holding that customer 19 database information qualified as a trade secret
How later courts described this case
- holding that customer 19 database information qualified as a trade secret
- “[T]he public interest is served when defendant is asked to 19 do no more than abide by trade laws and the obligations of contractual agreements signed with her employer”
Written by the judges who cited it.
The opinion
1
2
3
4
5 IN THE UNITED STATES DISTRICT COURT
6 FOR THE NORTHERN DISTRICT OF CALIFORNIA
7
8 FBC Mortgage, LLC, Case No. 23-cv-00143-CRB
9 Plaintiff,
ORDER DENYING MOTION FOR
10 v.
TEMPORARY RESTRAINING
ORDER
11 Broker Solutions, Inc., et al.,
12 Defendants.
13 Plaintiff FBC Mortgage, LLC (“FBC”) alleges the misappropriation of its trade
14 secrets by Defendants Broker Solutions, Inc. dba New American Funding (“New
15 American”) and by several of FBC’s former employees, Brian Skarg (“Skarg”), Amanda
16 Benson (“Benson”), Ryan Gee (“Gee”), and Joshua Savea (“Savea”) (collectively,
17 “Defendants” or, as to the last four, the “Employees”). See FAC (dkt. 7). FBC moves for
18 a Temporary Restraining Order (“TRO”) seeking to (1) enjoin Defendants from sharing
19 FBC’s trade secrets or contacting FBC’s former clients or builders; (2) enjoin the four
20 Employees from communicating with former clients or builders, or violating their
21 contractual obligations under their respective employment agreements; (3) order all
22 Defendants to destroy FBC’s trade secrets and to notify FBC’s counsel after doing so; and
23 (4) order all Defendants to provide contact information for individuals with whom they
24 shared FBC’s trade secrets. See Mot. (dkt. 25) at 2–3. For the reasons discussed below,
25 the Court DENIES FBC’s motion for a TRO.
26 I. BACKGROUND
27 Between July 2019 and May 2022, FBC, a company in the mortgage business,
1 3–6. Pursuant to each employee agreement, FBC entrusted the Employees with its
2 confidential, proprietary, and trade secret information, including without limitation
3 “current and potential client lists; client names, addresses, personally-identifying
4 information, and financial information; pricing and rate information; training and
5 marketing materials; job aids; and supplier, vendor, and referral sources.” Herbon Decl.
6 (dkt. 23) ¶¶ 3–10, Exs. A–D § 12.1 Conditioned upon their access to this information, the
7 Employees agreed that they would not, at any time during or after their employment,
8 “disclose or use in any way whatsoever any of such confidential information . . . [or] make
9 any duplicates, copies, or reconstructions of such materials.” Id. Aside from these non-
10 disclosure agreements, FBC has implemented security controls to maintain the secrecy of
11 its trade secrets, including password protection, dual authentication, and where
12 appropriate, encryption. Id. ¶ 15. The nondisclosure of FBC’s client information is,
13 according to Dan Herbon, the Chief Information Officer at FBC, “vitally important to [its]
14 business, and FBC would be seriously harmed by a breach of privacy or unauthorized
15 disclosure of client information.” Id. ¶¶ 2, 15.
16 Between November 11, 2022, and November 16, 2022, the Employees collectively
17 terminated their employment with FBC and began working for New American. See Means
18 Decl. (dkt. 23) ¶ 40; Bargioni Decl. (dkt. 23) ¶ 9; Iannetta Decl. (dkt. 23) ¶ 6; Herbon Decl.
19 ¶ 33. By virtue of their employment with FBC, the Employees gained inside knowledge of
20
21
1 New American objects to nearly all of the evidence submitted by FBC, including the
declarations from Dan Herbon (“Herbon Decl.”), John Iannetta (“Iannetta Decl.”), Rick
22 Bargioni (“Bargioni Decl.”), Gary Means (“Means Decl.”), and Eileen Ridley (“Ridley
Decl.”). See dkts. 28–31, 35. “Due to the urgency of obtaining a preliminary injunction at
23 a point when there has been limited factual development, the rules of evidence do not
apply strictly to preliminary injunction proceedings.” Herb Reed Enters., LLC v. Florida
24 Entmt. Mgmt., Inc., 736 F.3d 1239, 1250 n.5 (9th Cir. 2013); see also Johnson v.
Couturier, 572 F.3d 1067, 1083 (9th Cir. 2009). Therefore, while the Court will keep the
25 objections in mind, particularly as to foundation, the objections are largely moot. The
Court recognizes that New American contests many of the facts asserted by FBC’s
26 witnesses. Accordingly, New American may raise their objections to FBC’s evidence at a
later point. Of course, the Court hopes and expects that both parties will make only those
27 objections that they truly believe are meritorious. It is not good litigation strategy to lodge
meritless objections, nor a good use of anyone’s time to sift through them. See, e.g.,
1 FBC’s customer lists, its proprietary pricing, concession, rate, and marketing information,
2 and its strategies. See Iannetta Decl. ¶ 7. Evinced by soft credit pulls of nine former FBC
3 clients by the four Employees in their roles at New American, FBC argues that it has lost
4 unique and unquantifiable business opportunities. See Herbon Decl. ¶¶ 33, 35, 37–47 &
5 Exs. P–V; Iannetta Decl. ¶¶ 9–13 & Exs. A–B. For example, FBC argues that Savea used
6 FBC’s trade secrets while working for New American. See Herbon Decl. ¶ 37. After
7 terminating his employment with FBC, Savea initiated a soft credit inquiry for a client to
8 evaluate the client’s loan eligibility. See id. ¶¶ 37–38, Ex. P. FBC argues that Savea only
9 had access to this client’s information “by virtue of [his] employment with FBC and the
10 time, money, effort, and other resources expended by FBC.” Id. ¶ 35. FBC points to
11 similar actions taken by Defendants Benson, Skarg, and Gee. See id. ¶¶ 39–47, Exs. Q–V.
