Pauwels v. Bank of New York Mellon Corporation

Background

Andre Pauwels sued The Bank of New York Mellon Corporation and The Bank of New York Mellon, together called BNYM, as well as Deloitte LLP, Deloitte Tax LLP, and Deloitte USA LLP, together called Deloitte. He asserted several New York-law claims and a claim under United Kingdom law.

Pauwels alleged that he worked for BNYM as an independent advisor beginning in 2009 and developed two financial models: the Pauwels Model for evaluating alternative-energy investments and the Low Income Housing Tax Credit Model. He said he shared spreadsheets containing the Pauwels Model with selected BNYM employees, while asking BNYM not to share the model with third parties. He alleged that BNYM later provided more than 100 spreadsheets to Deloitte, whose monitoring model was substantially similar to his model. He also alleged that BNYM shared the LIHTC Model with an unidentified third party after ending its relationship with him. Finally, he alleged that BNYM misled him about Deloitte’s use of the Pauwels Model and failed to pay some invoices in full.

Legal standard

The court applied the standard for a motion to dismiss under which a complaint must contain enough factual matter to state a legally plausible claim. The court accepted the complaint’s factual allegations as true for purposes of the motions but did not credit unsupported legal conclusions.

Trade-secret claims

For the Pauwels Model, the court held that Pauwels described the alleged model specifically enough to give defendants notice of what he claimed was misappropriated. The court also concluded that he plausibly alleged the model’s value, his effort in developing it, and its limited availability.

The court nevertheless held that Pauwels did not plausibly allege that he took substantial measures to protect the model’s secrecy. He sent more than 100 spreadsheets to BNYM, did not allege a confidentiality or nondisclosure agreement, did not identify clear restrictions on who at BNYM could access the spreadsheets, and did not mark the spreadsheets as confidential. The court found that placing his initials on most spreadsheets and making a general request that BNYM not share them were insufficient. The court also held that Pauwels did not plausibly allege misappropriation by either defendant. BNYM’s alleged relationship with Pauwels was described as a conventional business relationship without sufficient facts showing a confidential relationship or duty. Deloitte allegedly received the spreadsheets voluntarily from BNYM, and the complaint did not show that Deloitte obtained them through deception, espionage, or other improper means, or that Deloitte knew they were confidential.

The court separately dismissed the trade-secret claim concerning the LIHTC Model because the complaint did not explain what measures Pauwels took to protect its secrecy, how BNYM misappropriated it, or who allegedly received it. The court stated that the Pauwels Model claim was Count One and the LIHTC Model claim was Count Eight, and dismissed both.

Other claims

The court dismissed the unfair-competition claims in Counts Two and Nine because they were based on the same alleged conduct as the deficient trade-secret claims.

The court dismissed the United Kingdom breach-of-confidence claims in Counts Three and Ten. Applying New York choice-of-law principles, it found a conflict between New York and United Kingdom law. It concluded that New York had the stronger connection because the defendants’ alleged conduct and the claimed injuries occurred in New York, while the United Kingdom connection identified in the opinion was Pauwels’s residence there. The court therefore applied New York law rather than United Kingdom law.

The court dismissed Pauwels’s fraud claim against BNYM. It found that Sarmasti’s statement that Deloitte would not be using the Pauwels Model could be understood as relating to present conduct, rather than only future conduct. But the complaint did not provide enough particular facts to support an inference that Sarmasti knew the statement was false or intended to deceive Pauwels. The court also noted that allegations that Sarmasti helped arrange a call between Pauwels and Deloitte appeared inconsistent with an intent to conceal Deloitte’s work.

The court dismissed the negligent-misrepresentation claim because Pauwels did not plausibly allege that BNYM owed him the special or fiduciary relationship required for that claim under New York law. The court characterized the alleged relationship as a traditional business arrangement or consultancy and found that Pauwels’s conclusory reference to a duty was insufficient.

The court dismissed both unjust-enrichment claims in Counts Six and Seven. The claim concerning the Pauwels Model duplicated the trade-secret claim. The invoice-related claim did not adequately identify the basis or amount of the alleged underpayment or explain how BNYM was enriched at Pauwels’s expense.

Disposition

Judge Ronnie Abrams granted BNYM’s and Deloitte’s motions to dismiss in their entirety. The court granted Pauwels leave to amend and directed him to file an amended complaint no later than March 19, 2020. The opinion does not state that the claims were dismissed with prejudice or without prejudice.