1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 LUMINATE HOME LOANS, INC., Case No. 24-cv-2251-BAS-MSB

12 Plaintiff, ORDER GRANTING IN PART, 13 v. DENYING IN PART DEFENDANT SYDNEY LYNN’S MOTION TO 14 BETTER MORTGAGE CO., et al., DISMISS (ECF No. 83) 15 Defendants. 16 BETTER MORTGAGE CO., 17 Counterclaimant, 18 v. 19 LUMINATE HOME LOANS, INC., et. al., 20 Counterclaim Defendants. 21 22 Presently before the Court is a motion to dismiss submitted by Defendant Sydney 23 Lynn (“Lynn”) (ECF No. 83). For the reasons discussed below, the Court GRANTS IN 24 PART and DENIES IN PART Lynn’s motion to dismiss (ECF No. 83.) The Court 25 DENIES Lynn’s motion to dismiss Plaintiff’s claims for misappropriation of trade secrets 26 under state and federal law, breach of fiduciary duty, and breach of duty of loyalty. 27 However, the Court GRANTS WITHOUT PREJUDICE dismissal of Plaintiff’s tortious 28 1 interference claim and Plaintiff’s breach of contract claim. For these claims, the Court 2 GRANTS Plaintiff leave to amend by January 5, 2025. 3 I. BACKGROUND 4 Plaintiff is a mortgage loan lender. In 2022, Plaintiff acquired a mortgage division 5 known as NEO Home Loans from a struggling competitor, Celebrity Home Loans LLC 6 (“Celebrity”). (ECF No. 64-2 ¶¶ 9–10.) Over the next three years, Plaintiff made 7 significant developments to its NEO Division following acquisition—including creating 8 new mortgage offers and training NEO managers. (Id. ¶¶ 14–18.) 9 Lynn was initially a manager at Celebrity, and served as Director of Finance at 10 Luminate after making the transition from Celebrity upon Luminate’s acquisition of NEO 11 in 2022. (Id. ¶¶ 34.) As a condition of her at-will employment, Lynn reviewed and signed 12 an employee handbook and Plaintiff’s policy prohibiting dual employment. (Id. ¶¶ 36, 42.) 13 The employee handbook imposes obligations of protecting Plaintiff’s confidential business 14 information (including trade secrets). (Id. ¶¶ 70–71.) In early December 2024, Plaintiff 15 terminated Lynn’s employment upon discovering she was coordinating with a new retail 16 loan company, Defendant Better Mortgage Co. (“Better”), throughout the course of her 17 employment. (ECF No. 99 at 11:12–12:20.) Lynn had allegedly breached her obligations 18 to Plaintiff in exchange for a new job at Better. (ECF No. 64-2 ¶¶ 47, 48, 54, 59.) 19 Plaintiff filed a complaint against Lynn on December 23, 2024 in United States 20 District Court, District of Nevada. Luminate Home Loans, Inc. v. Lynn, 24-cv-02403, ECF 21 No. 1 (“Lynn Complaint”). By Order of Hon. Richard F. Boulware of the District Court 22 for Nevada, this action was transferred on June 2, 2025. (24-cv-02403, ECF Doc. No. 8; 23 3:25-cv-02014-BAS-MSB.) (“Lynn Action”). On August 25, 2025, the Parties filed a joint 24 motion seeking to consolidate the Lynn Action with the instant Action. (ECF No. 64.) The 25 Court granted the joint consolidation motion on September 19, 2025. (ECF No. 72.) Lynn 26 then filed a motion to dismiss Plaintiff’s claims. (ECF No. 83.) Plaintiff filed a response. 27 (ECF No. 99.) 28 1 In the Lynn Complaint, Plaintiff asserted five causes of action against Lynn, 2 including: (1) breach of contract, (2) breach of fiduciary duties, (3) misappropriation of 3 trade secrets in violation of the Defend Trade Secrets Act,

(“DTSA”), (4) 4 misappropriation of trade secrets in violation of state law, and (5) tortious interference. 5 (ECF No. 64-2.) 6 The Court finds Lynn’s motion to dismiss (ECF No. 83) appropriate to rule on the 7 papers and without oral argument. See CivLR 7.1.d.1. 8 II. LEGAL STANDARD 9 Rule 12(b)(6) allows a party to move to dismiss based on the legal sufficiency of the 10 claims asserted in the complaint. Navarro v. Block,

, 732 (9th Cir. 2001). 11 The court must accept all factual allegations pleaded in the complaint as true and draw all 12 reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. 13 Ins. Co.,

, 337–38 (9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a 14 complaint need not contain detailed factual allegations; rather, it must plead “enough facts 15 to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,

(2007). “A claim has facial plausibility when the plaintiff pleads factual content 17 that allows the court to draw the reasonable inference that the defendant is liable for the 18 misconduct alleged.” Ashcroft v. Iqbal,

(2009) (citing Twombly, 550 19 U.S. at 556). “Where a complaint pleads facts that are ‘merely consistent with’ a 20 defendant's liability, it ‘stops short of the line between possibility and plausibility of 21 entitlement to relief.’” Id. (quoting Twombly,

