Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 LUMINATE HOME LOANS, INC., Case No. 24-cv-2251-BAS-MSB 12 Plaintiff, ORDER DENYING DEFENDANT 13 v. SYDNEY LYNN’S MOTION TO DISMISS (ECF No. 118) 14 BETTER MORTGAGE CO., et al., 15 Defendants. 16 17 Presently before the Court is a motion to dismiss submitted by Defendant Sydney 18 Lynn (“Lynn”). (ECF No. 118.) For the reasons discussed below, the Court DENIES 19 Lynn’s motion to dismiss. (Id.) 20 I. BACKGROUND 21 Plaintiff is a mortgage loan lender. In 2022, Plaintiff acquired a mortgage division 22 known as NEO Home Loans from a struggling competitor, Celebrity Home Loans LLC 23 (“Celebrity”). (ECF No. 112 ¶¶ 9–10.) Over the next three years, Plaintiff made significant 24 developments to its NEO Division following acquisition—including creating new 25 mortgage offers and training NEO managers. (Id. ¶¶ 14–18.) 26 Lynn was initially a manager at Celebrity, and served as Director of Finance at 27 Luminate after making the transition from Celebrity upon Luminate’s acquisition of NEO 28 in 2022. (Id. ¶ 35.) As a condition of her at-will employment, Lynn reviewed and signed 1 Plaintiff’s policy prohibiting dual employment. (Id. ¶ 43.) In early December 2024, 2 Plaintiff terminated Lynn’s employment upon discovering she was coordinating with a new 3 retail loan company, Defendant Better Mortgage Co. (“Better”), throughout the course of 4 her employment. (Id. ¶¶ 27–31.) Lynn had allegedly breached her obligations to Plaintiff 5 by sharing Plaintiff’s proprietary information with Better, and soliciting Plaintiff’s 6 employees to join Better. (Id. ¶¶ 27–31.) 7 Plaintiff filed a complaint against Lynn on December 23, 2024 in United States 8 District Court, District of Nevada. Luminate Home Loans, Inc. v. Lynn, 24-cv-02403, ECF 9 No. 1 (“Lynn Complaint”). By Order of Hon. Richard F. Boulware of the District Court 10 for Nevada, this action was transferred on June 2, 2025. (24-cv-02403, ECF Doc. No. 8; 11 3:25-cv-02014-BAS-MSB.) (“Lynn Action”). On August 25, 2025, the Parties filed a joint 12 motion seeking to consolidate the Lynn Action with the instant Action. (ECF No. 64.) The 13 Court granted the joint consolidation motion on September 19, 2025. (ECF No. 72.) Lynn 14 then filed a motion to dismiss Plaintiff’s claims. (ECF No. 83.) Plaintiff filed a response. 15 (ECF No. 99.) 16 After the Court granted in part and denied in part Lynn’s motion to dismiss several 17 of Plaintiff’s claims (ECF No. 105), Plaintiff filed an amended complaint asserting six 18 causes of action against Lynn, including: (1) breach of contract (Count 1), (2) promissory 19 estoppel (Count 2), (3) breach of fiduciary duties (Count 3), (4) misappropriation of trade 20 secrets in violation of the Defend Trade Secrets Act, 18 U.S.C. § 1836 (“DTSA”), (4) 21 misappropriation of trade secrets in violation of state law, and (5) tortious interference with 22 contractual relations. (ECF No. 112 ¶¶ 68–134.) 23 The Court finds Lynn’s motion to dismiss (ECF No. 118) appropriate to rule on the 24 papers and without oral argument. See CivLR 7.1.d.1. 25 II. LEGAL STANDARD 26 Rule 12(b)(6) allows a party to move to dismiss based on the legal sufficiency of the 27 claims asserted in the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 28 The court must accept all factual allegations pleaded in the complaint as true and draw all 1 reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. 2 Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a 3 complaint need not contain detailed factual allegations; rather, it must plead “enough facts 4 to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 5 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content 6 that allows the court to draw the reasonable inference that the defendant is liable for the 7 misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 8 U.S. at 556). “Where a complaint pleads facts that are ‘merely consistent with’ a 9 defendant's liability, it ‘stops short of the line between possibility and plausibility of 10 entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557). 11 “[A] plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ 12 requires more than labels and conclusions, and a formulaic recitation of the elements of a 13 cause of action will not do.” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 14 U.S. 265, 286 (1986)). A court need not accept “legal conclusions” as true. Iqbal, 556 U.S. 15 at 678. Although courts accept Plaintiff's allegations as true, it is not proper for the court 16 to assume that “the [plaintiff] can prove facts that it has not alleged or that the defendants 17 have violated the ... law[] in ways that have not been alleged.” Assoc. Gen. Contractors of 18 Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). 