You’re Damned if You Do … Use a Competitor’s Stolen Customer List or Information or other Trade Secrets

Posted: April 28, 2011 in Choosing a Lawyer, Employee Contracts, Hiring and Firing, Lawsuits, Noncompetes, Rogue Employees, Trade Secrets and Proprietary Business Info.

If you hire a new employee from a competitor, you should make damn sure that the employee did not bring any trade secrets or proprietary information from the former employer. Otherwise, you could face significant exposure to your company, especially if others at your company participated in use of the trade secrets (the term “trade secrets” can be broad to include any proprietary business information, including customer lists and customer information).

This is the lesson of the attached case report, People’s Choice Mortgage, Inc. v. Premium Capital Funding d/b/a Topdot Mortgage. In the interest of full disclosure, I was the trial attorney for People’s Choice Mortgage (“PCM”), the prevailing party in the case.

The following is a summary of the case report, which is a public record: PCM employed Mr. Bodden, who turned out to be a dreaded Rogue Employee. Mr. Bodden then went to work for Topdot while still employed at PCM, and kept working for PCM for an additional five weeks. Bodden had access to PCM’s customer information. Because his commission structure was better at Topdot, Bodden used the PCM documents at Topdot to solicit and close loans. The Court concluded that Topdot had constructive knowledge that Bodden was using PCM documents. The case report makes for an interesting read.

The awards themselves against Topdot and Boddon were not large. PCM prevailed against Bodden in the amount of $39,005 ($64,589.20 after interest). PCM prevailed against Topdot for $12,279, which was doubled to $24,558 under Chapter 93A, which became $31,773 with interest. The bigger award was the attorneys’ fees and costs award against Topdot of $88,170.57.

That comes to a total of $184,532 against Topdot and Bodden for their use of PCM’s trade secrets. Not to mention the costs that they incurred on their own attorneys and other legal costs, which could bring the total exposure to a quarter million dollars.

If you have any questions regarding how to protect your trade secrets, what to do if a former employee is using your trade secrets, or how to make sure a new hire is not exposing your company, call me, Adam P. Whitney, at 617.338.7000.

Findings of Fact, Rulings of Law, and Order for Judgment

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