Trade Secret Claim Costs Company Over $17 Million
A case that illustrates how NOT to deal with company secrets.
An RV sales manager – we’ll call him Trealoff because that’s his name – was hired by Forest River, an RV company. Forest River was apparently on the cheap side, because it didn’t even provide Trealoff with a computer, forcing him to use his own laptop. According to Trealoff, the company also did not provide him with a promised raise, so he went looking for another job.
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When the company got suspicious that Trealoff was looking for greener pastures, it was decided that Trealoff really should not be permitted to leave with all the data residing on his personal laptop computer, gained while he was an employee of Forest River. Reasoning that the data was, after all, the property and trade secrets of Forest River, the president of the company, according to the case, decided that the best course of action was to temporarily steal Trealoff’s laptop and erase the hard drive. Trealoff took exception when his erased hard drive was returned to him, especially given that it contained years of contact information that he acquired independent of Forest River, so he sued.
The San Bernardino jury took exception to the conduct as well, and in addition to awarding Trealoff damages for unpaid commissions, the jurors tacked on punitive damages of $7 million against the RV company and $8 million against the president. (Personally, despite the egregious conduct, I would have found Trealoff contributorily negligent for not backing up the data in the first place.)
Lessons for all businesses: First, get over this concept of trade secrets unless you really do have trade secrets. In many instances, when a company calls me ready to go to the mattresses over alleged trade secrets, I find that the information is not at all secret. For instance, I once represented a company that was being sued by one of their salesperson’s former employers, because the salesperson had contacted their customers. There was no non-solicitation or non-disclosure agreement; the entire basis for the suit was that the customer list was a trade secret. I went on-line and found that the company’s entire customer list was proudly displayed on its website. Case dismissed.
Second, proceed with caution when pursuing trade secret claims. Many companies file groundless lawsuits in an attempt to frustrate a former employee’s efforts to work for a competitor. They reason that even if the action ultimately fails, it may be sufficient to persuade the competitor that the employee is just too hot to handle. If the company decides to call your bluff and hires a firm such as ours, then you will likely be taken to the woodshed, as was Forest River.
Third, provide your employees with computers so that the information contained thereon remains yours.
