Movement Mortgage, LLC v. McDonald

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

3:17-cv-00716-RJC-DSC

MOVEMENT MORTGAGE, LLC, )

)

Plaintiff, )

)

v. )

) ORDER

FRANKLIN FIRST FINANCIAL, LTD., )

)

Defendant. )

)

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

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

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.)

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

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.

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

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.)

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

Plaintiffs 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. Plaintiffs 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

Bate Cr Of

Robert J. Conrad, Jr. as

United States District Judge