Practice What You Preach: Trade Secret Rules (Of Course) Apply to Lawyers

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP

When trade secret lawyers advise executives transitioning to a job with a competitor, they typically tell them to “take nothing with you” on the way out – meaning that no confidential, proprietary or trade secret information should be retained or transferred to their new employer – lest they be accused of misappropriating trade secrets.  For good measure, lawyers also typically remind their clients to be especially careful about information maintained electronically, since the rules apply to electronic as well as hard copy information.  A recent decision from the Southern District of New York serves as a useful reminder that these rules apply, with the same force, to lawyers.  Berkley Ins. Co. v. Lane, Case No. 1:20-cv-03709-ALC (S.D.N.Y.)

In that case, Attorney Matthew Lane worked for Connecticut-based Berkley Insurance Co. as a Vice President and Transactional Risk Underwriter.  In February 2020, he quit to join a competitor.  Berkley sued Lane, alleging that, on the way out, Lane “stole massive amounts” of Berkley’s “confidential and proprietary information and trade secrets,” including Berkley’s “highly sensitive pricing formulas and models.”  Berkley’s complaint alleged that Lane did this in various ways – all eventually detected in a forensic review of his electronic devices – including setting up and running automatic-forwarding email programs, using his iPhone to take photos of documents he could not email, and printing and scanning documents to his personal computer.  Berkley asserted trade secret misappropriation claims under the federal Defend Trade Secrets Act, as well as claims under New York common law for misappropriation of trade secrets, breach of the duty of loyalty, and breach of contract.

Berkley also sought a preliminary injunction.  After some initial motion practice, Lane agreed to a stipulated preliminary injunction and, somewhat unusually, stipulated that he had removed Berkley’s confidential and proprietary information in essentially the ways Berkley alleged.  He also stipulated that, after receiving a letter from Berkley’s lawyers demanding that he retain, during the pendency of the litigation, the Berkley information he had removed, he promptly deleted it all from his personal computer and iPhone – again, just the opposite of the advice attorneys typically give their clients in these circumstances.  Eventually, Lane agreed to a permanent injunction preventing him from using any of Berkley’s confidential, proprietary or trade secret information (which he claimed he no longer possessed), and requiring him to sit for a deposition to describe, in more detail, what he had actually done.

The moral of the story is probably not the old adage that lawyers sometime make for the worst clients; rather, that, even though some employment transition restrictions may not apply to lawyers (e.g., New York non-competes in certain circumstances), lawyers must still abide by the rules protecting confidential, proprietary and trade secret information.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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