United States District Court, D. Maryland
L. RUSSELL, III UNITED STATES DISTRICT JUDGE
MATTER is before the Court on three Motions: Defendant 1st
Financial, Inc.'s (“1st Financial”) Motion to
Dismiss Plaintiff's Complaint (ECF No. 10);
Defendants/Counter-Plaintiffs Donna L. Case, Tiffany Coffman,
Brandon Flohr, James Prince, Jared Vogt, and Tia Watkins'
Motion for Leave to File Amended Answers and Assert
Counterclaim (“Motion for Leave to Amend”) (ECF
No. 17); and Movants Joseph Cammauf, Armen Manokian, and Ryan
Terpay's (“Intervenors”) Motion to Intervene
and Amend Counterclaim to Join Intervenor/Counter-Plaintiffs
(“Motion to Intervene”) (ECF No. 18). This action
arises from the departure of several of Plaintiff Equity
Prime Mortgage, LLC's (“Equity”) employees to
1st Financial, a competing mortgage lender, in the summer of
2017. The Motions are ripe for disposition, and no hearing is
necessary. See Local Rule 105.6 (D.Md. 2018). For
the reasons outlined below, the Court will grant in part and
deny in part 1st Financial's Motion to Dismiss, grant the
Motion for Leave to Amend, and grant the Motion to Intervene.
is a Georgia-based mortgage lender. (Pl.'s Compl.
[“Compl.”] ¶ 4, ECF No. 1). In May 2015,
Equity hired Coffman as branch manager of its Baltimore,
Maryland location. (Id. ¶ 16). In July 2016,
Equity hired Prince as branch manager of its Crofton,
Maryland location. (Id. ¶ 17). Coffman and
Prince (collectively, the “Branch Managers”)
hired Case, Brianna Fischer, Flohr, Kirsten Owens, Vogt, and
Watkins as staff for their branch offices. (Id.
Prince, Case, Fischer, Flohr, Owens, Vogt, and Watkins
(collectively, the “Ex-Employees”) all signed an
employment agreement (“Employment Agreement”)
with Equity. (Id. ¶ 19; Compl. Ex. A
[“Emp't Agmt.”], ECF No. 1-2). The Employment
Agreement provides that the Ex-Employees owe a duty of
loyalty to Equity, specifically, that they “shall
assist and work for only [Equity] and no other employer,
lender, broker, or other entity.” (Compl. ¶ 20;
Emp't Agmt. at 2). The Ex-Employees owed Equity a duty
not to “[c]lose or arrange for the closing of any loan
in the name of any person or entity other than [Equity],
unless authorized in advance by [Equity].” (Emp't
Agmt. at 3). By signing the Employment Agreement, the
Ex-Employees also agreed that all loans they handled, and
materials related to those loans, were the sole property of
Equity. (Compl. ¶ 22; Emp't Agmt. at 5).
the Employment Agreement prohibited the Ex-Employees from
“attempt[ing] to move any pipeline loan[s] to any other
person or entity following the end of employment.”
(Compl. ¶ 23; Emp't Agmt. at 5). The Ex-Employees
agreed to maintain the secrecy of confidential information,
which includes Equity's internal personnel and financial
information, as well as proprietary information provided to
Equity by any actual customer, potential customer, or third
party. (Compl. ¶ 24; Emp't Agmt. at 6). Upon
termination, the Ex-Employees agreed to promptly deliver to
Equity all of their work product, including confidential
material. (Compl. ¶ 25; Emp't Agmt. 6-7). The
Ex-Employees also agreed not to compete pursuant to the
Employment Agreement's “No-Solicitation, ”
“No-Hire, ” and “Re-Solicitation of
Borrowers” clauses. (Compl. ¶ 28; Emp't Agmt.
2017, the Branch Managers began communicating with 1st
Financial employees, agents, or officers. (Compl. ¶ 29).
1st Financial knew the Branch Managers and the other
Ex-Employees owed Equity certain duties and obligations
outlined in the Employment Agreement. (Id. ¶
30). Nevertheless, the Branch Managers agreed with 1st
Financial to subvert their contractual obligations and betray
Equity, secretly working for 1st Financial while still acting
as loyal Equity employees. (Id. ¶¶ 31-32).
Specifically, the Branch Managers slowed the origination of
residential mortgage loans at their branches, (id.
¶ 33); they “sat” on leads, developed them
slowly, or refused to develop them at all, (id.