). 22 “[A] plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ 23 requires more than labels and conclusions, and a formulaic recitation of the elements of a 24 cause of action will not do.” Twombly,

(quoting Papasan v. Allain, 478

(1986)). A court need not accept “legal conclusions” as true. Iqbal,

. Although courts accept Plaintiff's allegations as true, it is not proper for the court 27 to assume that “the [plaintiff] can prove facts that it has not alleged or that the defendants 28 1 have violated the ... law[] in ways that have not been alleged.” Assoc. Gen. Contractors of 2 Cal., Inc. v. Cal. State Council of Carpenters,

(1983). 3 III. ANALYSIS 4 A. Choice of Law 5 As discussed, Plaintiff’s case against Lynn was originally filed in the District of 6 Nevada, transferred to this Court, and subsequently consolidated with the present action. 7 (ECF Nos. 64, 72.) Since Plaintiff’s claims against Lynn in the District of Nevada involve 8 state common law (ECF No. 64-2), the Court now considers whether to apply Nevada or 9 California law to the present action. 10 Where a diversity case has been transferred for purposes of correcting the venue, the 11 transferee court is obligated to apply the choice of law rules of the state from which the 12 case was transferred. Globespan, Inc. v. O'Neill,

(C.D. Cal. 13 2001) (citing Klaxon Co. v. Stentor Electric Mfg. Co.,

(1941)). 14 However, when a transfer is based on other grounds, a federal court sitting in diversity shall 15 apply the choice of law rules of the state in which it sits. Globespan, Inc.,

. Here, the case was transferred from the District of Nevada not because the District 17 of Nevada would be an incorrect forum to hear Plaintiff’s case against Lynn—but rather, 18 because consolidation is in the interest of judicial efficiency pursuant to Fed. R. Civ. P. 19 42(a). (ECF Nos. 64, 72.) 20 According to California choice of law rules, California law is applied unless the 21 party in favor of applying foreign law shows that the “government interests” analysis used 22 in California dictates the application of the law of a foreign state.

at 1231–32; see also 23 Wash. Mut. Bank, FA v. Superior Court,

(Cal. 2001). Under the 24 “government interests” analysis, the Court must first determine whether the substantive 25 laws of California and the foreign jurisdiction differ on the claims. See Liew v. Official 26 Receiver and Liquidator,

(9th Cir. 1982). Second, if the laws differ, 27 the Court determines whether both jurisdictions have an interest in applying their own laws. 28 See

In determining the interests of a particular state in applying its laws, “the forum 1 court undertakes an examination of the policies underlying the particular law and asks 2 whether those policies will be served by applying that law in the action.” Hurtado v. 3 Superior Court,

(1974). Third, if both jurisdictions have an interest, 4 the Court then takes a “comparative impairment” approach to determine which 5 jurisdiction's interest would be more impaired if its policies were subordinated to those of 6 the other jurisdiction. See Liew,

. 7 Given that neither Plaintiff nor Lynn has specified whether they prefer applying 8 California or Nevada law, the Court finds California law should apply to Plaintiff’s claims 9 by default. Nonetheless, in her motion to dismiss (ECF Nos. 83, 83-1), Lynn applies 10 Nevada law across the discussion of Plaintiff’s common law claims. Lynn most explicitly 11 considers the conflict of laws issue in her section discussing Plaintiff’s breach of fiduciary 12 duty claim. (ECF No. 83-1 at 19:15-28.) Lynn states that while it is “impossible for Lynn 13 to ascertain which state’s common law [Plaintiff’s] claim is based upon,” “California law 14 does not impose fiduciary duties on at-will employees absent extraordinary circumstances” 15 and she “assumes (for purposes of this motion only) that [Plaintiff’s] claim for breach of 16 fiduciary duty is based on Nevada’s common law.” (Id.) 17 Even if Lynn explicitly moved to apply Nevada, rather than California law, the Court 18 finds California law should apply pursuant to the “government interests” analysis. 19 Globespan, Inc., 151 F. Supp. 2d at 1231–1233. The Court agrees with Lynn that both 20 states’ laws are substantively similar—albeit for a different reason. In both states, 21 employees—especially high-ranking employees like Lynn—can owe their employers a 22 fiduciary duty and duty of loyalty. See Metlife Bank, N.A. v. Evergreen Moneysource 23 Mortg. Co., No. 2:10-CV-00288-RLHPAL,

, at *2 (D. Nev. June 17, 24 2010) (“[T]he Nevada Supreme Court has held that employees owe their employers a duty 25 of loyalty and . . . has permitted employers to sue former employees for breach of fiduciary 26 duty”) (citing White Cap Industries v. Ruppert, 67 P .3d 318, 319–20 (Nev. 2003)); see also 27 Thomas Weisel Partners LLC v. BNP Paribas,

, at *5-6 (N.D. Cal. Apr. 28 1 1, 2010) (employees have been found to owe fiduciary duties if they participate in 2 management) (citing Sequoia Vacuum Sys. v. Stransky,

