FREEDOM CAPITAL GROUP LLC, Plaintiff, v. BLUE METRIC GROUP, LLC, et al., Defendants.
NO. 3:24-cv-00369
IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION
JUDGE RICHARDSON
Filed 07/08/24
Pending before the Court is Plaintiff‘s motion for a preliminary injunction (Doc. No. 11, “Motion“).1 Defendants Blue Metric Group, LLC, Blue Metric RV Park Fund, LLC, and Bayberry RV Park, LLC (collectively, “Blue Metric“), Defendants John Cascarano and John Cascarano, PLLC (collectively, “Cascarano“), and Defendant Chris Haynes (“Haynes“) (collectively, with Blue Metric and Cascarano, “Defendants“) filed a response in opposition to the Motion (Doc. No. 30, “Response“), to which Plaintiff filed a reply (Doc. No. 35, “Reply“).
With their Response, Defendants filed declarations of Cascarano2 and Haynes with supporting documents attached thereto. (Doc. Nos. 31, 32). Plaintiff then filed the declaration of
For the reasons stated herein, the Motion will be denied.
BACKGROUND
I. Factual Background3
A. Plaintiff‘s Business and Alleged Trade Secrets
Plaintiff is a business, founded by Kevin Barnett (“Barnett“) and Cameron Bailey (“Bailey“), that identifies, acquires, and manages RV parks. (Doc. No. 1 at ¶¶ 2, 20). Plaintiff identifies off-market RV Parks and gathers information about those parks such as the RV parks’ owners’ contact information, the owners’ initial asking prices and deal terms, and park-specific factors such as proximity to tourism hubs or popular destinations, anticipated renovation costs, operating expenses, net operating income, and guest facilities and amenities. (Id. at ¶ 31). Plaintiff obtains this information from a number of sources, including “public records, site visits, negotiations with RV Park owners, and (beginning in late 2022) its internal call center, which used automated and manual contact features, such as SMS text messaging, voicemail drops, and direct calls from [Plaintiff‘s] representatives.” (Id. at ¶ 32). Plaintiff consolidates all such information into its customer relationship management system (“CRM“) and synthesizes the data to calculate the projected value to be gained by adding each respective park to its portfolio. (Id.). By compiling this information (a process that Plaintiff started in October 2020), Plaintiff has built a “Contact List” of over 34,000 parks. (Id. at ¶ 36). Plaintiff then sends Acquisition Team members (such as
Notably, Plaintiff represents that Acquisition Team members have unfettered access to the CRM, provided that they access it with their username and password and utilize the two-step authentication process. (Doc. No. 11-1 at 6, n.4).5 Plaintiff has, in addition to the Acquisition Team, Call Center representatives who contact potentially interested sellers via a third-party telephone platform called “Just Call.”6 (Doc. No. 1 at ¶¶ 37, 39). Information from the calls (including audio recordings and various data points) is also added to the CRM. (Id. at ¶ 39).
Based on an analysis of all of the information in the CRM, Plaintiff created and maintains an “Investment Book,” which is a catalog of investment-grade properties. (Id. at ¶ 41). Plaintiff grades and ranks the properties in its Investment Book in accordance with Plaintiff‘s own investment criteria and designates each property in the Investment Book as one of the following,
B. Defendants’ Alleged Misappropriation
Haynes worked as an independent contractor for Plaintiff from June 2022 until April 2023, when Haynes voluntarily terminated his working relationship with Plaintiff. (Doc. No. 1 at ¶¶ 54, 69). As a member of Plaintiff‘s Acquisition Team, Haynes was tasked with evaluating certain potential target properties and gathering information relevant to the potential acquisition of those properties. (Id. at ¶ 33).
