Genworth Fin. Wealth Mgmt., Inc. v. McMullan

Decision Date30 March 2012
Docket NumberCIVIL ACTION NO. 3:09-CV-1521(JCH)
CourtU.S. District Court — District of Connecticut
PartiesGENWORTH FINANCIAL WEALTH MANAGEMENT, INC., Plaintiff, v. TIMOTHY MCMULLAN; JAMES COOK; TIMOTHY MCFADDEN; KAREN BAZON; TAMARA RIVERA; and TJT CAPITAL GROUP, Defendants. TIMOTHY MCMULLAN; JAMES COOK; TIMOTHY MCFADDEN; and TJT CAPITAL GROUP, Counter-Claimants and Third-Party Plaintiffs, v. GENWORTH FINANCIAL WEALTH MANAGEMENT, INC., Counter-Claim Defendant, GURINDER AHLUWALIA, Third-Party Defendant.
CONSOLIDATED RULING ON THE PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT (Doc. No. 195); PLAINTIFF'S AND THIRD-PARTY DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT (Doc. No. 198); and DEFENDANTS' MOTION
FOR SUMMARY JUDGMENT (Doc. No. 201)

The plaintiff, Genworth Financial Wealth Management, Inc. ("Genworth") brought this action for injunctive relief and damages against several of its former high-levelemployees, Timothy McMullan, James Cook, Timothy McFadden, and the business the three men formed after they left Genworth, TJT Capital Group, LLC ("TJT") (collectively, the "Principal Defendants"), as well as claims against two former Genworth employees who went to work at TJT in administrative jobs, Karen Bazon, and Tamara Rivera (collectively, the "Defendants"). The Principal Defendants counterclaimed against Genworth and brought a third-party complaint against Genworth's President and CEO, Gurinder Ahluwalia, seeking injunctive relief and damages. Pursuant to Federal Rule of Civil Procedure 56, both Genworth (Doc. No. 195) and the Defendants (Doc. No. 201) move for summary judgment on Genworth's claims, and Genworth and Ahluwalia move for summary judgment on the counterclaims and third-party claims (Doc. No. 198).

For the reasons stated herein, Genworth's Motion (Doc. No. 195) is denied, Genworth's and Ahluwalia's Motion (Doc. No. 198) is granted in part with respect to the tortious interference with contractual relations claim and denied in part as to all other claims; and the defendants' Motion (Doc. No. 201) is denied.

I. BACKGROUND1

This action arises out of the manner in which the Individual Defendants left the employ of Genworth in the summer of 2009. After doing so and establishing TJT, TJT began aggressively soliciting Genworth clients with whom they had worked while still at Genworth. Genworth mounted an aggressive campaign to retain those clients. Acrimony between the Principal Defendants and Genworth escalated, and Genworth commenced this lawsuit in September 2009.

A. The Individual Defendants' contractual relationships with Genworth

The Individual Defendants all worked for the Private Client Group ("PCG") at Genworth. The PCG originally began as a money management business called the BJ Group, which was owned in part by Bob Brinker. Genworth's L.R. 56(a)(1) Stmt. (Doc. No. 200) ¶ 1. Centurion Capital Management Corp. bought the BJ Group in 2000, and General Electric ("GE") bought Centurion in 2001, at which time the PCG was known as General Electric Private Asset Management. Id. ¶ 2. At some point in 2004 or 2005, GE spun off Genworth. Id. ¶ 3; Def.'s L.R. 56(a)(2) Stmt. (Doc. No. 210) ¶ 3. McFadden and Cook had started working with the BJ Group in 1996 and 1999, Def.'s L.R. 56(a)(1) Stmt (Doc. No. 203) ¶ 4, and McMullan served as head of the PCG between 2004 and 2009, Genworth's L.R. 56(a)(1) Stmt. (Doc. No. 200) ¶ 3.

After the spinoff, all five of the Individual Defendants signed a document entitled "Conditions of Employment Acknowledgment" (the "Contract"). The Contract conditions the employee's continued employment with Genworth on the employee reading and agreeing to three additional documents: (1) the "Proprietary Information and Inventions Agreement" (the "Confidentiality Agreement"), (2) the "Genworth Code of Ethics" (the "Code"), and the "Resolve Guidelines" and "Resolve Program Handbook" (collectively, the "Arbitration Agreement"). Genworth's L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. U, at 4-8 (the Contract signed by all the Individual Defendants). The Contract therefore unambiguously states that some of its relevant terms, namely those that appear in the Confidentiality Agreement, the Code, and the Arbitration Agreement, do not appear within its four corners. See id. The record does not contain copies of the Confidentiality Agreement, the Code, or the Arbitration Agreement signed and dated byany of the Individual Defendants.

