Nationstar Mortgage LLC v. ACI Payments Inc — Entry #18: REPLY filed by ACI Payments Inc, ACI Worldwide Corp, ACI Worldwide Inc re: 9 Motion to Dismiss for Failure to State a Claim (Villari, Timothy) (Entered…

Case 3:23-cv-02089-E Document 18 Filed 01/12/24   Page 1 of 18 PageID 133


                 UNITED STATES DISTRICT COURT
                  NORTHERN DISTRICT OF TEXAS
                       DALLAS DIVISION
NATIONSTAR MORTGAGE LLC d/b/a
MR. COOPER,

                Plaintiffs

    v.
                                         Civil Action No. 3:23-cv-02089-E
ACI PAYMENTS, INC., ACI
WORLDWIDE CORP., ACI
WORLDWIDE, INC.,

                Defendants.


           DEFENDANTS’ REPLY IN SUPPORT OF THEIR
             MOTION TO DISMISS THE COMPLAINT


      Case 3:23-cv-02089-E Document 18 Filed 01/12/24                               Page 2 of 18 PageID 134


                                         TABLE OF CONTENTS

                                                                                                                       Page

ARGUMENT ............................................................................................................2
I.       The Court Should Dismiss Nationstar’s Contract Claims ..............................2
         A.       Nationstar Failed to Plead Privity of Contract Necessary for Its
                  Breach of Contract and Indemnification Claims..................................2

         B.       Nationstar Failed to Plead Defendants Had Discretionary
                  Authority, As Needed to State an Implied Covenant Claim ................ 3

II.      The Court Should Dismiss Nationstar’s Tort Claims.....................................4

         A.       The DTSA, TUTSA, TTLA, and CFAA Claims Fail Because
                  Nationstar Pled that It Provided NPI to Defendants ............................4

         B.       Nationstar Failed to Plead the Existence of Third Party
                  Contracts, As Needed for Its Tortious Interference Claim .................. 8

         C.       The Negligence and Gross Negligence Claims Fail Because
                  Nationstar Did Not Plead Defendants Owed a Special Duty of
                  Care.......................................................................................................8

         D.       The Economic Loss Doctrine Bars Nationstar’s Tort Claims ............. 9
III.     The Complaint Should Be Dismissed for Group Pleading...........................10
CONCLUSION .......................................................................................................11


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                                   TABLE OF AUTHORITIES

                                                                                                          Page

CASES

ACQIS LLC v. Lenovo Grp. Ltd.,
  2022 WL 2705269 (W.D. Tex. July 12, 2022) ...................................................10

Arkansas v. Wilmington Trust National Association,
   2020 WL 1249570 (N.D. Tex. Mar. 16, 2020) ..................................................... 4

Atrium Companies, Inc. v. ESR Assocs., Inc.,
   2012 WL 5355754 (S.D. Tex. Oct. 29, 2012) ...................................................... 9

BHL Boresight, Inc. v. Geo-Steering Sols., Inc.,
  2017 WL 2730739 (S.D. Tex. June 26, 2017) ...................................................... 7

BRG Insurance Solutions LLC v. O’Connell,
  2017 WL 7513649 (N.D. Tex. July 18, 2017) ...................................................... 6

Compulife Software Inc. v. Newman,
  959 F.3d 1288 (11th Cir. 2020) ............................................................................5

Gines v. D.R. Horton, Inc.,
   699 F.3d 812 (5th Cir. 2012) ................................................................................4

Marek Vrother Sys. Inc. v. Enriquez,
  2019 WL 3322162 (N.D. Tex. July 24, 2019) ...................................................... 8

Sharyland Water Supply Corp. v. City of Alton,
   354 S.W.3d 407 (Tex. 2011) ................................................................................9

SMH Enterprises, L.L.C. v. Krispy Krunchy Foods, L.L.C.,
  2021 WL 1226411 (E.D. La. Apr. 1, 2021)........................................................10


                                                       ii


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Suissi v. Wells Fargo Bank Nat'l Ass'n as Tr. for Soundview Home
   Loan Tr. 2007-OPT4, Asset-Backed Certificates, Series 2007-
   OPT4,
   2023 WL 2700721 (N.D. Tex. Mar. 29, 2023) ...................................................10

Tuck v. Methanex Management, Inc.,
   2006 WL 6581524 (N.D. Tex. Jan. 11, 2006) ...................................................... 8

Van Buren v. U.S.,
  141 S.Ct. 1648 (2021) ...........................................................................................6

Variable Annuity Life Insurance Co. v. Coreth,
  535 F. Supp. 3d 488 (E.D. Va. 2021) ................................................................... 5

White Glove Staffing, Inc. v. Methodist Hosps. of Dallas,
  947 F.3d 301 (5th Cir. 2020) ............................................................................2, 8

OTHER AUTHORITIES

Rule 9(b)...................................................................................................................10

Rule 12 .......................................................................................................................7


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      Nationstar assumes its allegations and entitlement to relief are undisputed. Not

so. While Defendants dispute Nationstar’s allegations, they will respond

substantively at the proper time.

