BGC, Inc. v. Bryant

Background

BGC, Inc. sued Kimberly Bryant, its founder and former chief executive, alleging that after the Board of Directors removed her, she hijacked the company’s websites and redirected them to her own website. Bryant filed an answer and a separate cross-complaint asserting 14 claims against BGC and eight additional individuals and entities.

BGC filed two motions: a motion to dismiss the cross-complaint for lack of subject-matter jurisdiction or, alternatively, for failure to state a claim; and a motion to strike Bryant’s answer. The court vacated the scheduled hearing and decided the motions without oral argument.

Motion to Dismiss the Cross-Complaint

The court granted the motion based on lack of subject-matter jurisdiction, meaning the federal court concluded it lacked legal authority to hear Bryant’s cross-complaint.

Bryant invoked federal-question jurisdiction under 28 U.S.C. § 1331 and 12 U.S.C. § 3401. The court identified only one possible federal basis: Bryant’s claim under the Right to Financial Privacy Act. That statute governs government access to customer financial records held by financial institutions. Bryant’s claim was based on Wells Fargo’s alleged disclosure of her financial records to BGC, not to the government. Bryant conceded the statute’s limitation in her opposition and proposed relying instead on other privacy theories.

The court concluded that Bryant’s Right to Financial Privacy Act claim was so insubstantial and frivolous that it could not create federal-question jurisdiction. The court also rejected Bryant’s request to amend the cross-complaint to add a claim under the California Financial Information Privacy Act and to use that claim as a basis for federal jurisdiction. Bryant did not explain how that proposed claim, or her existing state-law claims, satisfied the requirements for federal jurisdiction over a state claim involving a substantial federal issue.

The court separately rejected supplemental jurisdiction. Supplemental jurisdiction can allow a federal court to hear related state-law claims when they form part of the same case or controversy as a federal claim. The court found that Bryant’s claims concerning her termination, removal as chief executive, and loss of access to Wells Fargo accounts went well beyond BGC’s narrower claims about alleged wrongful access to and appropriation of BGC’s domain names and website. The claims did not share a common nucleus of operative facts. Accordingly, the court granted BGC’s motion to dismiss Bryant’s cross-complaint for lack of subject-matter jurisdiction, with leave to amend consistent with Rule 11.

Motion to Strike the Answer

The court also granted BGC’s motion to strike Bryant’s answer. Under Federal Rule of Civil Procedure 8, an answer must admit or deny the allegations in the complaint and state defenses in short, plain terms.

Bryant acknowledged that her answer responded to an earlier version of BGC’s complaint rather than the operative amended complaint. The amended complaint added a claim and 30 paragraphs, and Bryant’s answer did not respond to those additional allegations. The court also found that the answer’s factual narrative did not adequately admit or deny the allegations as required by Rule 8. The court therefore struck the answer, with leave to file an answer to the operative amended complaint that complies with the Federal Rules of Civil Procedure.

The court found that Bryant’s affirmative defenses were generally inadequate because they listed defenses without identifying supporting facts or a legally understandable theory. The court specifically addressed the defenses of fraud, unclean hands, failure to join an indispensable party, and failure to mitigate. It found that the fraud and unclean-hands defenses lacked sufficient factual detail; that possible website witnesses were not shown to be indispensable parties; and that Bryant could amend the failure-to-mitigate defense to identify its factual basis. For several other defenses, Bryant’s response did not provide an adequate factual basis. The court permitted Bryant to plead those defenses in an amended answer if she had a good-faith factual basis for them. The order did not clearly state whether Bryant’s failure to respond to some remaining defenses was an oversight or a concession, but it likewise allowed her to plead them in an amended answer if supported by facts.

Disposition

Judge Jacquelyn Scott Corley granted BGC’s motion to dismiss Bryant’s cross-complaint for lack of subject-matter jurisdiction with leave to amend, and granted BGC’s motion to strike Bryant’s answer with leave to amend. The amended answer was due July 7, 2023. The order disposed of the docket entries identified by the court as Docket Nos. 70 and 71.