12 Additionally, FBC points to the actions of Defendant Skarg. Before terminating his
13 employment with FBC, Skarg sent himself FBC’s proprietary and confidential
14 information, “including without limitation its current and potential client lists, rate
15 information, marketing materials, training materials, job aids, application materials, and
16 information regarding personnel, clients, suppliers, vendors, and referral sources.” Herbon
17 Decl. ¶¶ 13–26, 33, Exs. E–N. FBC argues that Skarg sent himself this information to
18 solicit FBC’s clients and “undercut FBC from a rate standpoint, providing themselves and
19 [New American] with an unfair competitive advantage.” Iannetta Decl. ¶ 7; Mot. at 11.
20 FBC argues that his “near-simultaneous termination of employment with FBC and
21 commencement of employment with [New American]” indicates that Skarg is likely
22 sharing this confidential, proprietary, and trade secret information with the other three
23 Employees. See Mot. at 11; Iannetta Decl. ¶ 6; Means Decl. ¶ 40; Bargioni Decl. ¶ 9.
24 FBC brought this Motion for Temporary Restraining Order upon learning that
25 Defendants are purportedly using and disclosing FBC’s trade secrets in order to poach
26 FBC’s preferred lending relationship2 with the builder Woodside Homes. See Mot. at 1.
27
1 FBC argues that it invested “substantial time, money, and resources into developing a
2 preferred lending relationship with . . . Woodside Homes.” See Means Decl. ¶¶ 9–10;
3 Bargioni Decl. ¶¶ 4, 8. FBC further argues that the four Employees would not have had a
4 relationship with Woodside Homes but for their employment with FBC, nor did New
5 American have a preferred lending relationship with Woodside Homes in California. See
6 Means Decl. ¶¶ 12, 15, 41, 44; Bargioni Decl. ¶¶ 5, 8. FBC argues that the Employees are
7 seeking to “poach” its preferred lending relationship with Woodside Homes, as evidenced
8 by correspondence between Woodside Homes and the Employees at their New American
9 email addresses. See Herbon Decl. ¶¶ 28–29, Ex. O; Bargioni Decl. ¶¶ 15–16, Ex. A. One
10 email came to FBC’s attention when Herbon conducted a review of FBC’s internal email
11 database on June 20, 2023. See Herbon Decl. ¶ 27–29, Ex. O. Stephanie Nunziata, a
12 Mortgage Loan Originator at FBC, forwarded FBC’s Director of Operations for the
13 Western Region, Rick Bargioni, another email on June 1, 2023, indicating communication
14 between Woodside Homes and the Employees in their roles at New American. See
15 Bargioni Decl. ¶¶ 15–16, Ex. A
16 FBC alleges that on December 13, 2022, prior to filing this action, it sent a cease-
17 and-desist letter to New American, accusing it of aiding and abetting the Employees in
18 their breaches, interference with FBC’s contractual relationships with the Employees, and
19 violations of law. See Ridley Decl. (dkt. 25) ¶¶ 3–5, Ex. A. That same day, FBC also sent
20 a letter to Skarg, notifying him of his alleged violation of the employee agreement and law.
21 See Ridley Decl. ¶¶ 6–8, Ex. B.
22 FBC asserts that the Defendants’ actions have caused monetary damages of more
23 than $10 million per month in gross sales, and, unless enjoined, will continue to cause
24 immediate irreparable harm to FBC. See Means Decl. ¶ 47; Bargioni Decl. ¶ 12. On
25 January 18, 2023, FBC filed the FAC in this case, bringing 11 causes of action: (1) breach
26 of contract; (2) intentional interference with contractual relationships; (3) breach of
27
1 fiduciary duty; (4) aiding and abetting breach of fiduciary duty; (5) intentional interference
2 with prospective economic advantage; (6) negligent interference with prospective
3 economic advantage; (7) violation of the Computer Fraud and Abuse Act, 18 US.C. §
4 1030; (8) violation of the California Comprehensive Computer Data Access and Fraud
5 Act, California Penal Code § 502; (9) violation of DTSA; (10) violation of CUTSA; and
6 (11) violation of the Unfair Competition Law, Cal. Bus. Prof. Code § 17200, et. seq. See
7 FAC at 5, 8, 10, 11–13, 16, 18, 20, 22. FBC seeks: (1) compensatory damages, lost
8 profits, and restitution; (2) punitive damages; (3) pre-judgment and post-judgment interest
9 at the maximum rate allowable under California law; (4) injunctive relief requiring
10 Defendants to refrain from using its trade secrets, confidential and proprietary information,
11 and other documents, and further requiring Defendants to return these things to FBC; (5)
12 reasonable attorneys’ fees; and (6) costs of suit. See id. at “Prayer for Relief.”
13 The TRO requests that the Court: (1) enjoin all Defendants from using or sharing
14 any of FBC’s trade secrets and communicating with clients and builders with whom the
15 four Employees had contact while at FBC; (2) enjoin the four Employees from
16 communicating clients and builders with whom they formerly worked while at FBC and
17 restrained them from using many materials obtained at FBC; (3) order each Defendant,
18 within one week of the Court’s order, to destroy any of FBC’s trade secrets in its
19 possession and communicate to FBC’s counsel the completion of such destruction; and (4)
20 order each Defendant within one week of the Court’s order, to identify to FBC’s counsel
21 the last known contact information in Defendant’s possession of any person to whom any
22 Defendants have shared FBC’s trade secrets. See Mot. at 2–3.
23 II. LEGAL STANDARD
24 A TRO is an “extraordinary remedy” that should be awarded only upon a clear
25 showing that the party is entitled to such relief. See Winter v. Natural Res. Def. Council,
26 Inc., 555 U.S. 7, 22 (2008). The party seeking a TRO must establish: (1) a likelihood of
27 success on the merits; (2) a likelihood of irreparable harm absent preliminary relief; (3)
1 public interest. See id. at 20. Alternatively, the moving party must demonstrate that
2 “serious questions going to the merits were raised,” that “the balance of hardships tips
3 sharply in the [petitioner’s] favor,” and that the other two Winter elements are satisfied.
