must

“contain either direct or inferential allegations respecting all
material elements necessary for recovery under a viable legal
theory.”

D’Ambrosio v. Marino, 747 F.3d 378, 383 (6th Cir.

2014) (quotation marks omitted), cert. denied, 135 S. Ct. 758
(2014).
6

IV.

Analysis
Boyle’s

which

the

Dodd-Frank
Court

Act

has

claims

original

are

the

sole

subject-matter

claims

over

jurisdiction.

Boyle’s remaining claims and the claims asserted in Evolve’s
Counterclaim arise under Tennessee law.
court

may

decline

to

exercise

Because a “district

supplemental

jurisdiction

over

state law claims if it has dismissed all claims over which it
had original jurisdiction,” Novak v. MetroHealth Med. Ctr., 503
F.3d 572, 583 (6th Cir. 2007) (citing 28 U.S.C. § 1367(c)(3)),
the Court should first address Evolve’s Motion for dismissal of
the Dodd-Frank Act claims.
Evolve

argues

that

the

Dodd-Frank

Act

claims

must

be

dismissed because Boyle “has failed to identify a rule, law, or
regulation

within

the

[Security

and

Exchange

Commission’s

(“SEC”)] jurisdiction under which his alleged complaints were
made and further failed to allege that such disclosures were
required or protected by such law.”
588.)

Evolve

argues

whistleblower-protection

that,

to

provision

(ECF No. 8-1 at PageID

allege
of

a

the

claim

under

Dodd-Frank

the

Act,

a

plaintiff must show that the disclosure of an alleged violation
was made pursuant to a rule, law, or regulation subject to the
jurisdiction of the SEC and that the disclosure was required or
protected by that rule, law, or regulation.

(Id. (citing Azim

v. Tortoise Capital Advisors, LLC, No. 13-2267-DDC-JPO, 2015 WL
7

6802540, at *12 (D. Kan. Nov. 5, 2015)).)
although

Boyle

violations

of

alleges

he

made

various

federal

Evolve, none of the federal

numerous

Evolve argues that,
internal

provisions

while

reports

of

working

at

provisions listed in the Second

Amended Complaint is subject to the jurisdiction of the SEC and
none of the alleged violations Boyle lists is a required or
protected disclosure under a rule, law, or regulation subject to
the jurisdiction of the SEC.

(Id. at PageID 588-89.)

Evolve

also argues that it is a bank, is not required to make filings
with the SEC, and is not subject to the jurisdiction of the SEC.
(Id.

at

PageID

589.)

Thus,

the

whistleblower-protection

provision of the Dodd-Frank Act would not apply.

(Id.)

The Dodd-Frank Act, inter alia, “provides a private cause
of action for whistleblowers alleging retaliatory discharge or
other

forms

of

discrimination

under

certain

circumstances.”

Nollner v. S. Baptist Convention, Inc., 852 F. Supp. 2d 986, 992
(M.D. Tenn. 2012) (citing 15 U.S.C. § 78u-6(h)(1)(B)(i)).

The

Dodd-Frank

the

Act

protects

whistleblowers

by

prohibiting

following forms of retaliation:
No employer may discharge, demote, suspend, threaten,
harass, directly or indirectly, or in any other manner
discriminate against, a whistleblower in the terms and
conditions of employment because of any lawful act
done by the whistleblower-(i)

in providing information to the Commission in
accordance with this section;

8

(ii)

in initiating, testifying in, or assisting in
any investigation or judicial or administrative
action of the Commission based upon or related
to such information; or

(iii)

in making disclosures that are required or
protected under the Sarbanes-Oxley Act of 2002
(15 U.S.C. 7201 et seq.), this chapter,
including section 78j-1(m) of this title,
section 1513(e) of Title 18, and any other law,
rule, or regulation subject to the jurisdiction
of the Commission.

15 U.S.C. § 78u-6(h)(1)(A).
“[T]he

first

two

anti-retaliation

categories

protect

whistleblowers who report potentially illegal activity to the
SEC

or

who

work

with

the

SEC

directly,

in

concerning potential securities violations.”
Supp.

2d

at

993.

Boyle

does

not

allege

some

manner,

Nollner, 852 F.
that

he

reported

violations to the SEC or that he worked with the SEC in any
capacity.

