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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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. Lynn, to facilitate the transition. (Better’s Opp’n at 15:2–8; Ledlie Decl. ¶¶ 17–19.) 4 However, Defendants claim that by December 2024, Luminate abruptly reversed its 5 position and sought to obstruct the transition. (Better’s Opp’n at 15:14–15.) 6 Luminate initiated this action on December 2, 2024. (Compl. at 30:15.) Luminate 7 asserts seven causes of action: (1) breach of contract and (2) breach of fiduciary duties 8 against Individual Defendants; (3) misappropriation of trade secrets in violation of the 9 Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836, et seq., and (4) misappropriation 10 of trade secrets in violation of the California Uniform Trade Secrets Act (“CUTSA”), Cal. 11 Civ. Code § 3426, et seq., against all Defendants; (5) tortious interference with contractual 12 relations against all Defendants; (6) unfair competition in violation of Cal. Bus. & Prof. 13 Code § 17200 against Better; and (7) civil conspiracy against all Defendants. (Compl. ¶¶ 14 83–160.) Luminate seeks injunctive relief, monetary damages, and other equitable 15 remedies. (Id. at 1:23–26.) 16 Luminate requests that the Court issue a broad and sweeping injunction providing, 17 inter alia, the following relief. First, Luminate seeks to protect and recover its purported 18 proprietary information by requiring Defendants to submit their electronic devices and 19 accounts for forensic inspection, compelling Better to provide an affidavit detailing how 20 the information was acquired, and ordering the segregation, return, and certification of all 21 such materials held by Defendants. (TRO Mot. at 44:25–46:19.) Second, Luminate aims 22 to impose immediate restrictions on Defendants’ actions, including an injunction 23 preventing the use, disclosure, or deletion of its claimed trade secrets and proprietary 24 information, as well as prohibiting Defendants from employing current or former Luminate 25 employees in competing roles within Better’s NEO subdivision. (Id.) Finally, Luminate 26 demands expedited legal and procedural measures, such as requiring Defendants to respond 27 to discovery requests within 14 days, attend depositions within 30 days, bear the costs of 28 forensic analysis and data collection, and pay Luminate’s attorneys’ fees. (Id.) 1 On January 9, 2025, Luminate voluntarily dismissed Defendant Lauren Havins from 2 the Complaint without prejudice. (ECF No. 12.) On January 24, 2025, the Court held oral 3 argument, during which the parties presented their arguments concerning the temporary 4 restraining order.2 (ECF No. 30.) 5 II. LEGAL STANDARD 6 Rule 65(b) governs the issuance of a temporary restraining order (“TRO”). The 7 standard for a TRO is identical to the standard for a preliminary injunction. See Stuhlbarg 8 Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001). To obtain 9 either a TRO or a preliminary injunction, the moving party must show: (1) a likelihood of 10 success on the merits; (2) a likelihood of irreparable harm to the moving party in the 11 absence of preliminary relief; (3) that the balance of equities tips in favor of the moving 12 party; and (4) that an injunction is in the public interest. Winter v. Nat. Res. Def. Council, 13 Inc., 555 U.S. 7, 20 (2008). Alternatively, the Ninth Circuit “has adopted and applied a 14 version of the sliding scale approach under which a preliminary injunction could issue 15 where the likelihood of success is such that serious questions going to the merits were 16 raised and the balance of hardships tips sharply in [plaintiff’s] favor.” All. for the Wild 17 Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011) (cleaned up). Generally, a TRO 18 is considered to be “an extraordinary remedy that may only be awarded upon a clear 19 showing that the plaintiff is entitled to such relief.” Winter, 555 U.S. at 22. The moving 20 party has the burden of persuasion. Hill v. McDonough, 547 U.S. 573, 584 (2006). 21 III. ANALYSIS 22 Luminate argues that it will “suffer [] irreparable harm” due to Defendants’ alleged 23 continued use of its confidential and proprietary information, trade secrets, and ongoing 24 recruitment of its employees. (TRO Mot. at 34:25–27.) “[H]arm is irreparable if it cannot 25 be adequately compensated or corrected at a later date by legal remedies or monetary 26
