Movement Mortgage LLC v. CIS Financial Services Inc

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

JASPER DIVISION

Movement Mortgage, LLC, )

)

Plaintiff,

)

6:22-cv-00671-LSC

v. )

)

CIS Financial Services,

)

Inc., and Paula Reeves,

)

Defendants. )

MEMORANDUM OF OPINION

Long ago, the Philistines sought the secret to Samson’s great

strength. Ultimately, succumbing to the persistence and deceit of

Delilah, Samson revealed that if anyone cut his hair—something

forbidden by his Nazirite vow—he would “become weak, and be like any

other man.” As foretold, Samson lost his strength when Delilah “shave[d]

off the seven locks of his head,” and the Philistines took him captive.1

Secrets and subterfuge are also purported to be the root of this case.

Movement Mortgage, LLC (“Movement”) claims that CIS Financial

Services, Inc. (“CIS”) and one of its executives, Paula Reeves (“Reeves”),

violated the Alabama Trade Secrets Act (“ATSA”), the federal Defend

1 Samson, however, got the last laugh. See Judges 16:23–30.

Trades Secrets Act (“DTSA”), and the Computer Fraud and Abuse Act

(“CFAA”). Movement also alleges that the Defendants conspired to

misappropriate its trade secrets and tortiously interfered with its

contractual relations. The Defendants move for summary judgment on

all claims. For the following reasons, this motion is due to be GRANTED

IN PART and DENIED IN PART.

I. BACKGROUND2

Movement and CIS are rival mortgage companies, and Reeves is a

longtime CIS executive. (Doc. 41 at 4.) In 2019, Reeves struck up a

friendship with Tony Joyce, with whom she “enjoyed a social or romantic

relationship over the next few years.” (Id.) In early 2020, Joyce began

working for CIS as a benefits coordinator, and by the end of the year, he

obtained a loan officer license. (Id.) Reeves then contacted the manager

of Movement’s Birmingham office and recommended Joyce for a job

2 The facts set out in this opinion are gleaned from the parties’ submissions of facts

claimed to be undisputed, their respective responses to those submissions, and the

Court’s own examination of the evidentiary record. These are the “facts” for summary

judgment purposes only. They may not be the actual facts. See Cox v. Adm’r U.S. Steel

& Carnegie Pension Fund, 17 F.3d 1386, 1400 (11th Cir. 1994). The Court is not

required to identify unreferenced evidence supporting a party’s position. As such,

review is limited to exhibits and specific portions of the exhibits cited by the parties.

See Chavez v. Sec’y, Fla. Dep’t of Corr., 647 F.3d 1057, 1061 (11th Cir. 2011)

(“[D]istrict court judges are not required to ferret out delectable facts buried in a

massive record . . .”).

interview. (Id.) Movement showed interest in hiring Joyce as a loan

officer and sent him proposed compensation terms. (Id.) Joyce forwarded

Reeves “an email . . . outlining those proposed terms, labeling the email

CONFIDENTIAL-PAULA ONLY.” (Id. at 4–5.) In January 2021,

Movement hired Joyce as a loan officer—a position he held for about six

months.3 (Id. at 5; doc. 50-13 at 2.) “CIS continued to employ Joyce while

he was a loan officer at Movement” and paid him at least $20,000. (Doc.

41 at 8.) During his tenure at Movement, Joyce never closed a loan on its

behalf. (Id.)

Movement’s “signature marketing pitch is the 6-7-1 Process.” (Id.

at 6.) “The pitch is that Movement can expedite a loan closing by

underwriting a loan file within six hours, fully process the loan file within

seven days, and . . . have the loan file ready to go to closing within one

day.” (Id. at 6–7.) To teach this process to loan officers and other

personnel, Movement uses a 355-page Training Manual (“the Manual”),

which Movement updates approximately eight times a year. (Id. at 7.)

3 Movement officially terminated Joyce in June 2021. (See doc. 50-13 at 2.) The

Defendants claim that Joyce effectively resigned in April 2021. (See doc. 52 at 6–7.)

