The Federal Savings Bank v. Ace Watanasuparp et al

MOTION for Summary Judgment as to Def. Watanasuparp. Document

S.D.N.Y.April 3, 2017

1 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK THE FEDERAL SAVINGS BANK, : Plaintiff, : Civil Case No. 15-CV-3548 : v. : : NOTICE OF MOTION ACE WATANASUPARP, RONALD : RIEMER, AND CITIZENS FINANCIAL : ECF Case GROUP, : Defendants. : To: John P. Barry, Esq. PROSKAUER ROSE LLP Eleven Times Square New York, NY 10036-8299 Attorney for Defendants DEFENDANTS’ NOTICE OF MOTION FOR SUMMARY JUDGMENT PLEASE TAKE NOTICE that, upon the Memorandum of Law in Support of Plaintiff’s Motion for Summary Judgment; the accompanying Statement of Undisputed Material Facts Pursuant to Local Rule 56.1; the Declaration of Meghan Finnerty, and the exhibits attached thereto, Plaintiff will move this Court enter an Order of (partial) Summary Judgment against Defendant Ace Watanasuparp, finding that as a matter of law that Defendant Ace Watanasuparp breached his fiduciary duty to Plaintiff, and will do so before the Honorable Alvin K. Hellerstein, U.S.D.J. at 500 Peark Street, New York, NY, 10007, on a date and time to be designated by the Court. OFFIT KURMAN, P.A. Dated: April 3, 2017 /s/ Meghan Finnerty_______________ Meghan Finnerty (admitted pro hac vice) April Rancier 300 East Lombard Baltimore, MD 2102 410-209-6426 410-209-6435 (fax) arancier@offitkurman.com Attorneys for Plaintiff Case 1:15-cv-03548-AKH Document 89 Filed 04/03/17 Page 1 of 3 2 CERTIFICATE OF SERVICE I hereby certify that on April 3, 2017 on behalf of Plaintiff, the Federal Savings Bank, I caused Plaintiff’s Notice of Motion for Summary Judgment to be filed in the above-captioned action with the Clerk of the United States District Court, Southern District of New York, using the CM/ECF system, which sent notification to all counsel of record. OFFIT KURMAN, P.A. Dated: April 3, 2017 /s/ Meghan Finnerty_______________ Meghan Finnerty (admitted pro hac vice) April Rancier 300 East Lombard Baltimore, MD 2102 410-209-6426 410-209-6435 (fax) arancier@offitkurman.com Attorneys for Plaintiff Case 1:15-cv-03548-AKH Document 89 Filed 04/03/17 Page 2 of 3 3 4851-7214-4710, v. 1 Case 1:15-cv-03548-AKH Document 89 Filed 04/03/17 Page 3 of 3 1 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK THE FEDERAL SAVINGS BANK, : Plaintiff, : Civil Case No. 15-CV-3548 : v. : : ACE WATANASUPARP, RONALD : RIEMER, AND CITIZENS FINANCIAL : GROUP, : Defendants. : ORDER AND NOW, this _____ day of ________________________, 2017 upon consideration of Plaintiff the Federal Savings Bank’s (“TFSB”) Motion for Partial Summary Judgment (the “Motion) and all supporting documents, and Defendants’ Opposition Memorandum, and all documents supporting the Opposition, it is hereby ORDERED that the Motion is GRANTED. It is further ORDERED, that this Court finds that, as a matter of law, Defendant Ace Watanasuparp breached his fiduciary duty to Plaintiff. . ___________________________________ Alvin K. Hellerstein, U.S District Judge 4812-2976-1094, v. 1 Case 1:15-cv-03548-AKH Document 89-1 Filed 04/03/17 Page 1 of 1 0 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK THE FEDERAL SAVINGS BANK, : Plaintiff, : Civil Case No. 15-CV-3548 : v. : : ACE WATANASUPARP, RONALD : RIEMER, AND CITIZENS FINANCIAL : GROUP, : Defendants. : MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNT IV, BREACH OF FIDUCIARY DUTY, AGAINST DEFENDANT ACE WATANASUPARP OFFIT KURMAN Dated: March 31, 2017 /s/ Ari Karen Ari Karen (admitted pro hac vice) April Rancier Offit Kurman 300 East Lombard Baltimore, MD 21202 410-209-6426 410-209-6435 (fax) arancier@offitkurman.com Attorneys for Plaintiff Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 1 of 25 1 I. INTRODUCTION This action involves a systematic and coordinated raid by defendant Ace Watanasuparp (“Watanasuparp”) and his new employer, Defendant Citizens Financial Group (“Citizens”) on an entire division of Plaintiff, The Federal Savings Bank (“TFSB”), Mr. Watanasuparp’s former employer. While still employed by TFSB, Mr. Watanasuparp, a former senior executive of TFSB, and the President of DE Capital, a division of TFSB, abruptly resigned on March 31, 2015 to join Citizens. That same day, approximately 30 loan officers employed in TFSB’s DE Capital division, who all reported directly or indirectly to Mr. Watanasuparp, submitted near simultaneous letters of resignation. In the weeks that followed, TFSB learned that Mr. Watanasuparp – who was hired to service the relationship between TFSB and Douglas Elliman – was systemically undermining the goodwill between the entities from nearly the start of the relationship. TFSB also learned that Defendant Watanasuparp initiated discussions with over a dozen banks, facilitating them through the disclosure of TFSB’s confidential and proprietary information, and facilitating the introduction of his subordinate reports to those entities. Indeed, Defendant Watanasuparp supplied Citizens with confidential information with respect to TFSB’s pricing, loan officer compensation, and the details of its Marketing Services Agreement (“MSA”) with realtor Douglas Elliman, LLC, Douglas Elliman of LI, LLC and Douglas Elliman of Westchester, LLC, all d/b/a Douglas Elliman Real Estate (collectively, “Douglas Elliman”), which gave Citizens a leg up in negotiations both with TFSB employee loan officers, and TFSB’s MSA partner, Douglas Elliman. TFSB placed Defendant Ace Watanasuparp in a supervisory position at TFSB with respect to valued employees and a valued business partnership with Douglas Elliman. In discovery of this matter, TFSB has discovered that in violation of that trust, over a period of Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 2 of 25 2 months, Watanasuparp went door to door to at least ten of TFSB’s competitors, shopping not only TFSB’s MSA, but the entire DE Capital Division, including all of the loan officer employees under his tutelage. By this motion for partial summary judgment, TFSB seeks to narrow the issues for the upcoming trial by seeking a ruling that Mr. Watanasuparp’s actions breached his fiduciary obligations to TFSB. (See Count IV