¶ 34); and they delayed, or “slow-rolled, ”
the processing of mortgage loans so that the loans would not
close and fund until after the Ex-Employees quit Equity and
joined 1st Financial, (id. ¶ 35). This scheme
impacted the branches' business results in September
2017: the Crofton branch processed a lower volume of loans
than it had in any month since it opened, (id.
¶ 38), and the Baltimore branch similarly experienced a
drastic decline in origination volumes, (id. ¶
the summer of 2017, Coffman, Prince, and Flohr met with other
Equity employees, including Case, Fischer, Owens, Vogt, and
Watkins, regarding the conspiracy. (Id. ¶ 53).
Coffman, Prince, and Flohr presented the situation as a done
deal, implying the branch office would be closing and the
employees would lose their jobs. (Id. ¶ 54).
Coffman, Prince and Flohr invited the employees to join them
in their move to 1st Financial, so long as they also joined
in the conspiracy against Equity. (Id.). The
Ex-Employees all joined the conspiracy, agreeing to take
Equity's leads, loans, and other property to 1st
Financial. (Id. ¶ 55).
Ex-Employees all resigned from Equity between July 2017 and
August 2017: Fischer resigned on July 31, 2017 and began
working for 1st Financial “shortly thereafter, ”
(id. ¶ 41-42); Owens and Watkins resigned on
August 15, 2017 and began working for 1st Financial
“shortly thereafter, ” (id. ¶¶
43-46); and on August 31, 2017, Coffman, Prince, Case, Flohr,
Vogt, and others resigned, (id. ¶ 47). The
staggered resignations allowed some Ex-Employees to assist
1st Financial while the other Ex-Employees still had access
to Equity's confidential materials and loan files.
(Id.). The day before Coffman resigned, she
scheduled internal company meetings for the days after she
knew she was going to resign and join 1st Financial.
(Id. ¶ 50). In the run-up to her resignation,
Coffman and other Ex- Employees also bound Equity to
“ruinously expensive, long-term real estate and other
contracts.” (Id. ¶ 51). Meanwhile, 1st
Financial, including its President, supported the
Ex-Employees' steps to conceal their activities from
Equity and prepared to accept the Ex-Employees and Equity
property at 1st Financial. (Id. ¶¶ 58-60).
discovered it was missing loans and leads, laptops, and other
confidential materials after the Ex-Employees resigned and
contacted them as part of its investigation. (Id.
¶¶ 63-64). Coffman, Prince, and Flohr directed the
other Ex-Employees not to cooperate with Equity's
investigation. (Id. ¶ 65). The Ex-Employees
realized Equity was aware of their activities and, therefore,
knew that Equity was no longer obliged to pay them wages or
commissions they would otherwise be owed. (Id.
¶ 66). Instead, 1st Financial made “hush
money” payments to the Ex-Employees in those amounts.
(Id. ¶¶ 67-68).
a month of inquiries from Equity, Flohr, through his
attorney, admitted that the Ex-Employees kept Equity laptops
after leaving the company. (Id. ¶¶ 70-71;
Compl. Ex. B [“Flohr Ltr.”], ECF No. 1-2). Flohr
explained that Ex-Employees gave him their Equity laptops
after Equity locked them out of the Equity offices. (Compl.
¶ 72; Flohr Ltr.). Flohr, through counsel, returned five
missing laptops to Equity on October 25, 2017. (Compl.
¶¶ 72-75). Flohr stated that he never attempted to
review the contents of the laptops, (Compl. ¶ 72; Flohr
Ltr.), but Equity's examination of the laptops revealed
someone used them after August 31, 2017 to access
Equity's network, (Compl. ¶ 76). The Ex-Employees
still have other confidential Equity materials, (id.
¶ 77), and Defendants continue to solicit Equity's
current and prospective borrowers, (id. ¶ 78).
December 19, 2017, Equity filed suit against 1st Financial
and the Ex-Employees. (ECF No. 1). In its six-Count
Complaint, Equity alleges against all Defendants: fraud
(Count I); violation of the Maryland Uniform Trade Secrets
Act (“MUTSA”), Md. Code Ann., Com. Law
[“CL”] §§ 11-1201, et seq.
(West 2018) (Count II); breach of contract (Count III);
tortious interference with a contract (Count IV); conversion
(Count V); and unjust enrichment (Count VI). (Id.
