United States District Court, E.D. Virginia, Alexandria Division
C. Cacheris, UNITED STATES DISTRICT COURT JUDGE
matter is before the Court on Plaintiff Northwest Federal
Credit Union's (“NWFCU”) motion for a
preliminary injunction regarding aid provided to Christopher
Balestrino (“Balestrino”) and Jason Bengert
(“Bengert”) by Defendants SBC Finance, LLC
(“SBC Finance”), Gregory Gibson (“Greg
Gibson” or “Gibson”), Christopher Banks
(“Chris Banks” or “Banks”), and Janus
28, Inc. d/b/a Janus 28, LCC (“Janus”) as
Balestrino and Bengert allegedly violated restrictive
covenants in their Asset Purchase and Employment Agreements.
Plaintiff alleges that Defendants have engaged in tortious
interference with contract and conspiracy under Virginia law.
For the foregoing reasons, the Court will deny
Plaintiff's motion for injunctive relief.
case involves the domestic market for Small Business
Administration (“SBA”) and United States
Department of Agriculture (“UDSA”)
government-guaranteed loans. To expand into this market,
NWFCU purchased Park Place Equity, LLC (“PPE”) in
April 2014 for $8, 000, 000. Compl. ¶ 10; see
also Pl. Mem. in Supp. at 1. Defendant Gibson was
NWFCU's Chief Financial Officer at the time and
“its lead draftsman and negotiator” for the
agreements related to the PPE acquisition. Exhibit C,
Affidavit of Gregory Gibson [Dkt. 23-3], ¶ 4. Defendant
Banks represented PPE, acting as a broker for PPE and its
managing members, PPE executives Chris Balestrino
(“Balestrino”) and Jason Bengert
(“Bengert”). Exhibit B, Declaration of Chris
Banks (“Exh. B, Banks Decl.”) [Dkt. 23-2], ¶
4. Due to Balestrino and Bengert's expertise in SBA and
USDA loans, NWFCU retained them to lead the newly acquired
the Asset Purchase Agreement and Employment Agreements for
Balestrino and Bengert contained restrictive covenants
affecting their ability to: (1) compete with NWFCU for a
period of five years, regardless of whether they were still
employed by NWFCU; (2) solicit customers or clients of NWFCU
for a period of five years, regardless of whether they were
still employed by NWFCU; and (3) hire former employees of
NWFCU for a six-month period following their last date of
employment at NWFCU. Asset Purchase Agreement [Dkt. 1-1] at
§ 5.16; Employment Agreements [Dkt. 1-1] at § 6.
The Employment Agreements also entitled Balestrino and
Bengert to certain payments in the event that their
employment was terminated with or without cause. Employment
Agreements [Dkt. 1-1] at § 5(b). Additionally, the
Agreements included an arbitration clause that states:
Except as necessary for NWFCU and its subsidiaries,
affiliates, successors or assigns or Executive to
specifically enforce or enjoin a breach of this Agreement (to
the extent such remedies are otherwise available), the
parties agree that any and all disputes that may arise in
connection with, arising out of or relating to this
Agreement, or any dispute that relates in any way, in whole
or in part, to Executive's services on behalf of NWFCU or
any subsidiary, the termination of such services, or any
dispute by and between the parties and their subsidiaries,
affiliates, successors or assigns shall be submitted to
Id. at § 9(k).
Gibson and Banks allege that in early 2016, NWFCU denied
incentive compensation to Balestrino and Bengert that they
were entitled to under their Employment Agreements. Exhibit
D, Declaration of Chris Balestrino (“Exh. D, Balestrino
Decl.”) [Dkt. 23-4], ¶ 6. Thereafter, they gave
notice to NWFCU that they had “Good Reason” to
terminate their Employment Agreements. Id. ¶ 8.
Several days later, on May 9, 2016, NWFCU terminated
Balestrino and Bengert. Pl. Mem. in Supp. at 3.
their termination, Balestrino and Bengert filed an
arbitration demand against NWFCU (the
“Arbitration”) seeking damages of more than $3
million. Exh. D, Balestrino Decl. [Dkt. 23-4], ¶ 12.
NWFCU, represented by the same counsel, has answered that
demand. Def. Mem. in Opp. at 3. In connection with these
events, Defendants Gibson and Banks have signed sworn
affidavits stating that NWFCU's failure to pay incentive
compensation to Balestrino and Bengert violated their
Employment Agreements. Exhibit F, Affidavit of Chris Banks
sworn April 28, 2016 [Dkt. 23-6]; Exh. C, Gibson Affidavit.
