Home Builder Alleges Trade Secret Theft Of Strategic Plan By Former Executive
One of the nation’s large home builders recently filed suit against a former executive in federal court in Albuquerque, New Mexico for alleged misuse of the company’s trade secrets related to a highly confidential internal strategic plan.
Pulte Home Corporation filed suit against former executive Lynn Galindo, a former area vice president based out of Las Vegas, Nevada, in the United States District Court of New Mexico (Case 1:08-cv-00210-JB-LFG) alleging claims of trade secret misappropriation, conversion, breach of fiduciary duty, breach of contract, fraud, breach of implied covenant of good faith and fair dealing, and unjust enrichment.
The complaint alleges that shortly before Galindo’s departure from the company, she misappropriated an internal strategic plan related to the Albuquerque housing market and later used it to create a similar plan for a competitor.
According to the complaint, the plan, which cost in excess of $1 million dollars to produce, contained information that would allow a competitor at Pulte’s expense to make informative decisions regarding the “relative health of the market in terms of marco/micro economic and market forces; the size of the mobility of the population within the market; the organization of Pulte’s Target Consumer Groups; the location preferences by consumer group, price sensitivity, product preferences, over-and under-served consumers groups which indicates market opportunity; and the top performing communities in the market organized by Target Consumer Group.” The plan also contained Pulte’s analysis of this data, its strategy for increasing its presence in the market, an “identification of specific challenges of this market and Pulte’s proposed solutions to those challenges.”
According to Pulte’s complaint, “A knowledgeable person would be able to use Pulte’s . . . [strategic plan] to assess the viability of a specific location (or multiple locations), understand the best opportunities for targeting specific consumer groups in the locations under evaluation and be able to fine tune a product offering in terms of community layout, community design, community amenities, lot size and configuration, floor plan selection and specifications of homes.”
According to the suit, Pulte provided Galindo with notice of her termination in the spring of 2007 as part of a reduction in force. Galindo negotiated a lucrative severance package that paid her nearly $300,000 in severance pay, bonuses and other compensation. Pulte claims Galindo conspired to obtain the strategic plan while she was negotiating her severance from the company and that if it would have known she had obtained the highly confidential plan that it would not have entered the severance agreement. Galindo apparently obtained the plan by contacting a subordinate and induced the employee to send her a copy prior to her separation.
During Galindo’s employment and as part of her severance agreement, Galiando signed agreements to keep Pulte’s proprietary information, such as the strategic plan, confidential, according to the complaint. Pulte claims that Galindo agreed to provide a developer in the Albuquerque area with a marketing study and used material from Pulte's confidential strategic plan in the report.
The case has yet to be set for trial and has been assigned to District Judge James O. Browning and Magistrate Judge Lorenzo F. Garcia.
This case highlights the need for employers to review the activities of departing employees shortly before their departure to ensure that company confidential/trade secret information has not been compromised and that the employees understand their continued confidentiality obligations to the company. Employers should consider reviewing these employees’ e-mail activity and access to proprietary databases prior to their departure, as well as remind other employees to report any suspicious activities, to attempt to safeguard company secrets.