(1967)). 3 The Court also finds that the two states’ doctrines are substantially similar on 4 Plaintiff’s remaining claims, such that California law should apply. Breach of contract 5 claims in Nevada and California require proving the same elements. See Contreras v. Am. 6 Fam. Mut. Ins. Co.,

(D. Nev. 2015); Becerra v. Allstate 7 Northbrook Indem. Co., No. 22-CV-00202-BAS-MSB,

, at *3 (S.D. Cal. 8 July 1, 2022). Both Nevada and California courts have held that state law trade secret 9 claims have substantially similar elements to the federal Defend Trade Secrets Act 10 (“DTSA”),

. See Elko, Inc. v. WTH Com. Servs., LLC,

, 11 at *2 (D. Nev. Sept. 20, 2023) (citing InteliClear, LLC v. ETC Glob. Holdings, Inc., 978

, 657 (9th Cir. 2020) (finding that the elements of federal and state law trade secret 13 claims are “substantially similar”); see also Alta Devices, Inc. v. LG Elecs., Inc.,

Supp. 3d 868, 877 (N.D. Cal. 2018) (“The elements of misappropriation under the DTSA 15 are similar to those under the [California state trade secrets law].”). For tortious 16 interference claims, Nevada state courts explicitly follow the approach set out by California 17 state courts. J.J. Indus., LLC v. Bennett,

(2003) (under both California 18 and Nevada state law, “plaintiff must demonstrate that the defendant intended to induce 19 the other party to breach the contract with the plaintiff.”) 20 In sum, California law should apply across Plaintiff’s claims against Lynn pursuant 21 to the “government interests” test. Globespan, Inc., 151 F. Supp. 2d at 1233. 22 B. Trade Secret Claims 23 As discussed, courts have analyzed state and federal trade secret claims together 24 when the elements are substantially similar. InteliClear, LLC., 978 F.3d at 657. To 25 succeed on a claim for misappropriation of trade secrets under the DTSA, a plaintiff must 26 prove: (1) that the plaintiff possessed a trade secret, (2) that the defendant misappropriated 27 the trade secret; and (3) that the misappropriation caused or threatened damage to the 28 plaintiff. Id. at 657–58 (citing

(5)). 1 1. Possession of Trade Secret 2 To prove ownership of a trade secret, plaintiffs “must identify the trade secrets and 3 carry the burden of showing they exist.” MAI Sys. Corp. v. Peak Computer, Inc.,

(9th Cir. 1993). The definition of trade secret consists of three elements: “(1) 5 information, (2) that is valuable because it is unknown to others, and (3) that the owner has 6 attempted to keep secret.” InteliClear, LLC, 978 F.3d at 657. 7 i. Whether Plaintiff Identified Trade Secrets with Sufficient 8 Particularity 9 “The plaintiff ‘should describe the subject matter of the trade secret with sufficient 10 particularity to separate it from matters of general knowledge in the trade or of special 11 knowledge of those persons . . . skilled in the trade.’” Imax Corp. v. Cinema Techs., Inc., 12

(9th Cir. 1998). A plaintiff must “clearly refer to tangible trade secret 13 material” rather than referring to information “which potentially qualifies for trade secret 14 protection.” InteliClear, LLC, 978 F.3d at 658. 15 Here, Plaintiff alleges that the trade secrets appropriated by Lynn include: “training 16 materials, employee roster and salary lists, employment and third-party contracts, business 17 strategies, loan processing procedures, loan profit margins, financial details for Luminate’s 18 divisions and branches, economic models, revenue and performance reviews, completed 19 loan information, secondary market sales data, loan lead lists and leads.” (ECF No. 64-2 20 ¶ 90.) Concretely, Defendant Lynn has allegedly impermissibly downloaded “3,998 21 confidential [Plaintiff] files containing highly valuable and sensitive information on 22 [Plaintiff’s] business operations and loan data”—including “nonpublic information on 23 [Plaintiff’s] borrowers.” (Id. ¶ 97.) 24 Plaintiff’s Lynn Complaint includes exhibits providing specific examples of the trade 25 secrets that Lynn allegedly misappropriated. (ECF No. 64-2 ¶ 55.) As in the Court’s prior 26 order (ECF No. 101) on the motions to dismiss (ECF Nos. 45, 46) submitted by Defendants 27 Daniel Horanyi, Jeanette Lee, and Better Mortgage, Co., the Court finds that the inclusion 28 1 of such exhibits militates towards finding that Plaintiff has alleged trade secrets with 2 sufficient particularity. 3 ii. Whether Alleged Trade Secrets are Valuable Due to Secrecy 4 For there to be a trade secret, Plaintiff must also allege that such trade secrets are 5 “valuable because [they are] unknown to others.” InteliClear, LLC, 978 F.3d at 657. 6 Plaintiff alleges that, if shared, the alleged trade secrets would “provide a competitor a 7 significant advantage in creating a competing retail loan division based on Luminate’s 8 model for its NEO division.” (ECF No. 64-2 ¶ 104.) Additionally, Plaintiff allegedly 9 “derives independent economic value from its confidential data and trade secrets including 10 its employee data, business organization and strategies, company financial forecasting and 11 review, its loan pricing information, its secondary market sale terms, as well as its customer 12 and lead information.” (Id. ¶ 105.) 13 Courts have also previously held that the kinds of information Plaintiff alleges above 14 can constitute protectable trade secrets that provide economic value by virtue of their 15 secrecy. See e.g., Whyte v. Schlage Lock Co.,