In the fourth quarter of 2022, Cascarano expressed to Plaintiff his interest in forming his own RV park acquisition and management firm. (Doc. No. 1 at ¶ 55). Plaintiff did not oppose Cascarano‘s plan to form a company similar to Plaintiff, and in November 2022, (while still representing Plaintiff in at least some fashion), Cascarano formed Blue Metric Group—a company that, like Plaintiff, purchases and manages RV parks. (Id. at ¶¶ 55-56). According to Plaintiff, Cascarano represented to Bailey that Blue Metric Group would be a “collaborative, non-competitive enterprise” created to procure and manage RV parks that Plaintiff agreed to transfer to Blue Metric Group in exchange for an assignment fee.9 (Id.). To that end, between November 2022 and April 2023, Blue Metric Group acquired four RV parks that Plaintiff had identified but had not acquired, and paid Plaintiff an acquisition fee for each transaction. (Id. at ¶ 57). Because of the alleged understanding that Blue Metric Group would not compete with Plaintiff, Haynes
Plaintiff alleges that in early 2023 (while Haynes was still a member of Plaintiff‘s Acquisition Team and Cascarano was still representing Plaintiff in at least some legal capacity), Defendants “accessed, downloaded or transferred, and destroyed or attempted to destroy confidential and proprietary information derived from the Contact List, JustCall account, CRM, and Investment Book.” (Id. at ¶ 75). Defendants allegedly did so through Haynes‘s access to the CRM and an unidentified Call Center representative‘s access10 to the JustCall account. (Id.). Plaintiff further alleges that Blue Metric used and continues to use this “stolen” information to appropriate RV park investment opportunities from Plaintiff, including at least seven RV parks listed in the Investment Book.11 (Id. at ¶¶ 75-76).
II. Procedural History
Plaintiff initiated this action on April 1, 2024, by filing a verified complaint (Doc. No. 1, “Verified Complaint“) which remains the operative complaint in this case. Via the Verified Complaint, Plaintiff asserts several causes of action including: misappropriation of trade secrets in violation of the Defend Trade Secrets Act,
With respect to preliminary injunctive relief, Plaintiff requests that the Court issue an order enjoining Defendants from (i) completing any pending transactions in which they utilized, directly or indirectly, any information Plaintiff stored in its CRM or JustCall accounts, and (ii) prohibiting Plaintiff from accessing the information within its CRM and JustCall accounts. (Doc. No. 11 at 3-4).
LEGAL STANDARD13
Those seeking a preliminary injunction must meet four requirements.14 They must show a likelihood of success on the merits; irreparable harm in the absence of the injunction; the balance of equities favors them; and that the public interest favors an injunction. Winter v. Nat. Res. Def. Council, 555 U.S. 7, 20 (2008); Sisters for Life, Inc. v. Louisville-Jefferson County, 56 F.4th 400, 403 (6th Cir. 2022).
ANALYSIS
I. Likelihood of Success on the Merits15
Plaintiff bases the Motion only on its claims for misappropriation of trade secrets under both the DTSA and TUTSA (Counts I and II).16 “The respective requirements for establishing misappropriation under these statutes are largely the same, and so the Court will conduct a single analysis.” PSC Indus., Inc. v. Johnson, No. 3:19-CV-00362, 2021 WL 1663574, at *11 (M.D. Tenn. Apr. 28, 2021) (citing Great Am. Opportunities, Inc. v. Cherry Bros., LLC, No. 3:17-CV-1022, 2018 WL 418567, at *3 (collecting cases)); Allergan, Inc. v. Revance Therapeutics, Inc., No. 3:23-CV-00431, 2024 WL 38289 (M.D. Tenn. Jun. 3, 2024). To succeed on a trade secrets misappropriation claim, a plaintiff must show “(1) the existence of a trade secret; (2) misappropriation of the trade secret by the defendant; and (3) resulting detriment to the plaintiff.” ProductiveMD, LLC v. 4UMD, LLC, 821 F. Supp. 2d 955, 962 (M.D. Tenn. 2011) (citation omitted); see also
A. It is likely that, of the information allegedly comprising trade secrets, only information in the Investment Book derives independent economic value from not being generally known.
