UnIntellectual Property (UnIP): Trade Secret for Contact List

The Superior Court of Connecticut’s conclusions says it best: “To conclude, the plaintiff’s effort to turn the names and contact information input by loan originators into the Loan Manager system, even those who closed loans with COLG, into trade secrets, is akin to the alchemists’ efforts to turn lead into gold.”  Plaintiff, a mortgage originator, sued numerous ex-employees for, among other things, misappropriation of trade secrets in violation of the Connecticut Uniform Trade Secrets Act.  At issue was a contact list, comprised of the names and contact information contained in the Loan Manager database, including clients who had closed loans, family, friends, business and social acquaintances who had not closed loans, and referral sources (e.g. lawyers, accountants, realtors, investment advisors and others).

The Court held that Plaintiff failed to both identify the list as trade secret and maintain its secrecy.  In particular:

1. Plaintiff failed to advise originators that once they input the contact information gathered over the course of their careers, prior to and during their employment with Plaintiff, into Loan Manager, the information became the property of Plaintiff and could not be further disclosed.

2. Plaintiff did not advise or require the originators to destroy or delete the information contained on other media, i.e. rolodexes, note pads, cell phones, home computers, business cards, etc. Indeed, plaintiff assisted at least one defendant with the transfer of her database to her home computer, and many of the Defendants worked from home with access to and storage of the list.

3. Plaintiff’s employee handbook, while identifying and discussing confidential information does not identify the referral, customer or contact information input into Loan Manager as falling within its scope.

4. During marketing events such as an open house, the customers’ completed satisfaction surveys were displayed for guests to review.

5. Customer information was regularly disseminated with paychecks and on funding reports, a practice which continued even after the individual defendants were no longer working for Plaintiff.

6. Plaintiff told Defendants that the Loan Manager system was designed to assist them in ensuring that their customers were “customers for life.” To seal its own coffin, so to speak, Plaintiff even acknowledged that the originators could take the compiled database of contacts with them should they leave its employment.

Ultimately, the Court also found that the information in the list was readily ascertainable by proper means, given the personal and business relationships that exist between the Defendants and the names provided.  Any information related to the rate or term of a loan is generally available in land records. Telephone numbers are readily available on the internet or in telephone books. An individual could be contacted directly by a Defendant for all of the information contained in these lists.  Finally, the name and contact information for the many businesses, professionals and other referral sources included in the lists are readily available to the public at large through a multitude of forums.

Put simply, the Court recognized that the transient nature of any mortgage originator requires that contact information naturally travel with it from place to place.  “The mere act of inputting the information into Loan Manager did not transform the information into COLG property or trade secrets.”
I believe this case does not stand for the proposition that contact lists in the mortgage industry can not be a trade secret under Connecticut law.  The Court offered significant guidance that any such claimant of a trade secret can comply with.  However, it is, nonetheless, and important decision that sheds light on at least one state’s view when it comes to contact lists.
Charter Oak Lending Grp., Inc. v. August, CV054009529, 2013 WL 2923319 (Conn. Super. Ct. May 7, 2013).


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