4 All. For the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134–35 (9th Cir. 2011) (quotation
5 omitted). The “[l]ikelihood of success on the merits ‘is the most important Winter
6 factor.’” Disney Enters., Inc. v. VidAngel, Inc., 869 F.3d 848, 856 (9th Cir. 2017)
7 (quoting Garcia v. Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015)). Courts may analyze a
8 TRO request using a sliding scale approach through which the elements of the “test are
9 balanced, so that a stronger showing of one element may offset a weaker showing of
10 another.” See Armstrong v. Cnty. of Placer, No. 22:1-cv-00779-KJM-KJN, 2021 WL
11 2258716 (E.D. Cal. May 3, 2021) (citing All. For the Wild Rockies, 632 F.3d at 1131.).
12 III. DISCUSSION
13 FBC seeks a TRO based on its trade secret misappropriation and breach of contract
14 claims. Mot. at 4. Based on the evidence provided, FBC has not demonstrated that it is
15 likely to succeed on the merits of either claim. Additionally, while the balance of equities
16 tips in its favor, and an injunction would be in the public interest assuming that Defendants
17 were indeed using FBC’s trade secrets, FBC has not adequately demonstrated a likelihood
18 of irreparable harm, which rises and falls here with its likelihood of success on the merits.
19 A. Likelihood of Success on the Merits
20 FBC argues that is likely to succeed on the merits of both its (1) trade secret
21 misappropriation and (2) breach of contract claims. See id. at 5. The Court disagrees,
22 given the evidence presently before it.
23 1. Trade Secret Misappropriation
24 To succeed on the merits of a trade secret misappropriation claim under DTSA and
25 CUTSA,3 a plaintiff must show that “[a] the plaintiff owned a trade secret; [b] the
26
27
3 Courts have routinely analyzed claims under CUTSA and DTSA together because “the
elements are substantially similar.” InteliClear, LLC v. ETC Glob. Holdings, Inc., 978
1 defendant misappropriated the trade secret; and [c] the defendant’s actions damaged the
2 plaintiff.” Alta Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 3d 868, 877 (N.D. Cal.
3 2018); see also 18 U.S.C. § 1839(5)(A); Cal. Civ. Code § 3426.1(b).
4 a. Trade Secret Ownership
5 The first element of a misappropriation of trade secrets claim is demonstrating that
6 the plaintiff owned a trade secret. See Alta Devices, 343 F. Supp. 3d at 877. Trade secrets
7 include: “all forms and types of financial, business, scientific, technical, economic, or
8 engineering information, including patterns, plans, compilations, program devices,
9 formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or
10 codes . . .” 18 U.S.C. § 1839(3)(A).4 To prove ownership under both DTSA and CUTSA,
11 the holder of the information must show that (1) they have “taken reasonable measures to
12 keep such information secret; and (2) the information derives independent economic value,
13 actual or potential, from not being generally known to, and not being readily ascertainable
14 through proper means by, another person who can obtain economic value from the
15 disclosure or use of the information.” 18 U.S.C. § 1839(3)(A); See Cal. Civ. Code §
16 3426.1(d). Although DTSA requires that the trade secret not be readily ascertainable,
17 CUTSA does not. See 18 U.S.C. § 1839(3)(B); Cal. Civ. Code § 3426.1(d)(1). FBC
18 currently falls short on the independent economic value prong.
19 i. Reasonable Steps to Maintain Secrecy
20 FBC made reasonable efforts to maintain the secrecy of its purported trade secrets.
21 FBC entrusted the Employees with its trade secrets under the condition that they refrain
22 from using or disclosing it at any time during or after their employment with FBC. See
23 Herbon Decl. ¶¶ 3–10, Exs. A–D § 12. Additionally, FBC has implemented security
24 controls to safeguard its trade secrets and client information, “including, among other
25
26
of a misappropriation of trade secrets claim under the [DTSA] and [CUTSA] are
27 essentially the same”)).
4 CUTSA defines trade secrets more narrowly: “information, including a formula, pattern,
1 things, password protection, dual authentication, and where appropriate, encryption.” Id. ¶
2 15. FBC took reasonable efforts to maintain the secrecy of its trade secrets information.
3 Therefore, to establish ownership of the purported trade secrets, FBC must only
4 demonstrate that the information derives independent economic value from not being
5 generally known. It has not clearly done so.
6 ii. Independent Economic Value
7 FBC’s purported trade secrets include: “its current and potential client lists;
8 information regarding its preferred lending relationships with builders; non-public, inside
9 information and know-how related to those client and builder relationships; pricing, rate,
10 and concession information; training and marketing materials; job aids; and supplier,
11 vendor, and referral sources.” See Mot. at 2, 5, 7.
12 Client Lists
13 FBC argues that its “current and potential client lists” constitute trade secrets under
14 CUTSA and DTSA. In MAI Sys. Corp. v. Peak Computer, Inc., the Ninth Circuit held that
15 the plaintiff’s customer database qualified as a trade secret under CUTSA because (1) it
16 “has potential economic value because it allows a competitor . . . to direct its sales efforts
17 to those potential customers that are already using [plaintiff’s products],” and (2) the
18 plaintiff “took reasonable steps to insure the secrecy to this information” by “requir[ing] its
19 employees to sign confidentiality agreements respecting its trade secrets, including the
20 Customer Database.” 991 F.2d 511, 521 (9th Cir. 1993). FBC argues that, like the
21 customer database in MAI, its current and potential client lists similarly derive
22 independent economic value from their secrecy.
23
Disclosure of this information would allow a competitor to
undercut FBC by directing its sales efforts to FBC’s current
24
and potential borrowers. . . [and] allow FBC’s competitors to
poach FBC’s builder relationships, and the associated stream of
25
borrowers, after FBC has invested substantial time, effort, and
money into understanding the builder’s business needs and
26
fostering a relationship.