As noted above, Plaintiff claims that Defendants stole confidential information from its CRM, JustCall account, and Investment Book. Plaintiff admits that “some (if not all)” of the
Plaintiff relies on two cases to support its argument, but both of them are distinguishable, at least with respect to the CRM and JustCall account. First, Plaintiff points to the Sixth Circuit‘s statement in Caudill Seed & Warehouse Co. v. Jarrow Formulas, Inc., 53 F.4th 368, 380 (6th Cir. 2022), that “‘a plaintiff may prevail in a trade-secrets case without identifying a specific item of information that is not publicly known or readily available.‘” (quoting Mike‘s Train House, Inc. v. Lionel, L.L.C., 472 F.3d 398, 411 (6th Cir. 2006), abrogated on other grounds as recognized by A.K. ex rel. Kocher v. Durham Sch. Servs., L.P., 969 F.3d 625, 629-30 (6th Cir. 2020)). Although it is true that Caudill contemplated that the combination or compilation of discrete (individual) items of information known throughout an industry could conceivably constitute a trade secret, the court in Caudill made clear that “the plaintiff [seeking to protect a purported trade secret] must
[Plaintiff] applied the CRM‘s analytics tools and its own, customized and proprietary valuation methodologies to assemble select property lists that were prioritized based on, without limitation, the RV Park owners’ interest in a sale, the economic and physical attributes of each property, [Plaintiff‘s] valuations, and other data-based conclusions and performance indicators the company discerned from the property information database. By engaging in this expansive analytical process, [Plaintiff] produced a catalog of investment-grade properties that, almost
invariably, are unlisted and completely undiscovered within the real estate investing sector (the “Investment Book“).
(Id. at ¶ 41). Based on this description, it appears to the Court that the CRM is merely a depository of publicly available information gathered by Plaintiff (via its Acquisition Team and Call Center); that publicly available information is then analyzed using multiple factors, and the product of that analysis is the Investment Book—a “catalog of investment-grade properties” prioritized according to their ability to meet Plaintiff‘s specific investment criteria.
So, unlike the CRM and JustCall account—which include only information that is publicly available—the Investment Book is unique because it conveys, in addition to publicly available information, some information that is not publicly available—namely, the potential profitability (based on Plaintiff‘s investment criteria) of each RV park included therein.
In sum, although Plaintiff has not indicated what (if anything) makes the compilation of publicly available information in the CRM and/or JustCall account unique (such that it is potentially protectible as a trade secret under Caudill) Plaintiff has shown—through its analysis and ranking of the information therein—that the Investment Book is unique (such that it potentially is protectible as a trade secret).
Second, Plaintiff relies on GEP Administrative Services, LLC v. Wiseman, No. 3:24-cv-00256, 2024 WL 1019277, at *13 (M.D. Tenn. Mar. 8, 2024), wherein this Court found the existence of trade secrets in confidential information that “ha[d] high value because it detail[ed] internal proprietary processes and decision making, clients, potential clients, and their contact information, pricing and financial statements, and other sensitive business data[.]” But unlike here, in GEP the plaintiff did not acknowledge that “some (if not all)” of the information at issue was publicly available. So at least with respect to the information in the CRM and JustCall account, the Court does not see how Plaintiff could show that information—which Plaintiff admits was
B. Plaintiff likely has not made reasonable efforts to maintain the secrecy of its alleged trade secret information.
Even assuming arguendo that Plaintiff derives value from information in all three sources (the CRM, JustCall account, and Investment Book) not being generally known,20 that information is not likely to be considered trade secrets because Plaintiff likely has not taken reasonable efforts to maintain its secrecy.
Plaintiff argues that it took reasonable measures to protect the information contained in its CRM, JustCall account, and Investment Book from public disclosure by: (i) hosting those sources on its cloud-based servers, (ii) limiting access to its top management and Acquisition Team, (iii) assigning usernames and passwords (which require two-factor identification) to those with access, and (iv) tracking those who log in to the CRM and Investment Book when it backs up its systems. (Doc. No. 11-1 at 13). In asserting that these methods are sufficient to protect the information at
Putting aside the fact that this Court is not bound by the holding in RECO, Plaintiff ignores an important distinction between RECO and this case. In RECO, access to the alleged trade secrets was limited to employees, whereas here, Plaintiff gave access to (in addition to certain employees) independent contractors who were not bound by any agreement or, for that matter the duty of loyalty owed by an employee to an employer under Tennessee law21 whatsoever to maintain confidentiality or even to work exclusively for Plaintiff in their business dealings. Given that Haynes was not an employee and did not sign any type of confidentiality or non-disclosure agreement, it is entirely unclear what exactly Plaintiff believes obligated Haynes to maintain the secrecy of the information that Plaintiff willingly shared with him and every other member of its Acquisition Team. Plaintiff points to Bailey‘s declaration stating that Plaintiff trained and required all members of its Acquisition team (including Haynes) to “maintain the confidentiality of the RV Park information he procured on behalf of [Plaintiff], the non-public RV Park information stored in the CRM, and to never disseminate, disclose, or otherwise reveal such information to any non-
