Freedom Mortgage Corporation v. Tschernia

CourtDistrict Court, S.D. New York
DecidedMarch 26, 2021
Docket1:20-cv-01206
StatusUnknown

This text of Freedom Mortgage Corporation v. Tschernia (Freedom Mortgage Corporation v. Tschernia) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Freedom Mortgage Corporation v. Tschernia, (S.D.N.Y. 2021).

Opinion

□ UNITED STATES DISTRICT COURT peneremre SOUTHERN DISTRICT OF NEW YORK | DATE FILED: 3/26/2021 Freedom Mortgage Corporation, Plaintiff, 20-cv-1206 (AJN) ~ MEMORANDUM OPINION & Richard Tschernia, ORDER Defendant.

ALISON J. NATHAN, District Judge: Richard Tschernia and his business partners sold their successful mortgage loan business to Freedom Mortgage Corporation. Tschernia continued working for Freedom for four more years until Freedom elected not to renew his contract. He then went to work for one of Freedom’s rivals, taking with him two telephone numbers that Freedom alleges were included in the sale and that it had used in its advertisements. Freedom sued Tschernia, claiming that he breached the terms of the sale agreement and misappropriated the phone numbers. Tschernia moves to dismiss. The Court concludes that Freedom plausibly alleges breach of contract and unfair competition, but that its other claims reach too far. It thus grants the motion in part and denies it in part. I. Background For purposes of this motion, the Court takes as true all factual allegations in the first amended complaint (“FAC”), Dkt. No. 25, and draws all reasonable inferences in Freedom’s favor. Because Freedom asserts claims under the contracts governing its purchase of Tschernia’s

company and a subsequent release, the Court considers those, too. See Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002). Tschernia began working in the mortgage industry around 1985. FAC ¶ 8. In 2008, he became one of five shareholders in Continental Home Loans, Inc., a mortgage loan company

based in Melville, New York. Id. ¶ 9. The company was successful, and in May 2014 agreed to sell substantially all of its assets to Freedom, including its intangible assets and goodwill. Id. ¶ 20; see Asset Purchase Agreement, Dkt. No. 27-1, at 11–12. Tschernia was a party to the purchase agreement and received 5% of the purchase price based on his ownership in the company. FAC ¶¶ 21, 26; see Asset Purchase Agreement at 1. Freedom purchased Continental in part because of Continental’s police and fire union business. FAC ¶ 10. The asset purchase agreement included a provision barring the Continental shareholders from competing with Freedom for five years after the sale. Asset Purchase Agreement at 52–53; see FAC ¶ 31 n.3. In an employment agreement accompanying the sale, the Continental shareholders agreed that they would continue working for Freedom for a period after the sale. FAC ¶ 29; see

Employment Agreement, Dkt. No. 27-3. The employment agreement also included provisions barring Tschernia from working for any of Freedom’s competitors anywhere in the country or soliciting its clients for a period of two years after the end of his employment with Freedom. FAC ¶¶ 29–32. Following the sale, Tschernia continued working for Freedom until Freedom elected not to renew his contract in September 2018. Id. ¶ 41. During the course of preparing for Tschernia’s departure, Freedom leaned that he retained control over an 800 telephone number that both Continental and Freedom had used in their business. Id. ¶¶ 12, 42. When Freedom confronted Tschernia, he agreed to give up the number. Id. ¶¶ 43, 45–46. Freedom later learned that Tschernia had also retained control over another 718 number. Id. ¶¶ 48–49. These numbers had appeared in Continental’s and Freedom’s advertisements, including marketing materials directed at their police and fire union clients. Id. ¶¶ 11–14. Instead of returning those numbers to Freedom when his employment ended, Tschernia forwarded them (and some other numbers

