Luminate Home Loans, Inc. v. Better Mortgage Co.

CourtDistrict Court, S.D. California
DecidedFebruary 7, 2025
Docket3:24-cv-02251
StatusUnknown

This text of Luminate Home Loans, Inc. v. Better Mortgage Co. (Luminate Home Loans, Inc. v. Better Mortgage Co.) is published on Counsel Stack Legal Research, covering District Court, S.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Luminate Home Loans, Inc. v. Better Mortgage Co., (S.D. Cal. 2025).

Opinion

8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 LUMINATE HOME LOANS, INC., Case No. 24-cv-02251-BAS-MSB 12 Plaintiff, 13 v. ORDER: 14 BETTER MORTGAGE CO., et al., (1) DENYING PLAINTIFF’S MOTION FOR TEMPORARY 15 Defendants. RESTRAINING ORDER, PRELIMINARY INJUNCTION, 16 AND EXPEDITED DISCOVERY (ECF No. 4); 17 (2) GRANTING PLAINTIFF’S EX 18 PARTE APPLICATION FOR LEAVE TO EXCEED PAGE 19 LIMITS (ECF No. 6); AND

20 (3) DENYING DEFENDANTS’ EX PARTE APPLICATION TO 21 STRIKE (ECF No. 7) 22

23 This case arises out of a dispute between Plaintiff Luminate Home Loans, Inc. 24 (“Luminate”), a Minnesota-based corporation offering real estate financing solutions, and 25 Defendants Better Mortgage Co. (“Better”), a competitor in the mortgage industry, along 26 with three former Luminate employees: Daniel Horanyi, Jeanette Lee, and Lauren Havins 27 (“Individual Defendants”). Luminate alleges that Defendants engaged in a coordinated 28 effort to misappropriate its trade secrets and proprietary information to benefit Better’s 1 newly developed retail mortgage division. Defendants dispute Luminate’s allegations, 2 contending that its actions stem from a failed business partnership and are aimed at stifling 3 legitimate competition in the marketplace. 4 Before the Court is Luminate’s Emergency Motion for a Temporary Restraining 5 Order, Preliminary Injunction, and Expedited Discovery (“Motion”). (TRO Mot., ECF No. 6 4.) Defendants oppose the Motion. (Individual Defendants’ Opp’n, ECF No. 14; Better’s 7 Opp’n, ECF No. 15.) Also before the Court is Luminate’s Ex Parte Application for Leave 8 to Exceed Page Limits (ECF No. 6) and Defendants’ Ex Parte Application to Strike 9 Plaintiff’s Motion (ECF No. 7). 10 The Court held oral argument on January 24, 2025. (ECF No. 30.) Having 11 considered the parties’ filings and oral argument, the Court GRANTS Plaintiff’s Ex Parte 12 Application for Leave to Exceed Page Limits (ECF No. 6) and DENIES Defendants’ Ex 13 Parte Application to Strike Plaintiff’s Motion (ECF No. 7). Furthermore, the Court 14 DENIES Plaintiff’s Motion. (ECF No. 4.) 15 I. BACKGROUND 16 Luminate offers various mortgage products and services. (Compl. ¶¶ 12–13, ECF 17 No. 1.) According to Luminate, it acquired a mortgage division known as NEO Home 18 Loans (“NEO”) from competitor Celebrity Home Loans, LLC, through an asset purchase 19 agreement executed in December 2022. (Id. ¶¶ 14–15.) Luminate claims that the 20 acquisition encompassed “all assets related to the NEO division . . . including but not 21 limited to the relevant trade secrets and intellectual property.” (TRO Mot. at 4:16–23.) 22 Following the acquisition, Luminate asserts that it made significant investments in the NEO 23 division, including the integration of approximately 350 employees and infrastructure into 24 Luminate’s broader operations. (Compl. ¶ 17.) 25 Luminate contends that Individual Defendants were high-ranking employees within 26 its NEO division. (Id. ¶¶ 16, 44, 49.) Luminate avers that, as a condition of their 27 employment, Individual Defendants entered into agreements designed to safeguard 28 Luminate’s confidential information and trade secrets. (Id. ¶¶ 32–36, 41, 46–47, 52–53; 1 Exs. 1, 4, 6 at § 9.1.) Individual Defendants purportedly agreed to Luminate’s policy 2 prohibiting dual employment. (Id. ¶¶ 33, 38, 48, 53, 90; Exs. 2, 5, 7.) And Defendant 3 Horanyi’s employment contract included an ostensible non-solicitation clause. (Id. ¶ 42; 4 Ex. 3 at § 5.8.) 