He

violations

while

alleges
at

that

he

Evolve.

made

The

only

internal

reports

subprovision

of

of

the

whistleblower-protection provision under which Boyle might

be

protected is § 78u-6(h)(1)(A)(iii).
“[A]

plaintiff

seeking

protection

under

§ 78u-

6(h)(1)(A)(iii) must at least show the following: (1) he or she
was

retaliated

against

for

reporting

a

violation

of

the

securities laws, (2) the plaintiff reported that information to
the

SEC

or

appropriate;

to

another

(3) the

entity

disclosure

9

(perhaps
was

made

even

internally)

pursuant

to

a

as

law,

rule,

or

(4) the

regulation

disclosure

subject

was

to

the

‘required

or

SEC’s

jurisdiction;

protected’

by

rule, or regulation within the SEC’s jurisdiction.”

that

and
law,

Nollner,

852 F. Supp. 2d at 995.2
As
Evolve,

alleged
Boyle

in

the

Second

internally

Amended

reported

Complaint,

violations

of

while

at

numerous

banking- and lending-related statutes, rules, and regulations.
Boyle does not allege in the Second Amended Complaint that he
reported violations of a law, rule, or regulation subject to the
jurisdiction of the SEC.

He does not allege that any disclosure

he made was required or protected by a law, rule, or regulation
within the jurisdiction of the SEC.

2

Thus, Boyle fails to state

The parties contest whether Boyle may qualify under § 78u6(h)(1)(A)(iii) without having reported violations to the SEC.
Courts are split on the issue.
Compare Berman v. Neo@Ogilvy
LLC, 801 F.3d 145, 155 (2d Cir. 2015) (holding that plaintiff
may qualify as whistleblower for purposes of Dodd-Frank Act’s
anti-retaliation provision by reporting violations internally),
with Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 629 (5th
Cir. 2013) (holding that only individuals who report violations
to SEC qualify).
Recently, the Court of Appeals for the Sixth
Circuit was presented with an opportunity to address this issue,
but the Court decided the appeal on other grounds.
Verble v.
Morgan Stanley Smith Barney, LLC, No. 15-6397, 2017 WL 129040,
at *4 (6th Cir. Jan. 13, 2017).
The Supreme Court recently
granted certiorari in Digital Realty Trust, Inc. v. Somers to
address “[w]hether the anti-retaliation provision for ‘whistleblowers’ in the [Dodd-Frank Act] extends to individuals who have
not reported alleged misconduct to the [SEC].”
No. 16-1276
(June 26, 2017). The Court need not resolve this issue or defer
addressing Evolve’s Motion. As discussed below, even if § 78u6(h)(1)(A)(iii) could protect individuals who do not report
violations to the SEC, Boyle would not qualify for protection
under that section for other reasons.
10

a

claim

upon

which

relief

can

be

granted

under

whistleblower-protection provision of the Dodd-Frank Act.

the
See,

e.g., Azim, 2015 WL 6802540, at *18 (“[E]ven if plaintiff could
satisfy the first two elements of a Dodd-Frank Act retaliation
claim . . . plaintiff’s claim fails because he has not proved
the

third

or

fourth

elements

of

this

claim. . . . While

plaintiff asserts that he complained about securities violations
to human resources, he has failed to identify a rule, law, or
regulation within the SEC’s jurisdiction under which his alleged
complaints

were

made,

required,

or

protected.”);

Zillges

v.

Kenney Bank & Trust, 24 F. Supp. 3d 795, 801 (E.D. Wis. 2014)
(concluding that banking laws alleged to have been violated by
defendants were not securities laws, as defined by 15 U.S.C.
§ 78c(a)(47),

and

that

the

whistleblower

protections

of

the

Dodd-Frank Act do not “extend to those who disclose violations
or possible violations of non-securities laws”).
Boyle

contends

that

Evolve,

“as

part

of

[its]

normal

business plan,” sells the loans it makes “to other financial
institutions that repackage and sell the loans to investors,”
and

that

those

financial

institutions

corporations regulated by the SEC.”
642-43.)

Boyle

argues

that

“are

publicly

held

(ECF No. 14-1 at PageID

Evolve

has

“knowingly

and

intentionally placed the loans they have made in violation of
Dodd-Frank,

Regulation

Z,

[t]he
11

Truth

in

Lending

Act,

the

Consumer

Financial

regulations

Protection

because

of,

Act,

among

and

other

various

wrongful

other

acts,

federal

steering,

overages, and dual compensation into the stream of commerce and
into

the

hands

of

uninformed

investment

banks

and

unknowing

investors in contravention of the intent and specific purpose of
the

laws

enacted

precisely

(Id. at PageID 643.)
suggests

that,

to

prevent

this

from

occurring.”

Without citation to any authority, Boyle

because

Evolve

sold

loans

to

institutional

customers regulated by the SEC, Boyle may sue Evolve under the
whistleblower-protection provision of the Dodd-Frank Act because
Evolve retaliated against him for reporting violations of other
federal laws.
Boyle focuses on whether the defendant generally (or its
customers) is regulated by the SEC.
§ 78u-6(h)(1)(A)(iii)

have

required

Courts that have construed
that

the

law,

rule,

or

regulation allegedly violated by the defendant be within the
jurisdiction of the SEC.

