PHILIP A. BRIMMER, United States District Judge.
This 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 28 U.S.C. § 1332.
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. Id. at 16-17, ¶ 12. In early 2014, RE/MAX and Quicken Loans entered into negotiations for a potential marketing alliance. Id. at 17, ¶ 13. At that time, plaintiff and defendant executed a Non-Disclosure Agreement (the "NDA"). Id. After further negotiations, on July 9, 2015, RE/MAX and Quicken Loans executed a Strategic Marketing Alliance Agreement (the "Agreement"), which took effect on October 15, 2015. Id., ¶ 15. The Agreement required RE/MAX to provide marketing services to Quicken Loans in exchange for fees. Id., ¶ 16 and at 19, ¶ 22; see also Docket No. 56-1.
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 id. at 24-26, ¶¶ 42, 45. Quicken Loans named Motto as a third-party defendant in its counterclaims. Id. at 14-15, ¶ 3. Quicken Loans alleges that individuals who received Quicken Loans' confidential information and trade secrets while working at RE/MAX became executives at Motto and that RE/MAX used Quicken Loans' trade secrets in starting up Motto's operations. Id. at 25-27, ¶¶ 43, 49.
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. Id., Docket No. 37. On April 10, 2017, Magistrate Judge Nina Y. Wang recommended that the motion to amend be granted in part and denied in part. Id., Docket No. 44 at 17-18. Specifically, she recommended that Quicken Loans be permitted to add a claim for breach of the NDA, but that the motion to amend be denied with respect to the other claims. Id.
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
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., 336 F.3d 1194, 1201 (10th Cir. 2003) (quoting Sutton v. Utah St. Sch. for the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999)). In doing so, the Court "must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff." Alvarado v. KOB-TV, LLC, 493 F.3d 1210, 1215 (10th Cir. 2007). At the same time, however, a court need not accept conclusory allegations. Moffett v. Halliburton Energy Servs., Inc., 291 F.3d 1227, 1232 (10th Cir. 2002).
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, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)) (omission marks omitted). "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." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The "plausibility" standard requires that relief must plausibly follow from the facts alleged, not that the facts themselves be plausible. Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008). Nonetheless, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not shown — that the pleader is entitled to relief." Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (internal quotation marks and alteration marks omitted). Thus, even though modern rules of pleading are somewhat forgiving, "a complaint still must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Bryson, 534 F.3d at 1286 (alteration marks omitted).
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.
"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, 882 F.3d 1176, 1192 (10th Cir. 2018) (quoting Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256,
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:
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
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, 10 P.3d at 1264 (internal quotation marks omitted). To the extent that RE/MAX failed its obligations under the Amendment, whether because it was unable to perform them or otherwise, it may be liable for breach of contract for failing to meet its contractual obligations. But Quicken Loans' fraudulent inducement claim goes beyond the services RE/MAX ultimately contracted to provide. It seeks to hold RE/MAX liable for being incapable of providing services that RE/MAX allegedly knew it could not provide when the third representation was made. Docket No. 56 at 28, ¶ 59-60. To the extent that, through the Amendment, RE/MAX did not obligate itself to provide such services, the economic loss rule bars Quicken Loans' claim. This application of the economic loss doctrine "holds the parties to the terms of their bargain, enforces their expectancy interests, and maintains the boundary between contract and tort law." BRW, Inc., 99 P.3d at 72. Accordingly, the Court finds that Quicken Loans' second counterclaim is barred by the economic loss rule insofar as it is predicated on the third representation.
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., 159 P.3d 126, 132 (Colo. 2007) (Hobbs, J., dissenting)). This argument ignores Quicken Loans' allegation that the Amendment, and the process leading up to it, led Quicken Loans to continue incurring costs that it would have otherwise avoided, thereby resulting in damages. Docket No. 56 at 28, ¶ 64. Movants do not argue that this damages theory is not viable. See Docket No. 77 at 3.
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
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 non-performance; (3) failure to perform the contract by the defendant; and (4) resulting damages to the plaintiff." Western Distributing Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992) (citations omitted). Quicken Loans alleges that RE/MAX breached the NDA by disclosing information obtained pursuant to the NDA to Motto to "facilitate the development and launch of its competing mortgage origination business." Docket No. 56 at 30, ¶ 80.
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:
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."
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., 9 F.3d 823, 847 (10th Cir. 1993) (citing Colorado Uniform Trade Secrets Act, Colo. Rev. Stat. § 7-74-101 et seq.). The Colorado Uniform Trade Secrets Act defines a "trade secret" as:
Colo. Rev. Stat. § 7-74-102(4).
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 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." Id. at 22, ¶ 33. Quicken Loans also added allegations related to the security precautions it uses to protect its alleged trade secrets. Id. at 23-24, ¶ 38.
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, 2012 WL 628619, at *10 (D. Colo. Feb. 27, 2012) (explaining that there is no heightened pleading standard for trade secret claims).
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
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, 2010 WL 3489915, at *4 (D. Colo. Aug. 31, 2010) ("Ciena")). Further, as with the breach of NDA claim discussed above, movants argue that Quicken Loans' allegations that its trade secrets were misappropriated and used are conclusory. Docket No. 61 at 10-11. Quicken Loans argues that this case is distinguishable from Ciena because the "same employees who were working with Quicken Loans' trade secret information ... were set up as the senior executives in a brand new competitor, with timing so close that they would have had to be working on the two projects simultaneously." Docket No. 71 at 10.
In Ciena, a defendant hired the plaintiff's former employee who had access to trade secrets related to the plaintiff's business strategies. 2010 WL 3489915, at *4. The Court found that the defendant's employment of plaintiff's former employee was not enough to show misappropriation because it did not show that the employer misappropriated the trade secrets. Id. The court rejected the proposition that Colorado's Uniform Trade Secrets Act "impos[es] strict liability on a corporation that hires a person possessing others' trade secrets" and found that, without "specific factual averments" of disclosure or use, the Court could not impute the employee's acquisition of trade secrets to his new employer. Id. As movants argue, Quicken Loans' counterclaims lack any specific factual allegations of disclosure of trade secrets to Motto by RE/MAX's former employees and also lack any specific factual allegations of how such employees used Quicken Loans' trade secrets at 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., 311 F.Supp.2d 1048, 1115 (D. Colo. 2004).
In the transferred case, Judge Wang found that Quicken failed to allege facts showing that
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., 311 F.Supp.2d at 1115. Indeed, Quicken Loans does not dispute that Motto did not exist prior to RE/MAX's alleged breach of the Agreement. See Docket No. 71 at 10; Docket No. 56 at 24, ¶ 41 n.1. Accordingly, the Court will dismiss Quicken Loans' eighth counterclaim.
For the foregoing reasons, it is