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Loandepot.Com v. Crosscountry Mortgage, Inc.

United States District Court, D. New Jersey

June 24, 2019

CROSSCOUNTRY MORTGAGE, INC., et al., Defendants.


          KEVIN McNULTY. U.S.D.J.

         Now before me is the motion of defendant Justin Lieberman to compel arbitration and stay this action as against all defendants. (DE 44). Also before me is the motion (DE 45) of defendant Crosscountry Mortgage, Inc. ("Crosscountry") joining in Lieberman's motion to compel arbitration and requesting that the claims against Crosscountry be stayed pending the outcome of that arbitration. The motion to compel arbitration of the claims against Lieberman is granted to the extent that those claims are referred to the arbitrator, who will decide the issue of arbitrability. Only the claims against Lieberman in this action are stayed. CrossCountry's motion to stay the claims against itself in this action is denied.

         I. Summary[1]

         a. Procedural History

         On July 26, 2018, ("loanDepot") filed a Complaint (DE 1), attaching an application for temporary restraints and injunctive relief. (DE 1-2, 1-3). On July 27, 2018, this Court denied loanDepot's application for temporary restraints, but ordered defendants Crosscountry, Matthew Reid, and Andrea Manara to appear before the Court to show cause why the Court should not enter an order granting loanDepot its requested preliminary injunction. (DE 5, 6, 7). On August 1, 2018, loanDepot withdrew its application for a preliminary injunction, and the scheduled hearing was cancelled. (DE 9, 10, 11).

         On October 19, 2018, loanDepot filed its (1st) Amended Complaint. (DE 33, cited herein as "1AC") The Amended Complaint brings claims against Lieberman for breach of the duty of loyalty by acquiring adverse interests and taking action against loanDepot, his employer (Count Five); aiding and abetting breach of the duty of loyalty by violating employer policy on customer privacy (Count Six); aiding and abetting breach of the duty of loyalty by misappropriating of trade secrets and confidential information (Count Seven); tortious interference with the contracts of Reid, Christopher Albanese, Peter Costakos, and Peter Lucia with loanDepot (Count Eight); tortious interference with contractual relationships and prospective economic advantage (Count Nine); employee piracy (Count Ten); common law misappropriation of trade secrets and confidential information (Count Eleven); actual and threatened misappropriation under the New Jersey Trade Secrets Act (Count Twelve); violation of the Defend Trade Secrets Act (Count Thirteen); unfair competition (Count Fifteen); and civil conspiracy (Count Seventeen). (1AC)

         The Amended Complaint seeks permanent injunctive relief. (Id. p. 43). loanDepot has not, however, sought temporary restraints or a preliminary injunction against Lieberman to "protect its rights pending the outcome of arbitration" as provided for in the Branch Operator Agreement, discussed infra.

         On November 27, 2018, Lieberman filed this motion to compel arbitration and stay the entire action. (DE 44). On November 27, 2018, defendant Crosscountry filed a motion supporting Lieberman's motion to compel arbitration and seeking to stay this action as against itself, pending the outcome of Liberman's arbitration. (DE 45). On December 19, 2018, loanDepot filed an opposition to Lieberman's motion. (DE 47). On January 2, 2019, Lieberman filed a reply in support. (DE 48).

         b. Facts

         On July 15, 2011, Lieberman signed a Branch Operator Agreement in connection with becoming branch supervisor of the Aberdeen, New Jersey branch of loanDepot. (1AC ¶ 64). loanDepot did not attach Lieberman's Branch Operator Agreement to the Amended Complaint. Even so, "a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary judgment." In re Burlington Coat Factor Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

         The Branch Operator Agreement is "explicitly relied upon" or "integral" to the Amended Complaint. Id. The Amended Complaint expressly refers to Lieberman's Branch Operator Agreement several times. In the facts section, the Complaint lists the individual defendants' post-employment obligations, including those found in the non-solicitation provisions in Lieberman's Branch Operator Agreement. (1AC ¶ 64). Discussing loanDepot's "strict confidentiality policies" (id. ¶ 66), the Amended Complaint lists the confidentiality and enforcement provisions in the Branch Operator Agreement (id. ¶ 71). In addition, the Amended Complaint alleges that after Lieberman left the company and became an employee of Crosscountry (id. ¶ 77), loanDepot sent a letter to Lieberman reminding him of his post-employment obligations to loanDepot, including the obligation under the Branch Operator Agreement to preserve Confidential Information and not to solicit loanDepot's employees (id. ¶ 78). The substantive Counts expressly incorporate the preceding factual allegations, including those relating to the Branch Operator Agreement. (See e.g., Count Five, Am. Compl. p. 25). There is apparently no dispute as to the existence or authenticity of the Branch Operator Agreement. I may therefore consider it without converting Lieberman's motion to one for summary judgment.

