Fourth Circuit: Confidentiality Agreements Are Sufficient to Plead ‘Reasonable Measures’ Under DTSA

According to the Fourth Circuit, the company plausibly alleged that the proprietary software was covered by a confidentiality provision, which was a reasonable measure intended to keep it secret to survive the pleading stage.

Samuel Sherbrooke Corporate, LTD was incorporated in 2018 as a captive insurance company that insures its “captive” affiliates, which include nursing homes. Sherbrooke only has three shareholders: Samuel Goldner (majority shareholder), Gabriel Mayer (minority shareholder), and Joe Queen (minority shareholder). Sherbrooke alleged that Mayer and Queen had complete managerial control over Sherbrooke.

Goldner hired Beau Walker as Sherbrooke’s chief technology officer in 2022. Walker designed, created, and maintained proprietary software for Sherbrooke’s use. The proprietary software allowed Sherbrooke to use medical records to project and predict insurance risk-pricing for Sherbrooke’s nursing home clients.

Mayer, Queen, and Walker all executed employment contracts that contained a confidentiality provision prohibiting employees from disclosing, using, or exploiting confidential information for any purpose other than for Sherbrooke’s benefit. Additionally, the employment contracts also contained an inventions provision that assigned Sherbrooke ownership of any inventions or developments created during employment that relate to Sherbrooke’s business.

According to the complaint, Mayer and Queen formed a competing insurance company that also provided insurance to nursing homes. Shortly after its formation, Walker joined Mayer and Queen’s competing company. The three allegedly used Sherbrooke’s propriety software to operate the new insurance company in direct competition with Sherbrooke.

As a result, Sherbrooke and Goldner (collectively, “Sherbrooke”) sued Mayer, Queen, Walker, and their competing company (collectively, “the defendants”) for misappropriation of trade secrets under the DTSA, as well as several state law claims for corporate malfeasance. The defendants moved for judgment on the pleadings under Rule 12(c). The Eastern District of North Carolina granted judgment on the pleadings and dismissed the DTSA claim, concluding that Sherbrooke failed to plausibly allege that it took reasonable measures to protect the secrecy of the proprietary software. Sherbrooke appealed to the Fourth Circuit.

Case Information

Samuel Sherbrooke Corporate, LTD v. Mayer et al., No. 24-2173, 2025 WL 3210813 (4th Cir. Nov. 18, 2025)

Plaintiffs: Samuel Sherbrooke Corporate LTD; Samuel Goldner

Defendants: Gabriel Mayer; Beau Walker; Joseph Matthew Queen; Helios Risk Solutions, LLC

Judge: Judge Stephanie Thacker

Analysis and Outcome

Applying de novo review, the Fourth Circuit reversed the district court’s dismissal of the DTSA claim. To begin, the court explained that information is a trade secret under the DTSA if its owner has taken “reasonable measures” to keep the information secret.

Sherbrooke argued that it had sufficiently pleaded the secrecy element because it pled that the defendants were required to sign the employment contract, which included the confidentiality and inventions provisions. Sherbrooke contended that, under the employment contract, the proprietary software was treated as confidential information. Thus, Sherbrooke asserted that the complaint adequately alleged that the proprietary software was Sherbrooke’s confidential property pursuant to the employment contract, which was a reasonable measure intended to keep it secret. The Fourth Circuit agreed.

The Fourth Circuit rejected the defendants’ arguments to the contrary. First, the defendants argued that the complaint failed to connect the proprietary software to the confidentiality provision, because it failed to allege whether the proprietary software used open-source code. The court rejected this argument, reasoning that Sherbrooke did not need to disprove a potential defense to survive the pleadings stage; Sherbrooke only had to plausibly allege that the propriety software was covered by the confidentiality provision, which was a reasonable measure intended to keep information secret.

Second, the court rejected the defendants’ argument that a confidentiality provision alone is not sufficient, as a matter of law, to demonstrate reasonable measures to maintain secrecy. The court relied on a Ninth Circuit decision to conclude that, at the pleadings stage, allegations that an employee signed a confidentiality provision is — on its own — sufficient to plead “reasonable measures” to keep information secret under the DTSA. The court recognized that plaintiffs often allege that they did more than simply require a signed confidentiality agreement to maintain secrecy, but the court expressly declined to require the plaintiffs to plead more to survive the Rule 12 stage.

Finally, the court concluded that Sherbrooke plausibly alleged that the defendants misappropriated the proprietary software. The court reasoned that when all the factual allegations are considered together — Walker created the proprietary software for Sherbrooke, the three individual defendants were Sherbrooke insiders, the defendants formed a competing insurance company, and then the defendants allegedly actively used the proprietary software for their own competing company — the complaint plausibly alleges that the defendants misappropriated the proprietary software. As such, the court reversed the order dismissing the DTSA claim and remanded to the district court for further proceedings.