These affidavits, “representing both sides of the
transaction through which NWFCU acquired PPE[, ] . . . are of
central importance to the pending Arbitration.” Def.
Mem. in Opp. at 3; see also Exh. B, Banks Decl.,
result of Balestrino and Bengert's termination, NWFCU
shifted all SBA and USDA lending back to its operations in
Northern Virginia. Pl. Mem. in Supp. at 3. The parties
dispute whether NWFCU remains in the SBA and USDA loan
business today. According to Defendants, NWFCU terminated all
remaining employees and contractors in the PPE division and
is, therefore, no longer actively participating in the
market. Def. Mem. in Opp. at 3. Plaintiff asserts in its
reply that it is “carefully rebuilding its SBA and USDA
lending program.” Pl. Rep. in Supp. at 5.
11, 2016, Defendant SBC Finance was formed. Pl. Mem. in Supp.
at 3. Plaintiff alleges that Balestrino and Bengert are
owners, consultants, employees, or otherwise affiliated with
SBC Finance. Id. However, Defendants maintain that
SBC Finance's sole managing member is Fredrick Matson
Kelley (“Kelley”). Exhibit G, Declaration of
Fredrick Mason Kelley (“Exh. G, Kelley Decl.”),
¶ 10. Plaintiff alleges that Kelley is a “straw
owner” for Balestrino and Bengert, citing emails that
were inadvertently sent to its system involving notifications
from SBC Finance's registered agent, communication
between Bengert and Kelley regarding a laptop purchase for
Bengert, and financial payments in the amount of $30, 000
from Balestrino and Bengert to SBC Finance as proof of at
least an affiliation between the three Defendants. Pl. Rep.
in Supp. at 1-2.
also alleges that Defendants Banks and Gibson worked with
Balestrino and Bengert to market SBC Finance for sale to a
financial institution. Pl. Mem. in Supp. at 4. While
Defendant Banks acknowledges that he created a draft
marketing presentation for Balestrino and Bengert to market
their SBA and USDA loan expertise, he claims that the draft
presentation's inclusion of SBC Finance and Defendant
Gibson were both mistakes. Exh. B, Banks Decl., ¶¶
6-8. The draft presentation also included Defendant
Janus's name; Banks claims he was considering working
with that entity. Id. ¶ 8. Defendants contend
that Gibson, Banks, and Janus are not owners, consultants, or
active participants in SBC Finance. Def. Mem. in Opp. at 4.
Plaintiff contests the characterization of the relationship
between the four Defendants and continues to assert that the
business plan was “obviously specific” to SBC
Finance. Pl. Rep. in Supp. at 3.
Plaintiff alleges that SBC Finance has hired former NWFCU
employees, targeted NWFCU SBA and USDA loans for refinancing,
and followed up on lending opportunities that were initially
developed while Balestrino and Bengert were employed at
NWFCU. Pl. Mem. in Supp. at 4. Defendants admit that, having
been terminated without cause, several former members of the
PPE division at NWFCU now work for SBC Finance. Def. Mem. in
Opp. at 4. However, they also clarify that none of these
former PPE division employees are restricted from competing
with NWFCU, as Balestrino and Bengert are. Id. at 3.
10, 2016, NWFCU commenced a related case against JBCB
Investments, LLC (“JBCB”), an entity owned by
Balestrino and Bengert, alleging that JBCB had converted and
been unjustly enriched as the result of a payment from NWFCU.
See Exhibit H, Related Case Docket Report [Dkt.
23-8]; Exhibit I, Related Case Complaint [Dkt. 23-9].
Following JBCB's motion, on October 3, 2016, Judge
O'Grady stayed the case pending arbitration. See
Exhibit A, Related Case Order [Dkt. 23-1]. Less than two
weeks later, NWFCU commenced this action.
NWFCU is a credit union formed under the National Credit
Union Act and headquartered in Herndon, Virginia. Compl.
¶ 1. Defendant SBC Finance is a Nevada limited liability
corporation with its principal place of business in Arizona.
Id. ¶ 2. Defendant Janus is a corporation
formed and registered to do business in South Carolina.
Id. ¶ 5. Defendant Gibson is alleged to be
working full-time at a credit union in Georgia. Id.
¶ 3. Defendant Banks is alleged to reside in Georgia.
Id. ¶ 4.
October 13, 2016, Plaintiff filed the present lawsuit seeking
injunctive relief and damages pursuant to Virginia law,
including tortious interference with contract and conspiracy.
This motion is ...