Movement requires employees to execute confidentiality agreements

before they receive access to the Manual. (Id.)

Reeves obtained a copy of the Manual through Joyce and shared its

contents with CIS’s Vice President and Director of Innovation, Kyle

Senkbeil (“Senkbeil”). (Id. at 8.) In Senkbeil’s description, the Manual

outlines Movement’s “whole workflow for their salesperson beginning to

end.” (Doc. 50-2 at 19.)4 Senkbeil subsequently shared the Manual with

CIS’s loan processing supervisor. (Doc. 41 at 9.) Reeves acknowledged

that she made a “mistake” in taking the Manual from Joyce. (Id.)

II. STANDARD OF REVIEW

4 The Defendants seek to exclude Senkbeil’s deposition as well as his text messages

with Reeves—both were produced during discovery in a separate action in state court.

Defendants argue that Rule 804 of the Federal Rules of Evidence bars the Court’s

consideration of Senkbeil’s deposition because “Movement makes no showing that

Senkbeil is unavailable within the meaning of Rule 804, and indeed did not seek to

depose Senkbeil in this action.” (Doc. 52 at 17.) At the summary judgment stage, the

key question is whether evidence “can be reduced to admissible form at trial.”

Pritchard v. Southern Co. Servs., 92 F.3d 1130, 1135 (11th Cir. 1996). Presumably,

Senkbeil can testify at trial. His unavailability would only matter if Movement

offered his deposition testimony at trial instead of his live testimony. Defendants also

object to Senkbeil’s text messages because Movement did not authenticate the

messages with an attached affidavit. Rule 56 of the Federal Rules of Civil Procedure

does not impose an affidavit-only authentication requirement. Senkbeil

authenticated these messages in his deposition, so in ruling on this motion, the Court

may properly consider them. Cf. Lee v. Offshore Logistical & Transp., L.L.C., 859 F.3d

353, 355 (5th Cir. 2017) (explaining that Rule 56 “expressly contemplates that

affidavits are only one way to support a fact; documents . . . declarations, [and] other

materials are also supportive of facts.”) (citation and quotation marks omitted)

(alterations in original).

Summary judgment is appropriate “if the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled

to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A dispute is genuine

if “the record taken as a whole could lead a rational trier of fact to find

for the nonmoving party.” Hickson Corp. v. N. Crossarm Co., Inc., 357

F.3d 1256, 1260 (11th Cir. 2004). A genuine dispute as to a material fact

exists “if the nonmoving party has produced evidence such that a

reasonable factfinder could return a verdict in its favor.” Greenberg v.

BellSouth Telecomms., Inc., 498 F.3d 1258, 1263 (11th Cir. 2007) (quoting

Waddell v. Valley Forge Dental Assocs., 276 F.3d 1275, 1279 (11th Cir.

2001)). The trial judge should not weigh the evidence but should

determine whether there are any genuine issues of fact that should be

resolved at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249

(1986).

In considering a motion for summary judgment, trial courts must

give deference to the non-moving party by “view[ing] the materials

presented and all factual inferences in the light most favorable to the

nonmoving party.” Animal Legal Def. Fund v. U.S. Dep’t of Agric., 789

F.3d 1206, 1213–14 (11th Cir. 2015) (citing Adickes v. S.H. Kress & Co.,

398 U.S. 144, 157 (1970)). However, “unsubstantiated assertions alone

are not enough to withstand a motion for summary judgment.” Rollins v.

TechSouth, Inc., 833 F.2d 1525, 1529 (11th Cir. 1987). Conclusory

allegations and “mere scintilla of evidence in support of the nonmoving

party will not suffice to overcome a motion for summary judgment.”

Melton v. Abston, 841 F.3d 1207, 1219 (11th Cir. 2016) (per curiam)

(quoting Young v. City of Palm Bay, Fla., 358 F.3d 859, 860 (11th Cir.

2004)).

