District Court Ban on Soliciting Customers of Ex-Employer Exceeded Reasonable Bounds
By a MetNews Staff Writer
A District Court judge went overboard in barring ex-employees of a company, which is suing for theft of trade secrets, from soliciting business, in their now competing enterprises, from any of the plaintiff’s customers whose identities were revealed in pilfered records, the Ninth U.S. Circuit Court of Appeals has held, noting that the names of such potential customers can be readily ascertained from public sources.
The plaintiff is ExamWorks, LLC, a Georgia-based company which provides independent medical examinations at centers throughout the United States, as well as in the United Kingdom and Australia. Those sued are its ex-California employees Todd Baldini, Lawrence Stuart Girard, Abygail Bird and Pamella Tejada.
The opinion notes that Tejada entered into a settlement and has dismissed her appeal and Bird has indicated an intent to do the same.
Chief District Court Judge Kimberly Mueller of the Eastern District of California, in granting a preliminary injunction on June 3, declared:
“Defendants are hereby enjoined from conducting business with any individual or entity that did business with ExamWorks before defendants stopped working there to the extent those individuals or entities are identified in the bundle of trade secret materials misappropriated by defendants, including, without limitation, curated lists identifying ExamWorks’ clients, medical providers, and doctors; provided however that defendants are not precluded from lawfully announcing their new employment as long as any announcement does not make use of plaintiff’s trade secrets.”
The remaining appellants, Baldini and Girard, in opposing that provision when it was proposed, admitted that they swiped ExamWorks information while employed by it, but said in their District Court opposition:
“Their devices and accounts have now been turned over to a forensic neutral and they will never have access to that material again. Baldini and Girard do not oppose an injunction to require the completion of the forensic inspections of their devices and accounts, or to prevent them from using or disclosing any ExamWorks confidential information. The proposed injunction, however, goes much farther than the law permits.”
Ninth Circuit’s Opinion
The Ninth Circuit panel agreed. In a memorandum opinion filed Wednesday, Judges Daniel Aaron Bress, Andrew D. Hurwitz, and Jacqueline H. Nguyen, said that neither California law relating to trade secrets—which was applied in the diversity case—nor the indistinguishable federal provisions, justify an order of such broad scope.
The opinion says:
“Defendants maintain, and ExamWorks does not dispute, that defendants can identify numerous potential customers through publicly available sources, such as online directories. While these customers may also be among ExamWorks’s thousands of customers, there is not a sufficient basis for enjoining defendants from conducting business with ExamWorks customers they have not solicited using the misappropriated trade secrets.”
The panel went on to specify:
“We appreciate that the district court was handling a fast-moving preliminary injunction proceeding and note that the defendants on appeal challenge only one portion of the preliminary injunction. The other portions of the preliminary injunction remain in effect. This includes the requirement that defendants are enjoined ‘from acquiring. accessing, disclosing, or using’ ExamWorks’s trade secrets, which on its own prohibits defendants from using ExamWorks’s trade-secret compilations to solicit ExamWorks’s customers.”
The case is ExamWorks, LLC v. Baldini, 20-16125.
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