Thursday, September 25, 2014

Advancement Rights Percolate Beneath Delaware Trade Secrets Lawsuits

Assume you represent a company and suspect a departed executive is competing unfairly by using the company's trade secret information. Further assume you have a case with, at least at first blush, a strong set of facts and a motivated client which wants to move quickly. But like most trade secrets cases, the suit is going to cost a lot of money and take a great deal of discovery to resolve.

How do you feel about advising your client that it may need to pay the ex-employee's legal fees as the case proceeds?

This is the reality of trade secrets lawsuits, particularly against former officers and directors of Delaware corporations. Delaware has a broad public policy that encourages individuals to serve in officer and director roles. To entice that service, Delaware corporate law allows, and virtually all company bylaws adopt, broad advancement rights.

So what is "advancement"?

The concept simply refers to a corporation's obligation to front (or, advance) legal expenses that an officer or director incurs by reason of her service to the company. Unlike indemnification, advancement means that an officer or director may have a right to receive regular payments to defray legal expense as the proceeding develops over time.

Importantly, this advancement right even can apply when the officer or director sits in an adversarial position to the company, as the officer or director would in a trade secrets misappropriation case. I have highlighted above the phrase "by reason of" because it is central to many disputes over whether an individual is properly entitled to advancement of legal fees.

Delaware courts have provided a helpful definition for this key phrase: it simply means there must be a "causal connection" between the underlying proceedings and one's official corporate capacity. See Homestore, Inc. v. Tafeen, 888 A.2d 204, 214 (Del. 2005).

There are a growing number of cases that apply the official capacity test to trade secrets cases. The courts finding advancement rights in these cases reason that where a claim is based on misuse of confidential information learned in an individual's official corporate capacity, that claim is one that qualifies as being brought "by reason of" her service to the company. There are several cases that address this, and most look at the nature of the allegations found in the underlying complaint. An example for practitioners comes from Pontone v. Milso Indus. Corp., 2014 Del. Ch. LEXIS 152 (Aug. 22, 2014), a fairly common dispute between a company and a former officer, who competed after his non-compete agreement ended. The core allegation dealt with the officer's purported misuse of trade secrets to lure away customers and employees of the former employer.

The overarching rationale that allows for advancement is that a corporate officer would not have had access to confidential information but for her service to the company. This, courts reason, provides the essential link between the challenged conduct and the official capacity needed to meet the "by reason of" language that virtually all Delaware corporations have in their bylaws.

The advancement rights that are likely available may be limited to officers and directors, as opposed to employees. But it is essential to parse carefully the language of the state's enabling statute and the corporate charter and bylaws to see who qualifies for advancement and what the precise conditions are for receiving advancement. Though many states will follow Delaware case law, there is variation among the statutory provisions and a high likelihood that a non-Delaware entity will not provide for broad advancement rights.

So for those attorneys who are filing trade secrets cases, it is essential to evaluate the potential for advancing your adversary's costs along the way. In effect, this could double your client's litigation expense.

Thursday, September 18, 2014

A Fool's Errand: Seizing Instrumentalities of Trade Secrets Theft

There is much debate about the companion pieces of legislation introduced in Congress that relate to trade secrets law.

Those two proposed laws are known as the Defend Trade Secrets Act of 2014 (the Senate version) and the Trade Secrets Protection Act of 2014 (the House version). The debate often centers around whether it is sensible for Congress to federalize a branch of law traditionally reserved to the States, under which a well-established body of case law already exists. There also is the perception that federal courts provide muscle that state courts cannot, and that in certain states overly taxed judges do not have the resources to handle complicated discovery disputes and the sheer pace of trade secrets litigation.

One area of friction that is starting to gain some attention concerns the federal proposal to allow for ex parte seizure orders in trade secrets cases - something that commands almost no attention at the state level. Seizure orders are common in copyright and trademark cases because the infringing good (a pirated movie, for instance) is itself a reflection of the wrong. In trade secrets cases, however, the device used to store a stolen secret - a hard-drive or a server - may have (indeed, likely has) a mostly legitimate, non-infringing purpose. The DTSA attempts to incorporate the provisions of the Trademark Act in regards to seizure order, but this fails to recognize the vast difference in the type of intellectual property which trademark law is intended to protect compared with trade secrets law.