According to a Genworth employee, the Confidentiality Agreement as it existed in 2005 when the individual defendants signed the Contract expressly prohibited "use, publi[cation] or . . . disclos[ure] . . . [of] confidential information," including, by way of example, "information or materials concerning [Genworth]'s . . . customer relationships." Bartle Aff. (Doc. No. 214-1) ¶ 2, Ex. A. But the same employee testified that this language specifically identifying customer information as confidential was not added to the agreement until 2006 and did not apply to employees who signed the earlier version. Def.'s L.R. 56(a)(1) Stmt (Doc. No. 203) Ex. 8 (the "Bartle Dep."), at 41:1-42:17. The Principal Defendants claim that they have never seen this version of the Confidentiality Agreement. Def.'s L.R. 56(a)(1) Stmt. (Doc. No. 203) Ex. 1 (the "July 8 Cook Decl."), ¶ 14, Ex. 2 (the "July 8 McFadden Decl."), ¶ 11, Ex. 3 (the "July 8 McMullan Decl."), ¶ 21. Instead, each claims that he signed a different confidentiality agreement which, although it did prohibit disclosure of confidential information, did not specifically mention customer information as confidential. July 8 Cook Decl. Ex. A; July 8 McFadden Decl. Ex. A; July 8 McMullan Decl. Ex. A. Although Cook and McFadden appear to claim that they signed the same earlier confidentiality agreement, July 8 Cook Decl. Ex. A; July 8 McFadden Decl. Ex. A, McMullan claims that he signed yet another version of the confidentiality agreement, July 8 McMullan Decl. Ex. A. Bazon and Rivera do not contest that the Confidentiality Agreement proffered by Genworth binds them.

In addition, Genworth submitted a version of the Code dated 2006, after all the Individual Defendants except Rivera signed the Contract. Genworth's L.R. 56(a)(1)Stmt. (Doc. No. 200) Ex. W (the "2006 Code"), at 1, 44.2 This version of the Code does not contain a disclaimer of any contractual rights. See generally id. The Defendants submitted as evidence a version of the Code dated 2004, when Genworth was still part of GE, which states: "GE does not create any contractual rights by issuing the [Code]."3 Def.'s L.R. 56(a)(1) Stmt. (Doc. No. 203) Ex. 9 (the "2004 Code"), at 2. A Genworth employee testified that employees are trained on updated versions of the Code and must reaffirm their commitment to its principles, Bartle Dep. at 17:3-20, but no written reaffirmations or copies of training materials appear in the record.

Both versions of the Code have extremely similar sections discussing the need for employees to protect confidential and proprietary information and avoid conflicts of interest. 2004 Code at 26, 29-30; 2006 Code at 29-30, 36-37. McMullan testified that he "perhaps" did not comply with the Code's intellectual property provisions, Genworth's L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. E (the "McMullan Dep."), at 221:7-222:16, and Cook testified that he had violated the Code's conflict of interest provisions, Genworth's L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. H (the "Cook Dep."), at 224:15-24.

B. Individual Defendants' Departure From Genworth

As of December 2008, McMullan began planning to leave Genworth and start his own money management firm; as of January 2009, Cook and McFadden had agreed to join him. Genworth's L.R. 56(a)(1) Stmt. (Doc. No. 197) ¶¶ 23, 25. In April 2009,McMullan, Cook, and McFadden created a business strategy document for the proposed new enterprise; the document identified the proposed business' strategy as persuading Genworth clients with whom McMullan, Cook, and McFadden worked to move their money management business to TJT. See id. ¶¶ 26, 28-29.

In furtherance of this plan and while still employed at Genworth, McMullan began removing information about the targeted clients from Genworth client databases and sending it to TJT's eventual custodian, Charles Schwab. Id. ¶¶ 40, 42. Cook and McFadden also sent client contact information to Charles Schwab. Id. ¶ 54. McMullan also solicited Brinker, who had remained in an advisory role in the PCG's various incarnations, to end his relationship with Genworth and begin a new one with TJT. Id. ¶¶ 47-50. Brinker ultimately elected to contract with TJT on a non-exclusive basis and continue working with Genworth as well. Genworth's L.R. 56(a)(1) Stmt. (Doc. No. 200) Ex. F.

C. Genworth's Reaction to the Defendants' Activities

During July 2009, after McMullan's departure from Genworth, Genworth's co-chairman, Ronald Cordes, negotiated an extension of Genworth's advisory agreement with Brinker in which Brinker would provide non-exclusive advisory services to Genworth. Genworth's L.R. 56(a)(1) Stmt. (Doc. No. 200) ¶¶ 7-9. Upon learning from Genworth clients that the Principal Defendants also claimed to have an agreement with Brinker, Cordes met with Mary Jo Zandy, Brinker's authorized agent, on August 21, 2009. Id. ¶ 10.

The accounts of the meeting vary. According to Zandy, Cordes stated that McMullan had stolen client records, Genworth's Reply Mem. in Supp. of Mot. for Summ.J. (Doc. No. 232) Ex. Q (the "Zandy Dep."), at 96:8-16, and accused Zandy and Brinker of destroying Genworth's business, id. at 96:2-6. Zandy also stated that Cordes further threatened imminent legal action, including subpoenas and lawsuits, against Zandy and Brinker. Id. at 97:23-99:4. Zandy also stated that, in response to Cordes' threats, she decided to attempt to persuade Brinker to rescind his agreement with TJT, id. at 106:7-11, and that Brinker agreed, id. at 113:20-22. Zandy later sent an e-mail to Cordes stating that no agreement...

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