(2002) (holding 16 that marketing materials, along with cost and pricing information, was a trade secret); 17 StonCor Grp., Inc. v. Campton, No. C05–1225JLR,

, at *5 (W.D.Wash. 18 Feb. 7, 2006) (finding alleged misappropriation of “proprietary and confidential 19 information concerning. . . sales and marketing strategies, pricing and pricing policies, and 20 customer lists and installers” sufficient to state a claim); First-Citizens Bank & Tr. Co. v. 21 HSBC Holdings plc, No. 23-CV-02483-LB,

, at *11 (N.D. Cal. Jan. 10, 22 2024) (finding employee contact information “tether[ed]” to “salary, markets, skills, and 23 business relationships” are trade secrets); MAI Sys. Corp. v. Peak Comput. Inc.,

511, 521 (9th Cir. 1993) (recognizing a company's confidential customer database “has 25 potential economic value because it allows a competitor. . . to direct its sales efforts to the 26 plaintiff company's customers,” and constitutes a trade secret if the company has taken 27 reasonable steps to keep the database secret); Yeiser Rsch. & Dev., LLC v. Teknor Apex 28 Co., No. 17-CV-1290-BAS-RBB,

, at *5 (S.D. Cal. Aug. 21, 2018) 1 (“marketing-related information, such as marketing plans and marketing analysis may 2 constitute a trade secret”). 3 Thus, for the same reasons the Court has found Plaintiff’s alleged trade secrets 4 provide economic value in its prior order regarding other Defendants (ECF No. 101), the 5 Court finds the same here. 6 iii. Whether Owner has Attempted to Hide Alleged Trade 7 Secrets from the Public 8 Lastly, for a trade secret to exist, there must be proof that an “owner has attempted 9 to keep [it] secret.” InteliClear, LLC, 978 F.3d at 657. Plaintiff’s Lynn Complaint alleges 10 that Plaintiff took steps to safeguard it by restricting employees’ access, using password 11 protected logins for certain information, and having employees who will be provided 12 access to such privileged business information sign or acknowledge employment 13 provisions confirming they will not distribute or misuse these trade secrets (ECF No. 64-2 14 ¶¶ 55, 94, 103, 107). 15 For the reasons above, the Court finds that Plaintiff has alleged the existence of the 16 trade secrets with sufficient particularity. 17 2. Misappropriation of the Trade Secret 18 A misappropriation claim under the DTSA requires a showing of: (1) acquisition of 19 a trade secret by a defendant that knows or has reason to know was acquired by improper 20 means, or (2) disclosure or use of a trade secret by a defendant that knew or had reason to 21 know that the trade secret was (i) derived from or through a person who had used improper 22 means to acquire the trade secret; (ii) acquired under circumstances giving rise to a duty to 23 maintain the secrecy of the trade secret; or (iii) derived from or through a person who owed 24 a duty to maintain the secrecy of the trade secret. See

(5)(A), (B)(ii)(I)– 25 (III). “Improper means” include “breach or inducement of a breach of a duty to maintain 26 secrecy.”

(6)(A). 27 i. Improper Disclosure of Trade Secret 28 1 Plaintiff alleges Lynn accessed Plaintiff’s alleged trade secrets in her leadership 2 roles at Plaintiff’s NEO division, and shared Plaintiff’s alleged trade secrets with Better 3 without Plaintiff’s permission. (See e.g., ECF No. 64-2 ¶¶ 51–53.) Further, as discussed, 4 Lynn knew that the trade secrets she shared were “acquired under circumstances giving 5 rise to a duty to maintain the secrecy of the trade secret.”

(5) (B)(ii)(II). 6 As Plaintiff’s Director of Finance, Lynn owed Plaintiff “a duty to maintain the secrecy of 7 the trade secret” and because Lynn’s disclosure violated that duty, such disclosure was 8 improper.

9 ii. Interstate Commerce 10 For civil actions, the DTSA requires that Plaintiff allege the misappropriated trade 11 secrets “[are] related to a product or service used in, or intended for use in, interstate or 12 foreign commerce.”