of the Second Amended Complaint.) While issues of fact remain for trial pertaining to the dollar value of the damage that TFSB suffered at the hands of Mr. Watanasuparp’s scheme, no genuine issue of material fact remains as to whether Mr. Watanasuparp’s conduct, i.e. shopping the entire division of loan officers around to TFSB’s competitors, sending TFSB competitors confidential information, and repeatedly complaining about his employer to Douglas Elliman, constituted a breach of Mr. Watanasuparp’s fiduciary duties and duty of loyalty to his employer, TFSB. Accordingly, TFSB seeks a pretrial ruling that Mr. Watanasuparp had a fiduciary duty to his employer TFSB, and that Mr. Watanasuparp’s conduct breached that duty. II. RELEVANT FACTUAL BACKGROUND A. TFSB ACQUIRES DE CAPITAL AND HIRES DEFENDANT WATANASUPARP AS ITS PRESIDENT During the first quarter of 2014, TFSB entered into the MSA with Douglas Elliman. (SOF 1.) TFSB created a division within its bank -- DE Capital, a Division of Federal Savings Bank (“DE Capital Division”) -- with the chief aim of servicing the Douglas Elliman MSA. (SOF 2.)1 Defendant Ace Watanasuparp was hired as an Executive Vice President of TFSB and 1 Prior to entering into the MSA with TFSB, Douglas Elliman was part of a joint venture with Wells Fargo called “DE Capital Mortgage, LLC.” However, Wells Fargo made the decision to dissolve all joint ventures, including DE Capital Mortgage, LLC, because of concerns of illegality under Dodd Frank. After the dissolution of the joint venture with Wells Fargo, Douglas Elliman had no partner, and the loan officers had no employer. Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 3 of 25 3 President of DE Capital. (SOF 3). DE Capital was a division of The Federal Savings Bank. (SOF 3.) When Mr. Watanasuparp joined TFSB, he and all of the loan officers who reported to him were employees of TFSB and were paid by TFSB. (SOF 4.) Mr. Watanasuparp was not an employee of Douglas Elliman while employed by TFSB. (SOF 5.) Mr. Watansuparp acknowledged at deposition that he was aware that he had a fiduciary responsibility to DE Capital (SOF 6), and that DE Capital was a division of TFSB. (SOF 6.) Mr. Watansuparp testified at deposition that he was hired to head and service the relationship between Douglas Elliman and TFSB. (SOF 7.) B. DEFENDANT WATANASUPARP DECIDES TO UNDERMINE THE MSA RELATIONSHIP FOR PERSONAL GAIN Yet, from nearly the beginning, Defendant Watanasuparp undermined that relationship for the purpose of deteriorating the relationship so that he could move the entire division for the purpose of reaping personal financial gain. (SOF 8, 11, 12, 13.) Watansuparp’s intent can be discerned from an email he drafted in the initial weeks after DE Capital became a division of TFSB. In an email titled, “Why I feel we need to leave this bank”, he “identified the reasons why I believe [TFSB is] not the right long term partner[] and . . . propos[ing] solutions at the bottom” in August of 2015. (SOF 10.) This email was discovered within the “drafts” section of Mr. Watanasuparp’s TFSB email account, and he admitted drafting the email at deposition, but denied ever sending it. (SOF 11.) In his “draft”, Defendant Watanasuparp outlined what he called proposed solutions to the MSA between TFSB, his employer, and Douglas Elliman, the MSA relationship, which TFSB trusted Mr. Watanasuparp with handling: The first option is now that all of our bankers have taken the course to be licensed we will have a bigger pool of potential partners as a mortgage bank. The new licensing exam that Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 4 of 25 4 everyone will take will now allow each loan officer to be licensed in 28 states which includes NY. There are a couple of really good options that I wanted to go over with you in person. I have learned an enormous amount and have met so many people in the secondary market that are interested in our company. I would like to set up these meetings with them after labor day weekend. I would also like to sit down with Howard to see who he recommends as well. the [sic] worst case that we all don’t want but is on the table is an MSA with a retail bank whether its Citibank or Wells I know both institutions will offer us close to 100,000 a month for the relationship. (SOF 11.) As is the case with any corporate transition, there were growing pains when loan officer that had worked for years at lending giant Wells Fargo, joined TFSB. These growing pains were magnified by new laws that went into effect just prior to the transition that had the effect of changing the available loan types and documentation requirements, causing a substantial decrease in overall loan volumes nationwide. Yet, instead of even attempting to explain to loan officers and Douglas Elliman the challenges these initial months would present, Defendant Watanasuparp used these challenges as a pretextual basis to poison TFSB both with respect to the subordinate employees he was paid to supervise as well as with its MSA Partner Douglas Elliman. Consistent with his intention as set forth in his “draft” email, Mr. Watanasuparp began soliciting and encouraging complaints from his team. In fact, beginning as early as June of 2014, less than three months after the MSA had been executed, Defendant Watanasuparp reached out to the loan officers in his division soliciting examples of “challenges” they had had getting files through to closing and ordered his assistant to get examples of loans “lost” to other banks. (SOF 15). Defendant Watanasuparp then took responses to his request, revised the responses as necessary to remove references to mistakes made by his loan officers, and sent them – not to his employer, TFSB – but rather to the leadership of Douglas Elliman. (SOF 16- Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 5 of 25 5 18.) Without thoroughly researching the cause of these complaints, he would tie them together to portray TFSB to Douglas Elliman as an incompetent and untrustworthy MSA partner. Indeed, Defendant Watanasuparp repeatedly contacted Douglas Elliman surreptitiously – usually using a personal email account TFSB