The TSPA is, to be certain, more mindful of the problems associated with the ex parte seizure order. But in trying to be more balanced (ostensibly), the TSPA deploys a weird seven-part test that an applicant must show on an ex parte basis. As if district court judges need more seven-part tests to apply.

Part one of the test specifically requires an applicant to show that a temporary restraining order would be ineffective because the responding party would evade it. Yet, the law clearly allows federal courts to issue orders directed at parties to preserve relevant evidence. And the destruction of evidence not only leads to sanctions, but it's also a criminal act. The built-in deterrent from the common law is so strong that part one of the test is almost self-defeating. Then, there's part six of the test, which separately requires an applicant to show that the responding part would "destroy, move, or hide the property" subject to the seizure order. I have thought about this too much and still cannot see how this is any different than the part one, but I suppose someone will come up with a reason. The only "benefit" I can see is that it gives an associate three more pages of briefing to come up with in the ex parte motion.

The seventh part of the test is downright bizarre, as it states that the applicant cannot have publicized the requested seizure. This raises the obvious question of what constitutes a publication. If a company needs to reassure investors, lenders, or clients that it is taking steps to remedy trade secrets theft that includes the application for a seizure order, it seems unusual to penalize the company for such a practice and remove an otherwise viable remedy the statute provides. There's no policy rationale to discourage publication.

In opposing the new federal legislation, a group of 31 law school professors stated that they were "concerned the TSPA requires a level of secrecy about court rulings that is unprecedented." I don't believe that's the case at all, since nothing in the TSPA requires the impoundment of court orders relating to ex parte seizure applications. My concern is that existing law covers any concerns Congress may have. And the new law may stand in the way of applying that time-tested law relating to preservation of relevant evidence, expedited discovery, and the use of court-appointed neutrals to image and copy digital storage media.

I have been relatively ambivalent when it comes to federalizing trade secret law. But any law that allows for the use of ex parte seizure orders is pushing me towards favoring the current state law regime. This is simply a poor fit for a branch of intellectual property law that is qualitatively different than trademark and copyright.

Monday, September 15, 2014

A Non-Compete Damages Overview

Companies that enforce restrictive covenants against ex-employees often face an uphill battle in proving damages resulting from a breach. It is for this reason that in the vast majority of cases a plaintiff focuses primarily on securing an injunction right away. It also is fairly clear that unless a new employer has aided the breach in some respect (for which it could be liable to an equal extent as the breaching employee) that an individual likely does not have the ability to pay a monetary judgment.

Still, it is important for plaintiff's counsel to understand the damages landscape and how to value a case. In this regard, the following damages theories might be available in a non-compete dispute:


  1. Lost profits - The conventional method of proving contract damages is through a showing of lost profits. By definition, lost profits are speculative to a degree because they seek to project a model of economic activity in a counter-factual world. Put another way, but for the breach of the restrictive covenant, what profits would the employer have earned? Lost profits claims are delimited by the "reasonable certainty" rule, which means that a plaintiff must establish loss to a reasonable degree of certainty. Many courts confuse this rule's application. Generally speaking, it applies to the fact of damage. And once a plaintiff shows some damage, it is entitled to greater latitude in quantifying the harm - particularly where the employee's conduct has impeded quantification. In non-compete cases, a party may attempt to prove lost profits by projecting a picture of future sales from diverted or impaired customers.
  2. Restitution - Although lost profits is likely the preferred route to establish damages, the concept of restitution also may apply in non-compete suits. Many courts hold that if a plaintiff's lost profits (or reliance) damages are unavailable due to the uncertainty in measuring the loss, a plaintiff can recover in restitution. The term simply refers to the plaintiff's interest in having restored to it any benefit the defendant achieves. Non-compete cases present an obvious case for restitution damages when a new employer has benefited from an employee's breach. The damages simply may be the new employer's own profits that are tied to the employee's breach, not those the ex-employer would have earned absent the breach.
  3. Liquidated Damages - I have written extensively, both in this blog and in published journals, regarding the benefits of using liquidated damages clauses in non-compete agreements. The idea is that an employer can predetermine its damages by setting forth a formula in a contract. That formula then would apply if (a) it's a reasonable measure of damages, (b) the potential loss is difficult to quantify, and (c) it is not intended as a penalty to coerce contractual performance. Many cases find that non-compete contracts are well-suited to liquidated damages clauses. The reason is that the interest a non-compete protects is largely intangible. Therefore, proving specific, monetary loss always will be difficult. Drafting is essential, with the employer bearing a significant burden to show that its damages formula is reasonable. Employers would be well-advised to create a working damages model based on objective criteria that will stand up in court to the inevitable defense challenge.
  4. Goodwill Impairment - The concept of "goodwill" is intrinsically tied to non-compete cases because many times the contract protects this intangible business interest. Goodwill is nothing more than a company's expectation that its customers will remain with the firm. Since a non-compete violation can result in a permanent loss of customers beyond the covenant's duration, a damages analysis relying on goodwill impairment is another possible means of recovery. In some respect, it overlaps with a projection of future profits so the two analyses shouldn't result in a duplicate damages claim. Although expert testimony is not needed to prove lost profits, it likely would be required if a plaintiff sought to prove goodwill impairment. The reason is that any goodwill impairment analysis should incorporate some sort of regression analysis to explore the relationships among variables that may affect a business's going-concern value.
Assessing damage in a non-compete case frequently is an afterthought. Counsel for both plaintiff and defendant should examine exposure as quickly as possible, even if the facts concerning liability will be the initial focus in the case.

