Monday, December 22, 2008

Ohio Decision Demonstrates Vagueness Problem With Trade Secrets Injunctions (Chornyak & Assoc. v. Nadler)

A recent decision out of the Ohio appellate courts demonstrates a common, amateurish mistake many attorneys make in trade secrets litigation.

On appeal, a company in the financial services industry contended the trial court improperly refused to hold its ex-employee in contempt of court for violating a permanent injunction order entered in November 2005. That order restrained defendant from "directly or indirectly, ... disclosing, using, transferring or destroying any Chornyak & Associates, Ltd. trade secret(s) as that term is defined in [Ohio Code Section] 1333.61 in any form whatsoever including originals, copies, other reproductions, derivatives, or computerized information, in any form whatsoever."

The plaintiff filed a contempt citation when its expert determined that the defendant had uploaded and used one Word document and two Excel spreadsheets generated during the course of his employment with Chornyak and which had been in his home office stored on a floppy disk. Eventually, the appellate court affirmed the trial court's determination that none of the documents constituted trade secrets of the former employer, and it upheld the trial court's denial of the contempt citation.

The more central question, though, is why the court even addressed the status of the documents as trade secrets in the first place. The underlying injunction order was patently void.

Illinois law on this issue is particularly exacting, mandating that a party seeking an order of injunctive relief spell out with reasonable specificity the exact trade secrets that are the subject of the restraint. In state court, Tseutaki v. Novicky, 158 Ill. App. 3d 505 (1st Dist. 1983), sets forth the standard, while in federal courts the landmark decision from American Can v. Mansukhani, 742 F. 2d 314 (7th Cir. 1984), delineates the law to be followed.

At bottom, a reasonable person with no legal training must be able to ascertain what documents or categories of information are subject to an order punishable by contempt. Simply incorporating the terms "trade secrets or confidential information of the Plaintiff" is too vague and not enforceable by contempt sanctions.

Poor drafting and lack of judicial oversight of such orders does no one any good. The plaintiff will not be able to rely on the order in the event the defendant uses its information, and the defendant will have to test its conduct through contempt proceedings. Great care must be taken with the drafting of injunction orders. And if the plaintiff is concerned about disclosing its trade secrets in a court order, it can always make reference to an attached schedule kept under seal in the court file.


Court: Court of Appeals of Ohio, Tenth Appellate District
Opinion Date: 12/18/08
Cite: Chornyak & Assoc., Ltd. v. Nadler, 2008 Ohio App. LEXIS 5569 (Ohio App. Ct. Dec. 18, 2008)
Favors: Employee
Law: Ohio

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