      Defendants’ Motion demonstrates that Nationstar omitted facts needed to

sustain its claims and pled facts foreclosing certain of its other claims. Both defects

justify dismissal, particularly because they undo Nationstar’s federal claims and this

Court’s basis for subject matter jurisdiction. In response, Nationstar tries to buttress

its pleadings with rhetoric and extrinsic sources, but its claims must be assessed on

the factual allegations in the Complaint. Nationstar also downplays the conflict

between its factual pleadings and legal theories on the basis that its invalid claims

are pled “in the alternative.” But alternative pleading does not allow Nationstar to

pursue legal claims foreclosed by its own factual allegations. The presumption of

truth cuts both ways.

      For the reasons below and in Defendants’ Motion, the Court should dismiss

Nationstar’s Complaint.


                                           1


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                                            ARGUMENT1

I.      The Court Should Dismiss Nationstar’s Contract Claims

        A.      Nationstar Failed to Plead Privity of Contract Necessary for Its
                Breach of Contract and Indemnification Claims

        Nationstar concedes that it failed to plead the identity of its contractual

counterparty but argues the omission can be overlooked because Nationstar alleged

that “ACI assumed Speedpay’s contractual rights and obligations.” See Opp. 7. But

Nationstar’s own cited cases demonstrate that it failed to plead successor liability.

        In Renfro v. HCR Pool III Funding Corp., the plaintiff brought contract claims

against two non-contractual parties that had purchased the assets of plaintiff’s

counterparty. The court explained that successor liability may attach to defendants

only if they “expressly assume[d] the liability of the predecessor,” 2006 WL

8437652, at *1 (N.D. Tex. Aug. 28, 2006), and dismissed plaintiff’s claims because

it omitted this allegation. Id. Nationstar’s claims also fail because it does not allege

which Defendant is Speedpay’s successor or that one of the Defendants expressly

assumed Speedpay’s liabilities. Such specific pleadings are necessary to impose

contractual liability on a non-contract party.


1
  Nationstar waives the argument in footnote 1 of its opposition. See White Glove Staffing, Inc. v. Methodist
Hosps. of Dallas, 947 F.3d 301, 308 (5th Cir. 2020) (“Arguments subordinated in a footnote . . . are
waived.”). And Nationstar has not requested leave to amend the Complaint if the Motion is granted, so the
interests of judicial efficiency and deciding cases on their merits inherent in the Court’s procedures would
be served by considering Defendants’ motion, not striking it.


                                                     2


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      Similarly, in United States v. Vista Hospice Care, Inc., the court dismissed the

plaintiff’s contract claim because it failed to plead the “successor expressly or

impliedly agree[d] to assume liabilities of predecessor, transaction is considered a

de facto merger, successor is considered a ‘mere continuation’ of predecessor, or

transaction was fraudulent.” 2014 WL 12580020, at *1 (N.D. Tex. Aug. 4, 2014).

The same should happen here. Nationstar does not allege that Speedpay merged into

a Defendant, a Defendant is a “mere continuation” of Speedpay, or the Speedpay

acquisition was fraudulent. Indeed, Nationstar cannot plead the necessary facts

because “it does not know with certainty which entity assumed [Speedpay’s]

obligations.” Opp. 5. If one of the Defendants were its contractual counterparty, then

Nationstar would know and must plead this element.

      B.     Nationstar Failed to Plead Defendants Had Discretionary
             Authority, As Needed to State an Implied Covenant Claim
      Nationstar argues that it sufficiently pled its implied covenant claim simply

by stating that Defendants breached the MSA. See Opp. 9–10. Nationstar is wrong,

and the case it cites demonstrates why. In Amoco Oil Co. v. Ervin, the court

explained, “[t]he duty of good faith and fair dealing applies when one party has

discretionary authority to determine certain terms of the contract, such as quantity,

price, or time.” 908 P.2d 493, 498 (Colo. 1995), as modified on denial of reh'g (Jan.