In sum, Plaintiff‘s insistence that “[t]he Investment Book is the most valuable and protected of [Plaintiff‘s] proprietary and confidential information,” (Doc. No. 1 at 12), is belied by its willingness to give independent contractors “unfettered” access to that information—which was
Because, so far as the record currently indicates, it is at least as likely as not that Plaintiff disclosed its alleged trade secrets to its independent contractors “without notifying them of the information‘s confidential nature or binding them to confidentiality agreements, [Plaintiff] is unlikely to be able to show that it undertook reasonable measures to protect the secrecy of its alleged trade secrets.” Broker Genius, Inc. v. Zalta, 280 F. Supp. 3d 495, 517-18 (S.D.N.Y. 2017); see also RV Horizons, Inc. v. Smith, No. 18-cv-02780-NYW, 2020 WL 6701119, at *26-27 (D. Colo. Nov. 13, 2020) (finding that plaintiff-employer did not take reasonable measures to secure information as trade secrets where, despite general practices like password-protected accounts and limiting the number of persons with access to information, the employer failed to advise employees
So even assuming arguendo that the information Defendants allegedly acquired and used was valuable to Plaintiff because it is not generally known, Plaintiff is unlikely to succeed in establishing that such information constitutes trade secrets under the DTSA or TUTSA because Plaintiff has not shown (at least based on the current record) that it likely took reasonable measures to protect that information.
C. Defendants’ actions cannot constitute misappropriation of trade secrets (as opposed to misappropriation of something else) if, as is likely here, the information allegedly misappropriated did not consist of any trade secrets.
In addition to showing that the information contains protectable trade secrets, Plaintiff must also show a likelihood of success in establishing that Defendants misappropriated those trade secrets. The DTSA defines misappropriation as:
(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(B) disclosure or use of a trade secret of another without express or implied consent by a person who—
- used improper means to acquire knowledge of the trade secret;
- at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was—
- derived from or through a person who had used improper means to acquire it;
- acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
- derived from or through a person who owed a duty to the person seeking relief to maintain [its] secrecy or limit [its] use ....
“Improper means” includes “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and does not include ... any other lawful means of acquisition.”
Because (for reasons explained immediately above) Plaintiff is unlikely to establish that the information in its CRM, JustCall account, and Investment Book are in fact trade secrets, Defendants’ alleged acquisition, use, and/or disclosure of that information would not likely constitute misappropriation of trade secrets (even if it could be deemed misappropriation of information that does not have trade-secret status). Accordingly, the Court need not at this time wade through the conflicting factual accounts offered by the parties in support of their respective arguments relating to whether Defendants misappropriated Plaintiff‘s information. Rather, the Court concludes that because Plaintiff has not established that it took reasonable measures to protect the information contained in its CRM, JustCall account, and Investment Book, Plaintiff is unlikely to succeed on the merits of its claims for misappropriation of trade secrets under the DTSA and TUTSA.
II. Irreparable Harm
Plaintiff asserts that in the absence of a preliminary injunction, Defendants will continue to misappropriate Plaintiff‘s trade secrets, causing “further immediate and irreparable harm that money damages cannot remedy.” (Doc. No. 11-1 at 16). It is true that some district courts have concluded that irreparable harm is generally established where it is shown that the defendant has
With respect to Plaintiff‘s assertion that an injunction is necessary to keep Defendants from deleting information from the JustCall account, the Court does not see how this can be true in light of Plaintiff‘s allegation that Defendants have already deleted “virtually all information stored in [Plaintiff‘s] JustCall account.” (Doc. No. 11-1 at 8 (citing Doc. No. 1 at ¶ 86)).28 Thus, this purported ground is not grounds for finding that Plaintiff will suffer irreparable harm in the absence of a preliminary injunction.
midpage-fn n=“28“>Plaintiff might respond that at least some information remains in its JustCall account and could be deleted by Defendants in the absence of injunctive relief. However, the Court would find this concern unreasonable given that Plaintiff has terminated any Call Center representatives allegedly influenced by Defendants. (Doc. No. 11-1 at 8 (citing Doc. No. 1 at ¶ 87)). Moreover, the Court has no reason to believe that Defendants themselves can still access Plaintiff‘s CRM or Investment Book. Thus, any concern that Defendants might delete the information contained therein is unwarranted and does not indicate a likelihood that Plaintiff could suffer irreparable harm.III. Balance of Equities
A plaintiff seeking a preliminary injunction must also establish that the balance of equities tips in his favor. Winter, 555 U.S. at 20. Seeking to minimize the equities that favor Defendants, Plaintiff asserts that the requested preliminary injunction would not substantially harm Plaintiff
Moreover, even if the balance of equities did tip in Plaintiff‘s favor, that would not change the result, because Plaintiff has not satisfied any of the other requirements necessary to obtain preliminary injunctive relief. See Sisters for Life, 56 F.4th at 408-09.