could not monitor – in order to complain about delays in loan closings. He would relay these complaints to Douglas Elliman despite his knew knowledge there were a myriad of causes to these delays -- including improper actions by the loan officers he supervised – a well as other reasons beyond TFSB’s control. On issues ranging from loan officer compensation to consumer interest rates, Defendant Watanasuparp hounded Douglas Elliman claiming that TFSB gouged borrowers and underpaid employees creating an untenable situation. In fact, TFSB often had the best rates available to consumers and the compensation that it was willing to pay its loan officers was higher than what Citizens offered. Defendant Watanasuparp in essence admits this in an email when he said TFSB’s rates were competitive but complained that 75 basis points was not enough compensation. (SOF 2.) (Email from Ace Watanansuparp to Steve and John Calk re: Feedback Comp. Plan D. Herman). In fact, 75 basis points was more than the loan officers previously made at Wells Fargo and more than what Citizens was offering to pay them. Nonetheless, Defendant Watanasuparp not only lodged these complaints with Douglas Elliman but would surreptitiously follow up if Douglas Elliman inquired to TFSB, in order to secretly denigrate TFSB’s response. The record contains at least ten emails from Watanasuparp to Douglas Elliman complaining of alleged “issues”2. (SOF 23, 63.) Without exception, Mr. Watanasuparp failed to 2 While not necessary to resolve for the purposes of the instant motion, it should be pointed out that the discovery record reveals that the accusations lodged by Mr. Watanasuparp against TFBS Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 6 of 25 6 copy any of his superiors at TFSB. (See id.) As a further act of subterfuge, at least half of those emails were sent from Mr. Watansuparp’s personal email address in order to keep his communications secret from TFSB management. (SOF 23.) Mr. Watanasuparp’s only explanation for why he utilized his personal email account was that it would not have “helped anyone” if TFSB had known of his actions. (SOF 23.) In the meantime, Defendant Watanasuparp continued to play Jekyll and Hyde, continuously leading his superiors at TFSB to believe he was supporting TFSB and its relationship with Douglas Elliman. C. DEFENDANT WATANASUPARP BEGINS PEDDLING THE DOGLAS ELLIMAN MSA TO COMPETITORS Despite the fact that Defendant knew that he was hired to facilitate the relationship between TFSB and Douglas Elliman, he began contacting lenders to shop the Douglas Elliman relationship and facilitate its move from TFSB. As outlined in his “draft email” Defendant Watanasuparp began soliciting offers to lure Douglas Elliman away from TFSB. Indeed, Defendant Watanasuparp began communications with as many as fourteen TFSB competitors, including Citizens Bank, whom Watanasuparp between August of 2014 and April 2015 in an attempt to find a new MSA partner for Douglas Elliman. (See id.). Watanasuparp was out in front of the negotiations on behalf of Douglas Elliman, preparing the presentations and marketing materials in order to shop Douglas Elliman, all while behind closed doors to Douglas Elliman were baseless. Defendant Watanasuparp confirmed at deposition that closing dates could not be set until final clearance was obtained by the bank. (SOF 24). Further Mr. Reimer confirmed that TFSB had guidelines where closings could not be scheduled until at least 48 hours after clearance. (SOF 24.) Herman and Haber conceded that these issues. Herman and Haber conceded these issues may not have been caused by TFSB during their depositions. Nonetheless. Watanansuparp used these allegations to fuel the fire. Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 7 of 25 7 employed as president of DE Capital. (SOF 3) (email from Ace Watanasuparp’s personal email account, ace1k@hotmail.com: “Yes this is something I am putting together for Howard so that we can show a potential partner the bandwidth of the company as we are trying to negotiate a deal with them.”) Using the materials he helped to create to shop the Douglas Elliman relationship to other lenders, Defendants Watanasuparp began investigating and recommending potential MSA partners. As early as October 2014, Mr. Watanasuparp was corresponding and meeting with potential lenders and competitors of TFSB, meetings which continued throughout the next five months of Mr. Watanasuparp’s employment with TFSB to discuss bringing his team of loan officers and the relationship with Douglas Elliman to one of TFSB’s competitors. (SOF.) When shopping the MSA relationship to TFSB’s competitors, Defendant Watanasuparp -- either personally, or through his assistant Christian Nguyen whom Mr. Watanasuparp called his “right hand man” who “can get you anything you need (SOF 30) routinely sent out TFSB confidential information to prospective Douglas Elliman partners. For example, Watanasuparp and/or Nguyen forwarded information such as TFSB year to date Profit & Loss, year to date loan volumes, compensation plans, pricing, actual loan volume, and information on product mix to TFSB competitors in the residential home mortgage lending business such as Total Mortgage, Continental Home Loans, Caliber Home Loans, Defendant Citizens, and First Key. (SOF.). Indeed, Mr. Watanasuparp testified that with every bank that went through the vetting process, they sent TFSB pricing information on jumbo loans to TFSB’s competitors. (SOF.) All defendants recognize this information was confidential and proprietary, because in part it would assist a competitor in developing compensation plans for employees, a structure for the Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 8 of 25 8 MSA and loan pricing that would be both economically viable and attractive, without the risks normally attendant to these situations because of the guesswork in estimating current conditions and relying upon unprovable representations of self-interested parties. Ironically, when disclosing this information -- which Defendant Watanasuparp was not entitled to share – he signed nondisclosure agreements using the