Georgia On My Mind . . . .
By Todd
We are particularly interested in legal decisions that address the issue of the "sticky-handed departing employee." The United States District Court for the Northern District of Georgia, Judge Shoob presiding, published a written opinion and order on December 8, 2005 in which the court addressed exactly that topic - a departing employee who thought it might make sense to bring a book of business with him to his new place of employment. In Opteum Financial Services, LLC v. Spain et al., Judge Shoob was asked to dismiss most of the claims filed by the former employer, Opteum Financial Services, due to Mr. Spain's, and his new employer Market Street Mortgage Services', contention that some of Opteum Financial's legal claims were tricky attempts to bypass the Georgia Trade Secrets Act. Some background is in order.
Seems Mr. Spain worked as a mortgage loan officer for Opteum from May 1, 2003 until his resignation on May 16, 2005. At the time of his resignation Mr. Spain was working on nine mortgage loan applications that had been approved by Opteum for processing. The day BEFORE his resignation, May 15, Mr. Spain apparently deleted some of the loan information that Opteum maintained for these nine loan applications, took one of the original loan files from Opteum's offices, and also made copies of all of the eight other loan files. Mr. Spain proceeded to resign from Opteum, effective May 16, and was found to be working as a mortgage loan officer for Market Street Mortgage Corporation shortly thereafter and, you guessed it, trying to market alternative mortgage products to those same nine customers of Opteum Financial. Opteum sued Mr. Spain and his new employer immediately for: (a) violations of the Georgia Trade Secrets Act; (b) conversion; (c) misappropriation of personal property; (d) unjust enrichment; and (e) quantum meruit. Although it isn't clear from Judge Shoob's opinion and order, it looks as if Market Street Mortgage and Mr. Spain were able to convince at least some of these nine loan applicants that Market Street Mortgage was a better place to get a mortgage than Opteum - and this presumably made Opteum pretty mad. Due to the fact that they were particularly hacked off at Mr. Spain and had an employment-related nondisclosure agreement with him, they sued him personally for: (a) breach of nondisclosure agreement; and (b) civil theft. Interestingly, Mr. Spain's nondislosure agreement with Opteum was not limited in time - it was silent as to how long he needed to keep hush-hush. It might be generally said about restrictive covenants in Georgia that "no limitation in time is no limitation at all."
The attorneys for Mr. Spain and Market Street Mortgage Corporation obviously felt that there were too many pages in Opteum Mortgage's complaint. They made a motion to the court to dismiss the conversion, misappropriation of personal property, unjust enrichment, quantum meruit, and civil theft claims on grounds that they were just alternative, and prohibited, names for a GTSA claim. The court granted that motion, essentially agreeing that all of these claims were pre-empted by the Georgia Trade Secrets Act. This is, in our view, good law - the Georgia Trade Secrets Act specifically provides that the Act supercedes, or pre-empts if you prefer that word, all "tort, restitutionary and other laws of this State providing civil remedies for misappropriation of a trade secret." The court noted, again correctly, that the GTSA does not pre-empt claims not based on misappropriation of a trade secret. Things get a little complicated with that carve out - as the reasonable question remains: how does anyone know if certain information is a "trade secret" or something else until the judge actually rules?
Opteum's attorneys argued "hey, judge, we don't know if the information relating to these nine customers will be deemed a trade secret or not - so you can't dismiss those other tort claims at this point." AU CONTRAIRE! the judge replies and then explains that the Act intended there to be one cause of action for claimed theft of a trade secret. In other words, "you've either got a GTSA misappropriation claim or you don't, you don't get subsequent shots at this apple and you can't give the same alleged legal wrong a bunch of different legal names just to be cautious." Interestingly, though, the same GTSA rescued Opteum's claim for breach of nondisclosure agreement against Mr. Spain. The Act also provides, contrary to standard Georgia restrictive covenant law, that an agreement seeking to protect against the disclosure of trade secrets does not have to have a temporal limitation in it. Thus, inasmuch as the information Mr. Spain allegedly took with him is a trade secret of Opteum's, its nondisclosure agreement will not be ineffective as a potential legal source for a recovery. That claim survived. The parties will be litigating, with less paper obviously, the rest of this case for misappropriation of trade secrets and breach of nondisclosure agreement.
If you're confused at this point, don't be. We'll try to explain a good number of these concepts in some upcoming posts. Suffice it to say that in Georgia, and other states having a version of the UTSA that provides for pre-emption of certain common-law claims, you can't plead your trade secrets misappropriation claim in the alternative. Litigation under the UTSA and its various state law versions is tough - you have to plead the case correctly, conduct the proper discovery, find the solid and reliable evidence of misappropriation, and argue and prove damages in a particularized manner. This is not the type of case you want to cut your teeth on as a litigator. In one of the upcoming posts we'll discuss the phrases "confidential information" and "trade secret information" and give you our take on why these words should not be considered synonymous or otherwise inter-mixed. We'll also be identifying in the months to come some litigation-related anecdotes that some of you attorneys might be interested in. We can tell you, from experience, that Mr. Spain's departure and efforts to hit the ground running with some of his former employer's customers is not a novel fact pattern . . . .