In a motion for summary judgment, “the moving party has the

burden of either negating an essential element of the nonmoving party's

case or showing that there is no evidence to prove a fact necessary to the

nonmoving party's case.” McGee v. Sentinel Offender Servs., LLC, 719

F.3d 1236, 1242 (11th Cir. 2013). Although the trial courts must use

caution when granting motions for summary judgment, “[s]ummary

judgment procedure is properly regarded not as a disfavored procedural

shortcut, but rather as an integral part of the Federal Rules as a whole.”

Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).

III. DISCUSSION

A. ATSA & DTSA

The ATSA “provides for the recovery of ‘actual damages’ suffered as

a result of a ‘misappropriation’ of a trade secret, as well as exemplary

damages for a willful and malicious misappropriation.” Systrends, Inc. v.

Grp. 8760, LLC, 959 So. 2d 1052, 1065 (Ala. 2006) (quoting Ala. Code §

8-27-4). Under the ATSA, a trade secret is information that:

a. Is used or intended for use in a trade or business;

b. Is included or embodied in a formula, pattern, compilation,

computer software, drawing, device, method, technique, or

process;

c. Is not publicly known and is not generally known in the

trade or business of the person asserting that it is a trade

secret;

d. Cannot be readily ascertained or derived from publicly

available information;

e. Is the subject of efforts that are reasonable under the

circumstances to maintain its secrecy; and

f. Has significant economic value.

Ala. Code § 8–27–2(1). Similarly, the DTSA protects:

[A]ll forms and types of financial, business, scientific,

technical, economic, or engineering information, including

patterns, plans, compilations, program devices, formulas,

designs, prototypes, methods, techniques, processes,

procedures, programs, or codes, whether tangible or

intangible, and whether or how stored, compiled, or

memorialized physically, electronically, graphically,

photographically, or in writing if-- (A) the owner thereof has

taken reasonable measures to keep such information secret;

and (B) the information derives independent economic value,

actual or potential, from not being generally known to, and

not being readily ascertainable through proper means by,

another person who can obtain economic value from the

disclosure or use of the information[.]

18 U.S.C. § 1839(3) (2016). Because the language of the two statutes is

“nearly identical,” this Court—as both parties do—will discuss the

statutes together. See Parker v. Petrovics, No. 2:19-CV-00699-RDP, 2020

WL 3972761, at *4 (N.D. Ala. July 14, 2020).

The Defendants contend that Movement’s ATSA and DTSA claims

fail for these reasons (more or less): 1) Movement failed to properly

identify trade secrets within the Manual; 2) some or all the information

within the Manual is publicly available; 3) Movement’s efforts to protect

the secrecy of the Manual were insufficient; 4) Movement failed to prove

that it suffered any damage from the alleged misappropriation of the

Manual.

Movement asserts that the entire Manual is a trade secret because

it is a compilation of materials that gives Movement a competitive

advantage over its rivals. Movement’s designated corporate

representative, Trasi King, attested to this claim in her deposition. (See

doc. 51-1 – Sealed.) As she explained, the Manual contains some

information that is generally known within the mortgage industry, but

in its entirety, the Manual outlines a unique method that allows

Movement to process loans more efficiently than its competitors. Having

reviewed the sealed portions of King’s deposition, the Court finds that

this issue presents a genuine dispute of material fact. King’s testimony

is opaque in places, but she ultimately describes the distinctive features

of the Manual with sufficient particularity to require that a jury decide

if the Manual is a trade secret.

Similarly, the fact that the Manual contains publicly available

information does not doom Movement’s trade secrets claims. The critical

issue is whether the Manual contains “a unique combination of that

information, which adds value to the information.” Penalty Kick Mgmt.

Ltd. v. Coca Cola Co., 318 F.3d 1284, 1291 (11th Cir. 2003). As before,

this question must be left for a jury.

In addition, Movement’s efforts to protect the secrecy of the Manual

are reasonable enough to withstand summary judgment. Most

importantly, Movement required all employees to sign confidentiality

agreements. See Physiotherapy Assocs., Inc. v. ATI Holdings, LLC, 592 F.

