Re/Max, LLC v. Quicken Loans Inc.
Re/Max, LLC v. Quicken Loans Inc.
Opinion of the Court
PHILIP A. BRIMMER, United States District Judge *1166This matter is before the Court on RE/MAX, LLC'S and Motto Franchising, LLC's Motion to Dismiss Counterclaims [Docket No. 61]. The Court has jurisdiction under
I. BACKGROUND
Plaintiff RE/MAX, LLC ("RE/MAX") is a real estate franchise company that has a network of franchisee real estate agents. Docket No. 56 at 16, ¶ 11. Defendant Quicken Loans Inc. ("Quicken Loans") is a mortgage lender.
In September 2015, after Quicken Loans had a third party perform a valuation analysis of the Agreement, Quicken Loans told RE/MAX that the Agreement was overvalued. Docket No. 56 at 18, ¶¶ 18-19.
Two parallel lawsuits followed. On September 7, 2016, Quicken Loans filed a complaint against RE/MAX in the United States District Court for the Eastern District of Michigan. Quicken Loans Inc. v. RE/MAX, LLC , No. 2:16-cv-13233-DML-RSW, Docket No. 1 (E.D. Mich. Sept. 7, 2016). Twelve days later, RE/MAX filed this case. Docket No. 1. Both parties accuse the other of breaching the Agreement. RE/MAX alleges that Quicken Loans failed to pay amounts due under the Agreement. Docket No. 45 at 9, ¶ 29. Quicken Loans alleges that RE/MAX failed to provide services as required under the Agreement. Docket No. 56 at 29, ¶ 75.
On October 25, 2016, RE/MAX launched Motto Mortgage, LLC ("Motto") as a new venture; Motto is a wholly-owned subsidiary of RE/MAX. Docket No. 56 at 15, ¶ 7 and at 24, ¶ 41. Motto is a mortgage provider that provides services similar to those provided by Quicken Loans. See
On October 31, 2016, the Eastern District of Michigan transferred its case to this district pursuant to a mandatary forum selection clause in the Agreement. Quicken Loans Inc. v. RE/MAX, LLC , No. 16-cv-02696-PAB-NYW, Docket Nos. 1, 17 (the "transferred case"). On February 2, 2017, Quicken Loans filed a motion to amend its complaint in the transferred case, seeking to add claims for breach of the NDA against RE/MAX, misappropriation of trade secrets against RE/MAX, tortious interference with a contract against Motto, and misappropriation of trade secrets against Motto.
On May 2, 2017, the Court entered an order denying a motion to dismiss this case filed by Quicken Loans and denying a motion for consolidation filed by RE/MAX. Docket No. 53. Instead, the Court administratively closed the transferred case. Quicken Loans Inc. v. RE/MAX, LLC , No. 16-cv-02696-PAB-NYW, Docket No. 47. The Court acknowledged Judge Wang's recommendation on Quicken Loans' motion to amend in the transferred case, but did not rule on the motion to amend. Docket No. 53 at 2 n.1.
On May 16, 2017, Quicken Loans filed its answer and counterclaims. Docket No. 56. Quicken Loans' counterclaims consist of the same nine claims that it sought to bring in the transferred case through its motion to amend, but with some added allegations about its trade secrets. Compare Docket No. 56 at 14-33 with Quicken Loans Inc. v. RE/MAX, LLC , No. 16-cv-02696-PAB-NYW, Docket No. 37-1 at 2-18. On June 6, 2017, RE/MAX and Motto (collectively, "movants") filed the present motion to dismiss. Docket No. 61. They seek to dismiss Quicken Loans' second *1168counterclaim, for fraudulent inducement of the Amendment, as well as Quicken Loans' sixth, seventh, eighth, and ninth counterclaims, which are the same as the four claims that Quicken Loans sought to add in the transferred case through its motion to amend.
