BNY Mellon Cleared of Unjust Enrichment After Six-Year Legal Battle

By Charlotte Plaskwa A jury found Bank of New York Mellon not liable for unjust enrichment, rejecting claims that it stole an investment analyst's financial models and passed them to Deloitte to copy.

BNY Mellon openly admitted to sending to Deloitte models by Andre Pauwels which assess the economic viability and projected returns of wind energy investments. The bank denied, however, that Deloitte’s models were a copy. Pauwels accused Deloitte of lifting major parts of his models, including the formulas he wrote and the formatting he designed, sparing BNY Mellon the cost of paying the consulting firm to develop new models from scratch.

 

“The bank stole my models and sent them to Deloitte,” said Pauwels in his deposition. “They were taken from me and they didn’t pay anything for it.”

The bank contested that Deloitte pulled only basic data from Pauwels’ models and that, regardless, BNY Mellon and Deloitte were entitled to use the analysis and formulas under an implied contract between Pauwels and the bank.

This unjust enrichment trial marked the final phase of a case that began in 2019, when Pauwels sued BNY Mellon and Deloitte alleging fraud, negligent misrepresentation, trade secret misappropriation, unfair competition and unjust enrichment.

A federal judge dismissed all claims, finding that Pauwels had not taken sufficient steps to protect his models and that his contracts didn’t prohibit BNY Mellon’s use of them. An appeals court upheld the dismissal but revived his unjust enrichment claim, which was at jury trial for 5 days last week.

The outcome of this case raises the question of whether analysts need to think about explicit contractual protections if they want to control how their models are used. Absent clear restrictions, work produced for a bank or firm can be treated as the firm’s property.

 

Pauwels built a dozen financial models for BNY Mellon from 2014 to 2017. Deloitte took over and began monitoring the bank’s wind farm portfolio in 2016. According to BNY Mellon, Deloitte had a pre-existing tool that it had used to evaluate wind investments for other clients. The bank paid Deloitte approximately $455,000 to develop and customize this tool for their investments.

Pauwels also said they continued using his models after he left the bank, including for their investment in the Smoky Hills windfarm in Kansas.

He valued his models at $7 million and claimed the bank relied on them to make investment allocations of around $2 billion across 22 wind-farm projects. He came to this valuation by comparing his fees from the bank, $2.1 million over 4 years, with the model’s useful life of 10-14 years.

However, the jury decided Pauwels could not prove that the bank unfairly benefited from his financial modelling work without paying him.

“This is self-serving speculation on what he thinks the model is worth, in absence of ties to useful metrics of valuing the model,” said BNY Mellon’s lawyer, Michael Banks of Morgan Lewis Bockius.

“Just because it is hard to value doesn’t mean it has no value,” said Pauwels' lawyer, Joshua Schiller of Boies Schiller Flexner.

Models are always considered the firm's intellectual property, said Michael Kaye, Senior Research Analyst at Bloomberg Intelligence. “When an analyst leaves the firm he cannot take the models with him, even if he was the one who created and maintained it.”