(b)(1); see also Yeiser Rsch. & Dev., LLC v. Teknor 13 Apex Co., No. 17-CV-1290-BAS-RBB,

, at *4 (S.D. Cal. Aug. 21, 14 2018). 15 Plaintiff has alleged that Better intended to offer its services online—alleging 16 Better had provided Lynn with “detailed plans” for “tak[ing] over [Plaintiff’s] 17 neohomeloans.com website” and “utilizing the YouTube Channel set up for [Plaintiff’s 18 NEO division.” (ECF No. 64-2 ¶ 50.) Services offered over the internet can plausibly lead 19 to the inference that such services meet DTSA’s interstate commerce element, unless 20 specified otherwise. Cf. Greenmount LLC v. Cleanline Mgmt. LLC, No. 2:23–CV–10376– 21 MRA-RAO,

, at *8 (C.D. Cal. Sept. 18, 2024) (no interstate commerce 22 where defendant’s “website also indicates that its products are not sold outside of 23 California”); Albert S. Smyth Co. v. Motes, No. CV CCB-17-677,

(D. 24 Md. July 31, 2018) (DTSA's interstate commerce element satisfied where an online jewelry 25 business alleged that it did business over the internet because the court could “easily infer 26 that an online jewelry business attracts out-of-state customers to [the plaintiff's] 27 products.”). The Court, therefore, finds Plaintiff has adequately alleged Lynn had 28 misappropriated trade secrets “related to. . . service[s] that were used in, or intended for 1 use in, interstate or foreign commerce.”

(b)(1) (emphasis added). Thus, 2 Plaintiff has sufficiently alleged Lynn’s misappropriation of Plaintiffs’ trade secrets under 3 the DTSA. Accordingly, the Court DENIES Lynn’s motion to dismiss Plaintiff’s state and 4 federal trade secret claims. (ECF No. 83.) 5 C. Breach of Contract 6 Plaintiff asserts that Lynn has breached two of her contracts with Plaintiff. (ECF 7 No. 64-2 ¶¶ 67–77.) Under California law, a contract “is an agreement to do or not to do 8 a certain thing.”

. The elements of a claim for breach of contract 9 are: (1) existence of the contract, (2) Plaintiff's performance or excuse for nonperformance, 10 (3) Defendants’ breach, and, (4) damages to Plaintiff therefrom. Becerra v. Allstate 11 Northbrook Indem. Co., No. 22-CV-00202-BAS-MSB,

, at *3 (S.D. Cal. 12 July 1, 2022) (citing Wall St. Network, Ltd. v. N.Y. Times Co.,

, 13 1178 (Cal. Ct. App. 2008)); see also Novalk, LLC v. Kinsale Ins. Co., No. 22-CV-0290- 14 BAS-LR,

, at *2 (S.D. Cal. Mar. 21, 2025). 15 As a threshold matter, Plaintiff’s breach of contract claim is not preempted by 16 Plaintiff’s trade secrets claim because trade secret claims can generally exist independently 17 from Parties’ contracts. For example, Officia Imaging, Inc found “[t]he plain language of 18 CUTSA provides that it does not preempt ‘contractual remedies, whether or not based upon 19 misappropriation of a trade secret.’” Officia Imaging, Inc. v. Langridge, No. 20 SACV172228DOCDFMX,

, at *9 (C.D. Cal. Aug. 7, 2018); see also 21 Integral Development Corp. v. Tolat,

(9th Cir. Jan. 11, 2017) (citing 22

(b)(1) ); Angelica Textile Servs., Inc. v. Park,

(Cal. Ct. App. Oct. 15, 2013) (“Breach of contract claims, even when they are 24 based on misappropriation or misuse of a trade secret, are not displaced by [C]UTSA.”). 25 1. Existence of the Contract 26 To determine whether a contract exists between Plaintiff and Lynn, the Court must 27 assess whether the following are binding contracts: (1) the employee handbook (ECF No. 28 1 64-2 ¶ 36) (“Handbook”); and (2) the dual employment policy (“Dual Employment 2 Policy”) (ECF No. 64-2 ¶ 42). The Court considers each in turn. 3 i. Handbook 4 Plaintiff asserts the Handbook is a contract, since its terms “are to be followed by. . 5 . employees as a condition of their employment” (see ECF No. 64-2 ¶ 69). Additionally, 6 Lynn signed an acknowledgment in receipt on the last page of the Handbook. (Id. ¶¶ 36– 7 37.) However, the Handbook contains an express disclaimer, stating: “This handbook has 8 been created to help you get acquainted with our company and to explain our policies, 9 procedures, and benefits and is not intended to be and does not constitute a legal contract, 10 either express or implied, between the company and its employees.” (ECF No. 83-1 at 11 16:22-26 (emphasis in original).) 12 Courts within the Ninth Circuit have held that, under California law, employee 13 handbooks are not contracts when they contain similar express disclaimers. See, e.g., 14 Bianco v. H.F. Ahmanson & Co.,

, 439–40 (C.D. Cal. 1995) (“An 15 employee handbook which states on its face that it ‘is not intended to constitute or create, 16 nor is it to be construed to constitute or create, the terms of an employment contract’ cannot 17 be a promise or a commitment to future behavior”); LaFont v. Fed. Express Corp.,