16, 1996). Nationstar alleged only that Defendants “fail[ed] to ensure that the

Services that [they] provided accurately and correctly performed the functions


                                          3


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required to make customer payments as intended.” Opp. 9. But that is a far cry from

pleading that Speedpay (or a successor) was granted discretion to unilaterally

determine, in good faith, fundamental contract terms, such as quantity, price, or the

time of performance. 2

II.       The Court Should Dismiss Nationstar’s Tort Claims

          Nationstar does not oppose Defendants’ argument that, if the Court holds that

Nationstar’s contract claims fail, then the tort claims also fail because they are

derivative of Nationstar’s deficient MSA allegations. See Mot. 8. Nationstar has thus

abandoned this issue, requiring dismissal of these claims. See Arkansas v.

Wilmington Trust National Association, 2020 WL 1249570, at *5 (N.D. Tex. Mar.

16, 2020) (“Failure of a party to respond to arguments raised in a motion to dismiss

constitutes waiver or abandonment of that issue[.].”). Nationstar’s tort claims fail for

additional reasons.

          A.       The DTSA, TUTSA, TTLA, and CFAA Claims Fail Because
                   Nationstar Pled that It Provided NPI to Defendants
          Nationstar’s DTSA, TUTSA, TTLA, and CFAA claims fail because

Nationstar pled that it gave Defendants its customers’ NPI pursuant to the MSA. See,

e.g., Compl. ¶¶ 43–48. Even the press release that Nationstar improperly references3


2
 Nationstar purports to quote language from the MSA in support of its opposition. See Opp. 10, n. 6. But
neither Nationstar nor Defendants have attached the MSA to their filings. Nationstar may not rely on MSA
provisions out of context. See Gines v. D.R. Horton, Inc., 699 F.3d 812, 820 (5th Cir. 2012).
3
    See Gines, 699 F.3d at 820 (“[A] district court may not ‘go outside of the complaint.’”).


                                                       4


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makes this point clear. See Opp. 16 n.12 (“ACI used actual consumer data it had

received from Mr. Cooper.”). Nationstar fails to explain how these claims—which

require Defendants to have misappropriated, stolen, and hacked NPI—can proceed

when Nationstar pled that it gave NPI to Defendants under the MSA.

      On the DTSA and TUTSA claims, Nationstar argues that Defendants acquired

the NPI subject to the confidentiality terms of the MSA and then “recklessly cop[ied]

and us[ed] the NPI for its own QA testing in a live production environment without

Nationstar’s authorization.” Opp. 19. But this concedes that Defendants rightfully

accessed NPI. The alleged wrongful act was not Defendants’ accessing NPI but

rather Defendants purportedly uploading NPI to a live production environment,

which Nationstar says triggered the so-called “Incident.”

      The out-of-circuit cases that Nationstar cites in support of its DTSA and

TUTSA claims are distinguishable. None permitted a trade secret claim to proceed

where the plaintiff gave trade secrets to the defendant but was allegedly harmed by

the defendant’s subsequent use. See Compulife Software Inc. v. Newman, 959 F.3d

1288 (11th Cir. 2020) (defendant discovered trade secrets by taking aerial

photographs of methanol plant); Variable Annuity Life Insurance Co. v. Coreth, 535

F. Supp. 3d 488, 515 (E.D. Va. 2021) (defendants surreptitiously took customer

information, resigned, and used it to compete against plaintiff).


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      The DTSA and TUTSA claims also fail because Nationstar failed to plead the

existence of a trade secret. Nationstar analogizes NPI to customer lists and

information that can sometimes be trade secrets but no factual allegations in the

Complaint justify that comparison. Indeed, Nationstar avoided alleging any facts that

reveal what NPI is. See, e.g., Compl. ¶¶ 4–7, 34–37. Nationstar also does not allege

sufficient facts regarding its precautions to maintain the secrecy of NPI. Nationstar

points to the MSA’s confidentiality provision but much more detail is needed to

plead this element. See, e.g., BRG Insurance Solutions LLC v. O’Connell, 2017 WL

7513649, at *8 (N.D. Tex. July 18, 2017) (password-protected databases,

confidentiality and nondisclosure agreements, and information only disseminated on

a need-to-know basis).

      Nationstar also failed to allege the independent economic value of the NPI’s

secrecy. See Compl. ¶ 94 (skipping this element). Nationstar’s only response is to

point to the alleged harms resulting from the “Incident,” but that is insufficient. To

plead this element, Nationstar needed to allege the value it derives from protecting

NPI from its competitors, not the harm it allegedly sustained from a business

partner’s purported misuse.