II. STANDARD OF REVIEW
Movants challenge the above-mentioned counterclaims for failure to state a claim under Fed. R. Civ. P. 12(b)(6). "The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted." Dubbs v. Head Start, Inc. ,
Generally, "[s]pecific facts are not necessary; the statement need only 'give the defendant fair notice of what the claim is and the grounds upon which it rests.' " Erickson v. Pardus ,
III. ANALYSIS
A. Fraudulent Inducement Against RE/MAX
Movants argue that Quicken Loans' fraudulent inducement claim must be dismissed for three reasons: (1) due to the economic loss doctrine, (2) because Quicken Loans does not allege damages resulting from the alleged misrepresentations inducing the Amendment, and (3) because of the integration clause in the Agreement. Docket No. 61 at 4-7.
1. Economic Loss Doctrine
"Under the economic loss doctrine, 'a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such a breach absent an independent duty of care under tort law.' " Spring Creek Expl. & Prod. Co., LLC v. Hess Bakken Investments II, LLC ,
Quicken Loans claims that its fraudulent inducement claim is not barred by the economic loss rule because the "fraudulent representations that RE/MAX made to Quicken Loans were separate from the Agreement and Amendment [and] were not memorialized in the Amendment." Docket No. 71 at 12.
Quicken Loans alleges four misrepresentations by RE/MAX:
(1) misrepresenting to Mr. Latka, on September 22, 2015, that there would be 4.25 million unique visitors per month to the remax.com homepage, which would display Quicken Loans' logo; (2) Mike Ryan (Executive Vice President of RE/MAX) intentionally concealing RE/MAX's inability to provide its marketing services in certain independently-owned and operated regions when describing web presence and internet traffic with Mr. Latka, on September 22, 2015 and again during early October 2015, making those representations regarding value, activity levels, and scope of its services false; (3) Mr. Ryan falsely representing to Mr. Latka, several times, including on September 22, 2015, that Quicken Loans' links or logos would be embedded on each property listing webpage (both desktop and mobile-accessed websites) while concealing the fact that RE/MAX did not have the authority or access to provide such marketing services; and (4) Mr. Ryan misrepresenting to Mr. Latka on or about September 22, 2015 that the remax.com site generated over one million direct customer leads to RE/MAX agents (which would include a check-box for more information regarding a loan with Quicken Loans); yet Mr. Ryan knew, when making these false representations, that the sites generated only a fraction of that number of leads (no more than 360,000 leads), and that many of those dramatically reduced leads are actually bogus, automated inquiries (collectively, the "Representations").
Docket No. 56 at 18-19, ¶ 21.
RE/MAX does not identify any obligation under the Agreement or Amendment that reflects the first, second, and fourth representations, which concern the *1171number of unique visitors to RE/MAX's websites per month and the number of leads generated. See Docket No. 56 at 18-19, ¶¶ 19, 21. These representations, to the extent they were false, would have misled Quicken Loans regarding the value of the services RE/MAX was obligated to provide under the Agreement and Amendment, but not about RE/MAX's duties under the contracts. Thus, the source of the duty with respect to these representations is RE/MAX's independent duty not to make misrepresentations to induce the signing of a contract. Keller ,
On the other hand, the third representation, which concerns RE/MAX's ability to provide certain marketing services through its websites, has parallel obligations in the parties' contracts. In particular, the Amendment obligates RE/MAX to modify its mobile site in ways that it had previously agreed to modify its desktop site in the Agreement, Docket No. 56-3 at 2, ¶ j, and to make a "[g]ood faith effort" to modify the remax.com website and RE/MAX mobile app in four specified ways. Docket No. 56-3 at 2, ¶ m.9-12. Thus, after the third alleged representation was made, the parties negotiated and memorialized obligations related to the third representation as part of the Amendment; in particular, RE/MAX obligated itself to provide certain additional marketing services. Docket No. 56-3 at 2. The Agreement and Amendment are thereby the source of any "duty to act to avoid injury" that RE/MAX has to provide such services. See Town of Alma ,
2. Damages
Movants argue that the Amendment imposed no new obligations on Quicken Loans and therefore it cannot support a fraud claim. Docket No. 61 at 6 (citing J.A. Walker Co. v. Cambria Corp. ,
3. Integration Clause
Movants argue that the fraud claim must be dismissed because of the integration clause in the Agreement. Docket No. 61 at 7. Under Colorado law, general integration clauses do not bar claims *1172based on misrepresentations related to contracts. Keller ,
