Ohio Supreme Court Agrees That Former Employee's Use of Secret Client Information from Memory Violates Trade Secrets Act

Today, a unanimous Ohio Supreme Court ruled that the Uniform Trade Secrets Act was violated by a former employee who had formed his own actuarial business and – based strictly on his own memory of customers he had met during his employment -- solicited a few customers from his former employer’s trade secret customer list. Al Minor & Assoc., Inc. v. Martin, Slip Opinion No. 2008-Ohio-292. In doing so, the Court affirmed the Franklin County Court of Appeals and Court of Common Pleas which had imposed a verdict of $25, 973 against the former employee.

According to the Court's opinion, the defendant employee had never been required to sign a non-competition agreement during his employment with the plaintiff employer. When he ultimately resigned his employment and started his own competing business, the employee took no confidential or trade secret documents with him. Nonetheless, he solicited 15 of his former employer’s 500 customers based on his own memory of the individuals and companies with whom he had previously done business. The former employer sued for lost business in the amount of $25,973 and sought, but was denied, an injunction against the former employee.

Importantly, the defendant employee failed to preserve the issue as to whether the client list at issue in fact satisfied the statutory definition of trade secret. Therefore, the Court was not faced with deciding whether the employer had taken appropriate steps to keep information on the list secret, etc. and was, instead, limited to assuming that the list was a trade secret. “Every employee will of course have memories casually retained from the ordinary course of employment. The Uniform Trade Secrets Act does not apply to the use of memorized information that is not a trade secret pursuant to R.C. 1333.61(D).”

Where the underlying customer list was a trade secret, “[n]either R.C. 1333.61(D) nor any other provision of the UTSA suggests that, for purposes of trade secret protection, the General Assembly intended to distinguish between information that has been reduced to some tangible form and information that has been memorized.” While some older trade secret cases in some states recognized a distinction between memorized information and information derived from a written list, “[i]n principle, however, the distinction between written and memorized information should not be encouraged. The form of the information and the manner in which it is obtained are unimportant; the nature of the relationship and the defendant’s conduct should be the determinative factors. The distinction places a premium upon good memory and a penalty upon forgetfulness, and it cannot be justified either from a logical or pragmatic point of view.”

“Based on the foregoing, we conclude that the determination of whether a client list constitutes a trade secret pursuant to R.C. 1333.61(D) does not depend on whether it has been memorized by a former employee. Information that constitutes a trade secret pursuant to R.C. 1333.61(D) does not lose its character as a trade secret if it has been memorized. It is the information that is protected by the UTSA, regardless of the manner, mode, or form in which it is stored – whether on paper, in a computer, in one’s memory, or in any other medium.”

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/newpdf/0/2008/2008-Ohio-292.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Federal Sixth Circuit Revives Retaliation Claim Where Employer Fired Employee Upon Learning of EEOC Charge.

On January 31, 2008, the Sixth Circuit affirmed the dismissal of an age discrimination claim where the plaintiff could not identify a similarly-situated younger employee with better treatment, but revived a retaliation claim where the employer had fired the employee the same morning he returned to the office after the EEOC served the employer with the EEOC Charge. Mickey v. Zeidler Tool & Die Co., No. 06-1960 (6th Cir. 1/31/08). In particular, the EEOC Charge was received on October 14, 2004 while the employer was out of town. He returned to work on October 19, 2004 and fired the plaintiff at 7:30 a.m. in the morning. The Court held that the proximity of the employer’s termination decision and learning of the EEOC Charge was sufficient by itself to establish a prima facie case of retaliation.

The Court's opinion also suggested that events which predated the filing of the EEOC Charge and the employer's knowledge of it could support a prima facie case, but there was a dissenting opinion on that issue.

In addition, the plaintiff presented sufficient evidence of pretext. While the employer claimed that his decision had been motivated by poor business conditions and the lack of work for the plaintiff to perform, the plaintiff was able to show that the records that the employer had been reviewing the prior weekend showed it was profitable in 2004 and that it had been recruiting to hire employees with the plaintiff’s qualifications both before and after the plaintiff’s termination. While the jury could believe that the employer was attempting to keep the company afloat after three years of losses, the court refused to make that determination at the summary judgment stage. Moreover, although the employer claimed the plaintiff’s performance had been deficient and had substantially reduced his compensation earlier in the year, there were no negative performance evaluations in his personnel file. Further, the employer’s answers to deposition questions were evasive when asked whether the EEOC Charge played a role in the termination decision. Indeed, at one point the employer denied knowing about the EEOC Charge before he terminated the plaintiff and then corrected himself when challenged.