Freedom had used) to his new employer so that prospective clients’ calls would continue to reach him, rather than Freedom. Id. ¶¶ 47–48. He also told some of Freedom’s union clients to contact him once he moved to a new company. Id. ¶ 44. Tschernia has since forwarded the 800 number back to Freedom but has not done so with the 718 number. Id. ¶¶ 47, 49. In December 2019, Tschernia began working CrossCountry—one of Freedom’s competitors—as a Senior Vice President of Affinity Lending at an office less than three miles from where he worked for Freedom. Id. ¶ 54. He continued to use the 800 and 718 numbers at his new job to originate mortgage loans on behalf of CrossCountry. Id. ¶¶ 57–59. Freedom also alleges that some of the loans it acquired from Continental under the asset purchase agreement were defective. Id. ¶¶ 68–72. It does not allege any details as to which

loans were defective or why they were defective. Although Freedom and the Continental shareholders agreed to a mutual release in 2018, the release stated that it would only be effective as to shareholders who did not challenge the restrictive covenants contained in the employment agreement. Id. ¶¶ 75–77. II. Legal Standard “To survive a motion to dismiss, a complaint must plead ‘enough facts to state a claim to relief that is plausible on its face.’” Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “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.” Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 715 (2d Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). When determining whether a complaint states a claim, a court accepts as true all allegations in the complaint and draws all reasonable inferences in favor of the non-moving party. Id. For

purposes of a motion to dismiss, “the complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference.” Chambers, 282 F.3d at 152 (quoting Int’l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (per curiam)). “Even where a document is not incorporated by reference, the court may nevertheless consider it where the complaint relies heavily upon its terms and effect, which renders the document integral to the complaint.” Id. at 153 (cleaned up). “At the motion to dismiss stage, a district court may dismiss a breach of contract claim only if the terms of the contract are unambiguous. Orchard Hill Master Fund Ltd. v. SBA Commc’ns Corp., 830 F.3d 152, 156 (2d Cir. 2016). III. Discussion

A. Breach of the Asset Purchase Provisions The parties’ dispute in this case centers on Tschernia’s retention of the phone numbers. Freedom alleges that it purchased those numbers along with Continental’s other assets under the asset purchase agreement. The agreement defines “purchased assets” as all Continental’s assets “primarily related to, used or held for use in, or otherwise necessary for, the conduct of the Business as a going concern, including [twelve categories of assets]; provided, that the Purchased Assets shall not include any Excluded Assets.” Asset Purchase Agreement at 11–12. Excluded assets are defined in a separate schedule. See id. The parties agree that neither the enumerated categories of documents listed as purchased assets nor the schedule of excluded assets specifically mention telephone numbers. In Tschernia’s view, the phone numbers are not included in the sale because they are not expressly identified as purchased assets.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Chickasaw Nation v. United States
534 U.S. 84 (Supreme Court, 2001)
Bell Atlantic Corp. v. Twombly
550 U.S. 544 (Supreme Court, 2007)
Ashcroft v. Iqbal
556 U.S. 662 (Supreme Court, 2009)
Ruotolo v. City of New York
514 F.3d 184 (Second Circuit, 2008)
Colavito v. New York Organ Donor Network, Inc.
860 N.E.2d 713 (New York Court of Appeals, 2006)
ITC Ltd. v. Punchgini, Inc.
880 N.E.2d 852 (New York Court of Appeals, 2007)
Greenfield v. Philles Records, Inc.
780 N.E.2d 166 (New York Court of Appeals, 2002)
Thyroff v. Nationwide Mutual Insurance
864 N.E.2d 1272 (New York Court of Appeals, 2007)
BDO Seidman v. Hirshberg
712 N.E.2d 1220 (New York Court of Appeals, 1999)
Litwin v. Blackstone Group, L.P.
634 F.3d 706 (Second Circuit, 2011)
Corsello v. Verizon New York, Inc.
967 N.E.2d 1177 (New York Court of Appeals, 2012)
Arakelian v. Omnicare, Inc.
735 F. Supp. 2d 22 (S.D. New York, 2010)
IDT Corp. v. Morgan Stanley Dean Witter & Co.
907 N.E.2d 268 (New York Court of Appeals, 2009)
Mandarin Trading Ltd. v. Wildenstein
944 N.E.2d 1104 (New York Court of Appeals, 2011)

Cite This Page — Counsel Stack

Bluebook (online)
Freedom Mortgage Corporation v. Tschernia, Counsel Stack Legal Research, https://law.counselstack.com/opinion/freedom-mortgage-corporation-v-tschernia-nysd-2021.