19 III. ANALYSIS 20 A. Choice of Law 21 For the same reasons the Court previously provided (ECF No. 105 at 4:4–6:21), the 22 Court finds that California law (rather than Nevada law) governs common law claims in 23 the current action. 24 B. Trade Secret Claims 25 Plaintiff has not modified her complaint regarding trade secret claims (Counts IV 26 and V). (See ECF No. 112 ¶¶ 97–126.) Lynn has not raised any novel grounds for 27 dismissing Plaintiff’s trade secret claims. (See ECF No. 118-1 at 15:24–16:4.) Thus, for 28 the same reasons the Court previously denied Lynn’s motion to dismiss Plaintiff’s trade 1 secret claims (ECF No. 105 at 6:22–11:4), the Court DENIES Lynn’s motion to dismiss. 2 (ECF No. 118.) 3 C. Breach of Contract 4 Under California law, a contract “is an agreement to do or not to do a certain thing.” 5 Cal. Civ. Code § 1549. The elements of a claim for breach of contract are: (1) existence 6 of the contract, (2) Plaintiff's performance or excuse for nonperformance, (3) Defendants’ 7 breach, and, (4) damages to Plaintiff therefrom. Becerra v. Allstate Northbrook Indem. 8 Co., No. 22-CV-00202-BAS-MSB, 2022 WL 2392456, at *3 (S.D. Cal. July 1, 2022) 9 (citing Wall St. Network, Ltd. v. N.Y. Times Co., 164 Cal. App. 4th 1171, 1178 (Cal. Ct. 10 App. 2008)); see also Novalk, LLC v. Kinsale Ins. Co., No. 22-CV-0290-BAS-LR, 2025 11 WL 896458, at *2 (S.D. Cal. Mar. 21, 2025). 12 Here, Plaintiff asserts a breach of contract claim against Lynn for violating the terms 13 of a dual employment policy that Lynn signed at the start of Lynn’s employment with 14 Plaintiff (“Dual Employment Policy”) (ECF No. 112-3). (ECF No. 112 ¶ 43 (citing ECF 15 No. 112-3)). 16 1. Existence of the Contract 17 Lynn moves to dismiss Plaintiff’s breach of contract claim on the basis that the Dual 18 Employment Policy (ECF No. 112-3) is not a valid contract.1 (ECF No. 118-1 at 8:10– 19 9:18.) Lynn bases her dismissal on a provision of Plaintiff’s employee handbook, which 20 states: 21 I understand that neither this handbook nor any other communication by a management representative or other, whether oral or written, is intended in 22 any way to create a contract of employment. I further understand that, 23 unless I have a written employment agreement signed by an authorized Company representative, I am employed “at-will” (to the extent permitted 24 by law) and this handbook does not modify my “at-will” employment 25 status. 26 27 1 For the reasons discussed in this Court’s prior order (ECF No. 105 at 12:3-26), the Court finds 28 1 (See id. (quoting ECF No. 112-3).) Lynn contests that this means the Dual Employment 2 Policy, as a written communication by a management representative, is not a contract. 3 (ECF No. 118-1 at 8:10–9:18.) However, even if accepting that the disclaimer is binding 4 upon Parties (which the Court previously held it was not (ECF No. 105 at 12:3-26)), it only 5 relates to the “at-will” status of Lynn’s employment—not to conditions surrounding dual 6 employment. As such, the employee handbook provision above would be inapplicable to 7 interpreting the Dual Employment Policy. See Parsons v. Bristol Dev. Co., 62 Cal. 2d 861, 8 865 (1965) (“The interpretation of a written instrument, even though it involves what might 9 properly be called questions of fact . . . is essentially a judicial function.”). 10 2. Breach of Dual Employment Policy Terms 11 The Dual Employment Policy requires “its employees to be its employees, unless 12 determined that the employee’s other outside employment . . . does not create a prohibited 13 conflict of interest.” (ECF No. 112-3.) The Dual Employment Policy further prohibits 14 Plaintiff’s employees from “working, in any capacity, for . . . other mortgage lenders . . . 15 or other compan[ies] that would pose a conflict of interest to the business of [Plaintiff].” 16 (Id.) In addition, the Dual Employment Policy requires that all Luminate employees 17 “disclose any and all actual or potential outside employment” to Plaintiff’s human 18 resources manager. (Id. (emphasis added).) 