On December 16, 2013, in a published decision, the New Jersey Appellate Division in Waste Management of New Jersey, Inc. v. Morris County Municipal Utilities Authority clarified the standard governing interlocutory injunctions in New Jersey state courts. The court held that a trial judge’s denial of an interlocutory injunction based solely on the determination that the plaintiffs were not likely to succeed on the merits constituted reversible error because “the judge mistakenly overlooked his authority to impose interlocutory relief to preserve the parties’ positions and subject matter of the suit[.]” Stated otherwise, Waste Management holds that one can obtain an injunction preserving the status quo even where he or she cannot show a likelihood of success on the merits.
Tagged: Restrictive Covenants
Trade Secrets Theft by Former Employee Results in a Criminal Conviction Under the Federal Computer Fraud and Abuse Act but Still Leaves Uncertainty Over the Scope of the Act
In United States v. Nosal, a federal jury in California convicted a former employee of Korn/Ferry for violating the Computer Fraud and Abuse Act (“CFAA”). The evidence showed that the defendant directed his co-conspirators within the firm to use a borrowed password to gain access to trade secrets to be used in establishing their own business. The use of the borrowed password was critical to the successful prosecution under the CFAA because earlier in the case the Ninth Circuit Court of Appeals issued an opinion that narrowly interpreted the statute to prohibit only “unauthorized procurement or alteration of information, not its misuse or misappropriation.” The significant aspect of the Ninth Circuit’s interpretation of the CFAA in Nosal is the Court’s conclusion that a violation of the statute does not occur merely because an employee initially uses his authorized access to obtain his employer’s proprietary information even if he does so with the intent to misappropriate it. Presumably, had Nosal’s co-conspirators who accessed the computerized information in question been able to do so using their own passwords, there would have been no “unauthorized procurement” in violation of the CFAA.
A Federal District Court recently refused to dismiss a complaint for lack of subject matter jurisdiction because, among several state law claims, the plaintiff – the individual defendant’s former employer – also asserted a claim under the Federal Computer Fraud and Abuse Act (CFAA). In NouvEON Tech. Partners, Inc. v. McClure, No. 3:12-CV-633-FDW-DCK, 2013 U.S. Dist. LEXIS 29208 (March 5, 2013), a North Carolina Federal District Court denied defendants’ Rule 12(b)(1) motion to dismiss, for lack of subject matter jurisdiction, a myriad of state law claims filed by NouvEON against its former employee (McClure) and her new employer (Smarter Systems).
In a recent “not for publication” Memorandum Opinion and Order relating to Reckitt Benckiser’s (“RB”) over-the-counter cough syrup, Delsym® (dextromethorphan polistirex), United States Magistrate Judge Douglas E. Arpert of the District of New Jersey found that RB failed to establish trade secret misappropriation, unfair competition, and tortious interference with business expectations claimed against Tris Pharma, following a four-day bench trial.
New Jersey District Court Enjoins Former Financial Services Employee from Taking Customer Information
In a case to be noted by financial services entities that are signatories to the “Protocol for Broker Recruiting,” a New Jersey District Court issued a preliminary injunction to a financial services employer, Ameriprise Financial Services, Inc. (“plaintiff”) to prevent a former financial advisor employee from retaining certain client information that he downloaded from his computer prior to his departure from plaintiff. Plaintiff was a party to the “Protocol for Broker Recruiting” that prescribes a method for a departing employee to retain certain client information when leaving for another financial services institution. To grant the injunction, the Court found that plaintiff showed it likely would succeed on its underlying breach of contract claim, it would suffer immediate irreparable harm absent the injunction, defendant would not suffer harm if enjoined, and the injunction favors the public’s interest. The Court essentially decided that if the Protocol is not followed in the first instance, a departing financial representative’s subsequent compliance is tainted and insufficient to withstand subsequent legal challenge.
New Jersey employers should be aware that yesterday Governor Chris Christie signed into law the New Jersey Trade Secrets Act (“the Act”), which for the first time codifies the law in New Jersey concerning the misappropriation of trade secrets. The new law is derived largely from, although is not identical to, the Uniform Trade Secrets Act, variations of which have been adopted in the great majority of states. New Jersey companies who are concerned about potential trade secret misappropriation by current or former employees should study the new law carefully.