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Fidelity Brokerage Services LLC,(Rbb v. Brendan Mcnamara; Merrill Lynch

May 27, 2011


The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge


This matter came before the Court on May 25, 2011 for hearing on Plaintiff Fidelity Brokerage Services LLC's ex parte motion for a temporary restraining order and order to show cause why a preliminary injunction should not issue. [Doc. No. 3.] Attorneys James Turken and Stacey Schmidt appeared on behalf of Fidelity, and attorneys John Vaughn and Timothy Pestotnik appeared on behalf of Defendants Brendan McNamara and Merrill Lynch, Pierce, Fenner & Smith, Inc. After the May 25 hearing, the Court issued an order permitting the parties to submit certain additional information to the Court. Upon consideration of the arguments made by counsel at the hearing, as well as the written submissions of the parties, the Court concludes Fidelity has demonstrated injunctive relief is appropriate.


Fidelity recently filed a civil complaint and statement of claim with the Financial Industry Regulatory Authority ("FINRA") against its former Account Executive Brendan McNamara, and McNamara's current employer Merrill Lynch, for among other things, misappropriation of trade secrets and unfair competition. [Doc. No. 1.] Fidelity asserts that during McNamara's tenure at Fidelity he twice signed employment agreements containing confidentiality and non-solicitation clauses. [Doc. No. 1, Exhs. B, C.] The Agreements indicate, generally, that McNamara would have access to Fidelity's confidential and trade secret information during his employment, and that he agreed not to improperly use, copy, retain or disclose any such information upon termination of his employment with Fidelity. The Agreements further state McNamara shall not solicit any of Fidelity's customers for a one year period after his employment with Fidelity terminated.

During McNamara's employment with Fidelity, he allegedly "had access to and acquired contact and confidential financial information for close to one thousand (1,000) Fidelity accounts, representing more than $238 million in assets under Fidelity management." [Doc. No. 1, ¶35.] Fidelity alleges that in or around December 2010 McNamara began using his "Fidelity computer to access, or 'look up,' confidential and trade secret information for a number of Fidelity customers in very short, sporadic time periods." [Id. at ¶40.] Fidelity asserts McNamara's look up activity was suspicious and continued until McNamara resigned on March 3, 2011 to take a job with competitor Merrill Lynch. [Id. at ¶¶40-45.]

According to Fidelity, within days of McNamara's resignation, he, in concert with Merrill Lynch, "began sending letters to Fidelity's customers regarding his new employment." [Id. at ¶47.] Fidelity acknowledges McNamara may legally notify his clients that he moved to Merrill Lynch, but argues McNamara wrongfully "called numerous Fidelity customers, soliciting their Fidelity accounts for Merrill Lynch." [Id. at ¶¶47-48.] McNamara admits he created a customer list from memory after leaving Fidelity by using publically available sources to obtain contact information for the names he recalled. [See id. at ¶56.] Fidelity asserts McNamara used this information to do more than merely announce his new employment to his former clients, as Fidelity received reports from several clients that McNamara had contacted them and discussed moving their assets to Merrill Lynch on multiple occasions. [Id. at ¶48.] In one case, McNamara allegedly continued to solicit a Fidelity client after she unequivocally indicated she had no desire to move her accounts. [Id. at ¶¶52-54.]

Fidelity estimates approximately $5 million of client assets previously managed by Fidelity have been moved to Merrill Lynch since McNamara left three months ago. [Id. at ¶61.] From March 2011 through early May 2011, Fidelity engaged in discussions with counsel for Merrill Lynch regarding McNamara's alleged activities in an attempt to reach an amicable solution to Fidelity's concerns. [Id. at ¶51.] When it became clear to Fidelity that an amicable resolution was not possible, Fidelity filed the present action and motion for a temporary restraining order on May 18, 2011. Fidelity argues McNamara should be ordered to "return" the list of trade secret client names he recreated from memory after moving to Merrill Lynch, and that Defendants should be enjoined from soliciting Fidelity's customers pending resolution of its claims before FINRA.


To prevail on a motion for temporary restraining order or to receive preliminary injunctive relief, the moving party bears the burden of demonstrating "(1) that it is likely to succeed on the merits, (2) that it is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in its favor, and (4) that an injunction is in the public interest." Earth Island Institute v. Carlton, 626 F.3d 462, 469 (9th Cir. 2010) (citation omitted). "A preliminary injunction is appropriate when a plaintiff demonstrates that serious questions going to the merits were raised and the balance of hardships tips sharply in the plaintiff's favor." Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011) (internal marks and citation omitted). However, "plaintiffs must establish that irreparable harm is likely, not just possible." Id. at 1131 (citing Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008)). Because injunctive relief prior to trial is an extraordinary remedy, it is to be granted sparingly. Id. Moreover, on application for injunctive relief the court need not decide disputed questions of fact. Arthur J. Gallagher & Co. v. Edgewood Partners Ins. Ctr., 2008 U.S. Dist. LEXIS 8924 *7-9 (N.D. Cal.) (citations omitted).



The Court has jurisdiction to enter injunctive relief "to preserve the status quo pending a final determination of the merits of this dispute" by FINRA. Merrill Lynch v. Chung, 2001 U.S. Dist. LEXIS 3248 *6 (C.D. Cal.) (italics in original); Toyo Tire Holdings of Americas Inc. v.Continental Tire North America, Inc., 609 F.3d 975, 980 (9th Cir. 2010) ("district court has authority to issue equitable relief in aid of arbitration").


Under California law, the Uniform Trade Secrets Act ("UTSA") prohibits employees from misappropriating their former employer's trade secrets. Cal. Civ. Code. § 3426.1. "Actual or threatened misappropriation may be enjoined." Id. at § 3426.2. Thus, to succeed on the merits of its claims, Fidelity must demonstrate the information McNamara possesses constitutes a trade secret, and that McNamara has ...

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