¶¶ 80-108). Equity seeks compensatory, statutory,
and punitive damages, as well as attorney's fees.
(Id. at 25-26).
April 6, 2018, 1st Financial filed its Motion to Dismiss
Plaintiff's Complaint.(ECF No. 10). On April 20, 2018, Equity
filed an Opposition. (ECF No. 13). On May 4, 2018, 1st
Financial filed a Reply. (ECF No. 16).
October 19, 2018, Defendants/Counter-Plaintiffs filed their
Motion for Leave to Amend Answers and Assert Counterclaim,
(ECF No. 17), and Intervenors filed their Motion to Intervene
and Amend Counterclaim to Join Intervenor/Counter-Plaintiffs,
(ECF No. 18). On November 2, 2018, Equity filed Oppositions.
(ECF Nos. 19, 20). On November 16, 2018,
Defendants/Counter-Plaintiffs and Intervenors filed a
combined Reply. (ECF No. 21).
Motion to Dismiss
Standard of Review
purpose of a Rule 12(b)(6) motion is to “test[ ] the
sufficiency of a complaint, ” not to “resolve
contests surrounding the facts, the merits of a claim, or the
applicability of defenses.” King v.
Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) (quoting
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th
Cir. 1999)). A complaint fails to state a claim if it does
not contain “a short and plain statement of the claim
showing that the pleader is entitled to relief, ”
Fed.R.Civ.P. 8(a)(2), or does not “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)). A claim is
facially plausible “when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550
U.S. at 556). “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice.” Id. (citing Twombly,
550 U.S. at 555). Though the plaintiff is not required to
forecast evidence to prove the elements of the claim, the
complaint must allege sufficient facts to establish each
element. Goss v. Bank of America, N.A., 917
F.Supp.2d 445, 449 (D.Md. 2013) (quoting Walters v.
McMahen, 684 F.3d 435, 439 (4th Cir. 2012)),
aff'd sub nom., Goss v. Bank of America,
NA, 546 Fed.Appx. 165 (4th Cir. 2013).
considering a Rule 12(b)(6) motion, a court must examine the
complaint as a whole, consider the factual allegations in the
complaint as true, and construe the factual allegations in
the light most favorable to the plaintiff. Albright v.
Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. of
Comm'rs, 407 F.3d 266, 268 (4th Cir. 2005) (citing
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). But,
the court need not accept unsupported or conclusory factual
allegations devoid of any reference to actual events,
United Black Firefighters v. Hirst, 604 F.2d 844,
847 (4th Cir. 1979), or legal conclusions couched as factual
allegations, Iqbal, 556 U.S. at 678.
Financial argues that each Count of the Complaint against it
should be dismissed for failure to state a
claim. The Court considers each Count in turn.
Financial argues Equity does not plead its fraud claim with
the particularity Rule 9(b) requires. The Court agrees.
plead a claim for deceit, also known as fraud,  a plaintiff must
(1) “that the defendant made a false representation to
(2) “that its falsity was either known to the defendant
or that the misrepresentation was made with reckless
indifference to its truth”;
(3) “that the misrepresentation was made for the
purpose of defrauding the plaintiff”;
(4) “that the plaintiff relied on the misrepresentation
and had the right to rely on it”; and
(5) “that the plaintiff suffered compensable injury
resulting from the misrepresentation.”
Kantsevoy v. LumenR LLC, 301 F.Supp.3d 577, 601
(D.Md. 2018) (quoting Nails v. S & R, Inc., 639
A.2d 660, 668 (Md. 1994)).
9(b) requires that “the circumstances constituting
fraud” be stated “with particularity.”
Those “circumstances” include the “time,
place, and contents of the false representations, as well as
the identity of the person making the misrepresentation and
what was obtained thereby.” Ward v. Branch Banking
& Tr. Co., No. ELH-13-01968, 2014 WL 2707768, at *6
(D.Md. June 13, 2014) (quoting United States ex rel.
Owens v. First Kuwaiti Gen. Trading & Contracting
Co., 612 F.3d 724, 731 (4th Cir. 2010)). Rule 9(b)
permits “[m]alice, intent, knowledge, and other
conditions of a person's mind [to] be alleged generally,
” however. A court should “hesitate” to
dismiss a complaint under Rule 9(b) if the court is
satisfied: (1) “that the defendant has been made aware
of the particular circumstances for ...