27 Means Decl. ¶ 7. New American responds that FBC’s “laundry list” of purported trade
1 otherwise are common knowledge to persons in the mortgage lending industry.” See
2 Opp’n at 6, 9. For instance, New American argues that certain customer materials that
3 Skarg sent to his personal email between October 25 and November 11, 2022 include
4 either material Skarg had possessed for years prior to working for New American or
5 standard materials that are common knowledge to anyone in the mortgage lending
6 industry. See Skarg Decl. ¶¶ 7–10; Herbon Decl. ¶¶ 13–26, Exs. E–N. Other materials
7 that Skarg sent to his personal email are purportedly ascertainable by accessing what is
8 known as a “Title Farm Report.” See Skarg Decl. ¶¶ 5–6. Skarg asserts that the Title
9 Farm Report contains the same information as the customer lists Skarg sent to his personal
10 email, including the name of the buyer that closed on the loan, the mortgage company the
11 buyer closed with, the loan type and interest rate, and the closing date. See id.
12 Courts in this district and California courts are “reluctant to protect customer lists to
13 the extent they embody information which is ‘readily ascertainable’ through public
14 sources, such as business directories.” Marsh & McLennan Agency, LLC v. Teros
15 Advisors, LLC, No. 20-CV-02679-HSG, 2021 WL 4846245, at *4 (N.D. Cal. Aug. 11,
16 2021) (citing Morlife, Inc. v. Perry, 56 Cal. App. 4th 1514, 1521 (1997)). Where the
17 employer has “expended time and effort identifying customers with particular needs or
18 characteristics, courts will prohibit former employees from using this information to
19 capture a share of the market,” but “[s]uch lists are to be distinguished from mere identities
20 and locations of customers where anyone could easily identify the entities as potential
21 customers.” Marsh, 2021 WL 4846245, at *4 (citing Morlife, 56 Cal. App. 4th at 1521–
22 22). At the motion hearing, FBC reiterated the arguments underlying its motion, arguing
23 that its client lists have value because they do not include public information and that its
24 list of leads is valuable because it gives FBC knowledge of people in need of mortgage
25 services. But FBC did not do enough for the Court to discern whether the customer lists
26 that Skarg sent to his personal email contain publicly accessible information, as New
27 American argues, or information that reflects a culmination of the “substantial time, effort,
1 relationship,” as FBC argues. See Means Decl. ¶ 7.
2 Because there is not enough information—at this point—to determine that the
3 customer lists are the product of “expended time and effort identifying customers with
4 particular needs or characteristics,” FBC has not adequately established that its client lists
5 derives independent economic value, actual or potential, from not being generally known
6 to, and not being readily ascertainable through proper means by, another person who can
7 obtain economic value from its disclosure or use. See 18 U.S.C. § 1839(3)(A); see also
8 Cal. Civ. Code § 3426.1(d).
9 Training and Marketing Materials, Other Information and Job Aids
10 FBC argues that its training and marketing materials, pricing, rate, and concession
11 information, and job aids also constitute trade secrets. See Mot. at 6. The California Court
12 of Appeal has held that a plaintiff’s marketing materials were trade secrets because they
13 “would be valuable if known by a competitor because it would allow the competitor to
14 predict and counter [plaintiff’s] advertising and marketing.” Whyte v. Schlage Lock Co.,
15 101 Cal. App. 4th 1443, 1456 (2002). Additionally, the Whyte court held that “cost and
16 pricing information not readily known in the industry—information such as the cost of
17 materials, labor, overhead, and profit margins—was [a] trade secret.” Id. at 1455–56
18 (internal citation omitted).
19 Here, FBC argues that its training and marketing materials, pricing, rate, and
20 concession information, and job aids also constitute trade secrets. See Mot. at 6. FBC
21 contends that these materials “contain information that is unique to FBC, rather than
22 commonly used, industry-wide formulas.” Means Decl. ¶ 8. The Court agrees in theory—
23 knowledge of FBC’s internal pricing schemes, marketing strategies, and instructional
24 tools, like job aids, might arm its competitors with an unfair advantage over it. This
25 information could allow FBC’s competitors to undercut FBC’s prices, pursue its clients,
26 and poach its “hard-fought relationships with its builders.” Id. FBC argues that the
27 marketing materials include the “Mortgage Checklist” and the “Mortgage Loan Officer
1 that the material Skarg sent himself also contained “FBC’s current pricing, rate, and
2 concession information.” See id. ¶ 23. But FBC provides no more specificity as to its
3 marketing and pricing, rate, and concession information. Nor does FBC identify any of its
4 “job aids” or “training materials” specifically from the materials Skarg sent to himself,
5 beyond mere conclusory lists containing all its purported trade secrets. See id. ¶ 14 (“The
6 information taken by Skarg included FBC’s proprietary and confidential information,
7 including without limitation its current and potential client lists, rate information,
8 marketing materials, training materials, job aids, application materials, and information
9 regarding personnel, clients, suppliers, vendors, and referral sources.”). Although FBC
10 identifies the “Mortgage Checklist” and the “Mortgage Loan Officer Profile” marketing
11 materials, it does not expand on the economic value of those documents.
12 As with its customer lists, FBC has not provided enough information at this point
13 about these purported trade secrets to establish their independent economic value from not
14 being generally known.
15 Preferred Lending Relationships
16 The same applies to FBC’s preferred lending relationships with builders. FBC
17 argues that the economic value of its relationship with builders derives from the substantial
18 time, effort, and money it invests into understanding each builder’s business needs,
19 fostering a preferred lender relationship, and retaining those relationships once they are
20 established. See Means Decl. ¶¶ 5–6; Bargioni Decl. ¶ 3. FBC’s preferred lender
21 relationships afford it increased visibility among the builder’s network of homebuyers, “a
22 steady stream” of qualified leads, decreased transaction costs, and a smoother and faster
23 loan origination process, all of which lead to a continuous flow of increased loan volume.
