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Chicago Shareholders Joseph Kish, Paul Motz, and Mitch Morinec obtained a complete defense verdict in a federal trade secret misappropriation trial. The case, tried in the U.S. District Court for the Southern District of Texas, also alleged that the Defendants breached provisions of their non-competition/non-disclosure agreements, intentionally interfered with the contractual relationship of over a dozen of Plaintiff’s clients, intentionally sought to interfere with 15 of Plaintiff’s employment contracts, and breached their fiduciary duty to the Plaintiff.
These disputes pitted two national companies, one of which, Plaintiff Visual Edge IT, was primarily a printer and copier company, that sued Impact Networking LLC, which offered managed IT, cybersecurity, and office equipment in markets across the country. Also sued were Impact Texas LLC and several Impact Texas LLC employees and affiliated companies. Visual Edge IT contended that the Defendants stole approximately 126,000 company emails containing numerous trade secrets including active and potential customer lists, internal financial metrics and sales strategy data for their Houston and Austin operations. Visual Edge IT argued to the jury that possession of this sensitive business data allowed the Defendants to open a “look-a-like” business in Houston. Additionally, Visual Edge IT alleged that the four individual Defendants all breached their non-competition, non-solicitation, and non-disclosure agreements when they left the Plaintiff’s employment to join the fledgling Houston start up office of Impact Networking Texas. Plaintiff blackboarded compensatory damages of approximately $6 million, including $5.1 million for trade secret misappropriation.
During opening, Mr. Kish put the difference between the two companies squarely at issue, along with why this litigation was being pursued: “The evidence will show in this case that this is not about confidential information and trade secrets. It's going to show that you it's about vengeance, vengeance by Visual Edge against my clients, because they claim that they're competitors. The overlay of this entire case is the fact that they are not competitors.”
The defense of this case centered around the conduct of the Defendants, what their jobs entailed at both employers, and the differences in the two businesses in Texas. The jury was able to hear extensive evidence that the Plaintiff’s local operation was focused on printer & copier sales whereas Impact Networking Texas’ operation was over 98% managed IT, cyber security, and managed marketing. This focus allowed for the defense to put forth a compelling argument that there was no competition between the two companies in Texas and that the purported trade secrets were useless to their operations in Texas.
During closing, Mr. Motz argued: “The fundamental difference between our two companies: [at the Plaintiff’s company] 100 percent turnover is considered normal. It's only when you get above 100 percent that you start to worry. Well, let's juxtapose that with the words of [Impact CEO] Mr. [Frank] Cucco: " It's about the people you hire. You hire great people. You hire these great people, empower them, and let them do their work."”
The jury deliberated approximately five and a half hours and returned a resounding finding in favor of the defense: there was no misappropriation of trade secrets, no intentional interference with existing or prospective contractual relationships and no breach of fiduciary duty. As a result, no damages were awarded. Had a liability and damage finding been made by the jury, the parties would have then argued exemplary (punitive) damages, which could have risen as high as $12 Million. Had the jury decided the case differently, a total verdict for the Plaintiff would have exceeded $20 Million.
