Hurry Family Revocable Tr. v. Frankel

• Decision Date: 03 January 2023
• Docket Number: 8:18-cv-2869-CEH-CPT
• Parties: THE HURRY FAMILY REVOCABLE TRUST, SCOTTSDALE CAPITAL ADVISORS CORPORATION and ALPINE SECURITIES CORPORATION, Plaintiffs, v. CHRISTOPHER FRANKEL, Defendant.
• Court: U.S. District Court — Middle District of Florida

THE HURRY FAMILY REVOCABLE TRUST, SCOTTSDALE CAPITAL ADVISORS CORPORATION and ALPINE SECURITIES CORPORATION, Plaintiffs,
v.
CHRISTOPHER FRANKEL, Defendant.

No. 8:18-cv-2869-CEH-CPT

United States District Court, M.D. Florida, Tampa Division

January 3, 2023

ORDER

CHARLENE EDWARDS HONEYWELL, UNITED STATES DISTRICT JUDGE

This matter comes before the Court upon Plaintiffs' Motion for Entry of a Permanent Injunction and to Amend the Judgment in Conformity Therewith and Incorporated Memorandum of Law of Plaintiffs Hurry Family Revocable Trust, Scottsdale Capital Advisors Corporation, and Alpine Securities Corporation [Doc. 325], Defendant Christopher Frankel's Opposition [Doc. 330], Plaintiffs' Reply [Doc. 340], the arguments of the paries on February 25, 2022, and their supplemental briefs [Docs. 386, 387, 396]. Plaintiffs request a permanent injunction prohibiting Defendant from using or disclosing any of their confidential information or trade secrets, among other things. Having considered the motion and being fully advised in the premises, the Court will deny Plaintiffs' Motion for Entry of a Permanent Injunction and to

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Amend the Judgment in Conformity Therewith and Incorporated Memorandum of Law.

Also before the Court are Defendant's Motion for Judicial Notice of FINRA's Expulsion of Alpine [Doc. 393] and Motion for Judicial Notice [Doc. 404], as well as Plaintiffs' responses in opposition [Docs. 399, 407]. Defendant asks the Court to take judicial notice of various aspects of filings in a FINRA proceeding involving Alpine Securities Corporation (“Alpine”). Upon review and consideration, Defendant's Motion for Judicial Notice of FINRA's Expulsion of Alpine [Doc. 393] is granted, while Motion for Judicial Notice [Doc. 404] is granted-in-part and denied-in-part.

I. BACKGROUND

In this action for breach of contract and misappropriation of trade secrets, Plaintiffs Scottsdale Capital Advisors (“Scottsdale”), Alpine, and the Hurry Family Revocable Trust requested injunctive relief as to all four claims against Defendant Christopher Frankel. [Doc. 61¶¶ 38, 45, 54, 55, 64]. Scottsdale and Alpine are each involved in the broker-dealer business. Id. ¶ 10. Scottsdale is a full-service broker-dealer focused on serving the OTC (over the counter) securities market. Id. Alpine is a registered broker-dealer that is an industry leader for clearing OTC stock. Id. Scottsdale and Alpine were previously indirectly owned and/or controlled by the Hurry Family Revocable Trust. Id. Defendant served as Alpine's CEO from approximately July 2015 through July 2018, and then as a consultant from July 2018 through September 2018. Id. ¶ 17.

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As to Count I for breach of contract, Plaintiffs requested injunctive relief pursuant to the written Non-Disclosure and Confidentiality Agreement (the “Original NDA”) entered into by Defendant in June 2015, when Plaintiffs considered hiring him to help run their broker-dealer business and engaged in discussions with him about their businesses. Id. ¶¶ 11-12, 16, 38. The breach of contract claim in Count II sought injunctive relief pursuant to an Employee Nondisclosure & Computer Use Agreement (“the Employee NDA”), which Defendant entered into after he was hired by Plaintiffs and “which superseded the Original NDA with regard to protecting Alpine and Scottsdale's numerous trade secrets and confidential information.” Id. ¶¶ 17-18, 21-23, 45. In Count III, Plaintiffs asserted a claim for violation of the Defend Trade Secrets Act and alleged that they are entitled to an injunction to prevent the actual or threatened misappropriation of their trade secrets and/or requiring affirmative actions to protect the trade secrets. Id. ¶ 54. Plaintiffs also requested injunctive relief for the Violation of the Florida Uniform Trade Secrets Act claim in Count IV. Id. ¶ 64.