B. Breach of the NDA Against RE/MAX
Under Colorado law, a breach of contract claim has four elements: "(1) the existence of a contract; (2) performance by the plaintiff or some justification for nonperformance; (3) failure to perform the contract by the defendant; and (4) resulting damages to the plaintiff." Western Distributing Co. v. Diodosio ,
In the transferred case, Judge Wang found that Quicken Loans stated a claim for breach of the NDA, but acknowledged that Quicken Loans' allegations were limited:
To be certain, Quicken Loans's proposed claim for breach of the NDA would benefit from additional factual allegations. But at this juncture, the Plaintiff need only meet the pleading requirements of Rule 8(a); there is no heightened pleading standard that applies to a breach of a NDA. Plaintiff identifies the NDA, see [# 37-1 at 36], identifies certain categories of confidential information accessed by RE/MAX, [id. at ¶ 28], identifies the manner in which RE/MAX breached the NDA, i.e., RE/MAX failed to comply with the terms of the Agreement by using the information for a purpose that was not permitted by the Agreement, see [# 37-1 at ¶¶ 35, 66], and states a plausible way in which it was damaged, including that it lost proprietary information to a potential competitor. [# 37-1 at ¶¶ 33-34, 68]. See Viesti Associates, Inc. [v. Pearson Educ., Inc.] ,2013 WL 1229534 , at *4 [ (D.Colo. 2013) ] (finding that plaintiff "has identified works allegedly infringed, the manners in which the licenses were allegedly breached, and the plausible ways in which it was damaged," and thus plaintiff's "complaint meets the threshold required under notice pleading."). See also Iqbal ,556 U.S. at 678 ,129 S.Ct. 1937 ("A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."). Drawing all inferences in favor of Quicken Loans, the limited facts pled are sufficient to nudge the claim for breach of the NDA against RE/MAX...over the line from speculative to plausible.
Quicken Loans Inc. v. RE/MAX, LLC , No. 16-cv-02696-PAB-NYW, Docket No. 44 at 10-11.
Movants argue that Quicken Loans' allegations are deficient because Quicken Loans "does not provide any allegations indicating that Motto has used Quicken Loans' confidential information, or even suggesting how Quicken Loans believes Motto is using its confidential information."
*1173Docket No. 61 at 8-9. The Court agrees. Quicken Loans' allegations of harm from the alleged improper disclosure of its confidential information are conclusory. See Bestop, Inc. v. Tuffy Sec. Prod., Inc. ,
C. Misappropriation of Trade Secrets
In order to state a claim for misappropriation of trade secrets, Quicken Loans must allege facts supporting the following elements: (1) Quicken Loans possessed a valid trade secret; (2) the trade secret was disclosed or used without consent; and (3) the counterclaim defendant knew, or should have known, that the trade secret was acquired by improper means. Gates Rubber Co. v. Bando Chemical Industries, Ltd. ,
any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value. To be a "trade secret" the owner thereof must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.
Quicken Loans brings counterclaims for trade secret misappropriation against both RE/MAX and Motto. Docket No. 56 at 30-33. Based on Quicken Loans' allegations in the transferred case, Judge Wang found that Quicken Loans did not state a claim for trade secret misappropriation:
Quicken Loans alleges that it disclosed to RE/MAX, "confidential, proprietary, and trade secret" information regarding *1174its marketing strategies, compliance policies, and loan origination practices. [# 37-1 at ¶ 28]. But it alleges no facts, taken as true, that allow the court to provide sufficient notice to Defendant as to what subset of "confidential" information constitutes the "trade secrets," or whether all the information is both "confidential" and "trade secret." Nor does Plaintiff aver facts to allow the court to conclude that the alleged "trade secrets" meet the statutory definition. For instance, Quicken Loans generally avers that it "took measures to prevent [the information] from becoming available to persons other than those [whom Plaintiff] selected," [# 37-1 at ¶¶ 71-72], but that allegation merely mirrors the statutory language. Quicken Loans does not allege facts that lead the court to that conclusion. See generally [# 37-1]. Plaintiff does not allege that it required its own employees with access to the trade secrets to enter non-disclosure agreements.Id. It does not allege that it separated its trade secrets from other confidential information.Id. And Plaintiff does not allege that it subjected the separated trade secrets to heightened protection.Id. Finally, Quicken Loans fails to aver facts to support the conclusion that it allowed authorized individuals to access its "trade secrets" only for "a limited purpose."Id.