24 See Means Decl. ¶¶ 2–6.
25 New American argues that FBC’s preferred lender relationships with builders
26 cannot constitute trade secrets, as the “alleged effort and expenditure of [a] resource alone
27 is [not] enough to invoke trade secret protection.” See Opp’n at 11. New American also
1 knowledge.” See Skarg Decl. ¶ 15. Indeed, FBC does not provide sufficient evidence,
2 beyond conclusory statements, to overcome New American’s argument that FBC’s
3 preferred lender relationships are common knowledge. See id.; 18 U.S.C. § 1839(3)(A);
4 Cal. Civ. Code § 3426.1(d). FBC merely states that their independent economic value
5 stems from the “substantial time, effort, and money” invested into understanding each
6 builder’s needs. See Mot. at 6. Accordingly, FBC has not adequately demonstrated that
7 its preferred relationships with builders derive independent economic value from not being
8 generally known.
9 Supplier, Vendor, and Referral Sources
10 Finally, FBC has failed to establish why “its supplier, vendor, and referral sources”
11 derive independent economic value from their secrecy. See Mot. at 5, 7. Aside from
12 contending at the motion hearing that FBC’s supplier, vendor, and referral sources were
13 among the materials Skarg downloaded, FBC has not sufficiently established the
14 independent economic value of these materials. On the one hand, this information is broad
15 enough that it could potentially be analogized to customer lists or marketing materials,
16 which can be trade secrets under federal and California common law. See Whyte, 101 Cal.
17 App. 4th at 1456 (holding that marketing materials, along with cost and pricing
18 information, was a trade secret); MAI Sys. Corp., 991 F.2d at 521 (holding that customer
19 database information qualified as a trade secret). On the other hand, FBC pleads the
20 distinct misappropriation of this information alongside its customer lists and marketing
21 materials. See id. FBC has provided no information suggesting the independent economic
22 value of its supplier, vendor, and referral sources, nor any authorities that could lead the
23 Court to hold that their value is implied.
24 In sum, FBC has not provided enough evidence to counter New American’s
25 arguments that FBC’s purported trade secrets contain no information beyond common
26 knowledge. As such, it has not adequately established the independent economic value of
27 its trade secrets. Therefore, FBC’s trade secrets misappropriation claim would likely not
1 Even if FBC were to establish the independent economic value of its purported
2 trade secrets, it would still need to satisfy the other elements of a trade secret
3 misappropriation claim. For the reasons discussed below, FBC has not done so.
4 b. Misappropriation of Trade Secrets
5 The second element of a trade secret misappropriation claim requires demonstrating
6 that the defendant misappropriated a trade secret. See Alta Devices, 343 F. Supp. 3d at
7 877. DTSA and CUTSA, in their relevant portions, define the misappropriation of a trade
8 secret as (1) the acquisition of data through improper means; or (2) the unauthorized
9 disclosure or use of another’s trade secret by a person who knew or had reason to know
10 that the knowledge of the trade secret was acquired under circumstances giving rise to a
11 duty to maintain its secrecy. See 18 U.S.C. § 1839(5); Cal. Civ. Code § 3426.1(b).
12 Although FBC notes the existence of both prongs in the TRO, it argues that it is likely to
13 succeed on the merits of its trade secrets misappropriation claim based only on the second
14 prong. See Mot. at 7 (“One alternative requires acquisition through improper means . . .
15 but a second, independent theory of misappropriation requires only that the trade secret be
16 acquired under circumstances giving rise to a duty to maintain the secrecy of the trade
17 secret or limit the use of the trade secret . . . and then disclosed or used by someone who
18 knew or had reason to know about the circumstances of acquisition”); id. at 7–9 (only
19 discussing second prong). Therefore, this Order only addresses the second prong. FBC
20 contends that: (i) the Employees and New American disclosed or used FBC’s trade secrets;
21 (ii) the Employees legitimately acquired the trade secrets under a duty to maintain their
22 secrecy; and (iii) all Defendants knew or should have known of this duty.
23 i. Disclosure or Use of Trade Secret
24 FBC would likely not succeed in demonstrating the disclosure or use of its trade
25 secrets. FBC has failed to demonstrate how the Defendants misappropriated its customer
26 lists, information regarding its preferred lending relationships with builders, pricing and
27 rate information, training and marketing materials, and job aids.
1 FBC argues that the four Employees took FBC’s client lists and builder information
2 to their new place of employment at New American, and together with New American,
3 “used or disclosed FBC’s trade secrets to begin servicing FBC’s current and potential
4 clients and builder accounts.” See Mot. at 9. For example, after terminating employment
5 with FBC, Savea initiated a credit inquiry for a client to evaluate the client’s loan
6 eligibility. See Herbon Decl. ¶¶ 37, 38 Ex. P. FBC argues that Savea only had access to
7 this client’s information “by virtue of [his] employment with FBC and the time, money,
8 effort, and other resources expended by FBC.” Id. ¶ 30. FBC points to similar actions
9 taken by Defendants Benson, Skarg, and Gee. See id. ¶ 39–47, Exs. Q–V. At the motion
10 hearing, FBC argued that exhibits Q–V from the Herbon Declaration, evincing New
11 American’s servicing of former FBC clients, were clear examples of misappropriation.
12 FBC argued that the Defendants would not have had knowledge of the specific clients but
13 for FBC. But FBC fails to persuade the Court that knowledge of clients, or even
14 relationships with clients, are trade secrets. FBC fails to establish adequately that the
15 Defendants are using or disclosing FBC’s trade secrets.
16 New American argues that these soft credit reports are speculative and are not
17 sufficient grounds for misappropriation. See Opp’n at 12, 17; Skarg Decl. ¶ 3. Moreover,
18 New American argues that there is no evidence ruling out the possibility that the clients
19 initiated communicated with the Employees in their roles at New American. See Opp’n at
20 12. The Court agrees. Although this evidence might suggest dubious behavior by the
21 Employees, it does not demonstrate explicit “use or disclosure” of FBC’s trade secrets
22 necessary to succeed on the merits of a trade secrets misappropriation claim. FBC’s
23 argument is too speculative.