fictitious name DE Capital LLC –a s if it was a stand-alone company as opposed to a mere TFSB division. Cognizant of the wrongdoing of their actions, Watanasuparp and Nguyen utilized their personal email accounts, not their work accounts. In fact, when one potential partner emailed Mr. Watanasuparp at his “decapitaltfsb.com” account, to “arrange[] a quick chat with our CEO to get you the answers to your question regarding, JV, etc. . .”, Mr. Nguyen apparently responded with a text message containing Mr. Watanasuparp and Mr. Nguyen’s personal email addresses, and the discussions continued on personal email. (SOF 14, 31) (“Got Christians [sic] text with your personal email addresses so thought I’d forward the earlier email to them . . .”). When asked why he used his personal email account, Defendant Watanasuparp explained it would not have “helped anyone” if TFSB was able to potentially discover what he was up to. For example, documents received in response from W. J. Bradley Mortgage Capital, LLC (“W.J. Bradley”) demonstrate that Mr. Watanasuparp met with W.J. Bradley Senior Managing Director, R. Ross Cowan, on November 11, 2014, and that after the meeting, Mr. Watanasuparp emailed Cowan from Mr. Watanasuparp’s personal hotmail account to let them know that “I received Blair’s request in a separate email and Christian should have most of that information readily available.” (SOF 35.) Mr. Watanasuparp carbon copied nguyen.h.christian@gmail.com, a personal email account for Nguyen. (SOF 36.)3 3 In response, to Mr. Watanasuparp’s email, Cowan responded “WJB is the right partner for you . . . Let’s do this.” (SOF 35.) Two days later, Mr. Watanasuparp emailed Ken Haber’s Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 9 of 25 9 According to documents produced from another TFSB competitor, Total Mortgage, Mr. Watanasuparp also met with their President and CEO, John Walsh, on December 3, 2014. (SOF 38.) The next day Mr. Walsh emailed Mr. Watansuparp and Mr. Nguyen on their personal email accounts, noting: “I honestly believe that we are exactly the type of company you guys are looking to partner with . . . I realize we are a late entrant, but I look at is as you saved the best for last.” (Id.) Mr. Nguyen sent screenshots of TFSB’s pricing to Mr. Penner at Total Mortgage. (SOF 52.) Mr. Watansuparp testified that screenshots of a lender’s pricing system would be considered confidential by his current employer, Citizens. (SOF 53.) Total Mortgage redacted its own pricing information in documents it produced in this case, indicating that it believed its pricing information to be confidential. (SOF) Mr. Watanasuparp agreed that banks consider their pricing systems proprietary. (SOF 54.) In December of 2014, Sandy Mozes, Vice President of Caliber Home Loans sent an email requesting funding numbers broken down by product type to Mr. Watanasuparp and Mr. Nguyen’s DE Capital work email accounts. (SOF 49.) In response, Mr. Nguyen sent a text to Ms. Mozes with Mr. Watanasuparp and Mr. Nguyen’s personal email accounts, and Ms. Mozes then forwarded the email to their personal accounts. (Id.) Mr. Watanasuparp also received an executed NDA from Caliber, and shared with Caliber confidential TFSB pricing information through his assistant. (SOF 50.) On December 8, 2014, the Managing Director of First Key Holdings, Charles MacIntosh, emailed an attachment to Mr. Nguyen at his personal email account, with the subject line: “Re: Countersigned NDA with FK/DE”. (SOF 43-44.) The email stated, assistant and asked if Mr. Haber would be in the office because “I need to swing by to get his signature on an NDA form.” (SOF 37). At his deposition, Mr. Watanasuparp agreed that his understanding of a nondisclosure agreement would be “to keep things confidential.” (SOF 37.) Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 10 of 25 10 “Christian please find attached the executed version. Please send over the data asap. Our chairman is chomping at the bit and I don’t want to lose his focus. I’ve been telling him for 3 days now it’s coming!” (SOF 43.) In response to the executed NDA, Mr. Watanasuparp’s assistant sent a variety of documents from his personal email account back to Mr. Macintosh, including transactions from 4/1/2014, “Official Start Date for DE Capital.” (SOF 44.) The email notes that it includes the “Locked Pipeline Tab.” (SOF 44.) Mr. Watanasuparp agreed at deposition that a locked pipeline report is the time of information he would consider confidential, and the type of information that could help a competitor. (SOF 45.) Mr. Macintosh requested and received additional responses on TFSB “rate info.” (SOF 46). Mr. Watansuparp also agreed that the rates on the existing pipeline constituted confidential information. (SOF 46.) Defendant Watanasuparp’s willingness to share TFSB’s confidential and proprietary information was so egregious that Citizens actually justified its receipt of information on the basis that Defendant Watanasupap had disclosed it to so many other people already that Citizens no longer viewed it as confidential. See T. Gamache 10/2016 Deposition 209:21- 211:25. Of course, Citizens never requested the information directly from TFSB, but rather received it surreptitiously via private email from Defendant Watanasuparp. D. DEFENDANT WATANSUPARP BEGINS SHOPPING THE EMPLOYEES OF DE CAPITAL. Defendant Watanasuparp understood that the DE Capital division was not just the MSA. Indeed the MSA would likely not leave TFSB unless the DE Capital employees left and vice versa. Further the real value of the DE Capital division was maintaining the continuity of the individual relationships on the mortgage and real estate side, with the integrity of the management in place. See G. Carter depo. 37:17 -38:17; 52:2-53:5. As such, to complete his Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 11 of 25 11 plan, Mr. Watanasuparp began telling the employees that he was entrusted and paid to supervise, about possibilities of employment with other banks and he began recruiting for these institutions. For example, Mr. Watanasuparp facilitated communications and meetings between Scott Penner, the