FBC Mortgage, LLC v. Broker Solutions, Inc

Background

FBC Mortgage, LLC alleged that Broker Solutions, Inc., doing business as New American Funding, and four former FBC employees—Brian Skarg, Amanda Benson, Ryan Gee, and Joshua Savea—misappropriated FBC’s trade secrets. FBC alleged that the employees collectively left FBC between November 11 and November 16, 2022, and began working for New American. FBC identified the alleged trade secrets as including client lists; information about preferred lending relationships with builders; pricing, rate, and concession information; training and marketing materials; job aids; and supplier, vendor, and referral sources.

FBC claimed that the employees used information obtained during their FBC employment to service former FBC clients and pursue FBC’s preferred lending relationship with Woodside Homes. FBC also alleged that Skarg sent FBC materials to his personal email account before leaving. FBC sought a temporary restraining order requiring the defendants to stop using or sharing FBC’s information, restricting certain communications with former clients and builders, destroying FBC’s trade secrets, and identifying people to whom the information had been shared. FBC asserted 11 causes of action, including trade-secret misappropriation under the federal Defend Trade Secrets Act and California’s trade-secret law, breach of contract, and several interference and computer-related claims.

Legal standard

A temporary restraining order is an extraordinary form of temporary relief. The requesting party generally must show a likelihood of success on the merits, a likelihood of irreparable harm without the order, and that the public interest favors relief. The court may also use a balancing approach when the party raises serious questions about the merits and the balance of hardships strongly favors that party.

Trade-secret claim

The court evaluated FBC’s likelihood of success on its trade-secret misappropriation claim under the federal and California statutes together because their relevant elements are substantially similar. FBC had to show that it owned a trade secret, that the defendants misappropriated it, and that the defendants’ conduct damaged FBC.

The court found that FBC had taken reasonable steps to keep its information secret. The employees had signed agreements restricting their use and disclosure of FBC’s confidential information, and FBC used password protection, dual authentication, and, where appropriate, encryption.

The court nevertheless found that FBC had not sufficiently shown that the information had independent economic value because it was not generally known or readily ascertainable. Regarding the client lists, FBC did not provide enough information to determine whether they reflected substantial effort to identify customers with particular needs or instead contained publicly accessible information. FBC also provided insufficient detail about the economic value of its training and marketing materials, pricing and rate information, and job aids. The court similarly found insufficient evidence that FBC’s preferred builder relationships or its supplier, vendor, and referral sources derived independent economic value from secrecy.

The court also found that FBC had not shown likely misappropriation. The soft credit inquiries and evidence that defendants were servicing former FBC clients might have suggested questionable conduct, but they did not establish that the defendants had explicitly used or disclosed FBC’s trade secrets. The evidence also did not rule out the possibility that clients had contacted the employees first. Skarg’s emails showed that he sent materials to himself, but FBC did not provide sufficient evidence that he actually used those materials or disclosed them to New American. Communications involving Woodside Homes likewise did not establish explicit use or disclosure of trade secrets. Because FBC had not shown unauthorized use or disclosure beyond speculation, the court concluded that FBC was not likely to succeed on the trade-secret claim. The court did not reach the damages element of that claim.

Breach-of-contract claim

FBC also argued that the employees breached non-disclosure and non-solicitation provisions in their employment agreements. The court stated that, under the Florida-law standard proposed by FBC, a breach-of-contract claim requires a valid contract, a material breach, and resulting damages. The parties disagreed about whether Florida or California law governed, but the court did not resolve that issue because FBC had not shown a likelihood of success under the evidence before it.

As to the non-disclosure provisions, FBC relied on the employees’ work for New American, their alleged efforts involving Woodside Homes, and the evidence concerning client information. The court found that the evidence did not explicitly show use or misappropriation of FBC’s trade secrets and therefore did not establish likely success on the non-disclosure theory.

As to the non-solicitation provisions, FBC argued that the employees had solicited FBC employees, clients, and builder accounts. The court found that FBC’s declarations did not establish a coordinated effort to leave FBC for New American and that FBC had provided no evidence beyond speculation that the defendants had solicited clients or builder accounts. The court therefore found that FBC was not likely to succeed on the non-solicitation theories and did not reach damages for the alleged contract breach.

Irreparable harm and other factors

FBC argued that it would suffer harm to its reputation, goodwill, and competitive position and that damages would be difficult to calculate because its builder relationships could generate continuing leads and loan volume. The court held that FBC had not sufficiently shown likely irreparable harm because it had not shown enough likelihood of success on the trade-secret claim.

The court found that the balance of hardships favored FBC. It also stated that the public interest would favor protecting trade secrets and enforcing contracts if FBC’s trade secrets were actually in danger. Those findings did not overcome FBC’s failure to establish likely success and likely irreparable harm.

Disposition

The court denied FBC’s motion for a temporary restraining order.