19 Here, Plaintiff has alleged that while employed at Plaintiff, Lynn had created digital 20 files and downloaded Plaintiff’s proprietary data in coordination with Better in order to 21 transfer Plaintiff’s data to Better. (ECF No. 112 ¶¶ 49–51.) As part of these efforts, Lynn 22 participated in calls with Better (id. ¶ 50), provided reports to other Plaintiff employees 23 knowing it would be used by Better (id. ¶ 52), created spreadsheets to facilitate the 24 formation of a new home loans division at Better using Plaintiff’s proprietary information 25 (id. ¶ 55), and downloaded flash drive information with Plaintiff’s proprietary information 26 (e.g., training materials, employee roster and salary lists, business strategies) with the intent 27 of transferring that information to Better (id. ¶ 56)—all while still employed with Plaintiff. 28 Further, Plaintiff alleges that “Better either offered Lynn a job or promised her future 1 employment and compensation while she was still working for [Plaintiff].” (Id. ¶ 28.) 2 Additionally, Lynn was hired by Better immediately after Plaintiff terminated her 3 employment. (Id. ¶ 66.) 4 First, Plaintiff has not suggested that Plaintiff assessed whether Lynn’s work for 5 Better to “create[d] a prohibited conflict of interest” (ECF No. 112-3)—which renders 6 Lynn’s unauthorized work a breach of the plain terms of the Dual Employment Policy. 7 Second, Plaintiff’s allegation that Lynn had received a potential employment offer from 8 Better and failed to disclose that offer another ground for breach of the Dual Employment 9 Policy. (See ECF No. 112-3.) Further, Lynn’s actions resulted in the disclosure of 10 Plaintiff’s proprietary information and in the resignation of several of Plaintiff’s 11 employees, who now work for Better. (ECF No. 112 ¶¶ 63–64.) They also resulted in 12 monetary damages to Plaintiff in the form of wrongful reimbursements. (Id. ¶¶ 93–94.) 13 Thus, construing the evidence in favor of Plaintiff at the motion to dismiss stage, the 14 Court hereby DENIES Lynn’s motion to dismiss Plaintiff’s breach of contract claim. (ECF 15 No. 112.) 16 D. Promissory Estoppel 17 Under the doctrine of promissory estoppel, a “promise which the promisor should 18 reasonably expect to induce action or forbearance on the part of the promisee or a third 19 person and which does induce such action or forbearance is binding if injustice can be 20 avoided only by enforcement of the promise.” Kajima/Ray Wilson v. Los Angeles Cty. 21 Metro. Transp. Auth., 1 P.3d 63, 66 (Cal. 2000). The elements of promissory estoppel are: 22 (1) a clear and unambiguous promise, (2) reliance by the party to whom the promise is 23 made, (3) the reliance is both reasonable and foreseeable, and (4) the party asserting 24 estoppel is injured by his reliance. U.S. Ecology Inc. v. State of California, 28 Cal. Rptr. 25 3d 894, 905 (Cal. Ct. App. 2005). “Under California law, the same allegations that give 26 rise to a breach of contract claim cannot also ‘give rise to a claim for promissory estoppel, 27 as the former [is] predicated on a promise involving bargained-for consideration, while the 28 latter is predicated on a promise predicated on reliance in lieu of such consideration.’ ” 1 JMP Securities LLP v. Altair Nanotechnologies Inc. 880 F.Supp.2d 1029, 1040–41 (N.D. 2 Cal. 2012) (quoting Co-Investor, AG v. FonJax, Inc., C 08-01812 SBA, 2008 WL 4344581, 3 at *3 (N.D. Cal. Sept. 22, 2008) (collecting California cases)). 4 Here, Plaintiff asserts a promissory estoppel claim against Lynn for disclosing 5 Plaintiff’s confidential information and trade secrets to Better, contrary to the terms of the 6 Dual Employment Policy and employee handbook—both of which Plaintiff had signed. 7 (ECF No. 112 ¶¶ 76–86.) Lynn’s motion asserts that Plaintiff’s promissory estoppel claim 8 should be dismissed since Plaintiff’s claim is based on: (1) the same facts as Plaintiff’s 9 breach of contract claim, and/or (2) a company handbook and employee policy that are not 10 legitimate sources of legally actionable promises against a former employee under the 11 doctrine of promissory estoppel. (ECF No. 118-1 at 11:11–12:20.) 12 The Court finds that Plaintiff is precluded from asserting a promissory estoppel 13 claim based on Lynn’s alleged violation of the terms of the Dual Employment Policy, since 14 Plaintiff has asserted a breach of contract action regarding the same. JMP Securities LLP, 15 880 F.Supp.2d at 1040–41. Further, the Court finds that to the extent that Plaintiff asserts 16 a promissory estoppel claim based on Lynn’s alleged violation of the employee handbook’s 17 terms prohibiting violation of Plaintiff’s other employment policies (i.e., a violation of the 18 Dual Employment Policy), Plaintiff’s promissory estoppel claim is precluded for the same 19 reason. Id. 20 However, to the extent that Plaintiff’s promissory estoppel claim against Lynn 21 depends on a breach of the employee handbook terms divorced from a violation of the Dual 22 Employment Policy, the Court finds Plaintiff has sufficiently alleged a claim for 23 promissory estoppel. 