27 2 The Court also addressed the parties’ Ex Parte Applications at the hearing. (ECF Nos. 6, 7.) While Plaintiff’s Motion fails to comply with Civil Local Rule 7.1(h), which promotes judicial efficiency, the 28 1 damages.” Ass’n v. Maxwell-Jolly, 563 F.3d 847, 852 (9th Cir. 2009) (citing Sampson v. 2 Murray, 415 U.S. 61, 90 (1974)). Generally, economic harm is not considered irreparable, 3 as monetary damages are deemed adequate. Rent-A-Center, Inc. v. Canyon Television & 4 Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991). However, “intangible injuries, 5 such as damage to ongoing recruitment efforts and goodwill, qualify as irreparable harm.” 6 Id.; see also Stuhlbarg Int’l Sales, 240 F.3d at 841 (recognizing that evidence of a 7 threatened loss of prospective customers or goodwill supports a finding of irreparable 8 harm). Still, a court’s finding of such harm cannot be “grounded in platitudes rather than 9 evidence.” Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 736 F.3d 1239, 1249 (9th 10 Cir. 2013). 11 District courts in the Ninth Circuit have been divided on whether irreparable harm 12 may be presumed in trade secret misappropriation cases. Cutera, Inc. v. Lutronic 13 Aesthetics, Inc., 444 F. Supp. 3d 1198, 1208 (E.D. Cal. 2020) (collecting cases). Some 14 courts have held that demonstrating a likelihood of success on a trade secret 15 misappropriation claim is sufficient to establish irreparable harm. See, e.g., Carl Zeiss 16 Meditec, Inc. v. Topcon Med. Sys., Inc., No. 19-CV-4162-SBA, 2021 WL 1186335, at *10 17 (N.D. Cal. Mar. 1, 2021). Others, however, have declined to apply such a presumption, 18 citing the Ninth Circuit’s skepticism about presumptions in other intellectual property 19 contexts. See, e.g., Zendar Inc. v. Hanks, No. 20-CV-03391-JSW, 2020 WL 4458903, at 20 *5 (N.D. Cal. May 27, 2020) (finding no presumption of irreparable harm given the Ninth 21 Circuit’s rejection in copyright cases). 22 Historically, some intellectual property claims, like trademark infringement, carried 23 a presumption of irreparable harm upon establishing a likelihood of success. Brookfield 24 Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1066 (9th Cir. 1999). However, 25 more recent Ninth Circuit cases, influenced by the Supreme Court’s decision in eBay Inc. 26 v. MercExchange, LLC, 547 U.S. 388, 394 (2006), have cast doubt on the continued 27 validity of such presumptions. Herb Reed Enters., 736 F.3d at 1250 (“Gone are the days 28 when ‘[o]nce the plaintiff in an infringement action has established a likelihood of 1 [consumer] confusion, it is ordinarily presumed that the plaintiff will suffer irreparable 2 harm if injunctive relief does not issue.’” (quoting Rodeo Collection, Ltd. v. W. Seventh, 3 812 F.2d 1215, 1220 (9th Cir. 1987))). 4 While the Ninth Circuit has not directly addressed whether eBay precludes 5 presuming irreparable harm in trade secret cases, this Court aligns with those that require 6 concrete evidence rather than relying on presumptions in this instant action. See, e.g., 7 V’Guara Inc. v. Dec, 925 F. Supp. 2d 1120, 1126 (D. Nev. 2013) (citing Flexible Lifeline 8 Sys., Inc. v. Precision Lift, Inc., 654 F.3d 989, 998 (9th Cir. 2011), in declining to presume 9 irreparable harm for a trade secret claim). “This approach collapses the likelihood of 10 success and the irreparable harm factors. Those seeking injunctive relief