E-mailing Work Documents to Your Personal Account Looks Fishy, Says NY Appeals Court in New Non-Compete Opinion
Non-lawyers often wonder why folks in our profession spend so much time and money poring over the documents and e-mails each side usually has to produce in litigation. Sometimes, these document reviews are the legal equivalent of looking for the proverbial needle in a haystack.
And sometimes, you find the proverbial needle – or needles. And when you do, and the success or failure of the case turns on that e-mail, or set of e-mails, then the time and money spent on the search for those things turns out to have been a wise and necessary investment.
Take the case of TBA Global, LLC v. Proscenium Events, LLC. TBA is an event planning company that “produces live event programs and marketing presentations for companies and branded products.” In the course of its work, it hired three senior employees – Santoro, Shearon, and Cavanaugh. While the exact terms of their agreements differ from each other, all three signed non-compete agreements with TBA that provided that if they ever left the company, they would not “directly or indirectly, communicate with clients or prospective clients” of the company for a period of time (one year for two of the executives, and two years for the other).
Because we’re writing about this case, regular readers of this space can guess what happened next. Santoro, Shearon, and Cavanaugh left TBA and immediately set up their own event planning company, Proscenium, to compete with it. TBA sued the individuals and Proscenium in New York State court, alleging, among other things, that the individuals were violating their non-solicitation agreements by contacting TBA’s clients and trying to lure them to Proscenium.
Santoro, Shearon, and Cavanaugh moved for summary judgment, arguing that agreements were unenforceable as a matter of law. The trial court agreed with them. In doing so, the court explained that under New York law, a non-compete is reasonable only if it: 1) is no greater than needed to protect an employer’s legitimate interest; 2) doesn’t impose undue hardship on the employee; and 3) doesn’t injure the public. TBA’s non-competes with the individuals failed the “no greater than needed” prong of the test. To meet it, TBA would have had to show that Santoro, Shearon, and Cavanaugh were providing services that were “unique or extraordinary,” or that that they had used “confidential customer lists or trade secrets to compete.” The individuals weren’t providing TBA with “unique or extraordinary” services, so the trial court looked to TBA’s evidence that they were using confidential information to compete. The trial court doesn’t specifically say what evidence it reviewed, but whatever it was didn’t satisfy it: it wrote only that TBA pointed to “broad and unsupported contentions” that the individuals were using TBA’s confidential info or customer lists. With TBA unable to meet the test, the court held that its non-compete agreements with the individuals were unenforceable.
Not so fast, said the New York Appellate Division on Tuesday, when it reversed the trial court’s decision. And here’s where the e-mails come in: they turned the case in TBA’s favor. Applying the same standard the trial court used to the facts before it, the Appellate Division saw not “broad and unsupported contentions” that the individual executives had misappropriated confidential information and customer lists, it saw “evidence that Shearon regularly forwarded to his personal email account confidential and proprietary TBA pricing and customer information,” including internal revenue reports, pitch materials and proprietary documents about TBA’s work. This meant that “at a minimum, there are issues of fact” surrounding whether the executives breached the non-competes. So, the litigation between TBA, Proscenium, and the executives will move forward, back in the trial court.
A little something to bear in mind next time you forward work materials to your personal e-mail account (not that you would do so, but hypothetically, of course): someday, some lawyer somewhere might find them, and their discovery might be significant.