24 More specifically, the Court finds that Plaintiff alleges Lynn has contradicted 25 promises Lee made when signing the employee handbook in its amended complaint. For 26 example, Plaintiff claims Lynn’s sharing of Plaintiff’s proprietary information with Better 27 is independently prohibited by § 9.1 of the employee handbook, which states: 28 1 [P]rotection of confidential business information is critical to the success of Luminate Home Loans. Information about the company, its 2 clients or employees should not be divulged to anyone other than 3 persons who have a right to know or are authorized to receive such information. 4 5 (See ECF No. 112 ¶ 78.) 6 Though the employee handbook is not a binding contract, it may constitute an 7 actionable promise under the promissory estoppel doctrine. Blix St. Recs., Inc. v. Cassidy, 8 191 Cal. App. 4th 39, 50 (2010) (citing rule in Drennan v. Star Paving Co., 51 Cal.2d 409, 9 413 (1958)) (“[E]stoppel can preclude a party from denying the existence, validity, or 10 enforceability of what otherwise would not constitute an enforceable contract . . . [when 11 the] party making a promise is reasonably relied upon.”). Here, the Court finds Plaintiff 12 has sufficiently alleged that Plaintiff relied upon Lynn’s promise to safeguard Plaintiff’s 13 proprietary information while employing and providing a salary to Lynn. (ECF No. 112 14 ¶¶ 37, 44–55.) 15 As such, the Court DENIES Lynn’s motion to dismiss Plaintiff’s promissory 16 estoppel claim insofar as it relies upon Lynn’s breach of the terms of the employee 17 handbook. (ECF No. 118.) 18 E. Tortious Interference of Contractual Relations 19 To state a claim for tortious interference of contractual relations, a plaintiff must 20 allege: “(1) the existence of a valid contract between the plaintiff and a third party; (2) the 21 defendant’s knowledge of that contract; (3) the defendant’s intentional acts designed to 22 induce a breach or disruption of the contractual relationship; (4) actual breach or disruption 23 of the contractual relationship; and (5) resulting damage.” Ixchel Pharma, LLC v. Biogen, 24 Inc., 9 Cal.5th 1130, 1141 (2020). 25 In its complaint against Lynn, Plaintiff has alleged that all of Plaintiff’s employees 26 had signed the Dual Employment Policy—which the Court has found to be a valid contract, 27 supra § III.C.1. (ECF No. 112 ¶ 128.) Plaintiff also alleges that Lynn induced Plaintiff’s 28 employees to breach the Dual Employment Policy by coordinating offers for Plaintiff’s | |}employees to meet with Better. (Ud. J] 130-131.) Lynn further involved Plaintiffs high- 2 || level managers to coordinate trips for over 50 of Plaintiff's employees to travel to Dallas 3 |}and New York City; and obtained reimbursements for these trips to Plaintiff. (Ud. 93- 4 ||94.) Additionally, there is no suggestion that Plaintiff's employees had reported their 5 || offers of employment from Better, coordinated by Lynn. 6 For the reasons above, Plaintiffhas adequately alleged Lynn has tortiously interfered 7 || with Plaintiff's non-party employees’ contracts with Plaintiff (i.e., the Dual Employment 8 Policy). More specifically, Plaintiff adequately alleged Lynn induced Plaintiffs non-party 9 ||employees to work in some capacity on behalf of Better and by offering Plaintiff's non- 10 || party employees employment with Better (which those employees do not appear to have 11 |}reported). Additionally, these efforts have resulted in damages to Plaintiff—as several of 12 Plaintiff's employees now work for Better (ECF No. 112 {| 63-64) and Plaintiff paid 13 |}monetary reimbursements for Lynn’s tortious recruitment efforts (id. 93-94). 14 ||Accordingly, the Court finds Lynn’s actions had resulted in an “actual breach or 15 disruption” of Plaintiff's employees’ signed Dual Employment Policies. /xchel Pharma, 16 || LLC, 9 Cal.Sth at 1141. 17 For the reasons above, the Court DENIES Lynn’s motion to dismiss Plaintiffs 18 || claims for tortious interference. (ECF No. 118.) 19 CONCLUSION 20 For the reasons discussed herein, the Court DENIES Lynn’s motion to dismiss 21 || Plaintiff's amended complaint. (ECF No. 118.) 22 Since the Court has denied Lynn’s motion to dismiss (id.), Lynn must now file her 23 || Answer. Accordingly, Defendants will be given two weeks from the date of this Order to 24 || respond to Plaintiff's amended complaint by May 13, 2026. 25 IT IS SO ORDERED. 26 ~ 27 || DATED: April 29, 2026 (yi. Duhark 28 H n. Cynthia Bashant, Chief Judge United States District Court _QO