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The Revolution FMO, LLC v. Mitchell

United States District Court, E.D. Missouri, Eastern Division

May 10, 2018





         This matter is before the Court on Defendant's Motion to Dismiss or for a More Definite Statement, [Doc. No. 40]. Plaintiffs oppose the Motion. Defendants have filed a Reply to the Opposition, and Plaintiff has, with leave of Court, filed a Sur-Reply. For the reasons set forth below, the Motion is denied in part and granted in part.

         Facts and Background

         Plaintiff's Complaint alleges the following:[1]

         The Revolution FMO, LLC, is a California limited liability company with its principal place of business in Nevada. The Revolution is engaged in the business of facilitating and developing support systems for insurance licensed agents in connection with the sale of insurance products, predominately Fixed Indexed Annuities. Defendant Marvin Mitchell, a licensed insurance agent, provides financial advice to clients regarding investments.

         The Revolution maintains a database containing documents regarding proprietary business development methodologies that are unique to The Revolution and only accessible by duly authorized agents of The Revolution. The database is password protected. Only employees, agents, and staff that have signed confidentiality and nondisclosure agreements are provided access to the database. The Revolution's information technology department maintains a record of access to its proprietary documents. These access records include the account used to access the database, when the materials were accessed, and whether materials were viewed and/or downloaded. The database may be up Dated: various times and is accessible to agents and their staff at any time.

         The Revolution's business development methodologies are the result of years of work and “constitute the DNA of The Revolution's business.” Agents who use The Revolution's system have experienced increased business revenue. The Revolution would be irreparably damaged if these business development methodologies and proprietary policies and procedures were to be obtained by their competitors.

         Certain forms and literary works incorporated in The Revolution's document database are the subject of Copyright Registration No. TXu-1-865-939, issued on May 1, 2013, and Copyright Registration No. TXu-1-875-708, issued on July 24, 2013. The Revolution is the exclusive licensee of Copyright Registration No. TXu-1-865- 939 and TXu-1-875-708, and Copyright Registration No. TXu-1-875-708, issued on July 24, 2013. Any copyrightable materials contained in the database that are not the subject of The Revolution's license were made as “work for hire” by employees of The Revolution and are therefore owned by The Revolution under 17 U.S.C. § 101.

         All potential The Revolution agents are required to sign a nondisclosure agreement before being provided access to The Revolution's proprietary information. Mitchell signed such a nondisclosure agreement when he first met with The Revolution to discuss a potential business relationship. When Mitchell subsequently joined The Revolution as an independent contractor on January 27, 2015, his contract with The Revolution, entitled “Agent Affiliation and Licensing Agreement” (“the Agreement”) included a confidentiality and nondisclosure provision. Pursuant to the terms of the contract, Mitchell acknowledged that he would receive access to “trade secrets, proprietary and confidential information … including, but not limited to … marketing data, client and or agent prospect lists, marketing, training, motivational material, trade secrets, and other confidential information unique to [The Revolution's] business.” Mitchell agreed that he would not “at any time post affiliation with [The Revolution] use, reveal, or divulge any trade secrets, marketing methods, material, training material, seminars, or other confidential information or information generated by or for [The Revolution].” Mitchell further agreed that “any actual or threatened breach of these terms” would cause “immediate and irreparable harm and that money damages will not be adequate to compensate [The Revolution] or to protect and preserve the status quo.” Mitchell consented to:

“[T]he issuance of a temporary restraining order or preliminary or permanent injunction ordering: that Agent immediately return to [The Revolution] all records whether original, duplicated, computerized, handwritten, or in any other form whatsoever, and that Agent be enjoined and thereby restrained from using or disclosing any information contained in such records.”

         On April 14, 2016, Mitchell signed a nearly identical, updated agreement with The Revolution that contained the same confidentiality and indemnification provisions.

         On May 1, 2017, Mitchell published a book titled “Protecting your Retirement Nest Egg: What The Wall Street Brokers & Bankers Don't Want You to Know, ” which is currently available for purchase. The book “reveals strategies” relating to retirement planning, which Mitchell learned from The Revolution. The book incorporates portions of The Revolution's literary works, which are the subject of Copyright Registrations No. Txu-1-865-939 and TXu-1-875-708. Where text has been modified from the registered works, the modifications are minor. Mitchell's book is a copy, or at least derivative, of The Revolution's registered work.

         After publishing his book, Mitchell received a cease and desist letter and The Revolution immediately worked to remove access to the infringing work.

         While the Parties were corresponding regarding the infringement, on June 5 and 6, Mitchell attended a recruiting event with The Revolution's competitor Advisors Excel.

         On June 22, 2017, The Revolution's records indicate that Mitchell's assistant, Arlene Hudson, who had also signed a confidentiality and nondisclosure agreement prior to receiving access to the database, downloaded The Revolution's entire database of proprietary material, containing The Revolution's secret business development methodologies as well as secret policies and procedures designed to reduce risk and improve client service. The records indicate that over the course of eight minutes on June 22, 2017, from 6:58 P.M. to 7:06 P.M., Hudson logged into The Revolution's database and downloaded a copy of the one hundred and thirty-four files comprising the entire database, in the order the documents appeared. To the best of The Revolution's knowledge, Mitchell and his staff never downloaded a complete copy of the database before June 22, 2017.

         On July 20, 2017, Mitchell informed The Revolution that he would be transferring to The Revolution's competitor, Advisors Excel, and that he was terminating the Agreement. Pursuant to the terms of the Agreement, Mitchell's license to utilize The Revolution's material was immediately revoked, and his access to The Revolution's database denied. Mitchell also signed and provided to The Revolution an Agent Transfer Acknowledgement form representing that all of The Revolution's intellectual property materials had been returned. However, The Revolution has not received any returned materials to date. Additionally, although the Agent Transfer Acknowledgement form requires the agent's new affiliated firm (“Receiving FMO”) to sign the same document, verifying that the “Receiving FMO” will not accept proprietary materials from the agent, Advisors Excel did not sign Mitchell's document, nor Excel nor did they submit the form directly from them to The Revolution's licensing department as ...

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