As readers of this blog know, Lauren and I represent employees in contract disputes with employers. We constantly hear from the employers, and their attorneys, that the departing employees have “stolen” confidential pricing information and are using the information to the disadvantage of the employer. “We are going to sue their pants off,” the employers cry!
Well….maybe and maybe not!
Not all pricing information and formulas are confidential. It depends on what steps the employer took to maintain the confidentiality of those prices and formulas. This very issue was analyzed in a recent case litigated in Tulsa, Oklahoma. In the case [Southwest Stainless, LP v. Sappington, 582 F.3d 1176 (10th Cir. 2009)], two employees (John Sappington and William Emmer) worked for over ten years supplying metals to customers in the Tulsa-area on behalf of Southwest Stainless. Within a month of each other, Sappington and Emmer left Southwest to work for a local competitor, Rolled Alloys. After their departure, Southwest identified two Southwest customer (previously serviced by Sappington and Emmer) who transferred business to Rolled Alloys. At trial, it was adduced that the former employees had assisted in preparing pricing quotes to these customers, including re-quoting Rolled Alloys’ prices at a price lower than the Southwest quote known to the former employees. The employer won at trial but the case was appealed and the employees ultimately prevailed.
The appellate court reversed the trial court, finding a distinction between “general measures” used to protect trade secrets and the “particular” pricing at issue in this case. The court cited evidence that Southwest had provided customers with “posted pricing,” that customers revealed competitors’ pricing, and that Southwest did not prevent customers from sharing its information. The appellate court relied upon the United States Supreme Court decision of Rucklehaus v. Monsanto Co., 467 U.S. 986, which held:
If an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.
In the Southwest Stainless case, because the employer had “disclosed the quote” and the customer was “under no obligation to keep the information confidential,” the Court held the trial court erred in holding such a price quote confidential and reversed the judgment in favor of the employer.
The Moral of the Story: Just because the employer says its price lists are confidential doesn’t always make it so.