Insomniacs can read the full decision at http://www.ca6.uscourts.gov/opinions.pdf/08a0056p-06.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Defamation and Privilege in the Workplace

Last month, the Ohio Court of Appeals affirmed the dismissal of most of the claims of defamation and tortious interference brought by a discharged supervisor against the employees’ and union officials whose allegations had led to his termination. Gintert v. WCI Steel, Inc., 2007-Ohio-6737 (12/14/07). In that case, the supervisor had been accused over the course of a couple of years of, among other things, sexually harassing two male co-workers, making racial slurs and leaving work early without permission to begin his vacation. He then brought suit against the employees who made the allegations and the union stewards who brought the allegations to the attention of management, which terminated. (The lawsuit against the employer was stayed when the employer filed for bankruptcy).

The Court dismissed all but one of the claims because the challenged statements were reasonably connected with the union grievance procedure and, therefore, were protected by a qualified privilege. “Under the doctrine of qualified privilege, statements made in good faith on a matter of common interest between an employer and an employee, or between two employees, concerning a third employee are protected in an action for defamation. . . . If the requirements for the qualified privilege are established, then the burden falls on the plaintiff to show by clear and convincing evidence that the statements were made with actual malice, i.e., that the statements were made with knowledge or reckless disregard for their truth or falsity.” In addition, Ohio recognizes “that "union officers and employees are immune from personal liability for acts undertaken as union representatives, on behalf of the union."

However, the court found that one of the sexual harassment accusations could have been made with actual malice because the plaintiff supervisor denied categorically to having made any of the alleged sexually harassing statements and this raised a question of fact as to whether the defendant made the accusation with knowledge or reckless disregard for the truth. Nonetheless, the court dismissed the tortious interference claims because of the same privilege and held that the accusations were not outrageous enough to sustain an emotional distress claim.

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/newpdf/11/2007/2007-ohio-6737.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Ohio Court of Appeals: Whistleblower Statute Requires More Notice of Product Flaws Than in Regular Quality Control Report.

Near the end of last year, the Ohio Court of Appeals affirmed the dismissal of statutory and common-law whistleblower/wrongful discharge claims on the ground that the plaintiff quality control manager failed to sufficiently specify the danger in writing of a defect in the production of components used in childcare products. Behm v. Progress Plastic Prods., Inc., 2007-Ohio-6357. The plaintiff claimed that he had been laid off for bringing serious concerns to management about the safety of its product. The parties agreed that the employer had manufactured parts which did not comply with its customers specifications, that the parts were supposed to support the weight of infants, that plaintiff tested the parts and found them to be too brittle for their intended purpose and that he advised his employer to recall the already shipped product:

"Attached are Melt Flow Analysis [sic] we've collected on the pad ring samples we have in Bellevue. As the higher the melt flow the more brittle the product I have serious concerns about product that has probably shipped to Evenflo. * * * The attached data does not bode well for this material having been used. We know Evenflo has product in house from 3/2 date codes, I've requested specific samples from that date be sent to Bellevue from Tiffin along with the dates of all product in stock at Tiffin. As you can see from the attached data some dates are missing and I fear they have shipped to Evenflo. We need to decide what to do as speed is of the essence in getting bad product possibly shipped to the customer from reaching consumers."

“Protection as a whistleblower requires an employee's strict compliance with the dictates of R.C. 4113.52. The statute's threshold requirements demand that both: (1) an employee reasonably believed that a statute, work rule, or company policy was violated; and (2) an employee reasonably believed the violation was (a) a misdemeanor which created imminent danger of physical harm, (b) a hazard to public health or safety, or (c) a felony. . . . R.C. 4113.52 also requires two types of notification from a person claiming protections under the statute: oral and written. Focusing on the latter, the statute demands that a person submit a written report with "sufficient detail to identify and describe the violation" to the same supervisor or officer that he orally notified. R.C. § 4113.52(A)(1)(a), (A)(3).”

The court rejected the employer’s argument that the plaintiff did not sufficiently specify the source of law which it purportedly violated. The plaintiff had testified that he knew there were criminal laws governing the production of child car seats, that he assumed similar laws existed for other child care products, and he was concerned that someone would get hurt from the defective products. As the court correctly noted, “sensible minds could differ as to whether appellant reasonably believed the violation constituted a hazard to public health or safety. Both appellant's deposition and his affidavit indicate that he in fact believed that a safety hazard existed.”

