United States District Court, D. Colorado
RECOMMENDATION OF UNITED STATES MAGISTRATE
Y. WANG UNITED STATES MAGISTRATE JUDGE.
matter is before the court on Plaintiff Charles Schwab &
Co., Inc.'s (“Plaintiff” or
“Schwab”) Motion to Dismiss (or
“Motion”). [#23, filed June 2, 2017]. The
undersigned considers the Motion pursuant to 28 U.S.C. §
636(b), the Order Referring Case dated March 31, 2017 [#6],
the Case Reassignment dated April 3, 2017 [#8], and the
Memorandum dated June 7, 2017 [#26]. This court concludes
that oral argument will not materially assist in the
resolution of this matter. Accordingly, upon careful review
of the Motion and related briefing, the applicable case law,
and the entire case file, I respectfully RECOMMEND that the
Motion to Dismiss be DENIED for the reasons stated herein.
initiated this action by filing its Complaint on March 30,
2017. [#1]. Plaintiff, a securities broker/dealer, entered
into a custodial relationship-the Investment Manager Service
Agreement (“IMSA”)-with Highwater, a Registered
Investment Advisory firm (“RIA”), wherein
Highwater could offer its clients the option of having their
assets custodied with Schwab. [Id. at ¶¶
6-9]. However, Plaintiff alleges that its former employee
Gregory Giuffra resigned from Schwab and joined Highwater,
and, in doing so, illicitly solicited business from
Plaintiff's clients in violation of a non-solicitation
agreement (the “Agreement”) with Schwab. [#1].
Plaintiff alleges that Highwater was complicit in Mr.
Giuffra's illicit acts and even encouraged them. [#1].
Accordingly, Plaintiff asserts the following claims against
Defendant: (1) tortious interference with contract; (2)
misappropriation of trade secrets pursuant to the Defend
Trade Secrets Act, 18 U.S.C. § 1831 et seq.;
(3) misappropriation of trade secrets pursuant to the
Colorado Uniform Trade Secrets Act (“CUTSA”),
Colo. Rev. Stat. § 7-74-101 et seq.; (4) unfair
competition; and (5) civil conspiracy. [#1]. Presently,
Plaintiff and Mr. Giuffra are engaged in arbitration before
the Financial Industry Regulatory Authority, Inc. (the
“FINRA Action”) that is set to commence in
December 2017. [#3, #47]. Highwater is not a party to that
1, 2017, Highwater filed its Answer and asserted
counterclaims for: (1) declaratory relief that the Agreement
is a void agreement not to compete; and (2) tortious
interference with contract and prospective financial
advantage. [#16]. Highwater then filed its First Amended
Counterclaims (“FAC”), amending its second
counterclaim to tortious interference with prospective
business relations (“Counterclaim II”)-the
subject of the instant Motion to Dismiss-on May 19, 2017.
relevant here, the FAC alleges that, on June 2, 2016, Schwab
informed Highwater that it was terminating the IMSA effective
September 7, 2016-the same date Plaintiff would close
Highwater's Investment Manager Master Account with
Schwab. [Id. at ¶ 26]. The June 2
correspondence also informed Highwater that Plaintiff
“would no longer accept and process any new account
opening documentation for Highwater clients or accept or
process documentation to link existing Schwab
accounts.” [Id. at ¶ 28]. Schwab then
informed Highwater's clients of the IMSA termination and
provided Highwater's clients a list of modifications to
their accounts, including new pricing guidelines.
[Id. at ¶ 29]. Highwater alleges that Plaintiff
sent the IMSA Termination Letter “to over 200
[Highwater] customers.” [Id. at ¶ 30].
contends that Schwab “intentionally attempted to
portray [it] in a negative light and create an appearance of
impropriety by Highwater when Schwab sent the IMSA
Termination Letters.” [Id. at ¶ 46].
Highwater further alleges that Schwab employees made
“false and disparaging statements regarding
Highwater's products and business” to Highwater
clients. [Id. at ¶ 47]. According to Highwater,
Schwab intended to steer Highwater's clients away from
continuing their business relationship with Highwater to
instead conduct business with Schwab, and that Highwater had
to make “concessions” to customers when their
accounts were moved out of Schwab. [Id. at
¶¶ 49-59]. Moreover, Schwab initiated this action
to recover from Highwater what it cannot recover from Mr.
