We reported yesterday that the attorneys generals of ten states are investigating several fast food franchisors for their use of so-called “no poach” provisions in their franchise agreements.  Well, less than twenty-four hours later, the New York Times has reported that seven fast food franchisors (mostly different ones than those who received the information demands discussed yesterday) entered into agreements with the Washington State Attorney General’s Office to remove such clauses from their franchise agreements.  According to the New York Times:

Many types of franchise businesses impose the clauses, but they may be most prevalent in the restaurant industry. The fast-food sector, in particular, relies overwhelmingly on independently owned and operated franchise stores.

Washington State Attorney General Bob Ferguson is quoted in the article as stating that his “goal is to eliminate these provisions in all fast-food contracts” in Washington State.  We will keep you posted on further developments.

Marc McGovern, the mayor of Cambridge, Massachusetts (home to many of the Commonwealth’s established and emerging pharmaceutical, biotech, and other life sciences companies), published an op-ed in today’s Boston Globe regarding the noncompete reform movement in Massachusetts (about which we have previously reported).  Unsurprisingly, given that Cambridge has been referred to as the “People’s Republic of Cambridge,” Mayor McGovern comes out strongly in favor of severe restrictions on the use of employee noncompete agreements, stating, among other things, that “noncompetes are unfair to employees.”   Among other things, Mayor McGovern proposes that noncompete agreements be banned outright, or at least severely limited; and if the latter, that employers be required to pay 100% of the employee’s salary during the restricted period (known as “garden leave” pay).  In his words: Continue Reading Mayor of the “People’s Republic of Cambridge” Steps Into The Massachusetts Noncompete Reform Fray

Earlier this month, the Texarkana Court of Appeals took the extraordinary measure of affirming an award of plaintiff attorney’s fees against a defendant for willful and malicious misappropriation of trade secrets in an amount that was ultimately more than 50 times higher than the plaintiff’s actual awarded damages.

Samuel D. Orbison worked for an oil and gas company, Ma-Tex Rope Company, Inc., for five years and signed an employment agreement containing a non-competition agreement, a non-disclosure agreement, and a non-solicitation agreement. During his tenure with Ma-Tex, Orbison became the coordinator of Ma-Tex’s recertification department until he resigned and began working for its competitor, American Pipe Inspections, Inc. (API), in the same position he had filled with Ma-Tex. When Ma-Tex learned that Orbison had begun soliciting recertification work from Ma-Tex’s customers, it sued Orbison and API for, among other claims, breach of contract and misappropriation of trade secrets. Continue Reading In Trade Secret Misappropriation Case, Texas Court of Appeals Affirms Attorney’s Fees Award Approaching $220,000 where Actual Damages Were $4,000

Democratic U.S. Senators Elizabeth Warren (D-MA), Chris Murphy (D-Conn.), and Ron Wyden (D-Ore.) introduced legislation on April 26, 2018, entitled the Workforce Mobility Act (“WMA”). Although the text of the WMA is not yet available, according to various press releases, it would prohibit the use of covenants not to compete nationwide. In Senator Warren’s press release announcing her co-sponsorship of the bill, Senator Warren stated that “[t]hese clauses reduce worker bargaining power, stifle competition and innovation, and hurt Americans striving for better opportunities. I’m glad to join Senator Murphy to put an end to these anti-worker, anti-market agreements.”  Continue Reading Democratic U.S. Senators Seek to Abolish Non-Compete Agreements

In Seyfarth’s second installment in its 2018 Trade Secrets Webinar Series, Seyfarth attorneys Scott Humphrey, Erik Weibust, and Marcus Mintz focused on trade secret and client relationship considerations in the banking and financial services industry, with a particular focus on a firm’s relationship with its FINRA members. In addition, the panel covered what to do if trade secrets are improperly removed or disclosed or if a former employee is violating his/her restrictive covenant agreements, how to prosecute a case against a former employee who is a FINRA member, and the impact of the Protocol for Broker Recruiting on trade secrets and client relationships.

As a conclusion to this well-received webinar, we compiled a summary of takeaways:

  • Remember that you can seek court injunctive relief (Temporary Restraining Order and, possibly, Preliminary Injunction) before proceeding in FINRA
  • The definition of a trade secret varies, but you must take adequate steps to protect them as a company, and the information cannot be publicly available or easily discovered, to merit enforcement under the law.
  • Employers can take steps at all stages to protect their confidential information—don’t forget to implement on-boarding and off-boarding procedures, as well as policies and procedures that will be in effect during an employee’s tenure, to protect your information before a problem arises.