Friday, August 15, 2014

At a Preliminary Injunction Hearing, How Likely Is an Employer to Win?

There are problems with statistical analyses. One of them is that the data sampling size may not be reliable or that the parameters established tend to skew results.

I am no statistician, but I have enough of a background to be dangerous. I decided to conduct a fairly rudimentary analysis of reported non-compete decisions so that I conclude how likely companies were to obtain a preliminary injunction in non-compete disputes at a contested hearing. This is a very narrow inquiry.

Because I only have so much time (and a trial in 10 days), I tried to obtain the best data I could, realizing full well that it was simply a subset of the actual number of decisions floating somewhere in the public domain. But I believe my data is more reliable than those used to predict a presidential election...so, here goes.

Conclusion: At a contested hearing, employers successfully obtain a preliminary injunction to enforce a non-compete agreement about 60% of the time.

Data Summary: I reviewed a sample of federal district court cases from July 2013 through August 14, 2014. I specifically limited my search to exclude appellate decisions (which would review the grant or denial of an injunction) and to exclude state trial court reports, because only a handful of states publish them online. Since federal courts issue opinions that follow the same general format, I found this to be the most reliable source of information. Finally, I only looked at preliminary injunction decisions after contested hearings, where the matter was fully briefed and the court had to decide issues of fact and law.

During this one-year window, I excluded the following from my analysis:

(1) Controversies between franchisors and franchisees (of which there were a significant number);
(2) TRO rulings, because those often times contain a sparse record for the court to consider and may not really be "contested" in the evidentiary sense;
(3) Non-compete issues arising out of a purchase or sale of a business; and
(4) Decisions that dealt only with trade secret enforcement.

I also took a subjective look at the case if the court was split (or granted the injunction only in part). That is, I made a qualitative assessment as to what kind of relief the moving party obtained and what it actually got after a hearing. If the party successfully enforced a key part of a restrictive covenant, I counted this as a favorable outcome for the employer. If it lost and only was able to enforce a non-disclosure covenant, I determined this to be a favorable outcome for the employee.

Other Observations: The data set was limited to 23 comprehensive decisions. This seems like a small number, but again, the parameters that I chose were very narrow and focused only on contested injunction hearings over a narrow span of time. I assessed what I believed were the court cases that met all the criteria in which I was interested in assessing. Though I expected to see 50 cases, the 23 I selected came from all across the country with both employer-friendly jurisdictions (Florida) and employee-friendly states (California) represented.

The conclusion of a 60% victory rate for employers after an injunction trial is, frankly, a little higher than I expected. This is so for a few reasons: (1) the difficult injunction standard employers must meet; (2) the hesitancy of courts to enforce restraints of trade; and (3) the perception that employees quickly settle obvious cases where the facts are bad. If all these are true, then I would think that contested hearings would skew in favor of employees. Apparently, not so.

Interestingly, I found no real clear pattern from the results. I found cases where courts refused to enforce agreements despite seemingly clear evidence of data theft, and cases where an employer enforced an agreement that appeared overly broad. There was no unifying theme among the decisions. This fits with the highly fact-intensive nature of these disputes.

All this underscores the fact that results are not predictable. I believe it is difficult to benchmark success when parties let a judge decide, and that it would be irresponsible to conclude that a party's chances of success ever are much greater than 50-60% even on the strongest facts.

