Employee Must Defend Both Trade Secret, Non-competition Violation Claims Against Former Employer

handshakeA recent ruling reiterated the rule that an employer may assert both trade secret and non-trade secret related claims, as long as the employer establishes separate bases for each. In Angelica Textile Services, Inc. v. Park, the California Court of Appeal allowed an employer to pursue its multi-claim action against a former vice president because the factual underpinnings of the company’s non-trade secret claims were separate from its trade secret claims, revolving solely around the vice president’s alleged violation of the terms of his non-competition agreement.

Jaye Park, a vice president at Angelica, had signed a non-competition agreement with his employer promising not to become involved with any business similar to Angelica’s as long as he worked for the employer. In 2008 and 2009, though, Park discussed the creation of a competing hospital linen and laundry company, including preparing a detailed business plan. In 2010, Park resigned and took a role as the Chief Operating Officer at the new company. Angelica sued, claiming Park misappropriated trade secrets, interfered with its business relationships, breached his contract and breached his fiduciary duty to the employer. The trial court concluded that the employer could proceed only on its trade secrets claim, because the other claims were dependent on the trade secrets claim and, as a result, the California Uniform Trade Secrets Act (CUTSA) displaced all of the other claims.

On appeal, though, the employer successfully argued for the other claims’ reinsertion. The California Court of Appeal pointed out that the CUTSA explicitly avoided displacing contractual claims, even if the basis of those claims was a misappropriated trade secret. Other non-contractual claims could also survive if the facts underlying them were independent from the facts supporting the trade secret misappropriation claim.

In Angelica’s case, its claims were independent of the trade secret issue. The employer predicated its breach of contract, breach of fiduciary duty and interference with business relationship claims, not on Park’s alleged misconduct with regard to the company’s trade secrets, but on his engaging in conduct expressly prohibited by the non-competition agreement. These violations flowing from Park’s allegedly breaking the non-competition contract stood independent of his alleged mishandling of Angelica’s trade secrets, the court determined.

The court’s ruling established that the employer could have maintained a triable case against Park, even without the alleged misappropriation of trade secrets. The key to the employer’s success on appeal was its having structured its complaint such that its non-trade secret claims stood on their own, with bases and supporting facts that were clearly distinct and independent from the issue of the existence or misappropriation of trade secrets.

The employer in Park’s case succeeded because it properly structured its claims to create distinct bases to avoid displacement. Whether you are an employer or an employee, it is important to have counsel who understands all of the rules of employment and business law and litigation, and can provide you with quality advice regarding how to proceed with your case. To ensure you and your rights are fully protected, reach out to the Oakland employment law attorneys at the Law Offices of Stephen M. Fuerch. The attorneys at the Law Offices of Stephen M. Fuerch offer skilled and diligent representation to people involved in business and employment disputes. Contact us through our website or call our office at (925) 463-1073 to schedule your confidential initial consultation today.

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New Statute Widens the Parameters of California’s Non-Discrimination Protections, Oakland Personal Injury Attorney Blog, Oct. 15, 2013