IV. Public Interest
Finally, the Court must determine whether the injunction is in the public interest. Winter, 555 U.S. at 20. Plaintiff argues that the injunction would serve the public interest because it would
CONCLUSION
“A preliminary injunction is an extraordinary remedy which should be granted only if the movant carries his or her burden of proving that the circumstances clearly demand it.” Overstreet v. Lexington-Fayette Urb. Cnty. Gov‘t, 305 F.3d 566, 573 (6th Cir. 2002) (citing Leary v. Daeschner, 228 F.3d 729, 739 (6th Cir. 2000)). The use of the word “extraordinary” here, far from being merely rote, is quite apt; a preliminary injunction serves to treat a plaintiff (at least partially and temporarily) as if it has won the entire lawsuit when in fact it has not yet done any such thing, and this is indeed extraordinary. So although the Court does not take lightly the seriousness of the allegations made in Plaintiff‘s Verified Complaint, Plaintiff simply has not satisfied the heavy burden required to obtain such extraordinary relief.
Accordingly, Plaintiff‘s Motion (Doc. No. 11) will be denied.
An appropriate accompanying order will be entered.
IT IS SO ORDERED.
ELI RICHARDSON
UNITED STATES DISTRICT JUDGE
Notes
Great Am. Opportunities, Inc., 2018 WL 418567, at *4 (quoting Wright Med. Tech., Inc. v. Grisoni, 135 S.W.3d 561, 589 (Tenn. Ct. App. 2001)). These six factors originated in cases discussing the common law misappropriation of trade secrets. E.g., Wright Med. Tech., Inc. v. Grisoni, 135 S.W.3d 561, 589 (Tenn. Ct. App. 2001). However, they have still been found relevant by courts (including this Court) to the analysis of whether information is a trade secret under TUTSA. E.g., SDC Fin., LLC v. Bremer, No. 3:19-CV-00525, 2019 WL 4393543, at *4 (M.D. Tenn. Sept. 13, 2019); PartyLite Gifts, Inc. v. Swiss Colony Occasions, No. 3:06-CV-170, 2006 WL 2370338, at *3 (E.D. Tenn. Aug. 15, 2006), aff‘d, 246 F. App‘x 969 (6th Cir. 2007); ProductiveMD, 821 F. Supp. 2d at 961. However, cases noting the distinction between TUTSA and the common law have not applied the factors (also without comment). Williams-Sonoma Direct, Inc., 109 F. Supp. 3d at 1018; J.T. Shannon Lumber Co., 2010 WL 3069818, at *4.[S]ome factors [are] relevant to whether information is a trade secret under Tennessee law:
(1) the extent to which the information is known outside of the business;
(2) the extent to which it is known by employees and others involved in the business;
(3) the extent of measures taken by the business to guard the secrecy of the information;
(4) the value of the information to the business and to its competitors;
(5) the amount of money or effort expended by the business in developing the information;
(6) the ease or difficulty with which the information could be properly acquired or duplicated by others[.]
Therefore, the Court believes the appropriate analysis is to assess the three requirements prescribed by TUTSA, as enumerated in J.T. Shannon Lumber Co., 2010 WL 3069818, at *4.
The term “trade secret” has a statutory definition [under the TUTSA] that is similar to the common law definition:
[I]nformation, without regard to form, including, but not limited to, technical, nontechnical or financial data, a formula, pattern, compilation, program, device, method, technique, process, or plan that:
(A) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and
(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Because the Court concludes that it is not likely that Plaintiff reasonable measures to protect the secrecy of its alleged trade-secret information, that information is not entitled to trade-secret protection at all, thus rendering moot (at least for purposes of Plaintiff‘s misappropriation claims) the separate inquiry of whether Cascarano acquired trade secrets through his confidential relationship with Plaintiff.