Supp. 3d 1032, 1041 (N.D. Ala. 2022) (“[C]ourts have identified two

efforts at secrecy that typically meet the mark under the ATSA. The first

is the company’s requirement that employees sign a confidentiality

agreement.”); Ex parte W.L. Halsey Grocery Co., 897 So. 2d 1028, 1034–

35 (Ala. 2004) (“Halsey’s actions in requiring employees to sign the

nonsolicitation agreement informing the employees of the confidential

nature of the information to which the employee will be exposed

sufficiently reflect efforts that are reasonable under the circumstances to

maintain [the] secrecy of Halsey’s information.”) (citation and quotation

marks omitted); Yellowfin Yachts, Inc. v. Barker Boatworks, LLC, 898

F.3d 1279, 1300–01 (11th Cir. 2018) (finding significant the plaintiff’s

failure to procure a signed confidentiality agreement).

Movement’s confidentiality agreement specifically mentions

training manuals, and employees were required to acknowledge that any

unauthorized disclosure of confidential information “would cause

substantial and irreparable harm to the Company.” (Doc. 50-3 at 6.) The

Movement employee handbook, moreover, includes a separate

confidentiality provision. Granted, as Defendants point out, Movement’s

efforts to safeguard the Manual were not necessarily exemplary. For

instance, during the relevant time period, Movement failed to “designate

the Manual itself as ‘confidential.’” (Doc. 43 at 44.) Nonetheless, the

Court cannot say as a matter of law that Movement’s efforts to protect

the Manual were unreasonable under the circumstances.

Movement also points to sufficient evidence of damage flowing from

the Defendants’ alleged misappropriation of the Manual. Senkbeil

testified that—at Reeves’ direction—he implemented ideas from the

Manual, thereby depriving Movement of the exclusive benefit of the

Manual. (Doc. 50-2 at 31; 49); Oakwood Labs. LLC v. Thanoo, 999 F.3d

892, 914 (3d Cir. 2021) (finding that loss of “the exclusive use of trade

secret information . . . is a real and redressable harm.”). Further,

Movement has produced evidence of the Manual’s development costs,

which can function as a proxy for a plaintiff’s damages in trade secrets

cases. See id. at 913–14; Bohnsack v. Varco, L.P., 668 F.3d 262, 280 (5th

Cir. 2012); Univ. Computing Co. v. Lykes–Youngstown Corp., 504 F.2d

518, 535–36 (5th Cir. 1974).

Accordingly, Movement’s ATSA and DTSA claims survive summary

judgment.

B. Conspiracy to Misappropriate Trade Secrets

In their motion for summary judgment, the Defendants argue that

Movement’s conspiracy claims “fail[] for want of a viable underlying

cause of action.” (Doc. 43 at 50.) Given the viability of the ATSA and

DTSA claims, Movement’s conspiracy claims likewise survive summary

judgment.

C. Tortious Interference with a Contractual Relationship

“In order to prevail on a claim of tortious interference, a plaintiff

must establish: (1) the existence of a protectible business relationship; (2)

of which the defendant knew; (3) to which the defendant was a stranger;

(4) with which the defendant intentionally interfered; and (5) damage.”

Nucor Steel Tuscaloosa, Inc. v. Zurich Am. Ins., 343 So. 3d 458, 476 (Ala.

2021) (quoting White Sands Grp., LLC v. PRS II, LLC, 32 So. 3d 5, 14

(Ala. 2009)). Movement concedes that the ATSA preempts a tortious

interference claim to the extent such a claim is premised on the

misappropriation of trade secrets. See Allied Supply Co. v. Brown, 585

So. 2d 33, 37 (Ala. 1991) (“[T]he legislature intended for the [ATSA] to

replace common law tort remedies for the misappropriation of trade

secrets.”). But Movement argues that its tortious interference claim is

not preempted because it is based on Defendants’ other actions “to induce

Joyce into breaching a valid contract with Movement,” such as

encouraging Joyce to share non-trade secret information. (Doc. 49 at 66.)

The Defendants, however, take a broader view of the ATSA’s preemptive

scope, claiming that the ATSA “preempts all claims based upon the

unauthorized use of information, even if the information does not meet

the statutory definition of a trade secret.” See Petrovics, 2020 WL

3972761, at *11 (citation and quotation marks omitted).