President of Total Mortgage, to TFSB employees. (SOF 41.) ( “I spoke to Tom Drew today and he mentioned that he, Ace, and some other individuals would likely be coming up to our offices in Milford, Connecticut on Tuesday.” (SOF 41.) Mr. Watansuparp admitted that Tom Drew was Mr. Watansuparp’s manager in Long Island, that he was a key person at DE Capital, and that he had introduced Mr. Drew to Mr. Penner. (SOF 41.) Mr. Watanasuparp testified that he instructed his assistant, Mr. Nguyen, to “inform the loan officers [of DE Capital] that Total Mortgage is one of the banks that we possibly may be considering, and to go look at their operations.” (SOF 41.) Subsequent to the emails, Mr. Watanasuparp took an entire team of TFSB employees to Irving, Texas to meet with Caliber Home Loans, including Tom Drew, Christian Nguyen, Ron Reimer, and Glenda Winter. (SOF 50.) In addition to the above banks, Mr. Watanasuparp also brought a “DE Capital Team” to Stamford, CT to meet with Luxury Mortgage. (SOF 55.) Mr. Watanasuparp could not recall at deposition who would have accompanied him to Stamford to meet with Luxury Mortgage. E. DEFENDANT WATANASUPARP INFLUENCES DOUGLAS ELLIMAN AND THE DE CAPITAL LOAN OFFICERS TO MOVE TO CITIZENS With respect to Citizens, Tom Gamache, Division Vice President of Retail Mortgage Banking at Citizens, testified that according to his internal emails, he was “under the impression that Mr. Watanasuparp and Victor Shaio immediately called [him] when they heard he joined [Citizens].” (SOF 58.) As of January 2015, Mr. Watanasuparp and Mr. Gamache were in active negotiations Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 12 of 25 12 during which Mr. Watanasuparp provided Mr. Gamache sensitive TFSB information. For example, on January 28, 2015, Mr. Watanasuparp had Mr. Nguyen provide to Citizens certain TFSB documents: including “DE Capital 2014 Fundings,” which Mr. Nguyen stated would have been a spreadsheet including the number of funded volume, meaning closed transactions that DE Capital had done in the year 2014, for the three quarters that DE Capital was a Division of TFSB. (SOF 59.) Mr. Nguyen testified that that information would have either come from TFSB’s loan software, Encompass, which TFSB’s Chief Technology Officer testified was password protected, from a “daily funding” email that was sent out to Mr. Watanasuparp in his capacity as President of TFSB, or from TFSB’s on-site ops manager, John Moscati, who was admittedly not informed that the information was being disseminated to Citizens. (SOF 61.) Additionally, that same January 28, 2015 email provided Citizens with loan officer compensation plans (SOF 61), and “Compensation plans for Ace Watanasuparp Senior Vice Presidents Mortgage Bankers/Assistants.” (SOF 61.) While Defendants represented in their initial opposition to TFSB’s Motion for a Preliminary Injunction that Mr. Watanasuparp was not involved in negotiating Citizens’ MSA with Douglas Elliman, subsequent written discovery has confirmed that was false. Not only was Mr. Watanasuparp in discussions with Citizens for weeks before anyone at Douglas Elliman had any contact with Citizens, but Mr. Watanasuparp continued to funnel Citizens with inside information regarding Douglas Elliman’s MSA with TFSB, including the amount TFSB paid Citizens per month, rental fees, and a description of the services provided. (SOF 63) All of this information enabled Citizens to formulate proposals both to Douglas Elliman and to loan officers with higher confidence levels that would enable Citizens to offer more lucrative deals Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 13 of 25 13 because of a reduced need to build in larger margins to guard against overly optimistic representations. In fact, Mr. Watanasuparp and/or his assistant Mr. Nguyen exchanged at least a dozen emails with Mr. Gamache between January 28, 2015 and February 24, 2015, the first time that anyone at Citizens apparently met with anyone from Douglas Elliman. (SOF 64.) In January of 2015, well before anyone from Douglas Elliman had ever met or talked with anyone from Citizens about a potential MSA relationship, Defendant Watanasuparp had already provided Citizens with TFSB Profit & Loss Statements (SOF 65.) In response, on January 30, 2015, weeks before anyone at Citizens had spoken to anyone at Douglas Elliman, Citizens probed Watanasuparp, known to be an employee of TFSB, for more details including: the breakdown of actual loans at TFSB; the structure of his group at TFSB; the compensation of managers; compensation for loan officers; details regarding how the MSA operates, including whether the cost of the MSA was charged against the division’s “Profit & Loss”, and desk rental fees. (SOF 66) On Friday, February 13, 2015, Mr. Gamache and Mr. Watanasuparp “reviewed compensation plans, proposed structure, [Citizens] culture, and [Mr. Gamache’s] expectations of the partnership and of [Mr. Watanasuparp].” (SOF 67.) At this point, no one from Douglas Elliman had spoken to anyone at Citizens, and Citizens and Defendant Watanasuparp were already plotting compensation plans for TFSB’s loan officers who would service that MSA. (See Id.) (“He is fine with a 3-5 bp reduction in lo commission to pay for the cost of the msa.”) On February 18, 2015, Mr. Gamache recapped a meeting with Mr. Watanasuparp in which he confirmed compensation negotiations to Mr. Watanasuparp, Tom Drew and Victor Shaio, retention bonuses for 10 “key” loan officers, as well as compensation structures for loan Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 14 of 25 14 officers. On February 20, 2015, Mr. Gamache wrote to his superiors that he “had a great meeting with Ace this morning. I am meeting with Howard Lorbo [sic] and their Chief Counsel Tuesday afternoon.” (SOF 70.) Mr. Gamache also noted that in that email that Citizens was competing with Citibank, and that Citibank was willing to pay $100,000 a month out of the gate for the MSA, which Mr. Gamache called “Insane.” He then stated: “I coached Ace on how exactly to address this with Howard.” (Id.) Mr. Gamache admitted at deposition that he provided coaching to Ace on