         The Branch Operator Agreement includes an arbitration clause, located at Section 16(f):

(f) Arbitration. In the event that any dispute should arise between the parties hereto as to the validity of this Agreement, or as to the construction, enforcement or performance of this Agreement, such dispute shall be settled by arbitration before a single arbitrator conducted at Norfolk County, Massachusetts, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The full rules of discovery shall apply to any such proceeding. The decision of the arbitrator shall be final and binding on all parties thereto, and judgment upon any award entered in such arbitration shall pay to the successful party all costs and expenses, including actual attorneys' fees, incurred therein by such successful party and such costs, expenses and attorneys' fees shall be included in and as part of such judgment or award. The determination of the arbitrator shall be conclusive on the matter of which party is successful for purposes hereof. In no event, however, shall this paragraph be deemed to preclude a party hereto from instituting legal action seeking relief in the nature of a restraining order, an injunction[sic] or the like in order to protect his or its rights pending the outcome of an arbitration hereunder.[2] With respect to matters submitted to arbitration other than claims for payment of monies due, the parties shall continue to perform their obligation hereunder relative to said matters pending resolution of the dispute by arbitration.

(Branch Operator Agreement, §16(f)).

         II. Discussion

         a. Legal standard

         This Circuit's case law has meandered somewhat in defining the proper standard of review of a motion to compel arbitration. The upshot, however, is fairly clear. Where the issue can be decided without evidence, it will be, based on an application of the familiar Rule 12(b)(6) standard to the face of the pleadings. Failing that, however, the Court will permit discovery and decide the issue on a summary judgment standard, pursuant to Rule 56. If there is a genuine issue of fact, summary judgment will be denied and the issues will be tried.

         Because arbitration is a "matter of contract" between two parties, "a judicial mandate to arbitrate must be predicated upon the parties' consent." Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 771 (3d Cir. 2013) (quoting Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980)). Pursuant to the Federal Arbitration Act ("FAA"), a court may enforce a contract to arbitrate, but only if the court is satisfied that the "making of the agreement" to arbitrate is not "in issue." Id.

         In Guidotti v. Legal Helpers Debt Resolution, the Third Circuit stated the approach a court must take on a motion to compel arbitration. The judiciary must balance the competing goals of the FAA: the speedy and efficient resolution of disputes, and the enforcement of private agreements. Id. at 773. Reconciling sometimes murky precedent in light of those competing interests, the Guidotti court reasoned that where "the affirmative defense of arbitrability of claims is apparent on the face of a complaint (or . . . documents relied upon in the complaint), . . . the FAA would favor resolving a motion to compel arbitration under a motion to dismiss standard without the inherent delay of discovery." Id. at 773-74. Such an approach "appropriately fosters the FAA's interest in speedy dispute resolution. In those circumstances, '[t]he question to be answered . . . becomes whether the assertions of the complaint, given the required broad sweep, would permit adduction of proofs that would provide a recognized legal basis' for rejecting the affirmative defense." Id. at 774 (quoting Leone v. Aetna Cas. & Sur. Co., 599 F.2d 566, 567 (3d Cir. 1979).

         "In many cases, however, a more deliberate pace is required, in light of both the FAA's insistence that private agreements be honored and the judicial responsibility to interpret the parties' agreement, if any, to arbitrate." Id.

[The Rule 12(b)(6) standard will not be appropriate] when either the motion to compel arbitration does not have as its predicate a complaint with the requisite clarity to establish on its face that the parties agreed to arbitrate or the opposing party has come forth with reliable evidence that is more than a naked assertion . . . that it did not intend to be bound by the arbitration agreement, even though on the face of the pleadings it appears that it did. Under the first scenario, arbitrability not being apparent on the face of the complaint, the motion to compel arbitration must be denied pending further development of the factual record. The second scenario will come into play when the complaint and incorporated documents facially establish arbitrability but the non-movant has come forward with enough evidence in response to the motion to compel arbitration to place the question in issue. At that point, the Rule 12(b)(6) standard is no longer appropriate, and the issue should be judged under the Rule 56 standard.
Under either of those scenarios, a restricted inquiry into factual issues will be necessary to properly evaluate whether there was a meeting of the minds on the agreement to arbitrate and the non-movant must be given the opportunity to conduct limited discovery on the narrow issue concerning the validity of the arbitration agreement. In such circumstances, Rule 56 furnishes the correct standard for ...

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