IP Law Daily, TRADE SECRETS—D. Ariz.: Bank stated claim against former employees who allegedly took client lists, (Oct 7, 2022)

By Kevin M. Finson, J.D.

Allegations of trade secret misappropriation against four former bank employees sufficed to put the defendants on notice of the subject matter of the allegedly stolen secrets.

A bank successfully stated claims for misappropriation of trade secrets against four former employees in its wealth management group, the federal district court in Phoenix has held. The complaint laid out the allegedly stolen secrets with sufficient specificity and alleged that the bank used non-disclosure agreements as reasonable protection of the obviously valuable customer information at issue (BMO Harris Bank NA v. Corley, October 3, 2022, Lanza, D.).

BMO Harris Bank, NA (BMO) employed Duncan Corley, Jason Miller, Louise Goudy Willmering, and Kris Yamano (collectively, “Defendants”) in its wealth management group until all four simultaneously resigned and went to work for Crewe Advisors, Inc. (Crewe), a direct competitor to BMO. All four employees had signed various non-disclosure and non-solicitation agreements with BMO as conditions of their employment. After the four left, various former clients of BMO moved their accounts to Crewe, causing BMO to lose $60 million in assets under management and $450,000 in annual revenue. BMO filed suit against the four former employees, alleging that they used trade secrets belonging to BMO, specifically including client lists, to induce those clients to follow them to Crewe, along with related state law claims. The Defendants moved to dismiss.

Trade secrets. The four former employees argued that the complaint lacked enough detail to put them on notice as to what the claimed secrets actually were; that the complaint did not allege any facts sufficient to turn a mere list of customer names into a protectable trade secret; and that BMO did not allege that it had used reasonable means to protect the claimed secret.

The court reviewed the complaint and held that the allegation that “BMO developed, maintained, and possessed Confidential Information and Trade Secrets that include, without limitation, BMO client names and client lists with which BMO conducts business on an ongoing basis” was sufficient to put the defendants on notice of what the claimed misappropriation was about. The court also observed that a list of client names alone, in the context of the high-net worth investing business in which BMO and the defendants operated, was clearly something of value. The services the parties offered were only of interest to a very limited number of individuals, so clearly some effort went into identifying and preparing lists of those individuals. Finally, the complaint clearly alleged, and the defendants did not dispute, that BMO used confidentiality agreements with the employees who were given access to the customer lists, which previous case law had clearly established constituted a reasonable safeguard for similar secrets. The motion to dismiss the trade secret claims was denied.

State law claims for breach of fiduciary duty, tortious interference, and civil conspiracy were dismissed on state law grounds, and leave to amend was granted.

The Case is No. 2:22-cv-00547-DWL.

Attorneys: Caroline B. Paillou (Greensfelder, Hemker & Gale, P.C.) for BMO Harris Bank, N.A. Sarah Martin Humble (Kercsmar Feltus & Collins PLLC) for Duncan Corley.

Companies: BMO Harris Bank, N.A.

Cases: TradeSecrets ArizonaNews