24 Skarg Emails Containing FBC Documents
25 FBC further argues that Skarg misappropriated FBC’s “current and potential client
26 lists, rate information, marketing materials, training materials, job aids, application
27 materials, and information regarding personnel, clients, suppliers, vendors, and referral
1 FBC’s “confidential” and “not publicly available” documents to his personal email
2 address, including what appears to be spreadsheets tracking current and prospective
3 clients, checklists, fillable forms, links to Google Docs, FBC rates, formulas, Skarg’s own
4 biography and headshot, and an email template. See Herbon Decl. ¶¶ 13–26, Exs. E–N.
5 FBC argues that Skarg sent himself this information to “solicit FBC’s clients and undercut
6 FBC from a rate standpoint, providing themselves and [New American] with an unfair
7 competitive advantage.” See Mot. at 11; Iannetta Decl. ¶ 7. At the hearing, FBC pointed
8 to exhibits A and B from the Iannetta Declaration as evidence that Skarg and New
9 American were using FBC’s pricing information and relationships to undercut FBC. This,
10 combined with exhibits E–N, FBC argues, is sufficient proof that Skarg and New
11 American are using FBC’s pricing information and relationships based on Skarg’s history
12 with those clients. Although this evidence shows that Skarg may be servicing former FBC
13 clients, it does not show that Skarg used or disclosed FBC’s trade secrets—as apart from
14 his own knowledge of those clients—in servicing these clients. There is nothing in
15 Iannetta exhibits A and B about pricing information, nor do those exhibits rule out the
16 possibility that the clients contacted Skarg first. Additionally, as New American argues,
17 FBC has not demonstrated that its relationships are trade secrets. The alleged effort and
18 expenditure of a resource alone does not render independent economic value, and the
19 relationships themselves may be common knowledge.
20 FBC has not established that Skarg explicitly used or disclosed this information to
21 New American. FBC speculates that:
22
the only reason that Skarg would have sent himself FBC’s
confidential, proprietary, and trade secret information is to use
23
this inside knowledge to solicit FBC’s clients and builder
relationships, and undercut FBC from a rate standpoint,
24
providing himself and his new employer with an unfair
competitive advantage.
25
Mot. at 11. However, the best evidence that FBC points to in support of such an allegation
26
is a statement from John Iannetta, an FBC Area Manager, that, by virtue of having worked
27
for FBC, the Employees gained inside knowledge of FBC’s pricing, concession, rate, and
1 marketing materials. See Iannetta Decl. ¶ 7. This, in turn, allows the Employees to
2 “solicit FBC’s clients and undercut FBC from a rate standpoint, providing themselves and
3 [New American] with an unfair competitive advantage.” Id. But again, FBC does not
4 provide evidence demonstrating that Skarg actually used the materials he sent to himself or
5 that he disclosed them to New American. The Court would have to speculate to accept
6 FBC’s interpretation.
7 Woodside Homes Preferred Lender Relationship
8 Finally, FBC argues that the four Employees are “now using or disclosing FBC’s
9 builder relationships, pricing and rate information, training and marketing materials, and
10 job aids to undercut and poach FBC’s preferred lending relationship with Woodside
11 Homes.” See Mot. at 10; Herbon Decl. ¶ 29, Ex. O; Bargioni Decl. ¶¶ 15–16, Ex. A. FBC
12 further argues that the four Employees would not have had a relationship with Woodside
13 Homes but for their employment with FBC, nor did New American have a preferred
14 lending relationship with Woodside Homes in California until the Employees poached
15 FBC’s relationship with Woodside Homes upon terminating employment with FBC and
16 joining New American. See Means Decl. ¶¶ 12, 15, 41, 44, 46; Bargioni Decl. ¶¶ 5, 8.
17 FBC argues that the Employees are seeking to “poach” FBC’s preferred lending
18 relationship with Woodside Homes, as evidenced by correspondence between Woodside
19 Homes and the Employees at their New American email addresses. See Herbon Decl. ¶
20 29, Ex. O; Bargioni Decl. ¶¶ 15–16, Ex. A. However, FBC provides no evidence to show
21 explicit use or disclosure by Defendants, beyond its contention that because the Employees
22 only worked with Woodside Homes “by virtue of their employment with FBC,” their
23 engagement with Woodside Homes while at New American “strongly suggests” trade
24 secret misappropriation. See Herbon Decl. ¶ 28.
25 FBC’s evidence does not demonstrate trade secret use or misappropriation beyond
26 speculation. And FBC fails to persuade the Court that a relationship is a trade secret.
27 Based on the evidence before the Court now, FBC has not demonstrated that the
ii. Acquisition Under Duty to Maintain Secrecy
1
FBC can easily meet the last two elements of misappropriation. The four
2
Employees, as former Mortgage Loan Originators at FBC, clearly acquired FBC’s trade
3
secrets under a duty to maintain their secrecy. See Herbon Decl. ¶¶ 3–10 Exs. A–D § 12.
4
The Employees each signed an Employment Agreement in which they expressly agreed
5
that they would have access to FBC’s “Confidential Information, Trade Secrets, and
6
Proprietary Information” under the condition that they would not disclose or use them
7
during or after their employment. Id. The Employment Agreement contractually obligated
8
the Employees to refrain from using or disclosing FBC’s trade secrets.
