Luminate loses bid for injunction in Better poaching case

A federal judge has denied Luminate Home Loans' request to bar its former employees from developing a competitor's retail business. 

The Minneapolis-based lender sued Better Home and Finance in December for allegedly poaching leaders of its Neo Home Loans arm and obtaining trade secrets in the process. Attorneys for Luminate sought a temporary restraining order and preliminary injunction, which would have prevented ex-Neo employees from working in competing retail roles at Better. 

Their motion also called on individual defendants to submit their electronic devices for forensic inspection and to return privileged materials. U.S. District Court Chief Justice Cynthia Bashant last week denied Luminate's motion because in its multiple filings, the lender didn't provide sufficient evidence of a likelihood of irreparable harm.

"Individual defendants correctly highlight that 'Luminate fails to cite tangible harm, such as lost clients, market share decline or measurable negative industry impact,'" wrote Bashant.

The sides are disputing the circumstances of Neo's departure from Luminate after it publicly announced last October it was shuttering the division for business reasons. In November, Better revealed it onboarded Neo staff to build the digital lender's distributed retail channel.

A spokesperson for Better said in a statement Tuesday the company is looking forward to moving to dismiss Luminate's "meritless" claims. An attorney for two individual Neo defendants also lauded Bashant's order.

"This is a case, and a motion, that never should have been filed," wrote Jason Murtagh of Buchanan Ingersoll & Rooney, on behalf of two former Neo employees, in a statement.

An attorney for Luminate said the company's case filings depict "strong and compelling evidence" against Better and the two former Neo leaders named. 

"The court deemed that a damages award at trial can adequately compensate for this case rather than requiring an injunction at this time, because the defendants' harm to Luminate was already inflicted," wrote Alexander Rogosa, counsel with Mitchell Sandler, on behalf of Luminate. 

Neo co-creator Daniel Horanyi, in a declaration filed last month, said Neo has always maintained its independence and intellectual property through its lender partnerships. He claimed Luminate CEO Taryn Reuter told him Neo could depart at any time without interference. The sides were allegedly amid negotiations to sell Luminate's mortgage business to Neo when the events in question occurred.

Luminate in its initial complaint said it tracked Neo leaders' work devices and learned they were sharing confidential company information with Better in anticipation of a departure. The company fired Neo's leadership in late October.

Reuter, according to Horanyi, accused Neo leaders of misappropriating the trade secrets, but said he wouldn't sue individuals. The company filed its lawsuit in early December and submitted its TRO request a few weeks later. 

The case remains pending in a California federal court.

The plaintiff firm, which is a subsidiary of Luminate Bank, is seeking combined actual and punitive damages in excess of $60 million. The companies are both billion-dollar originators, each generating over $2 billion in mortgage volume in 2023 according to the latest Home Mortgage Disclosure Act data.