When are Client Lists Trade Secrets? A Case Study: Atwood Agency v. Black

theft-of-trade-secrets1A recurring issue for those seeking my advice  is whether information known by a former employee is a “trade secret.” Many times the information at issue is a client list or simply the identify of clients and/or customers. The South Carolina Supreme Court considered this issue in the case of Atwood Agency v. Black, 374 S.C. 68, 646 S.E.2d 882 (S.C. 2007).

Atwood, a vacation rental business on Edisto Island that matches homeowners (rental property owners) with renters (those seeking vacation accommodations). Shaw worked for Atwood as a property manager from 1990 until August 26, 2005. When Shaw left, she became employed by another vacation rental agency, Edisto Sales and Rental Realty, Inc. (Edisto Sales).

Trade Secrets Act, S.C. Code § 39-8-10.

The trial court issued an temporary restraining order prohibiting Shaw and her employer and co-workers with Edisto Sales from “contacting and contracting with” any vacation renter or homeowner of Atwood’s. The court found Atwood’s renter list and homeowners list were trade secrets and reiterated the terms of the temporary restraining order.

The Supreme Court considered the following issue: “Does the information regarding homeowners and renters qualify as a trade secret?”

Shaw argued that the information regarding renters and homeowners was not “secret” because it is available from other sources. The Supreme Court agreed. A “trade secret” is defined as information, including a compilation, that:

(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by the public or any other person who can obtain economic value from its disclosure or use, and

(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The court found that the contact information of all the homeowners in Edisto Beach was a matter of public record available at Town Hall as well as other means. “Because the information Atwood seeks to protect is available through other proper means, it is not protected as a trade secret.”

However, the decision was not unanimous. Justice Pleicones concurred in part and dissented in part. And, although this is a good decision for those seeking to pursue their greatest worth, I suspect that it is not typical of what most courts would hold. Even though Shaw eventually won, she had to endure several years of litigation and was subject to a restraining order for 18 months. Employees should not take client lists with them, and although it is not clear, it is not clear that Shaw took any files. Employees should not make copies of electronic files nor email themselves files.  This can be tracked and can lead to significant problems.

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