Trade Secrets & Employee Mobility

Not many lawsuits under the Employee Retirement Income Security Act (“ERISA”) turn on whether an employer legitimately insisted that an employee sign a no-compete agreement in order to receive benefits, but a federal court lawsuit currently pending in Chicago presents that very scenario.

Specifically, in a case brought by a former Bank of America employee against Bank of America and others, Charles Corbisiero alleges that he was lured into continuing to work for Bank of America by a promise of certain allegedly vested bonuses and other benefits, only to be told upon his ...

A high-profile no-compete case currently pending in Chicago may turn on whether merely "preparing to compete" constitutes "engaging in" contractually prohibited business activities.

We previously wrote concerning a May 22, 2009 temporary restraining order granted by the U.S. District Court for the Southern District of Ohio against three former employees of UBS Financial Services Inc. ("UBS"), in effect pending an arbitration hearing before the Financial Industry Regulatory Authority ("FINRA"). On June 3, 2009, UBS successfully moved the District Court to expand the TRO and for a preliminary injunction on the basis of additional evidence. The expanded TRO shows that even a plaintiff who has secured temporary injunctive relief from a court need not wait for a scheduled FINRA injunctive hearing if its business interests continue to be threatened in the interim.

Although issues involving misappropriation of trade secrets are frequently litigated, they rarely result in criminal charges. However, according to recent stories in The Chicago Tribune, Reuters.com, and other media outlets, a former employee of Goldman Sachs was recently arrested by the FBI for allegedly stealing trade secrets (software code regarding a proprietary trading system) worth millions of dollars.

A recent decision of the United States District Court, Southern District of New York, illustrates the importance for employers of making sure non-competition agreements are correctly executed by employees.

A recent article in Lawyer USA discusses how litigation over noncompetition and nonsolicitation agreements has been on the rise in recent years.

A dispute between UBS Financial Services Inc. ("UBS") and three of its former brokers highlights various issues involving trade secrets and non-solicitation covenants in the financial services industry. On May 22, 2009, on UBS's motion in UBS Financial Services Inc. v. Lofton, Case No. 1:09 CV 367, the U.S. District Court for the Southern District of Ohio entered a preliminary injunction prohibiting the three individuals from soliciting any securities investment business from UBS customers pending an arbitration hearing before the Financial Industry Regulatory Authority ("FINRA").

In EMC Corp. v. David A. Donatelli, case number 09-1727-BLS2 in the Suffolk County Superior Court in Massachusetts, the Court modified the preliminary injunction it had issued against Donatelli by allowing him to start working for HP in California. The Court issued a narrow order tied to the protectable interest of EMC while at the same time, not depriving Donatelli his opportunity to pursue his livelihood in a competitive business.

While there is no magic wand that will prevent a theft or stop a thief in his tracks, a company can substantially lower the risk of trade secret misappropriation through proactive policies and procedures.

On May 4, the Superior Court in Massachusetts ruled that EMC, a Massachusetts corporation, could obtain injunctive relief preventing Mr. Donatelli, who had been President of one of EMC's major divisions, from starting a job at HP in California even though California has a statutory prohibition on covenants not to compete. The Court made some important findings in its decision.