By Robert Milligan and Jessica Mendelson
With the NBA basketball season almost upon us, a high profile legal battle between an aspiring NBA sports agent and his former agency continues to heat up in Los Angeles federal court. The case involves some interesting non-compete, trade secret, and privacy issues.
In April 2012, we first alerted you to the colorful case of Mintz v. Mark Bartelstein & Associates d/b/a Priority Sports & Entertainment, Case No. 12-02554 SVW (SSX), (C.D. Cal.), where Aaron Mintz, a National Basketball Players Association (NBPA) certified player-agent, brought a declaratory relief suit seeking to invalidate his non-compete agreement with his former employer, Priority Sports & Entertainment (“Priority”).
Mintz, based in Los Angeles, left Priority in March 2012, accepted a position with competitor Creative Artists Agency (“CAA”), and immediately sought declaratory relief to invalidate his two year non-compete agreement.
As the case has progressed, Mintz has added additional claims against Priority for violations of the Computer Fraud and Abuse Act, the Electronic Communications Act, and California Penal Code section 502, as well as claims for defamation, invasion of privacy, intentional inference with contractual relations, and violation of Business and Professions Code section 17200. Mintz has also asserted some of the claims against Priority principle Mark Bartelstein.
Mintz alleges that he worked eleven years for Priority and then decided to pursue a better opportunity with CAA. Apart from the two year non-compete, which he claims violates Business and Professions Code section 16600, Mintz claims that the fourteen-day notice of termination provision in his employment agreement violates section 16600 as well. Mintz claims that the notice provision restricts his ability to terminate his employment, and thereby prevents him from competing with Priority, at its discretion, for two weeks after termination in violation of California law.
The non-compete contains an Illinois choice of law provision but no separate action to attempt to enforce it has been initiated in Illinois to date.
Mintz also claims that after he resigned Priority hacked his personal email account, reviewed his contract with CAA, and disclosed its terms to third parties. He also claims that defamatory statements were made to basketball executives, players, and family members of players to persuade players not to follow Mintz to CAA. Among some of the NBA players on the parties’ joint witness list are Dominic McGuire, Jordan Crawford, Paul George, Danny Granger, and Acie Law.
Priority counterclaimed against Mintz asserting claims for breach of contract, breach of covenant of good faith and fair dealing, breach of duty of loyalty, misappropriation of trade secrets, intentional interference with contractual relations, intentional interference with prospective economic advantage, conversion, violation of California Penal Code section 502, defamation, trade libel, conspiracy, and unfair competition. Priority has also asserted some of the claims against CAA.
Priority alleges that under his employment agreement Mintz was required to provide Priority fourteen days’ notice prior to his termination. Instead, Priority alleges that Mintz immediately terminated his employment and filed suit against Priority depriving it of “its negotiated opportunity to communicate with its clients before Mintz’s departure and to attempt to retain their business and manage an orderly transition process.” Priority claims that Mintz formulated a strategy designed to keep Priority from learning of his plans to join CAA in order to give CAA an unfair advantage in its efforts to attract several of Priority’s clients. Priority also alleges that Mintz disclosed information regarding Priority’s contracts with its NBA clients and used confidential information to solicit Priority’s clients. In essence, Priority claims that Mintz and CAA conspired to steal Priority’s clients.
Mintz has brought a motion for summary judgment on his claims and Priority’s claims, along with CAA. Priority brought a motion for partial summary judgment on its claims against Mintz for breach of contract and breach of duty loyalty. The summary judgment hearings are set for October 29, 2012 along with the pretrial conference. The trial is set for November 13, 2012 before the Honorable Stephen Wilson.
Mintz claims in his opposition papers, among other things, that Priority’s duty of loyalty claim fails because California employees have every right to take preparatory steps to look for a new job and consult an attorney to protect one’s legal rights without violating their duty of loyalty to their existing employer. He also claims that Priority’s trade secret claim fails because, among other things, client names, contact information, contract terms and commission splits with third party handlers do not qualify for trade secret protection.
It will be interesting to see how the court addresses the notice of termination provision and section 16600 argument as some employers use notice provisions in their employment agreements, particularly with executives. Additionally, the court may provide some guidance on what trade secrets, if any, exist, in the context of a sports agent dispute, as well as what other information may be protectable under a contract theory.
One interesting discovery issue handled by Magistrate Judge Segal in the case involved Priority’s attempt to obtain Mintz’s phone records from a smart phone he used during his employment with Priority.
Priority subpoenaed Mintz’s phone records from the cellular provider, seeking ten categories of documents, including dates, times, originating and receiving telephone numbers, as well as the text messages from the cellular phone. In response, Mintz filed a motion to quash the subpoena, arguing that it was overbroad and sought confidential information. Priority argued the information was necessary to prove their counterclaims that Mintz had made false and defamatory statements regarding Priority and improperly solicited Priority’s clients. Furthermore, Priority argued that Mintz lacked an expectation of privacy in the phone, since Priority argued it owned and paid for the telephone account. Additionally, Priority argued that by acknowledging an employee manual stating that “personal information on company telephones shall be the property of Priority Sports,” Mintz waived any right to privacy he might have had.
Ultimately the court granted the motion to quash with respect to the content of the text messages, but denied the motion to quash with respect to the non-content information, which consisted of the dates, times, and telephone numbers for specific calls during a relevant period.
Under the Stored Communications Act (“SCA”), communication service providers are traditionally prohibited from divulging private communications to certain entities or individuals. The SCA does not contain an exception for civil discovery subpoenas. However, under the SCA, communication providers can divulge “non-content information to non-governmental entities.” According to the court, the bulk of the information requested in the subpoena was subscriber information, rather than the content of the messages. Furthermore, the court reasoned that since Priority was not a government entity, the information was “not barred from disclosure” under the SCA.
With respect to the content of the text messages, the court granted the motion to quash. The court ruled, however, that while Priority could not obtain the messages directly from the provider, it could obtain the messages directly from Mintz pursuant to a document request under Federal Rule of Civil Procedure 34, subject to Mintz’s privacy objections, which were not before the court. According to the court, the information was within “Mintz’s control” and could be obtained by Mintz from the provider.
The court also addressed Mintz’s privacy interest in the non-content information. Judge Segal reasoned that the phone started out as Mintz’s personal phone, but eventually became his business phone. Since the phone was used for business purposes, the court reasoned that Mintz had a limited expectation of privacy in the non-content information, and a protective order could be used to guard against any unwarranted intrusion into his privacy. Please see Eric Goldman’s blog for a more detailed discussion of Judge Segal’s ruling and SCA developments.
For litigants in trade secret and non-compete cases, the ruling is important because it provides guidance concerning discovery directed to probing allegations of solicitation, trade secret misappropriation, and other business and privacy torts. It is also an important reminder for employers to have strong policies that provide for ownership interests in company smart phones as well as that permit employer monitoring of company owned devices. The court credited those facts in requiring the production.
We will continue to follow this case, and keep you apprised of future developments as it moves towards the November trial date.