IP Law Daily Customer list for real estate brokerage firm not eligible as trade secret
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Monday, January 21, 2019

Customer list for real estate brokerage firm not eligible as trade secret

New York-based L.I. City Ventures’ employment contract was overly broad, and the firm failed to establish that its customer list contained valuable confidential information

By Brian Craig, J.D.

Concluding that information a real estate agent sent to her personal email account from her former employer does not qualify as a trade secret or other confidential information, the federal district court in New York City has denied a request for a preliminary injunction brought by her former employer. The court found that the real estate brokerage firm did not show a likelihood of success on the merits of its trade secrets and breach of contract claims against the former employee. The brokerage firm failed to show that the information containing customer information required the expenditure of substantial time and money to compile, or that it contained information relating to clients that is not readily known (L.I. City Ventures v. Urban Compass, Inc., January 16, 2019, Gardephe, P.).

L.I. City Ventures, LLC, d/b/a Modem Spaces ("Modem Spaces") filed a suit against Urban Compass, Inc., and Jessica Meis alleging claims for unfair competition under New York law, the Defend Trade Secrets Act, and breach of contract. Modem Spaces and Urban Compass are competing real estate brokerage firms. Meis is a real estate agent who formerly worked at Modem Spaces, but who now works for Urban Compass. When Meis started working for Modern Spaces, she signed an agreement that contains a non-disclosure provision. Prior to her departure, Meis sent numerous emails from her Modem Spaces’ email account to her personal account, with various spreadsheet attachments containing information.

Modern Spaces sought a preliminary injunction against Urban Compass and the former employee. The courtanalyzed whether the brokerage firm demonstrated a likelihood of success on the merits or sufficiently serious questions going to the merits. By holding that the real estate brokerage firm failed to show likelihood of success on the merits or sufficiently serious questions going to the merits, the court did not examine other factors relating to irreparable harm, balance of hardships, or the public interest.

Unfair competition. The court first analyzed whether thebrokerage firm showed a likelihood of success on the merits of the unfair competition claim. Under New York law, a trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives the holder an opportunity to obtain an advantage over those who do not know or use it. Here, the spreadsheets include customer contact information such as name, telephone number, and email address. Another spreadsheet was created by Meis that lists her own pending and closed details and does not list deals from other agents. Modern Spaces offered no evidence that the custom list required the expenditure of substantial time and money to compile, or that it contained information relating to clients that is not readily known in the trade and that is discoverable only through effort. Individuals seeking to buy or rent residences widely circulate their names, telephone numbers, and email addresses to real estate brokers. The spreadsheets do not constitute internal company documents. Because the court found that none of the information in the spreadsheets qualify as trade secrets, Modern Spaces did not show a likelihood of success on the unfair competition claim.

Defend Trade Secrets Act. The court next examined whether the brokerage firm showed a likelihood of success on the merits of the Defend Trade Secrets Act (DTSA) claim. The DTSA defines trade secrets as any business information that the owner has taken reasonable measures to keep such information secret and is not readily ascertainable through proper means or by another person who can obtain economic value from the disclosure or use of the information. Modern Spaces failed to show either that it was the owner of the documents or information contained in the spreadsheets, or that any improper means were used to acquire the documents or information. Accordingly, the brokerage firm failed to demonstrate a likelihood of success on the merits with respect to the DTSA claim.

Breach of contract. Finally, the court discussed whether the brokerage firm showed a likelihood of success on the merits of the breach of contract claim. Under New York law, restrictive covenants are enforceable to the extent necessary to prevent the disclosure or use of trade secrets or confidential customer information. Here, the court found that the agreement's non-disclosure provision is unreasonable in time and area, is not necessary to legitimate interests, and is unreasonably burdensome to the employee. The agreement is impermissibly overbroad in that it seeks to restrain the former employee from disclosing any information to which she had access to at Modern Spaces, regardless of whether that material constitutes a trade secret or is otherwise proprietary and confidential. Therefore, the court found that the brokerage firm did not demonstrate a likelihood of success on the breach of contract claim.

This case is No. 1:18-cv-05853-PGG.

Attorneys: Avi Lew (Warshaw Burstein Cohen Schlesinger & Kuh, LLP) for L.I. City Ventures d/b/a Modern Spaces. Emily Bab Kirsch (Kirsch & Niehaus PLLC) for Urban Compass, Inc.

Companies: L.I. City Ventures d/b/a Modern Spaces; Urban Compass, Inc.

MainStory: TopStory TradeSecrets NewYorkNews

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