Wednesday, August 13, 2014

Will the Seventh Circuit Weigh In On the Fifield Rule?

The body of work following the decision in Fifield v. Premier Dealer Services is somewhat scattered at best. Federal courts are divided on whether it represents the law in Illinois, with courts taking divergent views.

As most readers may know by now, Fifield stands for the proposition that a covenant not to compete signed by an at-will employee requires at least two years of continued employment for that to constitute sufficient consideration. The key aspect of Fifield is that this consideration rule applies even when an employee signs a covenant at the start of employment, rather than during the course of employment. An undecided issue is how Fifield applies to lawsuits outside Illinois' First District (that is, Chicago).

The Seventh Circuit, though, is primed to weigh in. The plaintiff in Instant Technology LLC v. DiFazio has appealed its loss to the circuit court, and one of the central features of the district court's holding was that Fifield barred the non-compete claims. The district court judge discussed Fifield at length in his memorandum opinion. My discussion of the district court ruling is here.

The plaintiff in Instant Technology is due to file its appellate brief in a few weeks. I will look forward to reading how much it attacks the reasoning from Fifield and whether the two-year rule is likely to be a central feature of the appeal.

Tuesday, August 12, 2014

In Non-Compete Suits, Is the Employee's Age Relevant?

It's a given that courts consider a wide range of facts - perhaps too wide - when ruling on enforcement actions. Already burdened with figuring out the competitive inflection points between warring companies on a truncated record, courts also must balance a completely unrelated issue. Hardship. As in, how would enforcement of a non-compete through a court order harm an employee?

This inquiry, part of the widely used "rule of reason" test, mandates a look at softer facts that really have nothing to do with the merits of the case. Instead, the collateral inquiry all but invites the court to take into account evidence that is highly personal .

This begs a question that few courts tackle head-on. How relevant is age?

I started thinking about this after I read an article by Josh Zumbrun from the July 14 Wall Street Journal ("Lower Job Churn Hurts Young Workers" at p. A2). The article describes a compelling economic rationale for mobility among younger workers, and consequently could be an endorsement that younger workers should be released from non-compete enforcement. The article discusses Federal Reserve Chairwoman Janet Yellen's concern over the lack of mobility among younger workers. The following passage is particularly illuminating:

By hopping from employer to employer, especially early on, workers find jobs better-suited to their skills, build their resumes, bid up their salaries and boost lifetime earnings prospects. They eventually settle down and change jobs less frequently.

Sounds reasonable.

Is this a consideration, though, for courts? It could be, depending on the strategic direction a defendant wants to take. In the context of non-compete battles, time is of the essence and a defendant spends a lot of time reacting. It's conceivable that a defendant could obtain an opinion from a labor economist on the issue of hardship, although that is a hefty expense few can afford.

I used to think of the age factor from a different perspective. Older workers tend to be less mobile and not as attractive on the open market. That could militate against enforcement, since courts occasionally (perhaps rarely) comment on this when looking at the hardship issue. The Wall Street Journal article sort of flipped my thinking and takes a longer term view of the economic impact of not changing jobs.

The tension is interesting because courts used to confront fact patterns where the older, seasoned worker developed goodwill, sales contacts, and enough embedded knowledge that her move to a competitor seemed most likely to pose a threat. In our more technology-driven economy, though, it often is the younger worker who imparts the most value to a company or who is more likely to innovate by developing a new product or service. The economics of job mobility could be seen as militating against non-compete enforcement for these younger, valuable workers.

Thursday, July 17, 2014

NYT Article Adds Grist to the Mill Over Non-Compete Debate

Camp counselors. Hair stylists. Yoga instructors.

These are not the occupations lawyers usually think of when the topic of non-compete enforcement comes up. We normally envision a dispute concerning the mobility of an executive sales manager, a software engineer, or a seasoned product developer.

But many employees in retail professions have to confront non-competes as well. The June 8 New York Times article, "Noncompete Clauses Increasingly Pop Up In Array of Jobs," addresses the ever-expanding use of non-compete agreements and its impact on mid-level professionals.

In fact, the illustration of the 19 year-old camp counselor bound to a non-compete in her summer employment agreement is ridiculous. The owner's justification for such a restriction is laughable:

"Our intellectual property is the training and fostering of our counselors, which makes for our unique environment. It's much like a tech firm with designers who developed chips."

Um, no it's not.

