There are limits to California Uniform Trade Secret Act's displacement rule

California courts have long grappled with the scope of the California Uniform Trade Secret Act's (CUTSA) displacement of other civil remedies touching on trade secrets. (Civil Code section 3426.7). Although CUTSA "occupies the field" as to common law trade secret misappropriation claims (K.C. Multimedia, Inc. v. Bank of America Tech. & Operations, Inc. (2009) 171 Cal.App.4th 939, 954), whether CUTSA "preempts" or displaces other claims involving the taking of confidential information is an issue courts recognize as "vexingly oblique." (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 232)

In Guild Mortgage Co., LLC v. Crosscountry Mortgage LLC, published on May 27, 2026, the Court of Appeal for the Fourth Appellate District held the CUTSA did not displace tortious interference claims or a claim for violation of Penal Code section 502 where a nationwide residential mortgage lender allegedly conspired with employees of a rival company to divert customers and convert confidential information before leaving en masse to join the competitor.

Guild Mortgage Co, LLC (Guild) sued Crosscounty Mortgage LLC (CCM) alleging that over 18 months, CCM conspired with several Guild employees to gut the branch by: (1) recruiting colleagues to join CCM, (2) diverting Guild's customers to CCM, and (3) converting Guild's pipeline of active loan applications to CCM. Guild alleged that in furtherance of the conspiracy, CCM and the employees accessed Guild's computer systems and copied valuable confidential information that CCM later used to gain a competitive advantage over Guild.

Guild's initial complaint against CCM asserted causes of action for (1) intentional interference with prospective economic advantage; (2) negligent interference with prospective economic advantage; (3) tortious interference with its employment contracts; (4) violation of Penal Code section 502 (the Comprehensive Computer Data Access and Fraud Act or "CCDAFA") for converting customer information from Guild's computer systems; and (5) unfair competition pursuant to Business & Professions Code section 17200, et seq (UCL). Notably, Guild did not include a claim for misappropriation of trade secrets. CCM demurred on the ground that all five claims were "preempted" by CUTSA, and the trial court sustained the demurrer with leave to amend. Guild amended the complaint to include a claim for aiding and abetting the employees' breach of their duty of loyalty. CCM again demurred, and the trial court again sustained the demurrer to tortious interference claims and the CCDAFA claim on the grounds CUTSA displaced them. The trial court provided Guild leave to amend only as to the aiding and abetting and UCL claims. After the trial court sustained CCM's demurrer to Guild's second amended complaint without leave to amend and entered judgment against Guild, Guild appealed.

The appellate court reversed, holding the conduct alleged in Guild's complaint went "far beyond merely taking and using confidential information." The appellate court found that although "the allegations about rummaging about in, and taking confidential information from, Guild's computer systems are pertinent," and those allegations "may reasonably be said to have been more in aid of the prime objective of appropriating the Kirkland branch's personnel, customers, and business pipeline than the prime objective itself." Applying "the gravamen of the action" test for CUTSA displacement espoused in K.C. Multimedia, supra, the appellate court concluded "the gravamen of the case is not the misappropriation of trade secrets, but a coordinated scheme between CCM and a Guild branch manager to sabotage a Guild branch office by actively working for CCM and competing against Guild while still employed by Guild." (cleaned up) Accordingly, the trial court erred in concluding CUTSA displaced the tortious interference claims.

The appellate court also held CUTSA did not displace Guild's CCDAFA claim. After noting no published California appellate decision addressed the issue, the appellate court examined the legislative history and intent of CCDAFA and held that:

[G]iven the fact that the Legislature chose to expand the degree of protection afforded by Penal Code section 502 by enacting a civil enforcement mechanism for it in the very same month (September 1984) in which it enacted CUTSA, we deem it implausible that the Legislature would have intended the civil remedy it added to one statutory framework to be swallowed up to so great an extent by the other statutory framework.

For California businesses, the Guild decision is a reminder that the scope of potential liability (and protection) in employee raiding and competitive poaching cases extends beyond trade secret law. When a competitor orchestrates a coordinated campaign to sabotage a branch, divert customers, and strip away personnel, the conduct is not merely the taking of confidential information. Victims of this conduct need not force their claims into a trade secret framework and may assert tortious interference and statutory computer fraud claims as independent causes of action. Companies on the other side of such disputes should understand that the absence of a trade secret claim in a competitor's complaint does not foreclose significant civil exposure.

For litigators, the decision provides a practical roadmap for pleading around CUTSA displacement. Plead the full scope of the alleged misconduct (including the broader scheme in which that conduct was merely one component) --not just the taking of confidential information. Where the gravamen of the action is competitive sabotage, employee raiding, or customer diversion, courts applying Guild should be less receptive to displacement arguments. And on the CCDAFA front, Guild breaks new ground as the first published California appellate decision to hold that Penal Code section 502's civil remedy survives CUTSA displacement--a holding rooted in legislative history that is unlikely to be easily distinguished in future cases.