Nonetheless, the court found the plaintiff’s written notice to be insufficient under the statute. “Noticeably absent from . . . appellant's the message[] to [his boss] was any mention of a violation or even a safety concern. In fact, in appellant's deposition he stated that he did not recall ever expressing in written form a safety concern to anyone [in management]. The abovementioned messages lacked what the statute demands: sufficient detail to identify and describe a specific safety violation. . . . Nothing in appellant's messages distinguishes them from a regular quality control concern characteristic of his quality management position . . . . Thus, . . . appellant failed to comply with the statute. . . . Appellant's failure to strictly adhere to the dictates of R.C. 4113.52 by not filing a report in the manner required, prohibits him from claiming the protections of the statute.”

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/newpdf/6/2007/2007-ohio-6357.pdf.

By way of comparison and contrast, in May 2007, the Cuyahoga Court of Appeals had reversed summary judgment in favor of an employer in a lawsuit brought by a whistleblowing former quality control employee who allegedly had been similarly fired in violation of public policy for refusing to certify airplane parts as meeting the customer’s quality specifications. Zajc v. Hycomb, 172, Ohio App. 3d. 117, 2007-Ohio-2637. The Court of Appeals believed that the plaintiff had identified sufficiently clear statutory and regulatory sources of authority for this public policy claim: the Uniform Commercial Code (giving the buyer the right to reject non-conforming goods), the Products Liability Statutes (creating strict liability where the risks exceed the benefits of a design) and Federal Aviation Administration regulations which require that a production inspection system must be in place to determine, inter alia, that subcontracted parts must be as specified in the design data, that parts are be inspected, and that inspection records are maintained. The court rejected arguments that the products liability laws sufficiently protect consumers by permitting injured consumers to sue the manufacturer without permitting the manufacturer’s employees sue for wrongful discharge. http://www.sconet.state.oh.us/rod/newpdf/8/2007/2007-ohio-2637.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Ohio Appeals Court Affirms OCRC Finding that One Week of Sexual Comments is Enough To Constitute Harassment

• Last year, the Fayette County Court of Appeals affirmed a decision by the Ohio Civil Rights Commission that a Washington Court House dentist had sexually harassed a chair-side dental assistant for about a week and then constructively discharged her about a month later when he retaliated against her for complaining. Jordan v. Ohio Civ. Rights Comm., 173 Ohio App.3d 87, 2007-Ohio-3830. The court found sufficient evidence in the record to support the OCRC conclusions that one week of comments could create a severe and/or pervasively hostile work environment based on the following testimony:
  
  · The assistant began keeping a diary of the dentist’s comments after he stated to her on her first day that he assured her that her mistakes were minor and then “stated, ‘eventually you'll know what I'm thinking * * * but then you'll probably want to slap me.’”
  · On her second day of work, he followed her around and then “grabbed her from behind and pulled her against him.”
  · He told her that his “wife was going on vacation and suggested that [she] should meet him at a restaurant called The Dock in Chillicothe.
  · He “frequently invited her over to his home to show her his horses and described to her in detail the horses' breeding habits.”
  · He “repeatedly suggested that she ‘needed a sugar daddy’ and that he had several friends that would ‘drop money’ on her if she had sex with them.
  · He “talked to her about taking Viagra and that the ‘prostitutes in Vegas hated when men took Viagra because it wore them out.’”
  · He said that" he couldn't tell anything about [her] body type because he hadn't seen me undressed."
  · He offered “to show her nude photos from the internet and told patients that she used to work in a strip club.”
  · After a patient commented that she was left-handed, he “responded to the patient that "left-handed women make better lovers."
  
  Following this last incident, the assistant testified that she finally confronted appellant for embarrassing her in front of the patient and informed him that she did not appreciate his sexually-oriented comments and asked him to stop making those types of comments. According to the testimony, the dentist stopped being friendly to her, ignored her and criticized her frequently. About six weeks after she was hired, she quit without notice when the dentist objected to her making long-distance telephone calls to her boyfriend from the office telephone.
  
  The OCRC awarded her both front and back pay, but the Court remanded the case to the OCRC to explain the basis for its financial calculations. The Court determined that the dentist’s sexually harassing conduct was sufficiently severe and pervasive even though it only lasted about a week because it affected her work performance and involved one incident of inappropriate touching (i.e., the hug). It also concluded that there was no abuse of discretion in finding that the dentist had constructively discharged the assistance because "[t]he evidence in the record supports the finding that Respondent singled Complainant out for treatment that became unbearable and intolerable and unreasonably altered the terms and conditions of her employment which forced Complainant to resign."
  
  Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/newpdf/12/2007/2007-ohio-3830.pdf.
  
  NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.