The parties do not cite—and the Court is unaware of—any binding

authority that delimits the ATSA’s preemptive effect. Although other

district courts have reached contrary conclusions, this Court nonetheless

prefers Movement’s narrower interpretation because the Defendants fail

to show that the ATSA’s text sweeps as broadly as they claim. Therefore,

while Movement’s tortious interference claim is preempted to the extent

it is duplicative of the ATSA claim, it is not entirely preempted.

The Defendants also argue that Movement cannot satisfy the

second and fifth elements of a tortious interference claim. As to the

second element, a reasonable factfinder could infer that the Defendants

were aware of a protectible business or contractual relationship.

Senkbeil, for example, sent Reeves this text message: “You think you

could access movement hub? I’d like to see the uw procedures and

processing etc.” (Doc. 50-6 at 34.) Reeves responded: “If Tony was here I

could. But he’s not. Sorry. He says they’ve got so much security and

tracking on their systems that he has to be careful. He would have to be

logged in on his computer and lord knows he can’t forward anything[.]

They’ve got him scared to death[.]” (Id.) This message (among others

conveying similar content) indicates that Reeves knew of Joyce’s

obligation to protect Movement’s confidential information.

With respect to damages—the fifth element, Movement fails to

explain the nature or quantity of its non-preempted damages (i.e.,

damages from Defendants’ alleged misappropriation of non-trade secret

information). But the Court will not dismiss Movement’s intentional

interference claim on this ground because a jury could properly award

nominal damages “in recognition of the invasion of the legal rights of the

plaintiff.” Roberson v. C.P. Allen Constr. Co., Inc., 50 So. 3d 471, 477 (Ala.

Civ. App. 2010).

D. CFAA

“Whoever . . . intentionally accesses a computer without

authorization or exceeds authorized access, and thereby obtains . . .

information from any protected computer violates the CFAA.” Brown

Jordan Int’l, Inc. v. Carmicle, 846 F.3d 1167, 1173 (11th Cir. 2017) (citing

18 U.S.C. § 1030(a)(2)(C)). The CFAA’s “statutory definition includes two

separate types of loss: (1) reasonable costs incurred in connection with

such activities as responding to a violation, assessing the damage done,

and restoring the affected data, program system, or information to its

condition prior to the violation; and (2) any revenue lost, cost incurred, or

other consequential damages incurred because of interruption of service.”

Id. at 1174. A plaintiff’s loss must amount to “at least $5,000 in value.”

18 U.S.C. § 1030(c)(4)(A)(i)(I).

Even if Movement could demonstrate that the Defendants

intentionally accessed its computer network without authorization,

Movement fails to explain how its loss, as defined by the CFAA, amounts

to at least $5,000. In the section of its brief devoted to CFAA damages,

Movement argued no evidence of the costs it incurred in response to the

Defendants’ alleged unauthorized access. Accordingly, the Court will

dismiss Movement’s CFAA claim.5

5 Furthermore, the Court doubts that Movement provides sufficient support for its

claim that the Defendants accessed its computer network without authorization. In

an attempt to support its CFAA claim, Movement relies on a handful of ambiguous

text messages from Reeves. (See doc. 49 at 75–76; doc. 50-6 at 20–26.) The text

messages certainly raise an inference of general malfeasance and provide evidence

that Joyce shared information from his virtual training sessions with Reeves. But

bereft of additional evidence that fleshes out the import of the messages, a reasonable

factfinder probably could not conclude that the Defendants intentionally accessed

IV. CONCLUSION

For the foregoing reasons, the Defendants’ Motion for Summary

Judgment is due to be GRANTED IN PART and DENIED IN PART. The

Court will enter an Order consistent with this Memorandum of Opinion.

DONE and ORDERED on April 20, 2023.

L. Scott G

United States Dist¥ict Judge

211211

Movement’s computer system. See Melton, 841 F.3d at 1219 (“Inferences based on

speculation and a mere scintilla of evidence in support of the nonmoving party will

not suffice to overcome a motion for summary judgment.”) (citation and quotation

marks omitted).

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