Employer gets TRO to protect trade secrets but can’t seize laptops or phones under DTSA

By Joy Waltemath

By Thomas Long, J.D.

A railcar leasing company has been granted a temporary restraining order (TRO) by a federal court in California, barring two former employees from disseminating confidential information that they allegedly misappropriated in order to disadvantage the company in debt restructuring negotiations. The company was denied, however, an ex parte seizure order under the Defend Trade Secrets Act (DTSA) that would have required the former employees to hand over company-issued devices containing the confidential information. In the court’s view, the company did not show that this extraordinary relief was necessary (OOO Brunswick Rail Management v. Sultanov, January 6, 2017, Davila, E.).

The two individual defendants were employees of OOO Brunswick Rail Management, a Russian limited liability company, and Brunswick Rail Group, a Bermuda company (collectively, “Brunswick”). Brunswick asserted that one of the employees sent several confidential documents to his personal email account without authorization, and that he had been communicating by phone with the other employee (who had, by that point, resigned from Brunswick), as well as a representative of one of Brunswick’s creditors who he was explicitly prohibited from contacting. This employee also refused to return a company-issued laptop and mobile phone.

The second employee allegedly received from his former assistant unauthorized confidential materials at his personal email account, which he forwarded to the creditor’s representative and to the first employee. According to Brunswick, both former employees planned to disclose trade secrets to creditors in order to disadvantage the company in ongoing negotiations relating to debt restructuring. Brunswick sued them for misappropriation of trade secrets in violation of California and federal law and sought a TRO and an ex parte seizure order under the DTSA.

Ex parte seizure. Brunswick sought an order under the DTSA to seize the company-issued laptop and mobile phone in the first employee’s possession. The DTSA provides for ex parte seizures only under “extraordinary circumstances” and only as necessary to prevent the dissemination of the trade secret at issue. In this case, seizure under the DTSA was not necessary, the court determined. The employee was required to deliver the devices to the court to a hearing scheduled two weeks later; in the meantime, the devices were not to be accessed or modified, the court said.

Temporary restraining order. Brunswick showed that it was likely to succeed on the merits of its trade secrets claims. Brunswick presented evidence showing that its former employees improperly disseminated confidential information by emailing documents to their personal accounts and then sending that information to third parties. According to the court, that information likely qualified as protectable trade secrets under the California Uniform Trade Secrets Act. Dissemination of the information to Brunswick’s creditors, competitors, and adverse parties would cause Brunswick irreparable harm.

The court also found that the balance of equities weighed in Brunswick’s favor, and a TRO would serve the public interest. The former employees were therefore restrained from using, disclosing, or disseminating Brunswick’s trade secret information, and they were ordered to appear in court in two weeks to show cause why a preliminary injunction should not issue.

Source:: Employment Law Daily Newsfeed