      Regarding its CFAA claim, Nationstar argues that Van Buren v. U.S., 141

S.Ct. 1648 (2021) may be ignored “because it does not bear on the sufficiency of

pleading at the 12(b)(6) stage.” Opp. 21. To the contrary, Van Buren held that the


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same CFAA theory alleged by Nationstar was foreclosed as a matter of law. The

purpose of Rule 12 is to separate the wheat from the chaff at the pleading stage.

Nationstar’s attempted reliance on Leitner v. Morsovillo is misplaced because that

plaintiff alleged the defendants “accessed data which was off-limits to them without

her authorization or consent.” 2021 WL 2669547, at *4 (W.D. Mo. June 29, 2021).

By contrast, in Van Buren and here, the plaintiff alleged that the defendants accessed

information available to them but then used it for an improper purpose.

        Nationstar concedes that its TTLA trade secret misappropriation claim is

preempted but seemingly argues that it also pled a TTLA civil theft claim that is not

preempted. See Opp. 20. That is wrong. See Compl. ¶¶ 131–38 (pleading only TTLA

trade secret misappropriation claim). Even if Nationstar did, the Complaint does not

state a TTLA civil theft claim because Nationstar alleged that Defendants

misappropriated copies of NPI4 rather than original data. See BHL Boresight, Inc. v.

Geo-Steering Sols., Inc., 2017 WL 2730739, at *15 (S.D. Tex. June 26, 2017)

(holding the plaintiff “cannot maintain” a TTLA claim based on misappropriated

copies of user guides and software but could move forward with TTLA claim based

on theft of physical USB devices that contained unique data).


4
  Nationstar’s Complaint and opposition are clear that Defendants allegedly accessed copies of NPI rather
than taking the original NPI. See Opp. 19.


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      B.     Nationstar Failed to Plead the Existence of Third Party Contracts,
             As Needed for Its Tortious Interference Claim

      In response to Defendants’ argument that it must plead basic details about

purported third party contracts to state a tortious interference claim, Nationstar only

points to its allegation that “ACI knew of facts that would lead a reasonable person

to conclude that Nationstar had contracts with its borrowers” and its accompanying

recitation of the claim’s elements. Opp. 24. That is insufficient. Nationstar must

plead the existence and details of specific third party contracts and how Defendants

allegedly interfered with them. See Marek Vrother Sys. Inc. v. Enriquez, 2019 WL

3322162, at *5 (N.D. Tex. July 24, 2019). Instead, Nationstar leaves Defendants and

the Court to read between the lines, pile “inference upon inference,” and guess at the

basic facts of Nationstar’s claim. Tuck v. Methanex Management, Inc., 2006 WL

6581524, at *3 (N.D. Tex. Jan. 11, 2006).

      C.     The Negligence and Gross Negligence Claims Fail Because
             Nationstar Did Not Plead Defendants Owed a Special Duty of Care
      Nationstar waives its negligence claim by opposing Defendants’ arguments in

a footnote. See White Glove Staffing, 947 F.3d at 308. Absent waiver, Nationstar’s

negligence claims fails because it makes no legal argument in support of them,

saying only that it pled “ACI (i) knew the risk of using NPI for QA testing in a live

production environment; (ii) knew why it was a risk; and (iii) took specific actions

that disregarded that risk.” Opp. 25. Such vague allegations do not suffice because


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they leave Defendants guessing at the nature of the purported risk, its extent, when

they became aware of it, and how they disregarded it.

      Nationstar also fails to rebut Defendant’s argument that the negligence and

gross negligence claims fail because Nationstar failed to plead that Defendants owed

a special duty of care to Nationstar. See Atrium Companies, Inc. v. ESR Assocs., Inc.,

2012 WL 5355754, at *11 (S.D. Tex. Oct. 29, 2012).

      D.     The Economic Loss Doctrine Bars Nationstar’s Tort Claims
      Beyond the fact that Nationstar omits essential facts and affirmatively pleads

facts that foreclose its tort claims, Nationstar’s tort claims are barred by the

Economic Loss Doctrine (“ELD”). Nationstar argues that the ELD does not apply if

it can articulate a statutory or common law duty distinct from the MSA. That is

wrong. The core inquiry in determining the applicability of the ELD is whether the

claimed damages arose from the “breach of a duty created under contract, as opposed

to a duty imposed by law.” Sharyland Water Supply Corp. v. City of Alton, 354

S.W.3d 407, 417 (Tex. 2011). Here, Nationstar expressly pled that the MSA is the

ultimate source of duties and obligations that Defendants owed to Nationstar,

including under each of its tort claims. Mot. 8–13.