must proffer 11 evidence sufficient to establish a likelihood of irreparable harm.” Herb Reed Enters., 736 12 F.3d at 1250. Consequently, a plaintiff cannot establish irreparable harm through “cursory 13 and conclusory” allegations; rather, it must be substantiated by evidence. Id. 14 Luminate cites TMX Funding, Inc. v. Impero Techs., Inc., No. C10-00202 JF, 2010 15 WL 1028254, at *8 (N.D. Cal. Mar. 18, 2010), arguing that “California courts have 16 presumed irreparable harm when proprietary information is misappropriated” and also cites 17 Stuhlbarg Int’l Sales, 240 F.3d at 841, arguing that “[e]vidence of threatened loss of 18 prospective customers or goodwill certainly supports a finding of the possibility of 19 irreparable harm.” (TRO Mot. at 36:10–12.) However, as previously noted, Ninth Circuit 20 precedent indicates that such a presumption is far from automatic, as Luminate claims; 21 instead, it may necessitate a factual showing that immediate and concrete harm is likely. 22 See Flexible Lifeline Sys., 654 F.3d at 997–98 (rejecting the presumption of irreparable 23 harm absent factual support). Moreover, though “[e]vidence of loss of control over 24 business reputation and damage to goodwill could constitute irreparable harm,” a district 25 court’s “analysis of irreparable harm” must still be “grounded in [] evidence” of such harm. 26 Herb Reed Enters., 736 F.3d at 1250. 27 Luminate claims it not only “faces the loss of goodwill as a result of Defendants’ 28 actions,” but also “fac[es] the permanent loss of numerous employees.” (TRO Mot. at 1 35:2–5.) Luminate further contends that the threat of being driven out of business is 2 “essentially the threat posed by Defendants’ wrongful conduct.” (Id. at 35:16–21.) 3 Additionally, Luminate argues that “it is impossible to currently calculate the extensive 4 revenue that will be lost from Defendants’ unlawfully built NEO division . . . .” (Id. at 5 35:10–12.) Ultimately, however, Luminate offers only “conclusory or speculative 6 allegations” in its moving papers.3 Equinox Hotel Mgmt., Inc. v. Equinox Holdings, Inc., 7 No. 17-CV-06393-YGR, 2018 WL 659105, at *9 (N.D. Cal. Feb. 1, 2018). 8 While “[t]he potential to lose customers, employees, goodwill, and revenue certainly 9 supports a finding of the possibility of irreparable harm,” Luminate must still “rel[y] on 10 evidence to establish this type of irreparable harm, not mere speculation of such harm.” 11 Prime Grp., Inc. v. Dixon, No. 2:21-CV-00016-RAJ, 2021 WL 1664007, at *6 (W.D. 12 Wash. Apr. 28, 2021) (emphasis in original). Individual Defendants correctly highlight 13 that “Luminate fails to cite tangible harm, such as lost clients, market share decline, or 14 measurable negative industry impact. Its imminent harm assertions are inherently 15 speculative.” (Individual Defendants’ Opp’n at 21:7–9.) The Court agrees and finds that 16 Luminate has not provided sufficient evidence of a likelihood of irreparable harm 17 concerning its goodwill, competitive standing, or business viability to meet the requirement 18 of “a clear showing.”4 Winter, 555 U.S. at 22. 19 3 In support of its motion for a TRO, Luminate submitted a declaration from its out-of-state counsel, Mr. 20 Lucas Markowitz. (TRO Mot. Ex. B.) However, the declaration also fails to provide evidentiary support 21 to establish a likelihood of irreparable harm.
22 4 In its Reply, Luminate, for the first time, presents an email exchange from a customer requesting to transfer their business elsewhere as purported evidence of the irreparable harm it claims to face. (Reuter 23 Decl. ¶ 41, Ex. 8; Pelham Decl. ¶ 21, Ex. 3.) While the Court acknowledges that such evidence may, in some circumstances, constitute the type of factual showing needed to support a finding of a likelihood of 24 irreparable harm, it cannot serve as the basis for granting emergency injunctive relief in this case because 25 it was not timely presented.
