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Ukrainian Future Credit Union v. Seikaly

United States District Court, E.D. Michigan, Southern Division

November 27, 2017

UKRAINIAN FUTURE CREDIT UNION, Plaintiff,
v.
WILLIAM R. SEIKALY, et al., Defendants.

         OPINION AND ORDER (1) GRANTING IN PART DEFENDANT SHIBANOV'S MOTION TO DISMISS (ECF #32), (2) DISMISSING COMPUTER FRAUD AND ABUSE ACT CLAIM AGAINST DEFENDANT SHIBANOV WITH PREJUDICE, (3) DISMISSING ALL OTHER CLAIMS IN FIRST AMENDED COMPLAINT WITHOUT PREJUDICE, (4) DENYING PLAINTIFF'S MOTION FOR LEAVE TO FILE ITS PROPOSED SECOND AMENDED COMPLAINT (ECF #27), (5) DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION (ECF #7), (6) DENYING PLAINTIFF'S MOTION FOR TEMPORARY RESTRAINING ORDER AND/OR PRELIMINARY INJUNCTION (ECF #38), AND (7) TERMINATING AS MOOT THE MOTION TO DISMISS BY DEFENDANTS SEIKALY AND SEIKALY, STEWART & BENNETT, P.C. (ECF #9)

          MATTHEW F. LEITMAN UNITED STATES DISTRICT JUDGE.

         In 2015, Plaintiff Ukrainian Future Credit Union (the “Credit Union”) sued its former employee, Defendant Lidia Shibanov, in state court. In that action, the Credit Union alleged that Shibanov improperly approved certain loan transactions. Defendants William R. Seikaly, Jeffrey T. Stewart, Larry W. Bennett, and their law firm Seikaly, Stewart & Bennett, P.C. (together, the “Seikaly Defendants”) represented Shibanov in the state-court action. During that litigation, the Credit Union complained that the Seikaly Defendants and Shibanov wrongfully used documents and information that had been improperly obtained from the Credit Union's files and/or computers. However, the state courts repeatedly declined to grant the full relief sought by the Credit Union based upon those allegations. So the Credit Union decided to take its complaints regarding its documents and information to a new forum - this Court.

         The Credit Union invokes this Court's federal-question jurisdiction. Its First Amended Complaint asserts a single federal claim (against Shibanov alone) for violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 (the “CFAA”). But the Credit Union's allegations do not state a viable CFAA claim. Therefore, the Court dismisses the Credit Union's CFAA claim with prejudice. The Credit Union's First Amended Complaint also asserts a number of state-law claims against all of the Defendants. The Court declines to exercise supplemental jurisdiction over those claims.

         In an effort to salvage federal subject-matter jurisdiction, the Credit Union has moved for leave to file a Second Amended Complaint that adds a claim under the Defend Trade Secrets Act, 18 U.S.C. §§ 1832-1839 (the “DTSA”). The Court will not allow the Credit Union to file its proposed amendment because it is futile.

         Finally, because the Court is dismissing all of the claims against the Defendants and is denying leave to amend, the Court will not grant either the Credit Union's motion for preliminary injunction or its motion for temporary restraining order and/or preliminary injunction. The Court will also terminate as moot a motion to dismiss that some of the Defendants directed toward the original Complaint.

         I

         A[1]

         The Credit Union is a state-chartered credit union. (See First Am. Compl. at ¶5, ECF #12 at Pg. ID 439-40.) Its principal office is located in Warren, Michigan. (See id.)

         Until late 2012, Shibanov worked full-time for the Credit Union as a loan officer. (See Id. at ¶¶ 6, 12, Pg. ID 440-41.) Thereafter, Shibanov worked remotely for the Credit Union on a part-time basis. (See Id. at ¶12, Pg. ID 441.) Her employment with the Credit Union ended on February 1, 2013. (See id.)

         While employed at the Credit Union, Shibanov had access to customer, employment, and regulatory examination records that were stored on her office computer and on the Credit Union's computer server. (See Id. at ¶13, Pg. ID 441-42.) In addition, as a Credit Union employee, Shibanov was subject to the Credit Union's E-Commerce Policies and Procedures and to the Credit Union's Employee Fraud Policy. (See Id. at ¶¶ 15-16, Pg. ID 442.) (The Court provides additional details concerning these policies below.)

         In early 2013, without the Credit Union's knowledge or consent, Shibanov used her computer to obtain documents that were stored on the Credit Union's computer system. More specifically, on January 5, 2013, Shibanov accessed that system and emailed to her personal email address a “confidential Business Loan Log of [the Credit Union] containing the amounts, terms, names of 41 customers and other confidential information.” (Id. at ¶30, Pg. ID 447.) In addition, between January 29, 2013, at 11:30 p.m. and January 30, 2013, at 1:00 a.m., Shibanov again accessed the Credit Union's computer system and emailed to her personal email address several more of the Credit Union's confidential documents, including:

