Customer List Not a Trade Secret according to Court Ruling
For something to be a trade secret, it needs to be…secret.
Of course, businesses should be able to protect information that is economically valuable from their competitors; however, business owners in Arizona should be aware of what it takes for their otherwise confidential information to be a legally enforceable trade secret.
One business learned this lesson the hard way in a recent Arizona case, Calisi v. Unified Financial Services, LLC.
The case involved Calisi, a certified public accountant (CPA) and former employee at Unified Financial Services, LLC (UFS). Calisi worked at UFS as a CPA, then was promoted to vice president of operations. When the president of UFS became dissatisfied with Calisi’s performance, Calisi was replaced by another employee and became a non-salaried commission-only financial advisor and tax season coordinator. For his work as the tax season coordinator, Calisi was to be paid $15,000.
After Calisi refused to sign documents allowing him to work for the new broker-dealer with which UFS planned to associate, his employment ended.
According to the court decision, “Calisi then sought help from Daryle Messina, owner of a mortgage company that from 2004 to 2008 had maintained a mutual referral arrangement with UFS.” Messina sent out a mass email to his company’s clients, which included clients of UFS, letting them know that Calisi had joined the company and was offering a discount on tax services.
Later, Calisi started his own financial advising firm and sued UFS for unpaid commissions and unpaid wages. In response, UFS countersued Calisi for misappropriation of trade secrets, claiming that he had misappropriated the company’s customer lists.
The court awarded Calisi $43,760 in treble damage for unpaid compensation and UFS $51,566 for misappropriation of trade secrets. As a result, Calisi was found to owe UFS more than $7,000. Calisi appealed the ruling, and the appellate court agreed that UFS has failed to show that its customer list was a trade secret.
In Arizona, a trade secret is “information, including a formula, pattern, compilation, program, device, method, technique or process, that both:
(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
A customer list that is a trade secret would have information about customers that is valuable, unique, and not readily accessible by competitors. Public knowledge cannot be considered a trade secret, nor can information that is unique to a business but which the business makes no effort to keep a secret.
If you are a business or an employee faced with a misappropriated trade secret issue, contact an experienced employment law attorney in Scottsdale, AZ for guidance.