Real estate giant CBRE has filed a massive theft of trade secrets lawsuit against former longtime broker Richard Rizika. In its complaint filed in the United States District Court for the Central District of California, CBRE details a shocking, intentional, pre-meditated conspiracy to steal nearly 500,000 company documents and files. Whether or not the documents at issue are ultimately proven to be trade secrets is not yet clear. But we already know this much: Whoever this Richard Rizika guy is— He sure is an idiot and he’s got one hell of a problem on his hands. Normally, I’m not a fan of CBRE. The company uses egregious and unenforceable non-compete agreements throughout the country (particularly in Florida). But it appears that CBRE is on the right side of this one. Let’s take a look.
Rizika’s History with CBRE
Rizika started working for one of CBRE’s predecessor companies in 1986. He spent more than 30 years in the organization. At the time of his resignation, Rizika was Vice Chairman of Retail Services for South Bay Los Angeles. Over the course of his career at CBRE, Rizika built a successful sales team, which included his colleagues Mitchell Hernandez and Alexander Saks, among others.
Sometime in May 2017, Rizika and certain of his team members began making plans to leave CBRE and launch a competing company. They discussed possible company names and entity formation and generally engaged in some market research. To be clear: Preparing to launch a competing company – without more – is not unlawful or tortious. If that was all Rizika and co. had done, there wouldn’t be any basis for a lawsuit. But there’s much more.
Rizika’s Departure and the Plot to Steal Everything
In January 2018, Rizika and Hernandez were ready to launch their new company, Beta Retail. According to the Complaint, the Defendants used CBRE information and databases to generate various analytics and market reports. And now for the kicker: From January 2018 through their resignation in late February, the Defendants allegedly downloaded nearly half a million files from CBRE’s password-protected Box.com account. In fact, CBRE alleges that the Defendants had developed a road map of what documents to steal, broken down by where those documents resided on CBRE’s systems.
On February 23, 2018, Rizika, Hernandez and Saks tendered their resignations. That same day, another member of Rizika’s sales team allegedly downloaded an additional 16,500 files from CBRE’s Box.com account. The following day, after resigning, Rizika accessed CBRE’s Box.com account and downloaded additional files, including data related to lease pricing, retail sales data and sales volume data. That same day, Rizika allegedly met with a former colleague Matt Dean and pitched him on a new opportunity with Beta Retail. On February 25, 2018, Dean allegedly downloaded 50 files from CBRE’s Box.com account. Those files included client contact information, leasing information, financial data, and marketing plans. According to CBRE, Dean passed this information off to Rizika.
That same day, CBRE got wind of what was happening. CBRE immediately contacted Rizkia and demanded that he stop soliciting CBRE employees and stop downloading CBRE information. [Pro tip: This is silly. A company of CBRE’s size should be capable of immediately hitting a kill switch and cutting off an ex-employee’s access to shared drives, data, etc.]. On February 26, 2018, several more members of Rizika’s sales team resigned. During an exit interview, at least one of those team members allegedly admitted to improperly downloading company files to use in her new job at Beta Retail! Caught red-handed, she told CBRE personnel what documents she had taken and allowed them to delete those files from her Google drive.
Apparently, sensing that he was completely and utterly screwed, Rizika made a move that was both interesting and hilarious: On February 27, 2018, one of Rizika’s business partners delivered an envelope to CBRE that contained three external hard-drives. The envelope also contained a note that said, “Anything we downloaded has been moved to a drive and returned to you and we agree not to use any CBRE proprietary information.” Brilliant. Now for my two cents:
- Rizika and his co-conspirators are toast. There is more than enough evidence to support a TRO or preliminary injunction. The real question is the scope of that injunction. For starters, the Court is going to order the Defendants to turn over all CBRE documents/materials in their position. The Court is also going to order the Defendants to submit all of their personal electronic devices for a forensic examination. Likewise, the Court is going to order that a third party vendor collect all of the Defendants’ email accounts and cloud-storage platforms (e.g. Google Drive, DropBox etc.). The Court is going to enjoin the Defendants from using any CBRE information. From there, it’s anybody’s guess. This is California and there’s no non-compete agreement at issue. But given the extent of the misappropriation, this may be a case where the Court shuts Beta Retail down and enjoins Rizika and co. from competing for six months to a year.
- On Damages: If the allegations are true, then yes, this case involves a spectacular, intentional, methodical conspiracy to steal trade secrets. But that doesn’t necessarily equate to damages. If CBRE wants to press the case for damages, that will require extensive expert testimony. CBRE will have to prove, e.g., that the Defendants took certain business opportunities that otherwise would have almost certainly gone to CBRE. They will then have to reduce those opportunities to an actual dollar amount. That’s tough sledding.
- Defense Strategy: Let’s map this out: It appears that a TRO or preliminary injunction is imminent. My guess is that the Court shuts Rizika and co. down for at least six months. From a damages standpoint, there’s a good chance that CBRE’s damages are speculative, as noted above. And although punitive damages of 2x actual damages are available under California trade secret law, the threat of punitives is likewise speculative. But there’s clearly substantial attorneys’ fee exposure. CBRE will be entitled to recover its fees under the CUTSA and the relevant contract at issue. The Defendant’s best strategy for mitigating their exposure is to stipulate to an injunction and make a substantial Rule 68 offer of judgment, inclusive of attorneys’ fees and costs. That’s not necessarily a winning play, but it’s the only reasonable play available.
- Other: CBRE has a strong enough case for actual theft of trade secrets that it shouldn’t waste time on unnecessary fluff. If you read CBRE’s complaint, there are allegations about how Rizika is now working with certain CBRE vendors. Nobody cares. Vendor relationships are neither proprietary nor protectable. Stick to the real case here, which is a pretty strong theft of trade secrets claim.