Giuffra in the FINRA Action-“a permanent restraint on
any customer contact and an improper de facto
extension of the restrictive covenants contained in the
Agreement.” [Id. at ¶ 25 (emphasis in
2, 2017, Schwab filed the instant Motion to Dismiss. [#23].
Plaintiff moves to dismiss Counterclaim II, because Highwater
fails to allege that Schwab improperly interfered with a
prospective business relationship or that Highwater suffered
any damages as a result of any improper interference.
[Id. at 7]. Highwater has filed a Response and
Plaintiff a Reply. [#28; #29]. The Motion is now ripe for
Rule 12(b)(6) a court may dismiss a complaint for
“failure to state a claim upon which relief can be
granted.” Fed.R.Civ.P. 12(b)(6). In deciding a motion
under Rule 12(b)(6), the court must “accept as true all
well-pleaded factual allegations . . . and view these
allegations in the light most favorable to the
plaintiff.” Casanova v. Ulibarri, 595 F.3d
1120, 1124 (10th Cir. 2010) (quoting Smith v. United
States, 561 F.3d 1090, 1098 (10th Cir. 2009)). The court
may also consider materials outside the complaint without
converting a motion to dismiss to one for summary judgment if
the documents are central to the plaintiff's claims,
referred to in the complaint, and the parties do not dispute
their authenticity. See Cty. of Santa Fe, N.M. v. Public
Serv. Co. of N.M., 311 F.3d 1031, 1035 (10th Cir.
survive a Rule 12(b)(6) motion, a plaintiff may not rely on
mere labels or conclusions, “and a formulaic recitation
of the elements of a cause of action will not do.”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007). Rather, “a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief
that is plausible on its face.” Ashcroft v.
Iqbal, 129 S.Ct. 1937, 1949 (2009); see also Robbins
v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008)
(explaining that plausibility refers “to the scope of
the allegations in a complaint, ” and that the
allegations must be sufficient to nudge a plaintiff's
claim(s) “across the line from conceivable to
plausible.”). The duty of the court is to
“determine whether the complaint sufficiently alleges
facts supporting all the elements necessary to establish an
entitlement to relief under the legal theory proposed.”
Forest Guardians v. Forsgren, 478 F.3d 1149, 1160
(10th Cir. 2007).
Colorado law, to maintain a claim for tortious interference
with prospective business relations (“tortious
interference”), Highwater must allege that Schwab
induced or caused a third party not to enter into or continue
its business relation with Highwater, or prevented Highwater
from acquiring or continuing the prospective relation.
See Harris Grp., Inc. v. Robinson, 209 P.3d
1188, 1196 (Colo.App. 2009) (quoting Restatement (Second) of
Torts § 766). Highwater need not prove the existence of
an underlying contract; rather, it must demonstrate
“intentional and improper interference such that a
particular contract is prevented from being formed.”
Shell v. Am. Family Rights Ass'n, 899 F.Supp.2d
1035, 1060 (D. Colo. 2012) (citing Id. at 1195-96).
“However, a protected relationship exists only if there
is a reasonable likelihood or probability that a contract
would have resulted; there must be something beyond a mere
hope.” Klein v. Grynberg, 44 F.3d 1497, 1506
(10th Cir. 1995); see also Campfield v. State Farm Mut.
Auto. Ins. Co., 532 F.3d 1111, 1122 (10th Cir. 2008)
(noting a plaintiff “must show that there was a
reasonable likelihood that a contract would have resulted but
for the wrongful interference.”).
Schwab moves to dismiss Counterclaim II because Highwater
fails to allege any improper interference by Schwab that
caused Highwater damages. First, regarding the IMSA
Termination Letter, Schwab argues for dismissal because (1)
Highwater provides only conclusory allegations that Schwab
intended to “steer customers away from Highwater,
” as the IMSA Termination Letter contained no false
statements about Highwater; (2) Schwab was contractually
entitled to terminate the IMSA and cannot be liable for
exercising its contractual rights; and (3) there are no
allegations that the IMSA Termination Letter caused damages.
See [#23 at 7-10; #29 at 3-4]. Second, as to the
allegation that Schwab immediately terminated the processing
of any new accounts for clients of Highwater, this allegation
fails because it is conclusory, ignores the plain language of
Schwab's rights under the IMSA, and fails to allege
damages, i.e., this did not prevent Highwater clients from
entering new contracts with Highwater. [#23 at
10-11]. Finally, as to any allegedly false statements Schwab
made to Highwater's clients, Schwab argues that Highwater
fails to allege how the one proffered false statement
(“that Highwater did not owe its customers ...