• “the 2011-2012 Roster of Ukrainian Future Credit Union which includes the full social security numbers and account numbers of all 37 board members and employees of the Ukrainian Future Credit Union” (id. at ¶14, Pg. ID 442);
• “a confidential Bankruptcy Report of [the Credit Union] containing the names, account numbers and balances of credit union members” (id. at ¶23, Pg. ID 444);
• “a confidential credit union Management Action Report . . . which references the private and confidential records of approximately 36 member accounts” (id. at ¶24, Pg. ID 444-45);
• “a confidential loan workout report” (id. at ¶25, Pg. ID 445);
• “a confidential expense report related to numerous credit union members” (id. at ¶26, Pg. ID 445);
• “a copy of confidential information regarding approximately 19 credit union members” (id. at ¶27, Pg. ID 446);
• “the confidential loan-to-value report of [the Credit Union] containing the private and confidential account information of approximately 400 credit union member accounts” (id at ¶28, Pg. ID 446; emphasis original);
• “a confidential Document of Resolution regarding regulatory matters/reviews” (id at ¶29, Pg. ID 446-47);
• “the confidential real estate foreclosure log of [the Credit Union]” (id at ¶31, Pg. ID 447);
• “[the Credit Union's] confidential log for customer loans” (id. at ¶32, Pg. ID 447-48);
• “a confidential report of [the Credit Union]” (id. at ¶33, Pg. ID 448);
• “a confidential charge off report regarding references to several hundred accounts” (id. at ¶34, Pg. ID 448); and
• “[the Credit Union's] confidential business loan report” (id. at ¶36, Pg. ID 449).

         B

         In 2015, the Credit Union sued Shibanov, her husband, Andrii and Svitlana Garak, and others in the Macomb County Circuit Court. See Ukrainian Future Credit Union v. Garak, Macomb County Circuit Court Case No. 15-0524-CZ (hereinafter, the “Garak Litigation”). The claims in the Garak Litigation did not relate to Shibanov's computer access described above (of which the Credit Union was not aware at the time it filed that action). Instead, the Credit Union alleged that Shibanov had facilitated a loan for the Garaks even though she knew that the loan was really for a different couple, Ihor and Oksana Holyk. (See Garak Litigation Compl., ECF #29-1.) The Seikaly Defendants represented Shibanov in the Garak Litigation. (See First Am. Compl. at ¶¶ 8-11, ECF #12 at Pg. ID 440-41.)

         During the Garak Litigation, the Seikaly Defendants obtained from Shibanov some of the documents that Shibanov had earlier taken from the Credit Union's computer system. (See Id. at ¶42, Pg. ID 450-51.) The Seikaly Defendants then used and disclosed several of those documents in their defense of Shibanov. (See Id. at ¶¶ 63-64, 78, Pg. ID 454-55, 458.) For instance, on April 21, 2016, while deposing a Credit Union employee, Defendant William Seikaly (“Seikaly”) referenced figures that apparently came from a charge-off report of the Credit Union. (See Id. at ¶35, Pg. ID 448-49.) At another deposition, Seikaly used a copy of the 2011-2012 Credit Union Roster without redacting the Social Security numbers of the Credit Union employees and board members. (See Id. ¶18, Pg. ID 443.)

         Seikaly subsequently attached to court filings in the Garak Litigation three of the Credit Union's documents that he had obtained from Shibanov: (1) the unredacted copy of the 2011-2012 Credit Union Roster; (2) “a copy of a confidential state examination response report to . . . a State of Michigan Credit Union Examiner which includes the names and account information of several borrowers;” and (3) a “management report containing the private and confidential personal account information of several credit union members.” (Id. at ¶¶ 19-21, Pg. ID 443-44.)

         C

         The Credit Union repeatedly complained to the state courts about the Seikaly Defendants' possession and use of its documents. For instance, during a motion hearing, the Credit Union asked the state trial court to remove from the court record the three documents identified above that Seikaly had filed. (See 10/17/2017 State Ct. Hearing Tr., ECF #28-4 at Pg. ID 781-83.) The trial court denied that request but ordered redactions of Social Security numbers and certain other identifying information in the documents. (See Id. at Pg. ID 782-83; 10/17/2016 State Ct. Order, ECF #28-5.)

         The Credit Union subsequently sought to disqualify the Seikaly Defendants as Shibanov's counsel based upon their use and possession of the Credit Union's documents, and the state trial court denied that request. (10/31/2016 State Ct. Hearing Tr., ECF #28-6 at Pg. ID 796.) The Credit Union then attempted to take an interlocutory appeal from that decision, and the Michigan Court of Appeals denied leave to appeal. (See Ukranian [sic] Future Credit Union v. Garak (Mich. Court of Appeals Case No. 335688); Court of Appeals Order, ECF #7-10.)

         The state trial court later granted Shibanov's motion for summary disposition on all of the Credit Union's claims and closed the case. (See 11/21/2016 State Ct. Order, ECF #28-8 at Pg. ID at 810.[2]) Shibanov then filed a motion for sanctions. At the hearing on that motion, the Credit Union again complained that the Seikaly Defendants unlawfully obtained the documents described above. (See 8/4/2017 State Ct. Hearing Tr., ECF #28-10 at Pg. ID at 850-51.) Following the hearing, the state trial court awarded Shibanov her attorneys' fees as sanctions against the Credit Union. (See 8/21/2017 State Ct. Order, ECF #28-11.)

         Finally, the Credit Union filed a motion for reconsideration of the state trial court's order assessing sanctions. (See State Ct. Mot. for Reconsideration, ECF #28-12.) The motion accused Seikaly and Shibanov of violating federal law, specifically 18 U.S.C. ยง 2113, by obtaining and possessing the Credit ...


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