App'x 971, 972 (9th Cir. 2021) (an express disclaimer meant an unsigned brochure was not 19 incorporated into an employee agreement). Where there is an express disclaimer, signed 20 receipt in acknowledgment of the terms of an employee handbook does not transform that 21 handbook into a binding employment contract between Parties. See e.g., Clayborne v. SSA 22 Grp., LLC, No. 25-CV-01617-DMR,

, at *2 (N.D. Cal. May 1, 2025) 23 (finding where Plaintiff expressly assented to terms of handbook, that alone was 24 insufficient to transform the handbook into a binding contract). Since the Handbook 25 contains an express disclaimer (ECF No. 83-1 at 16:16-22), the Court finds that the 26 Handbook does not constitute a contract. 27 ii. Dual Employment Policy 28 1 Besides the Handbook, Lynn also signed the Dual Employment Policy which 2 Plaintiff describes as a “distinct policy. . . prohibit[ing Lynn] from engaging in any dual 3 employment that could create a conflict of interest with Luminate.” (ECF No. 64-2 ¶ 4 74.) Lynn argues that the Dual Employment Policy is not a contract—but rather 5 implemented to “ensure compliance with applicable [Federal Housing Administration 6 and Department of Housing and Urban Development] requirements” for home loan 7 lenders. (ECF No. 83-1 at 18:24-28.) There is no language in the Dual Employment 8 Policy that it is not intended to be a contract. And, Lynn does not cite any legal precedent 9 supporting the interpretation that the Dual Employment Policy’s statement of purpose 10 renders it a non-contract. Lastly, the Dual Employment Policy otherwise fulfills the 11 requirements for a binding contract between Parties, in that it is written and signed. 12 GoPro, Inc. v. 360Heros, Inc.,

(N.D. Cal. 2017) (“a written 13 agreement is ‘executed’ when all parties sign the agreement”) (citing Nielsen Constr. 14 Co. v. Int'l Iron Prod.,

(1993)). 15 In sum, the Court finds that—unlike the Handbook—Plaintiff has sufficiently 16 alleged that the Dual Employment Policy is an existing contract binding Lynn. Language 17 stating the purpose of the Dual Employment Policy is to comply with agency requirements 18 is distinct from an explicit statement that such policy is not intended to be a contract. Cf. 19 Tetrault v. Cap. Grp. Companies Glob., No. 2:23-CV-5144-WLH-E,

, 20 at *8 (C.D. Cal. Jan. 17, 2024) (non-binding employee handbook states the “[h]andbook is 21 not intended to be in the nature of a legal contract”); see also Bianco v. H.F. Ahmanson & 22 Co.,

, 439–40 (C.D. Cal. 1995) (non-binding employee handbook states 23 it “is not intended to constitute or create, nor is it to be construed to constitute or create, 24 the terms of an employment contract”). 25 2. Breach of Employment Terms 26 According to Plaintiff, Lynn allegedly breached the terms of her employment by 27 “inter alia, using, disclosing, and/or stealing Luminate’s trade secrets and confidential and 28 proprietary information for her individual benefit and that of Luminate’s competitor, 1 Better, and by assisting in the solicitation of Luminate employees to terminate employment 2 with Luminate and join Better.” (ECF No. 64-2 ¶ 74.) 3 i. Dual Employment 4 Plaintiff makes several allegations that at the very least, Lynn had performed work 5 for Better in conflict of interest to Plaintiff’s business during her employment with 6 Plaintiff. For example, Plaintiff alleges that, while employed at Plaintiff, Lynn provided 7 Better with Plaintiff’s financial analysis reports and playbooks, facility lease agreements 8 for Plaintiff’s NEO Division, and Lynn’s own “financial analysis of Plaintiff’s branches 9 and how they could be used at Better, including, but not limited to, the creation of Branch 10 Pro Formas and setting corporate allocations.” (Id. ¶¶ 51–54.) Plaintiff also alleged that 11 Lynn violated her employment terms by “assisting in the solicitation of [Plaintiff’s] 12 employees to terminate employment with [Plaintiff] and join Better.” (Id. ¶¶ 74.) 13 However, conspicuously missing from Plaintiff’s complaint is whether Better had actually 14 employed, offered to employ, or otherwise compensated Lynn while she was acting in 15 conflict of interest with Plaintiff’s business interests. Though Lynn was offered a job at 16 Better after her termination (id. ¶ 31), Plaintiff does not provide any evidence she was 17 offered any material benefits or promises of future employment by Better while employed 18 at Plaintiff. Further, Plaintiff does not point to any language in the Dual Employment 19 Policy that Lynn’s actions—as currently alleged—amount to breaching its terms. 20 ii. Disclosing and Using Plaintiff’s Confidential and 21 Proprietary Information 22 Next, allegedly in contravention of the terms of the Handbook, Lynn “disclos[ed]. . 23 . company trade secrets and proprietary and confidential commercially sensitive 24 information (i.e. financial or sales records/reports, marketing or business strategies/plans, 25 product development information, customer lists, patents, trademarks, etc.) of the 26 company’ as part of their condition of employment with Plaintiff.” (ECF No. 64-2 ¶ 70). 27 As previously discussed, the Court has already found Plaintiff failed to sufficiently allege 28 the Handbook is a binding contract. Further, Plaintiff failed to explicitly allege that sharing 1 confidential information also violates the Dual Employment Policy—describing the Dual 2 Employment Policy as “distinct” from the Handbook. (Id. ¶ 73.) 3 3. Damages 4 Finally, to assert a breach of contract claim, Plaintiff must allege that Lynn’s breach 5 of contract led to Plaintiff incurring damages. Wall St. Network, Ltd.,