Quicken Loans Inc. v. RE/MAX, LLC , No. 16-cv-02696-PAB-NYW, Docket No. 44 at 12-13.
In this case, Quicken Loans added allegations regarding its trade secrets that did not appear in the transferred case. These additional allegations address some of Judge Wang's findings by describing two alleged trade secrets with more particularity. First, Quicken Loans has alleged that it disclosed its "unique technology that could identify any lead generated by a RE/MAX agent or the remax.com website[,] how that lead could be directed from the RE/MAX agent or the remax.com website to Quicken Loans[,] and how to secure customized information about that homebuyer's location and needs." Docket No. 56 at 21-22, ¶ 31. Second, Quicken Loans has alleged that it disclosed "how its automation and business processes could enable Quicken Loans to resurrect 'cold' leads from RE/MAX agents and return potential homebuyers to RE/MAX agents while also prequalifying them for mortgage loans, thus making their home buying process quicker and more efficient."
Movants argue that Quicken Loans' allegations are insufficient because "Quicken Loans failed to even identify what information it believes RE/MAX misappropriated, as opposed to simply describing all the allegedly trade secret information to which RE/MAX had access." Docket No. 61 at 11. The Court rejects this argument. The Court finds that Quicken Loans' allegations plausibly allege that trade secret information was passed to RE/MAX. Moreover, Quicken Loans' additional allegations are sufficient to identify the nature of the trade secrets allegedly misappropriated. See SBM Site Servs., LLC v. Garrett , No. 10-cv-00385-WJM-BNB,
Movants argue that Quicken Loans fails to plausibly allege that RE/MAX and Motto obtained trade secrets by improper means through misrepresentations. Docket No. 61 at 11-12. In particular, movants argue the counterclaims contain no allegations about when Quicken Loans disclosed trade secrets and therefore *1175there is no basis to infer that trade secrets were disclosed as a result of misrepresentations.
With respect to Motto, movants argue that Motto's employment of individuals who had access to Quicken Loans' trade secret information is not enough to state a claim. Docket No. 61 at 12 (citing Ciena Commc'ns, Inc. v. Nachazel , No. 09-cv-02845-MSK-MJW,
In Ciena, a defendant hired the plaintiff's former employee who had access to trade secrets related to the plaintiff's business strategies.
D. Tortious Interference with a Contract Against Motto
In order to state a claim against Motto for tortious interference with a contract, Quicken must allege facts showing: (1) a contract existed, (2) Motto knew of the contract, (3) Motto induced RE/MAX to breach the contract, and (4) Quicken Loans was injured as a result of the breach. Nobody in Particular Presents, Inc. v. Clear Channel Commc'ns, Inc. ,
In the transferred case, Judge Wang found that Quicken failed to allege facts showing that
Motto, as the creation of RE/MAX, independently and intentionally interfered with third-party RE/MAX's performance under the Agreement. Plaintiff alleges only that Mr. Morrison and Mr. Scoville, who are not named Defendants to this litigation, had the opportunity to misappropriate and/or interfere. See [# 37-1 at ¶¶ 31-32]. This is insufficient to state a claim for Motto's tortious interference with contractual relations between RE/MAX and Quicken Loans.
Quicken Loans Inc. v. RE/MAX, LLC , No. 16-cv-02696-PAB-NYW, Docket No. 44 at 15 (footnote omitted).