This type of reasoning would, of course, justify the use of non-compete clauses for any employee in any work environment. But the summer camp proprietor's comment illustrates the problem with an employee's ability to challenge the enforceability of that agreement. She would need to show the lack of a legitimate business interest worthy of protection. And the rub is this: that's awfully expensive to prove.

Business owners always will provide some rationale for why their business is unique or how it invests significantly in human capital. And these flimsy, self-serving assertions of a legitimate business interest often carry the day with judges who simply don't have the time to take a deeper dive into what exactly it is the employer is trying to protect. An employee trying to fence with her ex-employer on this issue is hamstrung by the cost of litigation.

The ubiquity now surrounding non-competes, particularly as they are applied to mid-level retail-oriented employees, ultimately could produce a boomerang effect. If non-competes become too widespread, policymakers will search for legislative solutions. Courts will question how the pervasive use of covenants squares with the widespread rule that they should protect only against unfair, not ordinary, competition.

There can, in fact, be too much of a good thing.

Monday, June 23, 2014

Supreme Court of Kentucky Finds Continued Employment Is Insufficient Consideration for Non-Compete

The enforcement of non-competes is most troublesome in the at-will employment context. This is a recurring topic on this blog, and countless others. Courts have taken divergent approaches to analyzing the consideration issue.

Generally, the rules concerning enforcement of covenants for at-will employees fall into one of three categories:

(1) Continued employment is sufficient to enforce a covenant not to compete against an at-will employee if she signs it after the start of employment. This may be the majority rule, although I haven't broken it down state-by-state.

(2) Continued employment is insufficient to bind an at-will employee to a newly presented covenant not to compete unless the employee receives some true, real advantage in connection with signing the contract. A substantial minority of states, including Minnesota, adopt some variant of this rule.

(3) Even if an at-will employee signs a non-compete at the start of her employment, continued employment is insufficient unless the employment continues for a substantial period of time. This is Illinois' outlier Fifield rule.

Recently, the Wisconsin Court of Appeals certified a legal question to the state supreme court for review, concluding that existing case law relating to consideration was hopelessly in conflict. And just last week, the Supreme Court of Kentucky weighed in on the "continued employment" rule - with an opinion that seems to be of little value.

The Court held that continued employment was insufficient consideration to enforce a covenant not to compete that an at-will employee signed. The case is Charles T. Creech, Inc. v. Brown. Ultimately, though, the opinion does not seem to provide any rules. Instead, the Court simply found that given the particular facts of the case, the relatively broad non-compete lacked consideration. That in and of itself seemed odd, since the parties didn't conduct must discovery.

Although the opinion has flaws, it's still useful for what the Court determined to be significant in regards to the consideration inquiry. It honed in on the following factors:

(1) The employer undertook no new obligations in the contract.
(2) The contract lacked any indicia of an employment agreement, such as provisions relating to salary, benefits, and conditions of discharge.
(3) Brown, the employee, was a 16-year employee with pre-existing experience in the industry, meaning he didn't receive specialized training in response to signing the non-compete.
(4) Brown was not promoted and did not sign the agreement in connection with any real new advantages, such as a bump in pay or some access to new training or new information. The employer seemed to demote him.
(5) Most unusually, the employer did not threaten Brown with termination if he refused to sign the agreement. (It's hard to see how a counterfactual would be more persuasive evidence of consideration.)

While the result in the employee's favor may be appropriate given the other problems with the non-compete, the opinion does nothing more than leave a murky area of the law even cloudier. The Court gave no rule - and only hinted at a standard. Therefore, employers still don't have clarification on what they would need to provide at-will employees in the way of proper consideration to support a non-compete covenant.

The best practice still is to afford an at-will employee with some real, tangible advantage that a court will be able to grasp. The concept of continued employment is somewhat nebulous and in certain circumstances illusory. It makes enforcement difficult, particularly with long-term employees. Potential benefits could include:

(1) A raise, bonus, or promotion.
(2) The ability to terminate only for cause.
(3) Severance if the employer must terminate without cause.

In many states, any one of these would vest a non-compete with consideration. In my view, it also is beneficial to include the covenants in a more robust contract of employment, as opposed to a stand-alone document.

Monday, June 16, 2014

Anti-SLAPP Motions and Private Contract Disputes

One of the burgeoning issues in employee competition disputes is the applicability (or inapplicability) of state Anti-SLAPP statutes.