5 Luminate alleges that, beginning in August 2024, Defendants conspired to 6 misappropriate its trade secrets and proprietary information and sought to recruit Luminate 7 employees to join Better with the intent of building a rival retail lending division within 8 the competing company. (Compl. ¶¶ 10, 157.) According to Luminate, Individual 9 Defendants, while still employed by Luminate, provided Better with Luminate’s 10 confidential and proprietary information, including, inter alia, “training materials, 11 employee roster and salary lists, employment and third-party contracts, business strategies, 12 loan processing procedures, loan profit margins, financial details for its divisions and 13 branches, economic models, lead lists and leads.” (Id. ¶ 109.) Luminate claims Better used 14 this information to develop its own retail lending division, “endeavor[ing] to replicate 15 Luminate’s operations and financials.” (Id. ¶ 118.) 16 Additionally, Luminate contends that Individual Defendants solicited Luminate 17 employees to join Better, including facilitating meetings with Better representatives and 18 offering contracts to induce employees to transition. (Id. ¶¶ 101, 145.) 19 On October 25, 2024, Luminate terminated Individual Defendants and six other 20 employees within the NEO division for their alleged misconduct and announced the wind- 21 down of the NEO division. (Id. ¶¶ 28–29.) Following these terminations, Luminate claims 22 to have discovered that its Director of Finance, Ms. Sydney Lynn, had downloaded 3,998 23 files containing Luminate’s trade secrets and confidential information. (TRO Mot. at 24 16:24–17:6; Markowitz Decl. ¶¶ 14–16; Exs. 3, 4.) Luminate subsequently terminated Ms. 25 Lynn and demanded the immediate return of the materials. (TRO Mot. at 17:6–8; 26 Markowitz Decl. ¶ 17; Ex. 5.) 27 28 1 Defendants present a counter-narrative that sharply contests Luminate’s allegations. 2 They assert that NEO Services LLC (“NEO”)1 was founded by Mr. Daniel Horanyi and 3 others as an independently owned and operated entity well before any association with 4 Luminate. (Individual Defendants’ Opp’n at 4:26–28; Horanyi Decl. ¶¶ 4, 19.) According 5 to Defendants, NEO was established to address inefficiencies in retail mortgage operations 6 and has always maintained its independence, even while partnering with companies such 7 as Celebrity and Luminate. (Individual Defendants’ Opp’n at 5:14–24; Horanyi Decl. ¶ 7.) 8 Defendants further contend that NEO’s intellectual property was never sold to Luminate 9 or any other entity. (Individual Defendants’ Opp’n at 6:1–5; Horanyi Decl. ¶ 9.) Instead, 10 they claim NEO entered into a partnership with Luminate under the condition that it would 11 retain autonomy and control over its intellectual property. (Individual Defendants’ Opp’n 12 at 6:6–7:8; Horanyi Decl. ¶¶ 10, 13; Grant Decl. ¶ 20.) Defendants assert that NEO 13 operated independently while partnering with Luminate, retaining its branding and 14 proprietary assets, as well as the ability to transition to another entity if necessary. 15 (Individual Defendants’ Opp’n at 7:10–16; Horanyi Decl. ¶¶ 15–16; Grant Decl. ¶ 20.) 16 According to Defendants, by mid-2024, NEO leadership began exploring a 17 partnership with Better as a contingency plan in case negotiations with Luminate failed. 18 (Individual Defendants’ Opp’n at 8:22–9:4; Horanyi Decl. ¶¶ 21, 23; Grant Decl. ¶ 31.) 19 Defendants maintain that no confidential or proprietary information belonging to Luminate 20 was shared with Better during NEO’s discussions with the company. (Individual 21 Defendants’ Opp’n at 9:4–8; Horanyi Decl. ¶ 24; Lynn Decl. ¶¶ 22–23.) Better avers that 22 it operated under the impression that NEO owned all the information shared by Individual 23 Defendants. (Rosenberg Decl. ¶ 7; Smith Decl. ¶¶ 11–12.) Meanwhile, Ms. Lynn asserts 24 that the information she downloaded was created by and belonged to NEO, with most of 25 the information predating NEO’s partnership with Luminate. (Lynn Decl. ¶ 31.) 26

27 1 The parties, in their respective pleadings, refer to NEO differently—specifically as NEO Home Loans and NEO Services LLC. For purposes of this Order, the Court does not distinguish between these entities 28 1 Defendants further contend that Luminate initially supported NEO’s transition to Better, 2 with Luminate’s CEO, Mr. Taryn Reuter, explicitly directing NEO employees, including 3 Ms.

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Luminate Home Loans, Inc. v. Better Mortgage Co., Counsel Stack Legal Research, https://law.counselstack.com/opinion/luminate-home-loans-inc-v-better-mortgage-co-casd-2025.