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Fidelity Brokerage Services LLC v. Rocine

United States District Court, N.D. California

September 7, 2017

FIDELITY BROKERAGE SERVICES LLC, Plaintiff,
v.
BRETT ROCINE, et al., Defendants.

          ORDER GRANTING APPLICATION FOR TEMPORARY RESTRAINING ORDER

          PHYLLIS J. HAMILTON, UNITED STATES DISTRICT JUDGE.

         Plaintiff's application for a temporary restraining order (“TRO”) came on for hearing before this court on September 6, 2017. Plaintiff appeared by its counsel Russell Beck and Ryan Erickson, and defendant Brett Rocine appeared by his counsel Andrew Hutchison and Leonard Weintraub. Having read the parties' papers and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby GRANTS the application as follows.

         BACKGROUND

         Plaintiff Fidelity Brokerage Services LLC ("Fidelity") filed the complaint in this action on August 28, 2017, asserting two claims of misappropriation of trade secrets, plus claims of breach of contract, tortious interference with employment agreement, unjust enrichment, and injunctive relief, against defendants Brett Rocine ("Rocine") and J.P. Morgan Securities LLC ("JPMorgan").

         Rocine worked as a Financial Consultant at Fidelity's Larkspur, California, office from October 2014 until July 20, 2017. He now works at JPMorgan in its Mill Valley, California, office, as a Vice President, Private Client Advisor. JPMorgan and Fidelity are direct competitors. Complaint ("Cplt") ¶¶ 3, 4, 6; Declaration of Peter Van Bemmel in support of TRO application ("Van Bemmel Decl.") ¶ 3.

         Fidelity provides its customers a variety of financial services, including financial planning, retirement services, wealth management, securities execution and clearing, and life insurance services. Cplt ¶ 19. Unlike most other retail brokerage companies, Fidelity does not have its Account Executives, including its Financial Consultants, make “cold calls” to prospective customers who have no established relationship with Fidelity. Cplt ¶ 20.

         Instead, Fidelity requires its Financial Consultants to develop service relationships based on leads that Fidelity provides, primarily prospective customers who have initiated contact with Fidelity, or existing customers who have experienced a “triggering event” such as a Fidelity 401(k) distributable event. Cplt ¶¶ 20-22. This lead-based approach to supporting its Financial Consultants distinguishes Fidelity from other full-service brokerages where individual brokers, rather than the firm, are responsible for establishing customer relationships. Cplt ¶ 23.

         Fidelity requires each employee to execute a standard Fidelity Employee Agreement in which the employee agrees not to use or disclose Fidelity's confidential information, including customer information. Cplt ¶ 7; Van Bemmel Decl. ¶¶ 8-9. Rocine signed the Employee Agreement at the inception of his employment in 2012. Cplt ¶¶ 31-34 & Exh. 1; Van Bemmel Decl. ¶ 8.

         The Agreement defines “Confidential Information” as including "all information not generally known to the public at the time made known to the Employee, " which in turn includes "trade secrets, " "customer, prospect, vendor, and personnel lists, " and "financial and other personal information regarding customers and employees." Cplt Exh. 1 at ¶ 1. The Agreement also includes a "Non-solicitation" provision, which prohibits an employee during his/her time of employment, and for one year thereafter, from using "Confidential Information" to solicit any Fidelity client to move his/her business away from Fidelity. Cplt Exh. 1 ¶ 6.

         Mr. Van Bemmel, Rocine's former supervisor, met with Rocine before Rocine departed from Fidelity on July 20, 2017, and reminded him of his obligation not to use or disclose Fidelity's confidential customer information. Cplt ¶¶ 5, 38; Van Bemmel Decl. ¶ 12. In addition, on July 29, 2017, Fidelity sent Rocine a "separation letter, " in which it again reminded Rocine of his obligation not to use Fidelity's confidential information and trade secret customer data, which Fidelity does not disclose to competitors and which it protects using various safeguards. Cplt ¶¶ 25-30, 40-41 & Exh. 5; Van Bemmel Decl. ¶ 14.

         Beginning in late July, Fidelity began receiving reports that Rocine had been calling Fidelity's clients in an effort to divert their accounts to JPMorgan. Cplt. ¶ 43; Van Bemmel Decl. ¶ 13; see also Declaration of Jess Perez ("Perez Decl.") ¶ 4. Fidelity asserts that Rocine has been using names and contact information he obtained while working at Fidelity. Cplt ¶ 43.

         After Fidelity learned about this, it sent Rocine a cease-and-desist letter on August 7, 2017, reminding him he was not permitted to use Fidelity's confidential customer information, including clients' names, addresses, telephone numbers, or account information. Cplt ¶¶ 8, 43 & Exh. 6; Van Bemmel Decl. ¶ 15. Fidelity also requested that Rocine return any confidential information in his possession. Cplt ¶ 43; Van Bemmel Decl. ¶ 15.

         Although Rocine did not respond to the letter, JPMorgan did respond, by email on August 9, 2017, advising Fidelity that Rocine was aware of his obligations, and stating that “Mr. Rocine assures us that he did not retain a client list or any other confidential documents or property from Fidelity.” Cplt ¶¶ 44, 45 & Exh. 7; Van Bemmel Decl. ¶ 16 & Exh. 7. Fidelity asserts, however, that notwithstanding JPMorgan's assurances, it has received reports directly from its customers that Rocine has been soliciting them to transfer their accounts to JPMorgan. Cplt ¶ 46; Van Bemmel Decl. ¶¶ 17, 18.

         According to Fidelity, over the period July 31, 2017, to August 22, 2017, at least six different Fidelity clients reported that Rocine had contacted them and solicited them to move their accounts to JPMorgan. Cplt ¶¶ 47-53 (citing reports by Fidelity customers identified as "EC, " "GP, " "PS, " "KM, " "GN, " and "AN"); see also Van Bemmel Decl. ¶¶ 20-23 & Exhs. 7-8; Supp. Van Bemmel Decl. ¶ 3-7 & Exh. 1; Perez Decl. ¶¶ 5-11 & Exhs. 1-6. Fidelity contends that Rocine could not have known of the existence of these customers unless he took confidential information with him when he left Fidelity. Cplt ¶ 54; Van Bemmel Decl. ¶¶ 13, 27.

         Fidelity filed the complaint in the present action on August 28, 2017, asserting six causes of action - misappropriation of trade secrets (under both the Defend Trade Secrets Act of 2016 ("DTSA") and the California Uniform Trade Secrets Act ("CUTSA")), against both JPMorgan and Rocine; breach of contract, against Rocine; tortious interference with employment agreement, against JPMorgan; unjust enrichment, against Rocine; and injunctive relief, against both defendants.

         Fidelity, JPMorgan, and Rocine are subject to the arbitration rules and regulations of the Financial Industry Regulatory Authority ("FINRA"), pursuant to FINRA Rule 13200. Cplt ¶ 11. Although this dispute will ultimately be decided in binding arbitration before FINRA, pursuant to FINRA Rule 13804, Fidelity is required to seek and obtain immediate injunctive relief in a court of competent jurisdiction before an expedited FINRA arbitration can proceed. Cplt ¶ 11.

         Fidelity asserts that once a restraining order is issued by this court, an expedited arbitration can be scheduled with FINRA within 15 days of the entry of the TRO. Cplt ¶ 11. If no TRO is issued, the FINRA arbitration cannot proceed on an expedited basis, and will instead be assigned to a standard-track arbitration, which Fidelity contends might not take place for a year or more. Cplt ¶ 11.

         DISCUSSION

         A. ...


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