Osborne Partners Capital Management, LLC v. Whisler

Background

Osborne Partners Capital Management, LLC sued its former employee Lia Whisler and Whisler’s new employer, Parallel Advisors. The complaint asserted claims under the federal Defend Trade Secrets Act, for tortious interference, breach of the duty of loyalty, breach of contract against Whisler, and violations of California’s Unfair Competition Law.

Osborne alleged that Whisler used or took confidential client information to contact clients she had served at Osborne and encourage them to move their business to Parallel. Osborne pointed to Whisler’s client communications and several actions before her departure, including scheduling client meetings after her transition, statements about a delayed transaction and client fees, and limited activity shown on her company laptop.

Whisler said she did not take any Osborne document and could identify or contact clients through public sources, personal knowledge, or information held in her personal capacity. She disputed Osborne’s interpretation of her emails and other conduct. Parallel said its policy of matching new clients’ existing fee structures explained Whisler’s statement that client fees would not change.

Temporary Restraining Order

Osborne sought a temporary restraining order, an emergency form of injunctive relief. The court applied the standard requiring a showing that the plaintiff was likely to succeed on the merits, likely to suffer irreparable harm without relief, that the balance of equities favored relief, and that an injunction would serve the public interest.

The court denied the motion. Osborne acknowledged at oral argument that it had no evidence Whisler took a client list. The court therefore considered whether Whisler might have misused information she knew, but concluded Osborne had not made the clear showing required for emergency relief.

The court explained that client identities may qualify as trade secrets if developing them required substantial resources, but they do not qualify if they are readily available from public sources or easily identified. Osborne’s statements that it had spent substantial resources developing client information were too general. Its evidence also did not show what client lists it maintained or that access was limited to employees with a need to know.

The court further concluded that Osborne had not shown a likelihood of success on its other claims. Whisler had reasonable explanations for the conduct underlying the contract and duty-of-loyalty allegations, and the evidence of improper conduct sufficient to support tortious-interference or unfair-competition claims was limited. The court also noted that Parallel had policies against bringing or using confidential information from a former employer and had evidence that it applied those policies here.

The court observed that several provisions in Whisler’s employment agreements appeared unenforceable under California law, including noncompetition and nonsolicitation provisions. It also found that some of the requested relief would be overbroad and would restrict Whisler’s rights in conflict with California law. Because the court denied the temporary restraining order, it did not need to decide additional arguments concerning the employment agreement’s arbitration provision.

The court also found that Osborne had not clearly shown irreparable harm. It reasoned that lost business can generally be addressed through damages and that Osborne’s claimed reputational harm rested on a speculative chain of events. The court additionally questioned whether an injunction would serve the public interest because California has a policy against nonsolicitation clauses and federal trade-secret law does not authorize injunctions that conflict with state laws prohibiting restraints on trade.

Expedited Discovery

The court granted Osborne’s request for expedited discovery, which is discovery allowed before the normal schedule when the requesting party shows a preliminary need and good cause. Although the evidence did not establish a likelihood of success sufficient for a temporary restraining order, the court found suspicious facts warranting faster discovery, including an email that appeared to show Whisler delaying work at Osborne for Parallel and the large number of clients she contacted.

The court found Osborne’s proposed discovery partly overbroad. No interrogatories would be allowed at that stage because depositions largely addressed the same subjects. Osborne was directed to narrow its requests to Whisler concerning communications about confidential information, and its request to Parallel for all communications about Whisler’s recruitment was found overbroad or irrelevant. The motion for expedited discovery was therefore granted with those limits.

The defendants also made an adequate showing for expedited discovery. The court granted them two depositions and five requests for production, to be shared between both defendants. All expedited discovery had to be completed by May 20, 2022, and discovery disputes were referred to a randomly assigned magistrate judge.

Other Orders

The court directed Osborne, if it continued seeking a preliminary injunction, to file that motion by May 27, 2022. Defendants’ responses were due June 3, 2022, and the hearing was set for June 16, 2022. The court also granted Osborne’s administrative motion to remove an incorrectly filed document. Chief United States District Judge Richard Seeborg signed the order on May 9, 2022.