9
iii. Knowledge or Reason to Know
10
Additionally, all Defendants knew or had reason to know that they acquired FBC’s
11
trade secrets under circumstances giving rise to a duty to maintain their secrecy. The four
12
Employees were on notice for the very same reason that they had a duty to maintain the
13
secrecy of the trade secrets—because they expressly agreed to this duty under their
14
Employment Agreements. See Herbon Decl. ¶¶ 3–10 Exs. A–D § 12. As for New
15
American, FBC sent a cease-and-desist letter to the organization on December 13, 2022 as
16
a “formal notice [that it] believes. . . Brian Skarg, has taken FBC’s proprietary and
17
confidential information to his new position at New American Funding, in violation of his
18
FBC Employment Agreement and U.S. law. . . [and] demands that [New American]
19
immediately cease and desist the use and dissemination of its documents, proprietary and
20
confidential information, and trade secrets.” Ridley Decl. at Exs. A–B. All Defendants
21
had reason to know that the Employees acquired FBC’s trade secrets under a duty to
22
maintain their secrecy.
23
Because on this record, FBC has not demonstrated Defendants’ unauthorized
24
disclosure or use of its trade secret beyond mere speculation, it is not likely to succeed in
25
demonstrating the misappropriation of its trade secrets.
26
Therefore, the Court need not reach the issue of whether FBC properly established
27
damages as a result of the Defendants’ misappropriation, the final element of a
1 misappropriation claim. See Alta Devices, 343 F. Supp. 3d at 877.
2 2. Breach of Contract
3 FBC next argues that it is likely to succeed on the merits of its breach of contract
4 claim, in which it argues that the Employees breached the non-solicitation and non-
5 disclosure obligations laid out in the employee agreements. See Mot. at 12–15. FBC
6 argues that the breach of contract claim is governed by Florida law.5 See id. at 12. To
7 prove a breach of contract under Florida law, a plaintiff must show (1) a valid contract, (2)
8 a material breach of that contract, and (3) damages resulting from the breach. See JF &
9 LN, LLC v. Royal Oldsmobile-GMC Trucks Co., 292 So. 3d 500, 508 (Fla. Dist. Ct. App.
10 2020). Based on the record currently before the Court, FBC does not appear likely to
11 succeed on the breach of contract claim.
12 FBC argues that the Employees breached both (a) the non-disclosure clause and (b)
13 the non-solicitation clause of their employment agreements. See Mot. at 12–13.
14 a. Non-disclosure clause
15 FBC argues that in their respective employment agreements, the Employees
16 expressly agreed that they would have access to FBC’s confidential information, trade
17 secrets, and proprietary information under the condition they not, at any time during or
18 after their employment, “disclose or use in any way whatsoever any of such confidential
19 information.” See Herbon Decl. ¶¶ 3–10 Exs. A–D § 12. FBC argues that the employees
20 breached this clause when they began servicing clients while employed at New American.
21 See Mot. at 17. Similarly, FBC argues that the Employees breached this clause through
22 their efforts to “poach FBC’s relationships with the builder Woodside Homes.” See id.
23 FBC argues that, in their effort to poach FBC’s relationships with Woodside Homes, the
24 Employees also used, disclosed, or duplicated FBC’s trade secret information. See Means
25 Decl. ¶¶ 40–47; Bargioni Decl. ¶¶ 14–18.
26
27
5 The parties disagree about whether Florida or California law governs. See Opp’n at 12–
1 But the only concrete evidence that FBC points to in support of this argument is an
2 email from a Woodside Homes employee to the Employees in their capacities at New
3 American. See Bargioni Decl. ¶ 15–16, Ex. A. In the email, a Woodside Homes
4 employee stated that she was leaving the company and passing her work on to her
5 successor. See id. ¶ 16, Ex. A. The Woodside Homes employee included several FBC
6 employees on the email, as well as Defendants Savea, Skarg, and Benson in their roles at
7 New American. See id. As noted above, although FBC provides evidence that might
8 suggest the use or misappropriation of FBC’s customer/client lists by Savea, Gee, and
9 Benson, FBC does not explicitly demonstrate trade secret use or misappropriation beyond
10 speculation. As such, FBC is not likely to prevail on the merits of its breach of contract
11 claim as to the non-disclosure clause.
12 b. Non-solicitation clause
13 FBC argues next that in their respective employment agreements, the Employees
14 expressly agreed that they would not:
15 (a) solicit for employment by Employee, or anyone else, or
employ any employee of FBC or any person who was an
16 employee of FBC within 12 months prior to such solicitation;
(b) induce, or attempt to induce, any employee of FBC to
17 terminate such employee’s employment; (c) induce, or attempt
to induce, anyone having a business relationship with FBC to
18 terminate or curtail such relationship or, on behalf of himself or
anyone else, compete with FBC…
19
See Herbon Decl. ¶¶ 3–10 Exs. A–D § 14. FBC argues that the Employees also breached
20
their non-solicitation agreements by soliciting and inducing: (1) FBC’s employees to
21
terminate employment with FBC; and (2) FBC’s clients and builder accounts, including
22
Woodside Homes, to terminate their business relationships with FBC. See Mot. at 15.
23
FBC argues that “[a]cting as a group, the [Employees] terminated employment with FBC
24
and began employment with [New American].” Means Decl. ¶ 40; see also Iannetta Decl.
25
¶ 6; Bargioni Decl. ¶ 9. FBC therefore concludes that “[t]he timing and the near-
26
simultaneous resignation of employment with FBC and commencement of employment
27
with [New American] indicates that this was a concerted group decision that had been
1 negotiated in advance, rather than a series of individual decisions.” See Mot. at 16; Means
2 Decl. ¶ 40; Iannetta Decl. ¶ 6; Bargioni Decl. ¶ 9.
3 However, as New American argues, nothing in these declarations establishes
4 coordinated effort to leave FBC for New American. See Opp’n at 16. Similarly, as noted
5 above, FBC provides no evidence, beyond mere speculation, that FBC solicited clients and
6 builder accounts, like Woodside Homes. As such, FBC is not likely to prevail on the
7 merits of its breach of contract claim as to the non-solicitation clauses.
8 In sum, based on the evidence now before the Court, FBC is not likely to prevail on
9 the merits of its breach of contract claim, and this Court need not reach the issue of
10 damages allegedly suffered from the breach.