26 Generally, “reply briefs are limited in scope to matters either raised by the opposition or unforeseen at the time of the original motion.” Burnham v. City of Rohnert Park, No. C 92–1439 SC, 1992 WL 672965, at 27 *1 n.2 (N.D. Cal. May 18, 1992) (citing Lujan v. National Wildlife Federation, 497 U.S. 871 (1990)). Submitting “new evidence . . . as part of a reply is improper” because it deprives Defendants of an adequate 28 1 Moreover, Luminate’s claim of irreparable harm relies on the assertion that 2 Defendants’ activities are forcing it to “take steps to wholly restructure its NEO division 3 and bring hundreds of employees and branches under new management or incorporate 4 them into other aspects of its business.” (TRO Mot. at 35:10–12.) While such restructuring 5 may pose operational challenges, allegations of business disruptions, including employee 6 departures, do not, by themselves, establish irreparable harm absent probative evidence of 7 non-compensable damage. See, e.g., Schrader v. Pakseresht, No. 3:22-CV-01957-JR, 8 2023 WL 2609572, at *7 n.5 (D. Or. Mar. 23, 2023) (“[T]he ability to obtain damages for 9 lost employees has led other courts to conclude that, absent proof that a particular employee 10 provided unique services, the loss of employees does not constitute an irreparable harm.”). 11 Furthermore, if this restructuring is already ongoing, then any alleged emergency has 12 passed, and Luminate has failed to demonstrate the immediacy necessary to justify 13 emergency injunctive relief. Consequently, monetary damages, as originally pled by 14 Luminate, are an adequate and available remedy should it ultimately prevail on its claims. 15 (Compl. at 30:1–9.) 16 Because Luminate has not proffered sufficient evidence to clearly demonstrate the 17 likelihood of imminent, irreparable injury, the Court denies its Motion for a TRO. In light 18 of the Court’s determination, the Court need not reach the likelihood of success on the 19 merits of Luminate’s claims or address the balance of equities and public interest factors. 20 “A failure to establish one of the Winter prongs is fatal to a motion for temporary injunctive 21 2018) (quoting Morris v. Guetta, 2013 WL 440127, *8 (C.D. Cal. Feb. 4, 2013)). As such, the Court has 22 the discretion to reject new evidence or arguments introduced in a reply and, in general, “should not consider the new evidence without giving the non-movant an opportunity to respond.” Provenz v. Miller, 23 102 F.3d 1478, 1483 (9th Cir. 1996). The Court exercises its discretion not to consider it here.
24 Furthermore, even if the Court were to consider this evidence, Luminate fails to make a clear showing 25 that it is likely to suffer irreparable harm in the absence of injunctive relief. While the Court could draw an inference in Luminate’s favor from this evidence and deduce that the email exchange supports a finding 26 that Defendants’ alleged misconduct is causing Luminate to lose customers, it is equally plausible that the customer sought to transfer for entirely unrelated reasons, such as securing a better deal or preferring to 27 work with a different mortgage provider. Without additional evidence, the Court is not persuaded that the email exchange is sufficiently probative to demonstrate a likelihood of irreparable harm warranting the 28 1 relief.’ Dixon, 2021 WL 1664007, at *1. Additionally, since the parties have had the 2 || opportunity to fully brief the TRO, the Court finds that further briefing on the preliminary 3 |/injunction is unnecessary and denies Luminate’s request. Lastly, the Court denies 4 ||Luminate’s request for expedited discovery because it has not demonstrated good cause. 5 || Cartwright v. Viking Indus., Inc., 249 F.R.D. 351, 354 (E.D. Cal. 2008) (“Good cause is 6 || present when ‘the need for expedited discovery, in consideration of the administration of 7 justice, outweighs the prejudice to the responding party.’” (quoting Semitool, Inc. v. Tokyo 8 || Electron America, Inc., 208 F.R.D. 273, 273 (N.D. Cal. 2002))). Luminate has not met 9 || this standard, and the Court finds no justification for the request. 10 || IV. CONCLUSION 11 For the reasons stated above, the Court GRANTS Plaintiff's Ex Parte Application 12 ||for Leave to Exceed Page Limits (ECF No. 6) and DENIES Defendants’ Ex Parte 13 || Application to Strike Plaintiff's Motion (ECF No. 7). Furthermore, the Court DENIES 14 || Plaintiff's Emergency Motion for a Temporary Restraining Order, Preliminary Injunction, 15 ||and Expedited Discovery. (ECF No. 4.) 16 IT IS SO ORDERED. 17 18 || DATED: February 7, 2025 (yatta Bahar 19 Hon. Cynthia Bashant, Chief Judge United States District Court 20 21 22 23 24 25 26 27 28