At trial, Plaintiffs provided evidence that prior to and after Defendant's last day as Alpine's CEO, he forwarded their information to his personal email addresses on multiple occasions. [Doc. 316 at 100:6-101:7, 103:16-104:2, 88:13-89:2, 107:25-108:11, 110:4-111:6, 115:23-116:20]. The information he forwarded included a list of Alpine and Scottsdale's top 50 clients with revenue numbers [Doc. 369-12], a trade blotter [Docs. 369-16, 369-17], a draft Employment Agreement [Doc. 369-10], an Alpine Secured Revolving Credit Facility Term Sheet [Doc. 369-9], and three emails

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attaching, among other things, Alpine's Written Supervisory Procedures, Alpine's Confidential 2016 Financial Statements with Reports, a document with the number and value of accounts for both Scottsdale and Alpine, Alpine's bylaws, the Hurry Trust's Certificate of Trust, and the First Amendment to the Hurry Trust [Docs. 3691 through 7, 369-8, 369-19]. In June 2019, Defendant joined Vision Financial Markets, LLC, as VP/Managing Director of Corporate Services Group and Correspondent Services. [Doc. 316 at 87:3-10].

After a week-long trial, the jury determined that Defendant breached his contracts with Plaintiffs, but Plaintiffs suffered no actual damage from Defendant's breach. [Doc. 302 at pp. 1-4]. The jury also found that Defendant misappropriated Plaintiffs' trade secrets and was unjustly enriched by doing so. Id. at pp. 4-5. A judgment was therefore entered in Plaintiffs' favor and against Defendant as to the claim for misappropriation of trade secrets. [Doc. 304].

Plaintiffs now seek a permanent injunction to enjoin Defendant from engaging in further unauthorized use or disclosure of their confidential information and trade secrets. [Doc. 325]. They specifically request an injunction:

(a) Finding, as a matter of law, that the following are Alpine's and Scottsdale's trade secrets

a. The top 50 customer list with revenue information;

b. The trade blotter;

c. Alpine's pricing information;

d. Scottsdale's pricing information;

e. Alpine's confidential financial statements;

f. Alpine's Written Supervisory Procedures; and

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(b) Prohibiting [Defendant] from using or disclosing any Confidential Information, as that term is defined in the NDA and the Employee NDA;

(c) Requiring [Defendant] to return in native format and then destroy all Confidential Information, as that term is defined in the NDA and the Employee NDA, still in his possession, custody, or control or in the possession, custody, or control of his attorneys;

(d) Prohibiting [Defendant] from using or disclosing any trade secrets identified in paragraph (a);

(e) Requiring [Defendant] to destroy any copies of any trade secrets identified in paragraph (a) that are in his possession, custody, or control or in the possession, custody, or control of his attorneys and/or agents;

(f) On or before the 30th day from the entry of this Order, requiring [Defendant] to serve on Plaintiffs a written report, under oath, setting forth in detail the steps taken to identify and destroy the Confidential Information and trade secrets still in his possession, custody, or control or in the possession, custody, or control of his attorneys and/or agents;

(g) On or before the 30th day from the entry of this Order, requiring [Defendant] to serve on Plaintiffs a written report, under oath, identifying each person to whom he provided any Confidential Information or trade secrets. The written report must also include the following for each person identified:

a. a description of all Confidential Information or trade secrets disclosed,

b. the date(s) on which he disclosed any Confidential Information or trade secrets,

c. the manner in which he disclosed the Confidential Information or trade secrets (i.e. via email, hand delivery, instant message, etc.)

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Id. at pp. 23-25. Plaintiffs argue that they have a right to injunctive relief under Florida and federal law for Defendant's misappropriation and under Arizona law for his breach of the agreements. Id. at pp. 9-12. They further argue that they are entitled to relief as the four factors considered in granting a permanent injunction weigh in their favor. Id. at pp. 12-23.

Defendant has presented various arguments in response. First, he argues that Rule 13804 of the Financial Industry Regulatory Authority (FINRA) gives FINRA exclusive jurisdiction to issue permanent injunctive relief involving its members, including Plaintiffs. [Doc. 330 at pp. 3-4]. He argues that Plaintiffs must show success on the merits, which they cannot do because the jury did not determine what information was trade secrets or confidential and because the jury returned a verdict in his favor as to the contract claims. Id. at pp. 4-9. Additionally, Defendant argues that Plaintiffs cannot establish irreparable harm as the jury found that Plaintiffs suffered no damages and their delay in seeking an injunction refutes their claim of irreparable harm. Id. at pp. 9-16. Defendant also asserts that Plaintiffs did not raise for trial issues as to whether he had retained any of their trade secrets or confidential information and did not obtain jury determinations on these issues of fact, barring them from seeking injunctive relief on these issues. Id. at p. 16-19. Additionally, Defendant argues that because these issues were not previously raised, awarding injunctive relief on them would violate his due process rights. Id.

Plaintiffs filed a reply addressing the Defendant's arguments. [Doc. 340]. They contend that FINRA cannot divest the Court of its authority to enter an injunction

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and that Defendant's claim is not supported by FINRA rules or the cases cited in his response. Id. at pp. 6-7. As to the claim that they cannot establish success on the merits, Plaintiffs point out that they obtained a verdict on the misappropriation claim and the jury determined that Defendant breached the contracts at issue. Id. at pp. 1-2. They further argue that entry of the injunction is consistent with...