Business Litigation I SEPTEMBER 4, 2019

Trade Secret Victory: Defeating Emergency Temporary Restraining Order Motion and Obtaining Summary Judgment for the Defendants

In 1979, at age 18, and shortly after completing high school, “Dave” started working at Company. “Ron” had just recently started the Company, which specialized in installation of fire and security alarm products throughout metropolitan Detroit.

Every day for 39 years, Dave gave his all for the Company and Ron. Regularly working 12 hour days, six days per week, Dave devoted his entire adult life to the success of the Company. The Company grew substantially, and became a well-known leader in its industry. Because of Dave’s relentless drive and devotion, the Company enjoyed business relationships with some of Michigan’s largest publicly traded corporations. Over time, Dave’s position elevated from a general laborer, to a manager, to head of operations, to ultimately the only vice-president of the Company.

Dave did not have a signed written employment agreement in place or any other writing describing his arrangement with the Company.

As the decades passed, Ron’s personal involvement at the Company declined. Many employees, customers, and suppliers viewed Dave as the true leader of the Company. Rather than appreciating Dave and his unwavering commitment to the Company, Ron resented Dave. Ron frequently belittled Dave in front of others at work, calling Dave derogatory names and mocking Dave’s lack of formal higher education beyond high school.

Eventually Dave grew weary of Ron’s antics. Dave began to consider other employment options. A newer company in the area made Dave an offer to join it as a sales manager, and proposed to nearly double Dave’s compensation. Dave decided to leave the Company for the new opportunity.

Dave knew than Ron would react unreasonably to Dave’s decision to leave the Company after 39 years and likely terminate him when he gave his two weeks’ notice. As Dave prepared to leave, he realized that he had substantial personal data stored on his Company computers, including family photos, videos, personal income tax return documents, books, and the like. Dave transferred to himself all of this data, and then offered his two weeks’ notice to Ron. As expected, Ron terminated Dave immediately.

Days later, Ron and Company sued Dave and his new employer in the Oakland County Circuit Court for alleged trade secret misappropriation. Company also filed an ex parte emergency temporary restraining order motion (“TRO”) seeking to force Dave to stop using Company trade secrets that it alleged Dave misappropriated and took with him to the new employer.

Dave’s new employer engaged me to represent them in the case. I appeared at the TRO hearing–just two days after the case was initiated–and defeated the Company’s motion. Two factors were most important there: First, Dave had no written agreement in place with the Company. There was no non-competition, non-solicitation, or any other restrictive covenants in place that contractually limited Dave’s work activities. 

Second, a TRO “is an extraordinary type of relief available only with a showing of irreparable harm.” Mich Coalition of State Employee Unions v Mich Civil Sery Comm’n, 465 Mich 212, 228; 634 NW2d 692 (2001). As an extraordinary remedy, injunctive relief is normally granted only when “(1) justice requires it, (2) there is no adequate remedy at law, and (3) there exists a real and imminent danger of irreparable injury.” Head v Phillips Camper Sales & Rental, Inc, 234 Mich App 94, 110; 593 NW2d 595 (1995); see alsoRogham v Block, 590 F Supp 150, 153 (WD Mich 1984), aff’d 790 F2d 540 (6th Cir 1986) (“There is no power the exercise of which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuing of an injunction.”). Moreover, injunctive relief “should be used only in the most compelling cases.” Thompson v Chrysler Corp, 382 F Supp 1317, 1319 (ED Mich 1974), aff’d 569 F2d 989 (6th Cir 1978); see alsoAmerican Civil Liberties Union of Kentucky v McCreary County, 354 F3d 438, 444 (6th Cir 2003) (stating that “[a] preliminary injunction is an extraordinary measure that has been characterized as one of the most drastic tools in the arsenal of judicial remedies.”).

The Company had to convince the Court with strong evidence that Dave had actually misappropriated trade secrets and used them, causing the Company irreparable harm. The Court held that the Company failed to meet its burden, and denied the TRO motion.

After the Court properly denied TRO motion, the case proceeded to discovery. I bombarded the Company with requests targeting the specific trade secrets that Dave had allegedly misappropriated and subsequently used. 

There are three elements of a claim for misappropriation of trade secrets under the Michigan Uniform Trade Secrets Act: “(1) the existence of a trade secret; (2) the defendant’s acquisition of the trade secret in confidence; and (3) the defendant’s unauthorized use of it.” Polytorx, LLC v University of Michigan Regents, 2015 WL 2144800, at *6 (Mich Ct App May 7, 2015) (quoting Stromback v New Line Cinema, 384 F3d 283, 302 (6th Cir 2004)). 

Michigan law defines a “trade secret” as “information, including a formula, pattern, compilation, program, device, method, or process,” that (1) “[d]erives independent economic value, actual or potential, from not being generally known” and (2) “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” MCL § 445.1902(d); Delphi Automotive PLC v Absmeier, No. 15-cv-13966, 2016 WL 787137, *10 (ED Mich March 1, 2016).

“Michigan courts have held that an alleged trade secret must be identified ‘clearly, unambiguously, and with specificity.’” See Am Furukawa, Inc v Isthihar Hossain, HT Wire & Cable Americas, LLC, 2016 WL 3444079, at *3 (ED Mich June 23, 2016) (citing Utilase, Inc v Williamson, 1999 WL 717969, *6 (6th Cir Sep 10, 1999)); Dura Global Technologies, Inc v Magna Donnelly Corp, 662 F Supp 2d 855, 859 (ED Mich, 2009) (“A party alleging trade secret misappropriation must particularize and identify the purported misappropriated trade secrets with specificity.”). “The identification of alleged trade secrets is important because ‘the general knowledge of an employee does not constitute a trade secret.’” Lowry Holding Co, Inc v Geroco Tech Holding Corp, 2012 WL 1890231, *3 (Mich Ct App 2012). (emphasis added).  And the concept of misappropriation of trade secrets “must not compromise the right of employees to change jobs.” Am Furukawasupra, at *11 (quoting Degussa Admixtures, Inc v Burnett, 277 Fed Appx 530, 535 (6th Cir 2008)).

Throughout discovery, including when I deposed Ron, the Company repeatedly generically alleged that Dave had taken “everything” or “all of our trade secrets” when Dave had transferred to himself his personal data. The Company never identified with specificity any alleged trade secret that Dave had allegedly taken. Moreover, the Company admitted that it had no evidence that Dave had ever actually used any allegedly misappropriated trade secret, or that the Company had suffered any damages as a result of any such potential alleged use. 

In the end, the Court granted my motion for summary judgment and dismissed the Company’s entire case. The Company is appealing.