      Nationstar also argues that the ELD does not bar its tort claims because it pled

reputational damages. See Opp. 13. But Nationstar’s Complaint lacks any factual

allegations regarding the nature or scope of its alleged reputational harm. As this


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Court recently held, naked allegations of non-economic harm are no obstacle for the

ELD. See Suissi v. Wells Fargo Bank Nat'l Ass'n as Tr. for Soundview Home Loan

Tr. 2007-OPT4, Asset-Backed Certificates, Series 2007-OPT4, 2023 WL 2700721,

at *5 (N.D. Tex. Mar. 29, 2023).

III.   The Complaint Should Be Dismissed for Group Pleading

       Finally, Nationstar impermissibly relies upon group pleading, which requires

dismissal of the Complaint. Mot. 24–26. Nationstar does not dispute using group

pleading, but argues there is no obligation to differentiate between “corporate

affiliates” in its pleading. Opp. 3. But the authorities Nationstar cites indicate no

such thing and tolerate group pleading only where sufficiently clear “to put the

defendants on notice as to who did what to whom, when, where and why” and hold

that a complaint should be dismissed “where it is ‘entirely implausible’ or impossible

for the grouped defendants to have acted as alleged.” ACQIS LLC v. Lenovo Grp.

Ltd., 2022 WL 2705269, at *3 (W.D. Tex. July 12, 2022). Nationstar’s allegations

do not provide the necessary notice to Defendants and are incoherent and impossible

as pled. See Mot. 24–25. For instance, Nationstar does not allege how all three

Defendants can have acquired or merged with Speedpay and expressly assumed its

contractual liabilities.

       Furthermore, in a CFAA complaint, a plaintiff must plead fraud with the

requisite particularity as to each of the defendants pursuant to Rule 9(b). See SMH


                                         10


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Enterprises, L.L.C. v. Krispy Krunchy Foods, L.L.C., 2021 WL 1226411, at *5 (E.D.

La. Apr. 1, 2021). Nationstar’s allegations lack the required precision and seem

designed to get at the ultimate corporate parent––ACI Worldwide, Inc.––without

alleging an alter ego theory or demonstrating why the parent is liable for its own role

in the alleged wrongdoing.

      Nationstar’s estoppel argument is baseless. There is no inconsistency or

inequity in permitting Defendants to use broad language when negotiating a waiver

of liability (especially when Defendants denied the allegations against them), while

requiring Nationstar to plead claims and facts against the appropriate entity.

                                  CONCLUSION
      For the reasons stated above and in Defendants’ Motion, the Court should

dismiss Nationstar’s Complaint.


                                          11


Case 3:23-cv-02089-E Document 18 Filed 01/12/24   Page 16 of 18 PageID 148


Dated: January 12, 2024              Respectfully submitted,

                                     /s/ Matthew A. Kairis

                                     Matthew A. Kairis
                                     Texas State Bar No. 24117376
                                     Jonathan D. Guynn
                                     Texas State Bar No. 24120232
                                     Timothy M. Villari
                                     Texas State Bar No. 24125870
                                     JONES DAY
                                     2727 North Harwood Street
                                     Dallas, TX 75201.1515
                                     Phone: (214) 969-3605
                                     Fax: (214) 969-5100
                                     Email: [email protected]
                                     E-mail: [email protected]
                                     E-mail: [email protected]

                                     Courtney Snyder, Esq. (pro hac vice
                                     pending)
                                     JONES DAY
                                     500 Grant Street, Suite 4500
                                     Pittsburgh, PA 15219
                                     Phone: (412) 391-3939
                                     Fax: (412) 394-7959
                                     Email: [email protected]
                                     Counsel for ACI Payments, Inc., ACI
                                     Worldwide Corp., and ACI Worldwide,
                                     Inc.


                                   12


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                     CERTIFICATE OF WORD COUNT

      I certify that the foregoing reply brief contains less than 2,500 words,

including footnotes and complies with the Court’s Standing Order § II(A).


                                                  /s/ Timothy M. Villari
                                                 Attorney for Defendants


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                         CERTIFICATE OF SERVICE

      I certify that the foregoing was filed through the Court’s ECF system on

January 12, 2024, notice of which will be sent electronically to all counsel

of record.


                                                    /s/ Timothy M. Villari
                                                   Attorney for Defendants


                                         14