11 B. Irreparable Harm
12 A TRO is not warranted absent a showing that “irreparable injury is likely in the
13 absence of an injunction.” Winter, 555 U.S. at 22. A party claiming irreparable harm
14 must establish that remedies available at law, such as monetary damages, are inadequate to
15 compensate them for their harm. See Herb Reed Enter., LLC v. Fla. Ent. Mgmt., Inc., 736
16 F.3d 1239, 1249–1250 (9th Cir. 2013). The Ninth Circuit has held that, although
17 “economic injury alone does not support a finding of irreparable harm. . . intangible
18 injuries, such as damage to ongoing recruitment efforts and goodwill, qualify as irreparable
19 harm. Rent-A-Ctr., Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603
20 (9th Cir. 1991). A showing that the opposing party intends “to make imminent or
21 continued use of a trade secret,” however, “will almost always certainly show irreparable
22 harm.” Pac. Aerospace & Elec., Inc. v. Taylor, 295 F. Supp. 2d 1188, 1198 (E.D. Wash.
23 2003) (internal citations omitted).
24 FBC advances several arguments in support of its claim of irreparable harm,
25 focusing specifically on its preferred lender relationships with builders like Woodside
26 Homes. First, FBC argues that absent an injunction enjoining Defendants from continuing
27 to use or disclose its trade secrets, FBC will “suffer harm to its reputation, goodwill,
1 spent substantial time, money, and resources developing.” See Mot. at 19; Herbon Decl. ¶
2 49. FBC argues that it has earned its competitive position through the substantial time,
3 effort, and money it has invested into its relationships with builders. See Means Decl. ¶¶
4 2–6. Absent an injunction, FBC maintains, Defendants will continue to use or disclose
5 these relationships. See Mot. at 19. Second, FBC argues that it “cannot reasonably
6 calculate the damage to its goodwill and competitive position in the marketplace if
7 Defendants are allowed to misappropriate its trade secrets.” Id. Because builder
8 relationships often lead to a “a steady stream of qualified leads and increased loan
9 volume,” it will be exceedingly difficult for FBC to calculate its damages. See id.; Means
10 Decl. ¶¶ 2–6.
11 In sum, FBC argues that it faces irreparable harm because the Defendants will
12 continue to use and disclose its trade secrets. But because FBC has not demonstrated
13 enough at this point to succeed on the merits of its trade secrets misappropriation claim, it
14 has not sufficiently demonstrated that irreparable injury is likely in the absence of an
15 injunction.
16 C. Balance of Harm and Public Interest
17 The remaining Winter factors are balance of hardships and the public interest.
18 1. Balance of Harms
19 In weighing the balance of hardships, the Court must consider the seriousness of the
20 possible injuries that could result to either side if the Court grants or denies the requested
21 relief. See Winter, 555 U.S. at 26. Here, the balance of harms weighs heavily in FBC’s
22 favor. FBC’s proposed TRO would: (1) enjoin all Defendants from using or sharing any of
23 FBC’s trade secrets and communicating with clients and builders with whom the four
24 Employees had contact while at FBC; (2) enjoin the four Employees from communicating
25 clients and builders with whom they formerly worked while at FBC and restrained them
26 from using many materials obtained at FBC; (3) order each Defendant, within one week of
27 the Court’s order, to destroy any of FBC’s trade secrets in its possession and communicate
1 one week of the Court’s order, to identify to FBC’s counsel the last known contact
2 information in Defendant’s possession of any person to whom any Defendants have shared
3 FBC’s trade secrets. See Mot. at 2–3, 21–22.
4 FBC argues that it will be harmed absent an injunction enjoining Defendants from
5 using FBC’s trade secrets and communicating with former FBC clients and builders and
6 ordering them to destroy FBC’s purported trade secrets. See id. at 20. By contrast, FBC’s
7 requested injunction would not be overly burdensome to any of the Defendants. In theory,
8 an injunction restraining the Defendants from using and disclosing FBC’s trade secrets and
9 communicating with FBC clients and builders would not impose any hardship on them.
10 Therefore, the balance of hardships favors FBC.
11 2. Public Interest
12 As for the public interest, the Court may only grant a TRO if “the public interests”
13 that favor granting it “outweigh other public interests that cut in favor of not issuing” it.
14 Alliance for the Wild Rockies, 632 F.3d at 1138. Here, FBC argues that entry of its
15 requested TRO would not be adverse to the public interest. See Mot. at 20–21. The public
16 has a strong interest in protecting trade secrets and enforcing compliance with contracts
17 into which individuals freely entered. See Henry Schein, Inc. v. Cook, 191 F. Supp. 3d
18 1072, 1078 (N.D. Cal. 2016) (“[T]he public interest is served when defendant is asked to
19 do no more than abide by trade laws and the obligations of contractual agreements signed
with her employer”); Comet Techs. United States of Am. Inc. v. Beuerman, No. 18-CV-
20
01441-LHK, 2018 WL 1990226, at *5 (N.D. Cal. Mar. 15, 2018) (“[T]he public has a
21
strong interest in ensuring trade secrets are protected”). Though California has a strong
22
public policy in favor of vigorous competition, that interest “yields to California’s interest
23
in protecting a company’s trade secrets.” Bank of Am., N.A. v. Lee, No. CV 08-5546
24
CAS(JWJX), 2008 WL 4351348, at *7 (C.D. Cal. Sept. 22, 2008). Here, the public
25
interest would weigh in FBC’s favor, if FBC’s trade secrets were in fact in danger.
26
IV. CONCLUSION
27
Based on the evidence now before the Court, FBC is not likely to succeed on the
1 || merits of its trade secrets misappropriation or breach of contract claim, and therefore has
2 |} also failed to demonstrate irreparable harm. Accordingly, the Court DENIES the motion
3 || fora TRO.
4 IT IS SO ORDERED.
5 Dated: August 1 , 2023 oa
CHARLES R. BREYER
6 United States District Judge
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