These statutes generally provide an expedited mechanism for an individual who is sued for petitioning the government or exercising her free speech rights to dismiss a retaliatory suit and obtain damages or attorneys' fees. Increasingly, individuals are using Anti-SLAPP statutes in the context of competition claims that employers bring.

I previously have discussed special problems that arise in the context of so-called "whistleblowers" and the intersection of trade secret law. Although this may provide a compelling factual scenario for the application of Anti-SLAPP motions, individual defendants generally have met with a fair amount of resistance in their efforts to use this statutory mechanism to cut off trade secrets claims.

By and large, Anti-SLAPP laws require a petitioning defendant (assumed here to be an ex-employee sued on some competition-related claim) to show that his or her activity involved a matter of public concern or public interest. For instance, the Court of Appeals of Washington recently found that an ex-employee's post to a job board that warned potential employees about his ex-employer's security practices did not involve a matter of sufficient public concern to invoke that state's Anti-SLAPP law. Alaska Structures, Inc. v. Hedlund, 2014 Wash. App. LEXIS 933 (Wash. Ct. App. Apr. 21, 2014).

Generally speaking, courts seem adverse to applying Anti-SLAPP laws to matters that involve private contract disputes, such as a claim for breach of a non-disclosure agreement. This is not to say fact patterns that overlap with a competition claim can't arise, but the employee's conduct generally must implicate some or all of the following:

  • The matter must be of interest of concern to a substantial number of people. An example would be a disclosure about an issue concerning consumer product safety;
  • There must be a close tie between the employee's statements, disclosures, or conduct and the public interest itself. For instance, an employee's disclosure of material must be directed towards the public good and not purely for some personal gain.
  • The individual's conduct should not be mere ammunition-gathering in a fight with her ex-employer. There must be some objective indication the employee is pursuing a matter of larger public concern.
I am not totally unsympathetic towards individuals' efforts to use Anti-SLAPP laws, but there is a disturbing overuse of these laws in private competition disputes. While an aggressive counterattack can shift the narrative of the case, it also has the potential to backfire and force parties to double-down in litigation. I do believe there is a greater role courts should play in scrutinizing competition cases that appear to be motivated out of pure spite or for no justifiable effort to recover something of value (that is, something that clearly outweighs the costs of litigation itself). But the Anti-SLAPP laws should be a rarely invoked tool in the judicial toolkit.

Thursday, June 12, 2014

Unreasonable Settlement Demands Illustrate Bad Faith In Trade Secrets Cases

Most attorneys believe everything said in a settlement letter is privileged through the Rules of Evidence.

This is decidedly not so.

The purpose of the evidentiary privilege is to preclude a jury from concluding that an offer to resolve a case suggests liability (on the part of the defendant) or weakness (on the part of the plaintiff). In trade secrets disputes, though, settlement statements that rise to the level of specious demands are not protected because they don't pose a risk of prejudicing a jury.

Trade secrets cases can go south in a hurry unless a plaintiff has done serious homework. And even if there has been a misappropriation, many times the plaintiff will have no shot at proving damages. That, however, does not preclude a plaintiff from making an outrageous demand. There are a number of courts that have assessed unreasonable settlement positions in the context of bad faith fee petitions for prevailing defendants.

An interesting, though non-precedential, decision from the Court of Appeal of California in Aerotek, Inc. v. The Johnson Group Staffing Co., Inc., affirmed a bad faith fee award of over $700,000. The court specifically looked at unreasonable settlement demands the plaintiff made, including a demand following a loss at trial, as evidence of bad faith.

Also of interest to the court:


  • An expert's apparent unawareness that one of the customers on which he based his lost profits calculation was no longer in business; and
  • A third-party witness's testimony that a plaintiff representative talked about the plaintiff's deep pockets and intent to shut the defendant's business down.
The interesting part of the case was the fact that the plaintiff actually won at the first trial, and the defendant stipulated that the customer list at issue was in fact a trade secret. Under such facts, its unusual to see a court find bad faith on the part of the plaintiff in bringing the case.

However, in California, there already is a strong public policy favoring open competition. Judges tend to view these cases more skeptically to begin with, and a case that might appear somewhat close still can yield a bad faith finding in California. Ultimately, it was clear that the plaintiff in Aerotek had a foundering case and doubled down. Maintaining a bad case will not endear any plaintiff's lawyer to the judge.