Mentor Worldwide LLC v. Craigo, D. Colo., No. 1:12-cv-00776-REB-MJW, 4/26/12
Holding: A company fails to get an injunction barring its former employee from working for a competitor based on the employee's alleged misappropriation by sending client lists to her husband five days before she resigned.
Takeaway: The employee's new employer instructs her on which customers to contact, and thus she is not exploiting the trade secrets of her former employer.
By Tamlin H. Bason
• Case Summary: A company fails to get an injunction barring its former employee from working for a competitor based on the employee's alleged misappropriation by sending client lists to her husband five days before she resigned.
• Key Takeaway: The employee's new employer instructs her on which customers to contact, and thus she is not exploiting the trade secrets of her former employer.
There was insufficient evidence to show that a sales representative was using a former employer's customer list during her current sales calls that were done on behalf of her new employer, a direct competitor of her old employer, the U.S. District Court for the District of Colorado held April 26, denying the former employer's motion for a preliminary injunction (Mentor Worldwide LLC v. Craigo, D. Colo., No. 1:12-cv-00776-REB-MJW, 4/26/12).
The court dissolved a temporary restraining order that it had issued three weeks prior after determining that the plaintiff had not demonstrated a likelihood of success on the merits in its misappropriation of trade secrets claim.
The court was not swayed by undisputed evidence that the employee emailed her husband a copy of the plaintiff's customer list just five days before she resigned her sales position with the plaintiff and immediately began her work for a competitor. Those documents have been expunged from the husband's computer, the court said, and there is no evidence that either the husband or the employee retained additional printed copies of the customer list. Accordingly, the court said that the plaintiff could not demonstrate that the employee was using its trade secrets during sales calls for her new employer.
Mentor Worldwide LLC is a Santa Barbara, Calif.-based supplier of aesthetic surgical products, such as silicon breast implants. Kristine Craigo worked as a sales representative for Mentor for 21 years.
Craigo resigned her position on March 12, 2012. She then immediately bean working for Sientra Inc., a company that on March 9 received approval from the Food and Drug Administration to sell silicon gel breast implants.
In the days leading up to her resignation, Craigo emailed her husband three copies of her Mentor customer list. These three emails, dated March 7 and 8, contained Excel spreadsheets detailing customer contact information, and quota information.
Craigo's husband printed at least one copy of the spreadsheets, but he never downloaded the documents onto his own computer. However, the files were automatically stored in the computer's temporary files folder.
Within days of her new position Craigo was contacting former Mentor customers pursuant to her duties with Sientra.
Mentor filed a complaint March 27 alleging that Craigo misappropriated the company's trade secrets, breached her duty of loyalty, interfered with Mentor's prospective business advantage, and breached a confidentiality agreement.
Mentor moved for a temporary restraining order and sought a preliminary injunction preventing Craigo from disclosing Mentor trade secrets, barring her from working with Sientra, and mandating that she return all Mentor property.
The court granted the temporary restraining order on April 6, and set an oral hearing April 20.
A customer list can be a protectable trade secret “ 'when it is the end result of a long process of culling the relevant information from lengthy and diverse sources,' ” the court said, quoting Hertz v. Luzenac Group, 576 F.3d 1103, 91 USPQ2d 1801 (10th Cir. 2009).
Here, the court said that Mentor's lists were protectable to the extent that they contain information beyond data that is publicly available. Specifically, Judge Robert E. Blackburn said “sales histories, buying patterns, pricing arrangements, customer consignment arrangements, and customer preferences, likely are a trade secrets.”
The question was whether Craigo was using that privileged information in her new capacity as a salesperson for Sientra. The court determined that there was no evidence that she was.
Craigo argued that she returned all of Mentor's property. She returned all of the printed copies of the customer list to Mentor, and the files have been deleted from her husband's computer, she said. Accordingly, she said that she is not in possession of any of Mentor's documents.
Mentor alleged, but could not demonstrate, that Craigo had additional copies of the customer list. The court was unconvinced, noting, “There is little, if any, evidence in the record that Ms. Craigo now possesses any physical items owned by Mentor that contain Mentor's trade secret information.”
Craigo admitted that she was contacting Mentor customers on behalf of her new employer, but she argued that she was doing so at the instruction of Sientra. Thus, she said that she was not exploiting any knowledge that she possesses regarding Mentor's business practices. The court agreed.
Craigo undoubtedly knows privileged information about Mentor, the court said, but there is no evidence that she is relying on that information. Indeed, the evidence presented during the April 20 hearing demonstrated that Sientra, and not Craigo, determines what customers Craigo should contact. The board said:
“Ms. Craigo says Sientra tells her what potential customers to contact and, as a result, Ms. Craigo says she is not using information from her Mentor customer list. The record contains no evidence that, in making those contacts on behalf of Sientra, Ms. Craigo is using Mentor's trade secret information. There is significant evidence in the record indicating that Sientra repeatedly has instructed Ms. Craigo not to use any information she acquired while working for Mentor.”
Because the evidence indicates that Craigo is not using Mentor's trade secrets, Mentor cannot demonstrate a likelihood of success on its misappropriation claim, the court said. Accordingly, the court denied Mentor's motion and dissolved and vacated its April 6 temporary restraining order.
Mentor was represented by Daniel Mitchell Combs of Littler Mendelson, Denver. Craigo was represented by John Patrick Barry of Proskauer Rose, Newark, N.J.
Opinion at http://pub.bna.com/ptcj/12776April2612.pdf