1178. Here, Plaintiff alleges, for example, that Lynn “sought and received reimbursement 7 from Luminate for expenses purportedly incurred during the performance of their job 8 duties that were, in actuality, spent in furtherance of their efforts to solicit [Plaintiff] 9 employees to join their competitor.” (ECF No. 64-2 ¶ 84.) Plaintiff also alleges Lynn 10 “directed and encouraged other [Plaintiff] employees to seek reimbursement for expenses 11 they incurred while meeting to consider solicitation efforts to join Better, and such 12 wrongful reimbursement requests were submitted to and paid by [Plaintiff].” (Id. ¶ 85.) 13 Plaintiff has thus adequately alleged damages resulting from its breach of contract claim to 14 survive the motion to dismiss stage. 15 * * * 16 For the reasons above, the Court GRANTS WITHOUT PREJUDICE dismissal of 17 Plaintiff’s breach of contract claim in its entirety. (ECF No. 83.) 18 D. Breach of Fiduciary Duty and Duty of Loyalty 19 Plaintiff asserts claims for breach of fiduciary duty and duty of loyalty against Lynn. 20 (ECF No. 64-2 ¶¶ 78–87.) As a threshold matter, Plaintiff’s breach of fiduciary duty and 21 duty of loyalty claims are not preempted by Plaintiff’s trade secret claims—since Plaintiff’s 22 breach of fiduciary duty claims go beyond Lynn’s alleged sharing of trade secrets (see ECF 23 No. 64-2 ¶¶ 82–85) (breach via soliciting employees to work for Better while employed at 24 Plaintiff and wrongfully requesting reimbursement from Plaintiff for recruitment efforts). 25 See Officia Imaging, Inc. v. Langridge, No. SACV172228DOCDFMX,

, 26 at *9 (C.D. Cal. Aug. 7, 2018) (citing Silvaco Data Systems v. Intel Corp.,

4th 210, 232–33 (Cal. Ct. App. Apr. 29, 2010)) (“[I]f a breach of fiduciary duty is not 28 ‘based on the same nucleus of facts as [the] trade secret misappropriation,’ [the California 1 trade secrets state law] will not preempt the claim”). The Court separately analyzes each 2 duty. 3 1. Fiduciary Duty 4 To evaluate Plaintiff’s claims for fiduciary duty, the Court first analyzes whether 5 Lynn owed Plaintiff a fiduciary duty. For a fiduciary duty to exist, a person “must either 6 knowingly undertake to act on behalf and for the benefit of another, or must enter into a 7 relationship which imposes that undertaking as a matter of law.” Lee v. Lee, No. 8 LACV1908814JAKFFMX,

, at *15 (C.D. Cal. May 13, 2021) (citing 9 City of Hope Nat'l Med. Ctr. v. Genentech, Inc.,

(2008)). In the context 10 of employment specifically, an employee generally does not owe a fiduciary duty to his or 11 her employer unless an employment contract provides otherwise. See Mattel, Inc. v. MGA 12 Entm't, Inc.,

(C.D. Cal. 2011). However, California courts have 13 held that corporate directors and officers typically are deemed to owe fiduciary duties to 14 their employer, and non-officers also have been found to owe fiduciary duties if they 15 participate in management. See generally Thomas Weisel Partners LLC v. BNP Paribas, 16

, at *5-6 (N.D. Cal. Apr. 1, 2010) (citing California cases). 17 Here, Lynn was employed as Plaintiff’s “Director of Finance.” (ECF No. 64-2 ¶ 18 34.) As part of Lynn’s employment, Plaintiff “entrusted her with confidential and 19 proprietary information about [Plaintiff’s] operations, strategies, and employees.” (Id. ¶ 20 35.) Lynn was allegedly part of Plaintiff’s NEO division leadership. (Id. ¶ 19.) Thus, 21 because of Lynn’s high-ranking position within the NEO Division, the Court finds that 22 Plaintiff adequately alleges Lynn owes Plaintiff a fiduciary duty. 23 Plaintiff further alleges Lynn breached her fiduciary duty to Plaintiff by—among 24 other things—“work[ing] on behalf of and me[eting] frequently with Better to aid 25 [Plaintiff]’s competitor” and by “soliciting and/or attempting to solicit [Plaintiff’s] 26 employees while they were all still employees of [Plaintiff], to terminate their employment 27 and/or violate their obligations to their employer [Plaintiff], and make arrangements to join 28 [Plaintiff]’s competitor, Better.” (ECF No. 64-2 ¶ 82.) California courts have held that a 1 corporate officer who, after agreeing to work for his or her employer's competitor, remains 2 with the current employer and assists the competitor in “raiding” the employer's key 3 personnel, breaches a fiduciary duty to the employer as a matter of law. GAB Bus. Servs., 4 Inc. v. Lindsey & Newsom Claim Servs., Inc.,