how to address Citi’s competing offer with Mr. Lorber. (SOF 70.) Both Gamache and Glenn Carter were acutely aware of Defendant Watanasuparp’s influence over Douglas Elliman’s selection of its next MSA Partner. A representative of Citizens finally met with Douglas Elliman leadership on Tuesday February 24, 2015. An email from 3:35 am early the next morning from Mr. Gamache to his superiors recapped his thoughts after that meeting: “Ace, his entire team, and Ken want to do MSA with us and has made it very clear to Howard.” (SOF 71.) He went on to describe the initial contact between Citizens and Watanasuparp: “Again we are last in. When they heard I joined the bank, victor and ace immediately called me.” (Id.) A year after the affiliation began, on or around March 31, 2015, Defendant Watanasuparp and dozens of TFSB loan officers sent nearly identical emails, noting that they were resigning from TFSB effective immediately. All of these employees had been presented and executed employment agreements with Citizens – all facilitated by Ace and the confidential and proprietary information which he had shared. In addition to the acquisition of substantially all of DE Capital’s loan officers, Defendant Citizens also entered into an MSA with TFSB’s chief marketing partner, Douglas Elliman. As Defendant Watanasuparp put it “we are still Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 15 of 25 15 partners with Elliman and it is in a form of a MSA agreement.” (SOF 9.) While issues of fact remain for trial pertaining to the dollar value of the damage that TFSB suffered at the hands of Mr. Watanasuparp, no genuine issue of material fact remains as to whether Mr. Watanasuparp’s conduct in sharing confidential information with TFSB’s competitors including Citizens, and secret emails to Douglas Elliman complaining about his employer TFSB constituted breaches of Mr. Watanasuparp’s fiduciary duty to his employer, TFSB. III. ARGUMENT Mr. Watanasuparp, as an employee and Vice President of TFSB, and President of the DE Capital division of TFSB, breached the fiduciary duty that he owed to TFSB when he systematically and repeatedly shared confidential TFSB documents with a slew of competitors including Citizens, and complained about his employer to TFSB’s marketing partner, in violation of the trust placed in him as the employee charged with managing the Douglas Elliman MSA and the DE Capital division of TFSB. A. LEGAL STANDARD FOR PARTIAL SUMMARY JUDGMENT Under Rule 56 of the Federal Rules of Civil Procedure, a party may move for summary judgment “upon all or any part” of a claim at issue. Fed. R. Civ. P. 56(a), 56(b) (emphasis supplied). A motion for partial summary judgment seeks a pretrial adjudication that certain issues shall be deemed established for the trial of the case. Alberty-Velez v. Corporacion de Puerto Rico, 361 F.3d 1, 6 n.5 (1st Cir. 2004); In re Ciprofloxacin Hydrochloride Antitrust Litigation, 261 F.Supp. 2d 188, 231 (E.D.N.Y. 2003). Motions for partial summary judgment are permitted where they are conducive to conservation of judicial resources and are of benefit to the parties. Bruschini v. Board of Educ., 911 F. Supp. 104, 106 (S.D.N.Y. 1995). Tronox Inc. Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 16 of 25 16 v. Anadarko Petroleum Corp., 464 B.R. 606, 612 (Bankr. S.D.N.Y. 2012). Summary judgment is warranted if the “pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). A “genuine issue” of “material fact” exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Although all facts and inferences therefrom are to be construed in favor of the party opposing the motion, Harlen Assocs. v. Village of Mineola, 273 F.3d 494, 498 (2d Cir. 2001), the non-moving party must raise more than just a “metaphysical doubt” as to a material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). “Mere speculation and conjecture is insufficient to preclude the granting of the motion.” Harlen, 273 F.3d at 499. There is no issue for trial unless there is “sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Anderson, 477 U.S. at 250. The non-moving party must thus come forward with competent evidence. As HN4 Rule 56(e) (Fed.R.Civ.P.) provides: When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party’s pleading, but the adverse party’s response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party. Chu Chung v. New Silver Palace Rest., 246 F. Supp. 2d 220, 226-27 (S.D.N.Y. 2002). The question of whether a defendant owed a plaintiff a fiduciary obligation is an Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 17 of 25 17 appropriate subject for partial summary judgment in the absence of a genuine issue of material fact. See, e.g., Liss v. Smith, 991 F. Supp. 278, 314 (S.D.N.Y. 1998) (granting partial summary judgment on a breach of fiduciary duty claim). B. NEW YORK LAW IMPARTS A FIDUCIARY DUTY OF LOYALTY ON EMPLOYEES Under New York law, it is axiomatic that an employee, who has been entrusted with confidential information pertaining to the conduct and clientele of his employer’s business, which he would not have obtained were it not for his status as a trusted employee, and which affords him an advantage over other competitors to whom the information is not available, may not subsequently use that information to further his own ends. Harry R. Defier Corp. v. Kleeman, 19 A.D.2d 396, 401, 243 N.Y.S.2d 930, 935 (1963). Further, as the Second Circuit has held, “under New York law, an agent is obligated ‘to be loyal to his employer and is ‘prohibited from acting in any manner inconsistent with his agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties.’” Phansalkar v. Andersen Weinroth & Co., L.P., 344 F.3d 184, 200 (2d Cir. 2003), citing Western Elec. Co. v. Brenner, 41 N.Y.2d 291, 295, 392 N.Y.S.2d 409, 360 N.E.2d 1091 (1977); Lamdin v. Broadway Surface Adver. Corp., 272 N.Y. 133, 138, 5 N.E.2d 66 (1936)); Sokoloff v Harriman Estates Dev. Corp., 96 N.Y.2d 409, 416, 754 N.E.2d 184, 729 N.Y.S.2d 425 [2001]; Bon Temps Agency Ltd. v Greenfield, 184 AD2d 280, 584 N.Y.S.2d 824 [1st Dept]; see also Aon Risk Servs., N.E. v. Cusack, 2011 NY Slip Op 52433(U), ¶¶ 12-13, 34 