Background
Guild Mortgage Company and CrossCountry Mortgage (CCM) are rival nationwide residential mortgage lenders. Guild alleged that beginning in January 2020, CCM conspired with three key employees at Guild’s Kirkland, Washington branch — including the branch manager — to systematically dismantle the branch from within over 18 months. While still on Guild’s payroll, the employees allegedly recruited Guild colleagues to defect to CCM, diverted Guild’s existing customers, converted Guild’s active loan pipeline, and accessed Guild’s computer systems without authorization to copy confidential borrower data and employee compensation records. The result was the loss of virtually the entire branch.
Guild had already won an arbitration against the three employees individually, with the branch manager ordered to pay over $10.6 million. This lawsuit targeted CCM itself for aiding and abetting the scheme. The trial court sustained CCM’s demurrers through three rounds, ultimately dismissing the case on three grounds: the employees owed no actionable tort duty to Guild, California’s Uniform Trade Secrets Act (CUTSA) displaced Guild’s interference and computer fraud claims, and the unfair competition claim failed without a viable predicate.
The Court’s Holding
The Fourth District Court of Appeal reversed on all three issues, directing the trial court to allow Guild’s claims to proceed.
Employee duty of loyalty. The court held that every employee — not just officers — owes their employer a common law tort duty of loyalty while employed, grounded in Labor Code section 2863 and cases like Huong Que, Inc. v. Luu and Fowler v. Varian Associates. The court declined to follow AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018), which had suggested otherwise, finding that AMN “ignored the key authorities on employee loyalty.” Because the employees owed these duties, CCM could be liable for aiding and abetting their breach.
Fiduciary duty. The branch manager owed a fiduciary duty as a matter of law. The test is not job title but whether the employee participated in management and was trusted with discretionary authority — a “low threshold” that the branch manager clearly met.
CUTSA displacement. The court applied a “gravamen” test and held that CUTSA did not displace Guild’s interference claims because the core of the case was a coordinated scheme to sabotage a branch — not misappropriation of trade secrets. The data theft aided the scheme but was not the scheme itself. In a holding of first impression for published California authority, the court also ruled that CUTSA does not displace civil claims under the California Computer Data Access and Fraud Act (Penal Code section 502), reasoning that the two statutes target categorically different harms and were enacted simultaneously.
Key Takeaways
- All California employees owe their employer a common law duty of loyalty while employed — not just officers or executives. The court expressly rejected the contrary reasoning in AMN Healthcare.
- Whether an employee owes a fiduciary duty turns on whether they participated in management and held discretionary authority, not on their job title.
- CUTSA does not displace tort claims whose “gravamen” is a scheme to sabotage a business, even if confidential information was also taken as part of the scheme.
- In a first-impression published holding, the court ruled CUTSA does not displace civil claims under the Computer Data Access and Fraud Act (Penal Code § 502).
- A rival company that knowingly assists employees in breaching their duties can face aiding-and-abetting liability.
Why It Matters
This decision is a significant win for employers facing coordinated employee defection schemes. By reaffirming that all employees — not just senior officers — owe a tort-enforceable duty of loyalty, the court gives employers a broader set of claims against both departing workers and the competitors who recruit them. The express rejection of AMN Healthcare resolves uncertainty that had been building in California business litigation.
The CUTSA displacement holdings are equally consequential. Employers can now pursue interference and computer fraud claims alongside trade secret claims without fear that CUTSA preempts the entire lawsuit. The first-impression ruling on Penal Code section 502 is especially important for cases involving unauthorized access to computer systems, which are increasingly common in employee-departure scenarios across technology, finance, and other data-driven industries.