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Fashion Company Launches Breach of Confidentiality/Unfair Competition Suit Against Former Employee

Posted in Restrictive Covenants, Trade Secrets, Unfair Competition

Now that the Tory Burch lawsuit has settled, it looks like we’ve got ourselves another preppy clothing dispute on our hands!  Last week, J. Crew sued one of its former employees, a senior design director named Dwight Fenton, for allegedly stealing confidential information in New York state court.  Fenton had recently resigned from the company to take a position at Bonobos, a competitor in the men’s clothing market.  Allegedly, Fenton planned to use confidential and proprietary information from J. Crew in working for his new employer.

As a function of his position at J. Crew, Fenton was allegedly able to access valuable confidential and proprietary business information.  During his employment, Fenton signed a confidentiality and non-disclosure agreement, agreeing to keep this information “confidential in the event he left the company.”   However, J. Crew alleges that Fenton failed to comply with the terms of the agreement when he resigned from J. Crew on January 15,2013.  Before leaving the company, he allegedly sent a variety of  “highly confidential and proprietary J. Crew documents to his personal email address,” including product design specifications and measurements, manufacturing resources and financials, budgets, and design inspirations.  J. Crew alleges that in doing so, Fenton violated company policy and breached the confidentiality agreement.  J. Crew asserts various causes of action, including misappropriation, breach of the duty of confidentiality, and unfair competition.

J. Crew is seeking injunctive relief, as well as compensatory and punitive damages of over $650,000.  The company alleges it meets the standard for a preliminary injunction, since Fenton violated J. Crew’s confidentiality agreement and “common law obligations under New York Law by misappropriating the confidential and proprietary information.”  Additionally, J. Crew alleges that if it is not granted a temporary injunction, it will suffer irreparable harm, since it will enable Bonobos will be allowed to copy J. Crew’s products and replicate them at a reduced cost.

Interestingly enough, J. Crew’s complaint for misappropriation never explicitly uses the phrase “trade secret.”  Instead, J. Crew claims Fenton misappropriated its “confidential and proprietary information [including] product designs, . . . productions schedules, manufacturing resources, and other information concerning [its] business operations,” such as budgets and marketing strategies.  As the Trade Secrets Institute explains it, New York has not yet adopted the Uniform Trade Secrets Act, instead, relying on common law.  Under common law, misappropriation of trade secrets requires a showing of use.  As such, many litigants will simply claim unfair competition, which allows a plaintiff to sue for unlawful misappropriation of property,  in order for the defendant to compete with the plaintiff.  The property at issue need not be tangible,  and as such, is often applied to ideas as well.  Here, the difficulty in proving that there was actual use may explain why the phrase “trade secret” is never explicitly mentioned in the complaint.  The case also highlights the importance of careful pleading, particularly in states which have not adopted the Uniform Trade Secrets Act.