The Inbox - There Will Be Damages

Last week, a Texas state court issued a whopping judgment in favor of a former employee of FE Services LLC. The case stemmed from an employment agreement between the founder of FE Services, doing business as Foxxe Energy, and a friend he enlisted to join the company. Founder James Stewart induced his friend, Marc Jan Levesconte, to work for the company with the promise of a significant cut of any future sale. Levesconte was terminated on the eve of the company’s $52 million acquisition by Ensign Services LLC. According to Law 360, Levesconte brought a breach of contract suit two years ago. Now, the court has decided that Ensign and Stewart owe him $16 million. You may recall the famous scene from There Will Be Blood where energy magnate Daniel Plainview taunts Eli with the milkshake metaphor (“I drink your milkshake!) and revels in his dominance of the oil-rich land. If Stewart drank Levesconte's milkshake, his (presumably) former friend Levesconte is now sipping from his own end of the straw.

As the term implies, a “trade secret” normally describes information kept confidential to prevent unfair competitive advantage. Is it possible that information housed on social media could also be protected as a trade secret? A California federal court will hold a trial on this novel question in Cellular Accessories For Less, Inc. v. Trinitas, LLC, No. CV 12-06736 DDP. The National Law Review discusses the suit in which Cellular Accessories sued a former employee, David Oakes, alleging breach of contract. Oakes, upon his departure, emailed himself a list of business contacts and other supporting information, and ultimately founded his own competing business, named Trinitas. He  continued to maintain his same business contacts on his LinkedIn profile. During his employment with Cellular Accessories, however, Oakes had signed an employment agreement and a statement of confidentiality which forbade the transfer of proprietary information, including the company's customer base. The confidentiality agreement further forbade the use or disclosure of such proprietary information. The company sued him for trade secret misappropriation under the California Uniform Trade Secrets Act and for breach of contract. Whether information is a trade secret under California law depends on whether the information is easily ascertained or otherwise available to the public. In this case, the court said, the parties hadn't given it enough detail to decide whether Oakes's contact list was actually available to everyone else who contacted him, and whether Oakes had control over the public availability of that list. Therefore, the court couldn't resolve the trade secrets issue on summary judgment (although it could resolve the breach of contract claim because Cellular Accessories had not established a loss). Perhaps equally interesting is the question of who owns the LinkedIn account. Can a trade secret belonging to Cellular Accessories exist in a public form essentially owned by the employee? We will keep you updated as the drama unfolds.

We have noted questionable tactics employed by government agencies when dealing with whistleblowers, and it appears the FBI has some explaining to do, at least to Senator Chuck Grassley of the Senate Judiciary Committee. A number of whistleblowers have approached Senator Grassley’s office with accounts of retaliation in the form of “Loss of Effectiveness” orders. When some whistleblowers have alleged wrongdoing within the agency, their managers have answered with these orders, essentially depriving employees of the right to answer the allegations or appeal any disciplinary action. According to Political News, Senator Grassley sent a detailed letter to FBI Director, James Comey, demanding explanation, and received a minimalist response with many of Grassley’s questions left unanswered.

• The Inbox