Misc. 3d 1205(A), 1205A, 946 N.Y.S.2d 65 (Sup. Ct.) This duty prohibits not just solicitation of customers, but extends to accounts, employees and business partners. See Mallory Factor, Inc. v. Schwartz, 146 A.D.2d 465, 536 N. Y.S.2d Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 18 of 25 18 752 (1st Dep’t 1989); Bender Ins. Agency, Inc. v. Treiber Ins. Agency, Inc., 283 A.D.2d 448,729 N.Y.S.2d 142, 145 (2d Dep’t 2001). In Aon Risk Servs v. Cusack, a New York court applied these general principles relating to an employee’s fiduciary duties and duty of loyalty to his employer to facts similar to the case at bar, where a manager organized a group of employees’ exodus to a competitor while on the company’s payroll. See Aon Risk Servs., N.E. v. Cusack, 2011 NY Slip Op 52433(U), ¶ 12, 34 Misc. 3d 1205(A), 1205A, 946 N.Y.S.2d 65 (Sup. Ct.). In Aon Risk Servs. v. Cusack, sixty Aon employees followed a senior executive to Alliant. 2011 NY Slip Op 52433(U), ¶ 1, 34 Misc. 3d 1205(A), 1205A, 946 N.Y.S.2d 65 (Sup. Ct.). As explained by the court, that case, “involve[d] a systematic and coordinated raid by defendant Michael Cusack and his new employer, defendant Alliant Insurance Services, Inc., on the clients and employees of the Construction Services Group of plaintiffs Aon Corporation . . . Cusack's former employer.” Id. There the court held that, “a corporate officer . . . owes a fiduciary duty to his employer, and is held to a standard ‘stricter than the morals of the marketplace. Not honesty alone, but the punctilio of honor the most sensitive, is ... the standard of behavior.’” Id., citing, In re Bernard L. Madoff Inv. Secs., LLC, 458 B.R. 87, 128 [Bankr SD NY 2011] [quoting Meinhard v Salmon, 249 NY 458, 464, 164 N.E. 545 [1928]). The court went on to explain that “corporate officers owe a fiduciary duty to their employer ‘not to (1) actively exploit their positions within the corporation for their own personal benefit, or (2) hinder the ability of a corporation to continue the business for which it was developed.’” Id. Moreover, where an agent has a conflict of interest with his principal, and fails to disclose the conflict, the agent is liable for a breach of fiduciary duty. Id. Under these facts, the court found that Aon had demonstrated a strong likelihood of success on the merits for its claim that Cusack had breached its fiduciary duty. Id. Specifically, Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 19 of 25 19 the court held: “As a senior executive at Aon, privy to Aon's most confidential strategic, financial and client information, once Cusack entered into employment negotiations with Alliant, he had a conflict of interest as to his continued dealings with Aon, and had a duty to disclose such negotiations.” Id. The facts of Aon are on all fours with the facts here. Just as Cusack worked to move the entire Aon Construction Services group that he managed to Alliant, Mr. Watanasuparp, who was entrusted with the management of TFSB’s DE Capital division, was surreptitiously working to move that division to a competitor. The record establishes that Mr. Watanasuparp was in violation of TFSB’s trust for over six months, actively shopping TFSB’s DE Capital division to TFSB’s competitors and sending numerous complaints about his employer to Douglas Elliman and TFSB employees. Moreover, without the permission of his employer, Mr. Watanasuparp provided or directed TFSB employees in his charge to provide TFSB confidential information to numerous TFSB competitors, including, inter alia, pricing (SOF 31), loan officer compensation information (SOF 69), employee contact information, MSA details, profit & loss sheets (SOF 65) and actual loan volume and product mix (SOF 30). Mr. Watanasuparp was aware that the information was confidential. With respect to pricing information, the information that was shared with competitors was captured by a screenshot of information behind a TFSB password protected firewall. (SOF.) Mr. Watanasuparp actively shielded his conduct from his employer by utilizing his personal email account to woo TFSB’s competitors. (SOF 49.) Moreover, Mr. Watanasuparp worked to introduce TFSB employee loan officers to competitor lenders, and did not disclose that information to TFSB. (See e.g. SOF 40-50.) Further, Defendant Watanasuparp repeatedly utilized his personal email account while employed Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 20 of 25 20 by TFSB to complain about TFSB to Douglas Elliman surreptitiously and without the permission of his employer, TFSB. (SOF 25.) The shared confidential information that Mr. Watanasuparp received pursuant to his position at TFSB, permitted TFSB competitors a leg up in negotiations with TFSB’s marketing partner, and with TFSB’s loan officers. Under New York law, as a TFSB employee, and an executive officer, Mr. Watanasuparp had fiduciary obligations to TFSB to be loyal, and to disclose conflicts of interest. In violation of those duties, Mr. Watanasuparp remained in TFSB’s employ so that he could obtain confidential TFSB information while shopping the TFSB division to its competitors. There is no genuine issue of material fact precluding summary judgment that this conduct constituted a violation of Mr. Watanasuparp’s fiduciary obligations to TFSB under New York law. C. DEFENDANT WATANASUPARP HAS NO DEFENSE FOR HIS DISLOYALTY. Mr. Watanasuparp has contended that his actions should be excused for a myriad of false and irrelevant reasons that provide no excuse for his breaches at all. First, at deposition, Mr. Watanasuparp tried to downplay his disloyal actions while employed by TFSB by repeatedly stating that the communications occurred after Douglas Elliman had provided notice that the MSA with TFSB would not automatically renew. (SOF.) According to Defendant Watanasuparp, by December 15, 2015, Douglas Elliman had decided that it would end its MSA relationship with TFSB. (Ex. [AW Expedited] at 98-102.) At that point, Mr. Watanasuparp claims he was directed by Howard Lorber “to do some fact finding about opportunities that were out there with Douglas Elliman” (Id. at 98-102). This was allegedly “after [Mr. Watanasuparp] found out that the partnership was no longer in existence,” and despite the fact that Mr. Watanasuparp was an employee of and paid by TFSB, and not an Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 21 of 25 21 employee of Douglas Elliman. (Id. at 98-102.) Even if this would-be defense was based in fact – and it is not -- it is a red herring. As to the facts, the discovery record confirms that Mr. Watanasuparp was meeting with TFSB competitors in an effort to move the division as early as October 2014, before Douglas Elliman provided notice that it would not renew the MSA. (SOF 29.) Further, the record confirms that even after the nonrenewal of the MSA, Douglas Elliman and TFSB continued to negotiate a renewal. In any case, this “defense” is entirely irrelevant and cannot preclude summary judgment because Mr. Watanasuparp was at all relevant times until his resignation an employee of TFSB. As an employee, he was precluded “from acting in any manner inconsistent with his agency or trust, and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties.” Phansalkar v. Andersen Weinroth & Co., L.P., 344 F.3d 184, 200 (2d Cir. 2003). The renewal or nonrenewal of the Douglas Elliman MSA did not affect Mr. Watanasuparp’s employment status with TFSB, and did not permit Mr. Watanasuparp to work against TFSB’s interests by sharing TFSB confidential information with competitors. There is simply no legal support to hold that his fiduciary duty to his employer ended if his employer lost a marketing relationship. In fact, the law establishes that the contrary is the case, as under New York law, “[e]ven if an employer rejects a business opportunity, an employee is not free to take the business or direct it to a competitor for his profit without the express consent and approval of his employer.” See Foley v. D’Agostino, 21 A.D.2d 60, 248 N.Y.S.2d 121, 129 (App. Div. 1st Dep't 1964) (citation omitted). Further, Mr. Watanasuparp’s assertions that he was merely following the directives of principles at Douglas Elliman are equally unavailing. Although the veracity of this statement is in question in light of testimony from Douglas Elliman principles that they were unaware that Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 22 of 25 22 information was being shared with a number of the lenders identified above, it is irrelevant. As established above, at all times while he was sending out TFSB’s confidential information to competitors, Mr. Watanasuparp was an employee of TFSB. He was the President of DE Capital, a division of the Federal Savings Bank, and his employment contract was with TFSB. His duty of loyalty was to TFSB, but the record demonstrates that he permitted his personal loyalties to the principles of Douglas Elliman and his own bank account to override any legal duties to his employer. While Mr. Watanasuparp meekly contended at deposition that he accepted directives by Douglas Elliman because they held a minority ownership interest in TFSB, he could not explain why this makes a difference since a minority owner could not direct disloyalty to an employer. In addition, any implication that Mr. Watanasuparp was actually acting at the behest of TFSB is easily dismantled by the record which demonstrates that at all times, he acted covertly and secretly to ensure that TFSB was not aware of what he was doing. (SOF 49.) If he was truly acting on behalf of TFSB and in TFSB’s best interests, he would not have felt the need to utilize personal email accounts for all communications with competitors. Moreover, Mr. Watanasuparp has contended that TFSB would have lost the MSA, employees, and clients regardless of his own conduct, and in essence, that there was nothing he could do to salvage the relationships. It should first be noted that this is an incredulously disingenuous argument in the face of a voluminous record of emails demonstrating that it was Mr. Watanasuparp poisoning TFSB’s relationships, the very relationships he was charged with maintaining. Instead of copying TFSB on communications with Douglas Elliman and the loan officers, or working to better those relationships, the record reflects that Mr. Watanasuparp himself was complaining about his employer in secret to TFSB’s MSA partner and loan officers. (SOF 24.) Even if what Mr. Watanasuparp is saying were true, that TFSB would have lost Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 23 of 25 23 everything even without his intervention, it would be incredibly difficult to prove given that that is not what actually occurred. New York law specifically recognizes that is the case, and accordingly, it is well-established that “[B]reaches of a fiduciary relationship in any context comprise a special breed of cases that often loosen normally stringent requirements of causation and damages.” Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537, 543 [2d Cir.1994); Wolf v. Rand, 258 A.D.2d 401, 685 N.Y.S.2d 708. This is because the purpose of this type of action ‘is not merely to compensate the plaintiff for wrongs committed ... [but also] to prevent them, by removing from agents and trustees all inducement to attempt dealing for their own benefit in matters which they have undertaken for others, or to which their agency or trust relates.’ Diamond v. Oreamuno, 24 N.Y.2d 494, 498, 301 N.Y.S.2d 78, 248 N.E.2d 910, citing Dutton v. Willner, 52 N.Y. 312, 319. IV. CONCLUSION AND RELIEF Based on the foregoing, TFSB respectfully requests that this Court enter an Order narrowing the issues for trial of this matter, entering partial summary judgment against Defendant Watanasuparp on Count IV, breach of fiduciary duty, ruling that Defendant Watanasuparp owed TFSB a fiduciary duty, and that his conduct breached his fiduciary duty to TFSB. Respectfully submitted: Dated: March 31, 2017 /s/ Ari Karen Ari Karen (admitted pro hac vice) April Rancier Offit Kurman 300 East Lombard Baltimore, MD 21202 410-209-6426 Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 24 of 25 24 410-209-6435 (fax) arancier@offitkurman.com Attorneys for Plaintiff 4823-1248-2118, v. 1 Case 1:15-cv-03548-AKH Document 89-2 Filed 04/03/17 Page 25 of 25