Quicken Loans argues that its tortious interference claim should be allowed to proceed because it has satisfied the notice pleading requirement of Fed. R. Civ. P. 8. Docket No. 71 at 8. The Court disagrees. As Judge Wang found, plaintiff does not allege any facts from which a factfinder could infer that Motto itself knew of the Agreement before it was breached or intentionally interfered with the Agreement, both of which are required elements of a claim for tortious interference with a contract. Nobody in Particular Presents, Inc. ,
IV. CONCLUSION
For the foregoing reasons, it is
ORDERED that RE/MAX, LLC'S and Motto Franchising, LLC's Motion to Dismiss Counterclaims [Docket No. 61] is GRANTED in part and DENIED in part. It is further
ORDERED that Quicken Loans' sixth, seventh, eighth, and ninth counterclaims are DISMISSED pursuant to Fed. R. Civ. P. 12(b)(6). It is further
ORDERED that Quicken Loans' second counterclaim is dismissed pursuant to Fed. R. Civ. P. 12(b)(6) as barred by the economic loss rule insofar as it is based on representations made by RE/MAX that it could modify its websites.
The following facts are taken from the answer and counterclaims and presumed to be true for the purposes of this motion.
Although not challenged by the motion to dismiss, one of Quicken Loans' claims is that changes in the interpretation of the Real Estate Settlement Practices Act meant that the valuation of the Agreement rendered the Agreement void. See Docket No. 56 at 27, ¶¶ 53-56.
The Colorado Supreme Court has identified "three main policy reasons" that support the application of the rule "between and among commercial parties...: (1) to maintain a distinction between contract and tort law; (2) to enforce expectancy interests of the parties so that they can reliably allocate risks and costs during their bargaining; and (3) to encourage the parties to build the cost considerations into the contract because they will not be able to recover economic damages in tort." BRW, Inc. v. Dufficy & Sons, Inc. ,
See Hamon Contractors, Inc. v. Carter & Burgess, Inc. ,
Quicken Loans also argues that it "incurred non-economic damages as a result of the misrepresentations." Docket No. 71 at 12. Quicken Loans does not identify any non-economic loss it suffered as a result of RE/MAX's alleged fraud. Instead, Quicken Loans claims it suffered " 'damages stemming from the lost time, energy, and effort expended by its team members.' " Docket No. 71 at 14 (quoting Docket No. 56 at 28, ¶ 64). Such damages are economic damages. See Coverstar, Inc. v. Cooley, Inc. ,
While movants argue that the alleged misrepresentations all occurred after the Agreement was signed, and are therefore barred by the economic loss rule, Docket No. 61 at 4, Quicken Loans' claim is premised, instead, on fraudulent inducement of the Amendment. Docket No. 56 at 28, ¶ 62.
Although the counterclaims state that the representations are alleged "[b]y way of example," Docket No. 56 at 18-19, ¶ 21, Quicken Loans' briefing does not indicate that it intends to rely on any other representations. See Docket No. 71 at 13.
Quicken Loans does not specifically allege that any of the individuals were working on implementing the Agreement and starting Motto at the same time. See, e.g. , Docket No. 56 at 24, ¶ 39. As discussed below, Quicken Loans does not dispute that the Agreement was terminated before Motto was formed. See id. at 24, ¶41 n.1 ("Motto Mortgage had registered as a limited liability company in the state of Delaware on August 26, 2016, just weeks after Quicken Loans sent its notice of default to RE/MAX and days before Quicken Loans filed its lawsuit.").
Quicken Loans does not argue so-called "inevitable disclosure" and, in any event, does not allege sufficient facts to support an inference that Motto's employees inevitably disclosed trade secrets that they possessed. See, e.g., PepsiCo, Inc. v. Redmond ,
Reference
- Full Case Name
- RE/MAX, LLC v. QUICKEN LOANS INC. v. Motto Franchising, LLC, Third-party
- Cited By
- 146 cases
- Status
- Published