The U.S. Court of Appeals for the Tenth Circuit recently held that a former employer’s price quotations to prospective customers were not trade secrets under Oklahoma law because they did not contain a confidentiality provision, but the former employee who took advantage of those quotations on behalf of his new employer did violate his non-compete covenant. Southwest Stainless, LP v. Sappington, No. 08-5127 (10th Cir. Sept. 21, 2009).
An Oklahoma court is permitted to blue-pencil unreasonable contractual geographic limits in a non-compete to make them reasonable. The Tenth Circuit held that the trial court’s damages award with respect to business lost due to violation of the non-compete was properly based on the ex-employer’s historic profit margins on business with the relevant customers. Moreover, injunctive relief should have been awarded because the ex-employee took advantage of the "personal contacts [with] and a knowledge of the special needs and requirements of" the ex-employer’s customers which the former employee learned during the employment relationship.
Coincidentally, only a few weeks earlier, an Oklahoma district court granted a motion for partial summary judgment in a breach of contract and trade secrets case, based on the plaintiff company’s "legitimate interest in . . . relationships . . . with . . . existing and established customers." The Court thereby upheld a "hands-off" non-solicitation covenant an independent contractor sales agent signed with the plaintiff. The plaintiff’s trade secret misappropriation claim was not discussed in the ruling on the partial summary judgment motion. Drummond Am., LLC v. Share Corp., No. CIV-08-1004-F (W.D. Okla., Aug. 3, 2009), 2009-2 CCH Trade Cases ¶ 76.701.
These decisions teach that in a state (such as Oklahoma) where covenants are enforceable, a breach of contract claim against former sales personnel may be at least as strong a cause of action for a jilted employer as a suit for misappropriation of trade secrets.