Seems Mr. Spain worked as a mortgage loan officer for Opteum from May 1, 2003 until his resignation on May 16, 2005. At the time of his resignation Mr. Spain was working on nine mortgage loan applications that had been approved by Opteum for processing. The day BEFORE his resignation, May 15, Mr. Spain apparently deleted some of the loan information that Opteum maintained for these nine loan applications, took one of the original loan files from Opteum's offices, and also made copies of all of the eight other loan files. Mr. Spain proceeded to resign from Opteum, effective May 16, and was found to be working as a mortgage loan officer for Market Street Mortgage Corporation shortly thereafter and, you guessed it, trying to market alternative mortgage products to those same nine customers of Opteum Financial. Opteum sued Mr. Spain and his new employer immediately for: (a) violations of the Georgia Trade Secrets Act; (b) conversion; (c) misappropriation of personal property; (d) unjust enrichment; and (e) quantum meruit. Although it isn't clear from Judge Shoob's opinion and order, it looks as if Market Street Mortgage and Mr. Spain were able to convince at least some of these nine loan applicants that Market Street Mortgage was a better place to get a mortgage than Opteum - and this presumably made Opteum pretty mad. Due to the fact that they were particularly hacked off at Mr. Spain and had an employment-related nondisclosure agreement with him, they sued him personally for: (a) breach of nondisclosure agreement; and (b) civil theft. Interestingly, Mr. Spain's nondislosure agreement with Opteum was not limited in time - it was silent as to how long he needed to keep hush-hush. It might be generally said about restrictive covenants in Georgia that "no limitation in time is no limitation at all."
The attorneys for Mr. Spain and Market Street Mortgage Corporation obviously felt that there were too many pages in Opteum Mortgage's complaint. They made a motion to the court to dismiss the conversion, misappropriation of personal property, unjust enrichment, quantum meruit, and civil theft claims on grounds that they were just alternative, and prohibited, names for a GTSA claim. The court granted that motion, essentially agreeing that all of these claims were pre-empted by the Georgia Trade Secrets Act. This is, in our view, good law - the Georgia Trade Secrets Act specifically provides that the Act supercedes, or pre-empts if you prefer that word, all "tort, restitutionary and other laws of this State providing civil remedies for misappropriation of a trade secret." The court noted, again correctly, that the GTSA does not pre-empt claims not based on misappropriation of a trade secret. Things get a little complicated with that carve out - as the reasonable question remains: how does anyone know if certain information is a "trade secret" or something else until the judge actually rules?
Opteum's attorneys argued "hey, judge, we don't know if the information relating to these nine customers will be deemed a trade secret or not - so you can't dismiss those other tort claims at this point." AU CONTRAIRE! the judge replies and then explains that the Act intended there to be one cause of action for claimed theft of a trade secret. In other words, "you've either got a GTSA misappropriation claim or you don't, you don't get subsequent shots at this apple and you can't give the same alleged legal wrong a bunch of different legal names just to be cautious." Interestingly, though, the same GTSA rescued Opteum's claim for breach of nondisclosure agreement against Mr. Spain. The Act also provides, contrary to standard Georgia restrictive covenant law, that an agreement seeking to protect against the disclosure of trade secrets does not have to have a temporal limitation in it. Thus, inasmuch as the information Mr. Spain allegedly took with him is a trade secret of Opteum's, its nondisclosure agreement will not be ineffective as a potential legal source for a recovery. That claim survived. The parties will be litigating, with less paper obviously, the rest of this case for misappropriation of trade secrets and breach of nondisclosure agreement.
If you're confused at this point, don't be. We'll try to explain a good number of these concepts in some upcoming posts. Suffice it to say that in Georgia, and other states having a version of the UTSA that provides for pre-emption of certain common-law claims, you can't plead your trade secrets misappropriation claim in the alternative. Litigation under the UTSA and its various state law versions is tough - you have to plead the case correctly, conduct the proper discovery, find the solid and reliable evidence of misappropriation, and argue and prove damages in a particularized manner. This is not the type of case you want to cut your teeth on as a litigator. In one of the upcoming posts we'll discuss the phrases "confidential information" and "trade secret information" and give you our take on why these words should not be considered synonymous or otherwise inter-mixed. We'll also be identifying in the months to come some litigation-related anecdotes that some of you attorneys might be interested in. We can tell you, from experience, that Mr. Spain's departure and efforts to hit the ground running with some of his former employer's customers is not a novel fact pattern . . . .
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