Wells Fargo Ins. Servs. USA v. McQuate - 276 F. Supp. 3d 1089 (D. Colo. 2016)

Rule:

A "trade secret" is any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value. Factors to consider in determining whether a trade secret exists include: (1) the extent to which the information is known outside the business; (2) the extent to which it is known to those inside the business, i.e., by the employees; (3) the precautions taken by the holder of the trade secret to guard the secrecy of the information; (4) the savings effected and the value to the holder in having the information as against competitors; (5) the amount of effort or money expended in obtaining and developing the information; and (6) the amount of time and expense it would take for others to acquire and duplicate the information. Trade secrets can consist of a combination of elements which are in the public domain or some of which are well-known, but their unified process, design and operation in unique combination, affords a competitive advantage to the owner. What constitutes a trade secret is a question of fact. And, a determination as to the existence of a trade secret as a fact issue requires doubts as to existence of triable issues of fact which must be resolved in favor of the existence of triable issues.

Facts:

Wells Fargo is in the business of procuring and servicing insurance coverages for various business lines, including the ones at issue here — energy and mining. Defendants were three of about 35 employees based in Wells Fargo's Denver, Colorado office. In this business, Wells Fargo does not underwrite the insurance policies but, rather, has relationships with insurance writers and brokers the insurance coverages on behalf of its business clients. Some clients require Wells Fargo to execute non-disclosure agreements prior to providing Wells Fargo information to obtain coverage while other clients do not. Even in the absence of a nondisclosure agreement with a client, Wells Fargo does not disclose that information to anyone outside their office other than when attempting to place coverage for clients. In those instances, Wells Fargo shares selected client information, such as renewal dates, premium information, and sometimes deductible information, with various insurance companies in order to place coverage for clients even though Wells Fargo does not have non-disclosure agreements with the carriers. Clients may — and do — share their policies with other brokerages if they are considering changing brokers, which may occur for any number of reasons. Wells Fargo considers various information to be confidential and trade secrets, including the combination of information it receives from clients and how it uses that information to place coverage. Wells Fargo also considers how it markets itself to be a trade secret. However, if a Wells Fargo marketing presentation was left with a client, and the client chose to do so, it could be given to a Wells Fargo competitor or other entity.

In January 2014, Wells Fargo sold 42 of its offices to USI Insurance Services ("USI"), which sale was completed around May 2, 2014. Defendants all had concerns about the sale. For example, Ms. Wong and Mr. Prouty expressed concerns about Wells Fargo's ability to service the remaining clients. Mr. McQuate complained because about 75% of his book of business and the office he reported to and relied on for support were sold to USI. After the sale, Defendants reported to Jon Lindstrom, the Managing Director of Wells Fargo's Denver office. It was after the sale to USI that Defendants decided to look for other employment. On August 22, 2014, Defendants tendered letters of resignation to Wells Fargo. Mr. McQuate's and Ms. Wong's resignations were nearly identical in all material respects, resigning effective that date, but offering a two-week notice, "if needed," as a "professional courtesy." Mr. Prouty's resignation, however, gave two weeks' notice, effective September 5, 2014. Wells Fargo accepted Mr. McQuate's and Ms. Wong's resignations as tendered — effective August 22, 2014. Mr. Prouty's employment was also terminated effective that date.

After the defendants’ departure to work for a competitor, McGriff, Seibels & Williams (“McGriff”), Wells Fargo looked through Defendants' files for information on accounts but was unable to locate files on certain accounts and found very little emails. Also, a number of clients moved their business — or considered moving their business — from Wells Fargo after Defendants' departure. Thus, Wells Fargo  filed this action, raising the following claims: (1) Breach of Contract; (2) Breach of Duty of Loyalty; (3) Misappropriation of Trade Secrets — Uniform Trade Secrets Act; (4) Unfair Competition; (5) Conversion; (6) Tortious Interference with Prospective Business Advantage; (7) Intentional Interference with Contractual Relationships; and (8) Civil Conspiracy.

Issue:

Are the subject information—clients’ information, prospects, and CRIP reports or information from customers—considered trade secrets of Wells Fargo?

Answer:

Yes.

Conclusion:

First, re: clients' information shared with Wells Fargo, but which information clients may also share with whom they please. Relying on Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1002, 104 S. Ct. 2862, 81 L. Ed. 2d 815 (1984) and Sw. Stainless LP v. Sappington, 582 F.3d 1176, 1190 (10th Cir. 2009), Defendants argue such information may not be trade secrets. The Court finds otherwise. Ruckelshaus and Sw. Stainless LP involved the owners' (in this case, Wells Fargo's clients) sharing of their trade secrets with others. Thus, as to Wells Fargo's clients, their sharing of information may preclude such information from being trade secrets as to them. But that is not the issue here.

Next, re: Wells Fargo's prospects despite such information is widely known (prospects) to clients. Wells Fargo did not specifically address "prospects" but the Court is not persuaded by Defendants' position. While the identity of mining companies in general — and thus which companies may be a prospect for insurance — is public information, Wells Fargo is seeking to preclude dissemination of its mining prospects, which information is not public. 

Finally, re: Wells Fargo's CRIP reports despite such information being gleaned from its customers. Based on the current record, the Court finds Wells Fargo has sufficiently shown such reports are trade secrets. The fact that each of Wells Fargo's customers has its own information (and may disclose it to whom they please), or that some of this information may be public, does not preclude a finding that such information — in combination — is a trade secret as to Wells Fargo.  A consideration of the six factors also supports this finding. Here, there is no evidence that Wells Fargo's CRIP reports — or the combination of information contained therein — are known outside the business. Wells Fargo has also sufficiently shown that only a limited number of employees within the business have access to such information and that it requires employees to maintain such information confidential. Although the savings effected is unclear from the record, even Mr. McQuate acknowledges that Wells Fargo's client information gives it a competitive advantage. While the money expended is also unclear, Wells Fargo has sufficiently shown it makes a relatively substantial effort in obtaining, developing and maintaining that information for future use. Finally, clearly it would take a competitor substantial time and effort to acquire and duplicate Wells Fargo's information — essentially, it would mean, at a minimum, its competitors would have to acquire this information individually from each of Wells Fargo's customers.