Tuesday, June 13, 2006, 6/13/2006 03:18:00 PM

Haberdashery Trade Secrets?

What happens when a retail salesman moves from one high-end to another one? How would a plaintiff-store calculate damages?

The Virginia Supreme Court dealt with this issue in Saks Fifth Avenue, Inc. v. James, Ltd. The case concerned Saks hiring away from James a long-time retail employee, Thompson, to work in the Saks store at the same mall.
The former employer raised a litany of claims including breach of fiduciary duty, intentional interference with contractual relations, intentional interference with prospective business and contractual relations, violation of Uniform Trade Secrets Act, violation of Computer Crimes Act, and conspiracy to injure another in a business, trade or profession.

Plaintiff's expert, one Dubinsky, provided a lost profits calculation which formed the basis of a damages judgment for over $1.6 million after a bench trial . (The damages claim with respect to trade secrets was earlier thrown out by the trial judge.)

The Supreme Court, though, tossed that judgment on the grounds that the expert "failed to connect the lost profits he claimed James incurred after Thompson's departure to anything other than the mere fact that Thompson was no longer working at James. This fact alone cannot be a basis for recovering damages, however, because Thompson was an at will employee who was free to stop working at James at any time."

According to the court, "Dubinsky's opinion on damages was solely based on Thompson having ceased employment with James, not the wrongful acts of the Defendants. Thus, Dubinsky's opinion did not establish the necessary factor of proximate causation between Defendants' conduct and the damages claimed by James. The trial court thus erred in denying the motion to strike James' evidence."

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