CMG Mortgage, Inc. d/b/a CMG Financial v. Kaim

Background

CMG Mortgage, Inc. d/b/a CMG Financial filed a complaint asserting one breach-of-contract claim. CMG alleged that defendants Kaim and Kim, whom the opinion identifies as former CMG employees, breached confidentiality agreements by retaining, using, misappropriating, or disclosing CMG’s confidential information. In its motion for a temporary restraining order, CMG argued that the defendants used confidential information to solicit CMG customers and divert at least five loans to First Heritage, their new employer.

Legal standard

A temporary restraining order is emergency relief that can prohibit conduct before a hearing on a preliminary injunction. The court applied the standard used for preliminary injunctions: the moving party must show a likelihood of success on the merits, likely irreparable harm without relief, that the balance of hardships favors the party seeking relief, and that an injunction would serve the public interest. Under the Ninth Circuit’s sliding-scale approach, serious questions on the merits may suffice only if the other required conditions are also met.

Court’s analysis

The court held that CMG had not shown a likelihood of success on its contract claim. CMG’s attorney asserted, without supporting facts, that the defendants had maintained, misappropriated, and used confidential information. CMG’s sales executive likewise asserted that the loan diversions demonstrated theft and misappropriation, but the filings did not explain what confidential information the defendants possessed or why the transactions could only have occurred through misuse of that information.

The defendants submitted declarations stating that, as to the four loans actually at issue, they told borrowers about their move to First Heritage—sometimes in response to borrower inquiries—and told the borrowers they could decide whether to move their business. The court said the record supported an inference that the defendants had informed borrowers of their change in employment and that the borrowers then chose to move their business. It cited the principle that merely informing a former employer’s customers about a change of employment, without more, is not solicitation.

Because CMG failed to establish likely success on the merits, the court stated that it did not need to consider the remaining preliminary-relief factors. In a footnote, however, the court also noted that CMG had not shown irreparable harm or that the balance of hardships favored it. The parties’ months-long dispute over whether defendants had to return signing bonuses suggested a lack of new urgency, and the possibility that defendants were engaged in legitimate competition weighed against CMG at that stage.

Disposition

The court denied CMG’s motion for a temporary restraining order. The order’s title also identifies the motion as seeking an order to show cause, but the conclusion specifically states that the motion for a temporary restraining order was denied.