On January 22, 2013, United States Magistrate Judge Steven Shreder of the Eastern District of Oklahoma issued a report and recommendation, following Plaintiff Pre-Paid Legal Services, Inc.’s motion for preliminary injunction against its former employee Todd Cahill, concerning whether certain social media communications constituted impermissible employee solicitations in violation of a restrictive covenant agreement. Pre-Paid Legal Services, Inc. v. Cahill, Case No. CIV-12-346-JHP, 2013 U.S. Dist. LEXIS 19323 (E.D. Okla., Jan. 22, 2013).
In its motion, Pre-Paid Legal Services, now known as LegalShield, sought a preliminary injunction seeking to enjoin Cahill’s misappropriation of trade secrets and solicitation of its workforce. LegalShield sought to prevent certain social media communications made by Cahill through Twitter and Facebook, which LegalShield argued constituted impermissible solicitations. Notably, Magistrate Judge Shreder held that these communications were neither solicitations nor impermissible conduct under the terms of the agreement.
To summarize the facts of the case, LegalShield sells legal service plans to its customers, providing access to legal services. LegalShield seeks to sell these plans utilizing a network marketing sales model, where sales associates recruit and build a sales organization, which is referred to as a recruiter’s “downline.” LegalShield makes “downline” information—made up of the contact and performance information of sales associates—available to sales associates through a password protected site.
Cahill was originally hired as a sales associate, built a significant downline network. In building his network, Cahill created private Facebook pages, which Cahill used to communicate with his most successful associates. Cahill was eventually promoted to a Regional Manager over the Southern California region and Regional Vice President of Illinois. Concurrent with his promotion to Regional Manager, he executed the Regional Manager Agreement. Included within that agreement were both confidentiality provisions and a non-solicitation provision, prohibiting solicitation of LegalShield employees.
On August 10, 2012, allegedly under false pretenses, Cahill allegedly called a meeting of a number of high ranking sales associates. Prior to the meeting, Cahill allegedly met with certain sales associates and solicited and sought to convince those persons to leave LegalShield’s employ for Nerium, a skin care company, which also operated a multi-level marketing company. At the meeting, Cahill allegedly told the employees that he was leaving LegalShield and, if the employees were interested in where he was going and what he was doing, they should email Cahill.
Following the meeting, Cahill emailed his resignation letter to LegalShield. After his resignation, LegalShield shut off his access to his downline information. Three days later, Cahill allegedlyposted information about Nerium on the private Facebook pages he created during his employment with LegalShield. Cahill did not post any information to those pages after August 13, 2012. Cahill, however, allegedly continued to post information about Nerium on his personal Facebook page and sent general requests to LegalShield employees to join Twitter.
In moving for a preliminary injunction, LegalShield argued that Cahill should be preliminarily enjoined from utilizing, disclosing or misappropriating LegalShield’s trade secrets, which LegalShield argued was its downline information. Cahill argued that he did not have access to the information, with which the court agreed and the court denied LegalShield’s motion with respect to its misappropriation claim.
LegalShield also argued that Cahill should be enjoined from directly soliciting LegalShield’s employees. Citing Cahill’s undisputed solicitations of LegalShield’s employees, the court found that LegalShield satisfied its burden and Cahill was enjoined from initiating contact with LegalShield’s employees.
In the most interesting piece of the case from a legal development standpoint, the court gave careful consideration to LegalShield’s argument that Cahill’s general posts to his personal Facebook page about Nerium constituted impermissible solicitations. Noting that such an argument constituted a “novel issue”, the court analyzed other court decisions in which similar arguments were made regarding alleged social media solicitations.
Specifically, the court analyzed Enhanced Network Solutions Group, Inc. v. Hypersonic Technologies Corp., 951 N.E.2d 265 (Ind. Ct. App. 2011) and Invidia, LLC v. DiFonzo, 2012 WL 5576406 (Mass. Super. Oct. 22, 2012). In Enhanced Network, the Indiana Court of Appeals considered whether a job posting on a LinkedIn page constituted an improper solicitation. The court found that the posting did not constitute a solicitation because the Enhanced Network employee “made the initial contact with Hypersonic after reading the job posting on a publicly available portal of LinkedIn.” 951 N.E.2d at 268.
In Invidia, the plaintiff argued that its former hairstylist violated a non-solicitation provision by friending certain of plaintiff’s customers on Facebook after leaving plaintiff’s employ. Finding that such friending was not a solicitation, the Massachusetts court held that: “one can be Facebook friends with others without soliciting those friends to change hair salons, and [Plaintiff] has presented no evidence of any communications, through Facebook or otherwise, in which [Defendant] has suggested to these Facebook friends that they should take their business to her chair at David Paul Salons.” 2012 WL 5576406, at *6.
Discussing the facts of the instant case, the court found that Cahill’s acts were even less explicit that those of the defendants in Enhanced Network or Invidia. The court also found that LegalShield presented no evidence that it would suffer irreparable harm if Cahill was not enjoined from posting on his personal Facebook page or that Cahill’s Facebook posts had caused a LegalShield employee left as a result of such posts. 2013 U.S. Dist. Lexis 19323 at *30-31.
The import of this decision and others like it is that courts do not appear convinced that simply providing information in a public forum, to which a former employee’s coworkers or customers may visit constitutes improper solicitation. That said, no court appears to have been confronted with the question of whether an improper solicitation occurs when the former employee communicate with a former employer’s workforce or customers directly through a social media site or speaks ill of the former employer through such a site. Despite no court being confronted directly with these questions, the Cahill, Enhanced Network, and Invidia decisions all foreshadow that courts will enjoin solicitations through social media if those communications rise to the level of traditional solicitations, such as emails, etc.
The important takeaway from this case is that courts are treating social media solicitations argument as legitimate. This development offers an area of discovery that all employers should seek to explore (and an area that defense counsel must be sure to caution their clients to preserve).
But, though it is now being recognized by courts as a possible means by which a former employee could breach a non-solicitation provision, employers are still required to show more than a former employee provides mere access to information, even where that information is likely to be viewed by that employer’s workforce or customers. Courts, instead, appear to be looking for either personalized communications to the allegedly solicited persons or generalized communications either extolling the virtues of the new employer or badmouthing the former employer. Under that factual scenario, the Cahill court, at least, appears to suggest that such generalized posts could constitute impermissible solicitations.
For more information on these interesting issues, please join me on February 20, 2013 for an informative complimentary webinar on Trade Secrets in the Telecommunications Industry. The webinar starts at noon c.s.t. and you can register here.