E.g., Azim, 2015 WL 6802540, at *18;

Zillges, 24 F. Supp. 3d at 801; Nollner, 852 F. Supp. 2d at 995.
The whistleblower-protection provision of the Dodd-Frank Act is
not a general-purpose anti-retaliation provision.
certain

kinds

violations.
not

implicate

of

whistleblowers

who

report

It protects

certain

kinds

of

Because the alleged violations Boyle reported do
the

whistleblower-protection

provision,

Boyle’s

Dodd-Frank Act claims under § 78u-6(h)(1)(A) necessarily fail.
12

Evolve’s

Motion,

to

the

extent

it

seeks

dismissal

of

Boyle’s Dodd-Frank Act claims, is GRANTED.
V.

Propriety of Exercising Supplemental Jurisdiction
Boyle’s remaining claims and Evolve’s

under Tennessee law.

Counterclaim arise

Absent the Dodd-Frank Act claims, neither

party asserts that, under 28 U.S.C. § 1331, this case “arise[s]
under federal law ‘[because] the vindication of a right under
state law necessarily turn[s] on some construction of federal
law.’”

Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808

(1986) (quoting Franchise Tax Bd. v. Constr. Laborers Vacation
Trust for S. Cal., 463 U.S. 1, 9 (1983)); see also Nollner, 852
F.

Supp.

2d

at

1000

(concluding

that,

although

Tennessee

retaliatory discharge claims under Tenn. Code Ann. § 50-1-304
may be premised on federal-policy violations, such claims “do
not present a federal question, because a state-law employment
action for wrongful termination in violation of federal public
policy

does

not

present

a

substantial

federal

question

over

which federal courts may exercise ‘arising under’ jurisdiction
under 28 U.S.C. § 1331” (quotation marks omitted)).

The Court

has supplemental jurisdiction over the remaining claims under 28
U.S.C. § 1367.3

3

Evolve did not invoke this Court’s jurisdiction under 28 U.S.C.
§ 1332.
13

Under § 1367(c), “district courts may decline to exercise
supplemental jurisdiction over a claim” if “the district court
has

dismissed

all

jurisdiction.”

28

claims
U.S.C.

over

which

§ 1367(c)(3).

it

has

“When

original

all

federal

claims are dismissed before trial, the balance of considerations
usually

will

remanding

point

them

to

to

dismissing

state

court

the

if

the

state
action

law
was

claims,

or

removed.”

Musson Theatrical, Inc. v. Fed. Express Corp., 89 F.3d 1244,
1254-55 (6th Cir. 1996) (collecting cases).

“In determining

whether to retain jurisdiction over state-law claims, a district
court should consider and weigh several factors, including the
‘values
comity.’”

of

judicial

economy,

convenience,

fairness,

and

Gamel v. City of Cincinnati, 625 F.3d 949, 951 (6th

Cir. 2010) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S.
343, 350 (1988)).
plaintiff

has

A court may also consider (a) whether the

engaged

in

forum

manipulation,

(b) whether

the

parties have completed discovery, and (c) whether any pending
summary judgment motions are ripe for decision.

See id. at 952.

“In cases that have been removed to federal court . . . when all
federal claims have been dismissed before trial, the best course
is to remand the state law claims to the state court from which
the case was removed.”

Novak, 503 F.3d at 583 (quotation marks

omitted).

14

This action asserts numerous claims arising under Tennessee
law based on conduct alleged to have occurred in Tennessee by
Tennessee
deciding

parties.
this

stages.

Tennessee

Tennessee

The

parties

action.

have

not

courts

have

This

case

completed

an
is

interest
in

its

discovery,

in

early

and

any

discovery that has been completed will facilitate the resolution
of

claims

in

state

court.

No

judgment are ripe for decision.

pending

motions

for

summary

There is no indication that

Boyle engaged in forum manipulation when he amended his Amended
Complaint to add his federal claims.

Remand would not disserve

the interests of convenience or fairness to the parties, and
remand would serve the values of judicial economy and respect
for comity.

See Gamel, 625 F.3d at 951.

For these reasons,

because the Dodd-Frank Act claims have been dismissed, the “best
course is to remand” the remaining state law claims.

Novak, 503

F.3d at 583.
VI.

Conclusion
For the foregoing reasons, Evolve’s Motion, to the extent

it seeks dismissal of Boyle’s Dodd-Frank Act claims, is GRANTED.
This action is REMANDED to the Circuit Court of Shelby County,
Tennessee, for the Thirtieth Judicial District at Memphis.

So ordered this 19th day of July, 2016.

15

/s/_Samuel H. Mays, Jr._____
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE

16