Continuing our annual tradition, we present the top developments/headlines for 2017/2018 in trade secret, computer fraud, and non-compete law.

1. Notable Defend Trade Secrets Act Developments

Just two years after its enactment, the Defend Trade Secrets Act (“DTSA”) continues to be one of the most significant and closely followed developments in trade secret law. The statute provides for a federal civil cause of action for trade secret theft, protections for whistleblowers, and new remedies (e.g., ex parte seizure of property), that were not previously available under state trade secret laws. Continue Reading Top Developments/Headlines in Trade Secret, Computer Fraud, and Non-Compete Law in 2017/2018

This post originally appeared on the Workplace Class Action blog

Seyfarth Synopsis: On February 1, 2018, the U.S. District Court for the Middle District of North Carolina entered an order granting in part, and denying in part, the plaintiff’s motion for class certification in a no-hire antitrust case entitled Seaman v. Duke University, 1:15-CV-462, at 1-2 (M.D.N.C. Feb. 1, 2018) (A copy of the decision can be found here.) The case was brought against Duke University, Duke University Health System (collectively “Duke”), and various University of North Carolina entities and one of its executives (collectively “UNC”). The complaint alleged that the defendants had entered into an agreement not to hire each other’s medical faculty employees in violation of federal antitrust laws. With some notable exceptions it has been difficult for plaintiffs to achieve class certification in wage suppression cases such as Seaman. The ruling is a “must read” for employers, as the Court’s reasoning and conclusions make it difficult to predict whether this case will be helpful to the plaintiffs’ bar in other cases.

Background To The Case

Seaman, an Assistant Professor of Radiology at Duke, contended that she applied for a position at UNC in 2015. She alleged that she was denied consideration due to an agreement among the Duke and UNC defendants that they would not hire each another’s medical faculty employees unless the hire involved a promotion. Seaman alleged that this agreement not only suppressed the compensation of defendants’ medical faculty members, but also their other skilled medical employees. Thus, Seaman sought to certify a class consisting not only of defendants’ medical faculty members, but also their physicians, nurses, and skilled medical staff. Id. at 1-2. Continue Reading Court Certifies Class In Duke-UNC No-Hire Workplace Antitrust Lawsuit

On Monday, January 29th, Faraday & Future Inc., the electric car manufacturer founded by Chinese billionaire and entrepreneur Jia Yueting, filed a one-count Defend Trade Secrets Act complaint against Evelozcity, Inc., an electric car manufacturer that was recently created by Faraday & Future’s former CFO and CTO.  The case is Faraday & Future Inc. v. Evelozcity Inc., 18-cv-00737, U.S. District Court, Central District of California (Western Division). Continue Reading Start-Up Car Companies Clash in Electrifying Trade Secrets Case

The Protocol for Broker Recruiting (“Protocol”) allows for reciprocal poaching of brokers. More specifically, if a broker leaves one Protocol firm for another Protocol firm, the broker can a) take certain account information (client names, addresses, telephone numbers, e-mail addresses, and account title information) to his/her new firm and b) solicit the clients he/she serviced at his/her former firm. Naturally then, the Protocol’s requirements conflict with confidentiality and restrictive covenant provisions that are commonly found in broker employment agreements and firm policies.  Continue Reading Are Financial Services Firms Reconsidering the Protocol?

In Seyfarth’s first webinar in its 2018 Trade Secrets Webinar Series, Seyfarth attorneys Michael Wexler, Robert Milligan, and Joshua Salinas presented 2017 National Year In Review: What You Need to Know About the Recent Cases/Developments in Trade Secrets, Non-Compete, and Computer Fraud Law. The panel reviewed noteworthy cases and other legal developments from across the nation over the last year in the areas of trade secrets and data theft, non-competes and other restrictive covenants, and computer fraud. Plus, they provided their predictions for what to watch for in 2018.

As a conclusion to this well-received webinar, we compiled a summary of takeaways:

  • While the Defend Trade Secrets Act provides for an ex parte seizure order, courts have been very unwilling to provide such relief except in extraordinary circumstances.
  • In light of recent state laws and appellate court decisions at both the federal and state level in 2017, choice of venue and choice of law provisions must be carefully considered and strategically implemented.
  • The ABA’s May 4, 2017, Ethics Opinion encourages lawyers to have an open exchange of communication with their clients about the securities measures their firms are taking to safeguard the clients’ confidential information.