(2000); see also 5 Bancroft-Whitney Co. v. Glen,

(1966). 6 The Court therefore DENIES Lynn’s motion to dismiss plaintiff's breach of 7 fiduciary duty claim (ECF No. 83). 8 2. Duty of Loyalty 9 Even if Lynn did not owe Plaintiff a fiduciary duty under California law, “an 10 employee does owe a duty of loyalty to his or her employer.” Clasby v. Ivanovic, No. 11 CV1802313SJOJPR,

, at *8 (C.D. Cal. Dec. 2, 2019) (citing Cal. Labor 12 Code §§ 2860, 2863). In the context of employment, this Court has reasoned the duty of 13 loyalty contains subsidiary obligations, including: “(1) the duty to refrain from competing 14 with the principal and from taking action on behalf of or otherwise assisting the principal's 15 competitors; (2) the duty not to acquire a material benefit from a third party in connection 16 with ... actions taken ... through the agent's use of the agent's position; and (3) the duty not 17 to use or communicate confidential information of the principal for the agent's own 18 purposes or those of a third party.” Erhart v. BofI Holding, Inc.,

, 19 1122 (S.D. Cal. 2020) (citing Huong Que, Inc. v. Luu,

(2007)). 20 Plaintiff alleges Lynn violated the duty of loyalty on all three of the grounds 21 discussed in Erhart, 612 F. Supp. 3d at 1122. (ECF No. 99 at 28:2–29:18.) Plaintiff has 22 alleged that Lynn has actively assisted Better—Plaintiff’s competitor—while employed at 23 Plaintiff through actions such as sharing Plaintiff’s trade secrets with Better and soliciting 24 Plaintiff’s employees to work at Better. (ECF No. 64-2 ¶¶ 47–52, 54, 58.) Though it is 25 unclear whether Lynn had shared confidential information with Better intending to 26 eventually receive a job offer (i.e., material benefit) from Better, Plaintiff has adequately 27 alleged Lynn breached her duty of loyalty on other grounds. As such, Plaintiff has 28 1 sufficiently alleged the elements for a breach of the duty of loyalty in an employer- 2 employee relationship. Erhart, 612 F. Supp. 3d at 1122. 3 The Court therefore DENIES Lynn’s motion to dismiss plaintiff's duty of loyalty 4 claim (ECF No. 83). 5 E. Tortious Interference 6 Plaintiff asserts a claim for tortious interference under California law against Lynn. 7 (ECF No. 64-2 ¶¶ 118–125.) More specifically, Plaintiff alleges Lynn tortiously interfered 8 with Plaintiff’s contracts with Plaintiff’s other employees by: (1) offering those employees 9 lucrative contracts to join Better; and (2) facilitating meetings between those employees 10 and Better’s representatives. (Id. ¶¶ 121–122.) 11 To state a claim for tortious interference of contractual relations, Plaintiff must 12 allege: “(1) the existence of a valid contract between the plaintiff and a third party; (2) the 13 defendant’s knowledge of that contract; (3) the defendant’s intentional acts designed to 14 induce a breach or disruption of the contractual relationship; (4) actual breach or disruption 15 of the contractual relationship; and (5) resulting damage.” Ixchel Pharma, LLC v. Biogen, 16 Inc.,

(2020). 17 Plaintiff primarily asserts that Lynn had induced other employees to breach the terms 18 of the Handbook. As previously discussed, the Dual Employment Policy is a valid contract, 19 but the Handbook is not. In its complaint against Lynn, Plaintiff fails to allege that Lynn 20 has induced Plaintiff’s employees to breach their other contracts. Notably, Plaintiff has 21 failed to allege that Plaintiff’s employees have signed the Dual Employment Policy, or 22 similar valid contracts. For the reasons above, the Court GRANTS WITHOUT 23 PREJUDICE Lynn’s motion to dismiss Plaintiff’s claims for tortious interference. (ECF 24 No. 83.) 25 V. CONCLUSION 26 For the reasons discussed herein, the Court GRANTS IN PART and DENIES IN 27 PART Lynn’s to dismiss (ECF No. 83.) The Court DENIES Lynn’s motion to dismiss 28 Plaintiff’s claims for misappropriation of trade secrets under state and federal law, breach 1 fiduciary duty, and breach of duty of loyalty. However, the Court GRANTS 2 || WITHOUT PREJUDICE dismissal of Plaintiff's tortious interference claim and 3 || Plaintiff’s breach of contract claim. For Plaintiff’s dismissed claims, the Court GRANTS 4 || Plaintiff leave to amend by January 5, 2025. 5 IT IS SO ORDERED. 6 ~ 7 || DATED: December 16, 2025 (yi. (Doha H n. Cynthia Bashant, Chief Judge United States District Court 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10.