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47ALI-ABA Topical CoursesTrade Secrets From the Employment Lawyer'sPoint of ViewMarch 28, 2012Telephone Seminar/Audio WebcastCases for Trade Secrets from the Employment LawyerBya. Bimbo Bakeries USA, Inc. v. Chris Botticella, No. 10-1510, United States Court ofAppeals for the Third Circuitb. Eagle v. Sandi Morgan, et al., Civil Action No. 11-4303, United States DistrictCourt for the Eastern District of Pennsylvaniac. Maremont v. Susan Fredman Design Group, Case No. 10 C 7811, United StatesDistrict Court Northern District of Illinois Eastern Divisiond. Phonedog v. Noah Kravitz, No. C 11-03474 MEJ, United States District CourtNorthern District of Californiae. Pure Power Boot Camp, v. Warrior Fitness Boot Camp, No. 08 Civ. 4810, UnitedStates District Court, Southern District of New Yorkf. Faiveley Transport Malmo AB v. Wabtec Corporation, No. 08-5126-cv, UnitedStates Court of Appeals for the Second Circuitg. Sasqua Group, Inc. v. Courtney, No. CV 10-528, United States District Court,Eastern District of New York

48PRECEDENTIALUNITED STATES COURT OF APPEALSFOR THE THIRD CIRCUITNo. 10-1510BIMBO BAKERIES USA, INC.v.CHRIS BOTTICELLA,AppellantOn Appeal from the United States District Courtfor the Eastern District of Pennsylvania(D.C. Civil No. 2-10-cv-00194)Honorable R. Barclay Surrick, District JudgeArgued June 3, 2010BEFORE: SMITH, FISHER, andGREENBERG, Circuit Judges(Filed: July 27, 2010)

49Michael L. Banks (argued)Morgan, Lewis & Bockius LLP1701 Market StreetPhiladelphia, PA 19103Attorney for AppelleeElizabeth K. AinslieJoseph Anclien (argued)Schnader Harrison Segal & Lewis LLP1600 Market StreetPhiladelphia, PA 19103Attorneys for AppellantOPINION OF THE COURTGREENBERG, Circuit Judge,I. INTRODUCTIONThis matter comes on before this Court on aninterlocutory appeal from an order of the District Court datedFebruary 9, 2010, and entered on February 12, 2010, grantingappellee’s motion for a preliminary injunction. BimboBakeries USA, Inc. v. Botticella, No. 10-0194, 2010 WL2

50571774 (E.D. Pa. Feb. 9, 2010). The issue on appeal iswhether the District Court erred in enjoining appellant ChrisBotticella, formerly a senior executive at appellee BimboBakeries USA, Inc. (“Bimbo”), from working for one ofBimbo’s competitors until after the Court resolved the meritsof Bimbo’s misappropriation of trade secrets claim againstBotticella. The Court intended that the preliminary injunctionwould last for about two months until the trial but, because ofthis appeal and a stay of the District Court proceedingsfollowing the filing of this appeal, the preliminary injunctionhas remained in effect. For the reasons we set forth below,we will affirm the order of the District Court.II. BACKGROUNDA. Botticella’s Employment at BimboBimbo, a Delaware corporation with its principal placeof business in Pennsylvania, is one of the four largestcompanies in the United States baking industry. Bimbo andits affiliates produce and distribute baked goods throughoutthe country under a number of popular brand names includingThomas’, Entenmann’s, Arnold, Oroweat, Mrs. Baird’s,Stroehmann, and Boboli. Botticella, a California resident,who already had experience in the baking industry, beganworking for Bimbo in 2001 and was, until January 13, 2010,its Vice President of Operations for California. In thatposition in which Botticella earned an annual salary of$250,000, he was directly responsible for five productionfacilities and oversaw a variety of areas including product3

51quality and cost, labor issues, and new product development.In addition Botticella worked closely with Bimbo’s sales staffon sales promotion and capacity planning, and also wasresponsible for overseeing the operations of “co-packers” inhis region, i.e., third-party manufacturers under contract withBimbo.As one of Bimbo’s senior executives, Botticella hadaccess to and acquired a broad range of confidentialinformation about Bimbo, its products, and its businessstrategy. For example, he was one of a select group ofindividuals with access to the code books containing theformulas and process parameters for all of Bimbo’s products.He also regularly attended high-level meetings with other topBimbo executives to discuss the company’s national businessstrategy. Significantly, as Bimbo repeatedly has notedthroughout these proceedings, Botticella was one of onlyseven people who possessed all of the knowledge necessary toreplicate independently Bimbo’s popular line of Thomas’English Muffins, including the secret behind the muffins’unique “nooks and crannies” texture. Thomas’ EnglishMuffins is the source of approximately half a billion dollarsworth of Bimbo’s annual sales income.While employed at Bimbo, Botticella signed a“Confidentiality, Non-Solicitation and Invention AssignmentAgreement” with Bimbo on March 13, 2009, in which heagreed not to compete directly with Bimbo during the term ofhis employment, not to use or disclose any of Bimbo’sconfidential or proprietary information during or after theterm of his employment with Bimbo, and, upon ceasingemployment by Bimbo, to return every document he received4

52from Bimbo during the term of his employment. App. at 214-18. The agreement, however, did not include a covenantrestricting where Botticella could work after the terminationof his employment with Bimbo. The agreement contained achoice of law provision providing that Pennsylvania lawwould govern any dispute arising from the agreement.Moreover, the agreement provided that certain state andfederal courts in Pennsylvania would have jurisdiction overlitigation arising from the agreement and over the parties tothat litigation. Thus, although this litigation seems onlymarginally related to Pennsylvania, Bimbo filed it in theUnited States District Court for the Eastern District ofPennsylvania, which has exercised jurisdiction.B. The Hostess Job OfferOn September 28, 2009, one of Bimbo’s primarycompetitors in the baking industry—Interstates BrandCorporation, which later changed its name to Hostess Brands,Inc. (collectively, “Hostess”)—offered Botticella a position inTexas as Vice President of Bakery Operations for its easternregion. The proposed position carried a base salary of$200,000, along with various stock option and bonusopportunities. On October 15, 2009, Botticella accepted theHostess position and agreed to begin in January 2010.Botticella did not disclose his plans to Bimbo for severalmonths, and he therefore continued to be engaged fully in hiswork at Bimbo and to have full access to Bimbo’sconfidential and proprietary information even after heaccepted the Hostess position. Botticella maintains that he5

53continued working for Bimbo notwithstanding his acceptanceof the Hostess position in order to receive his 2009 year-endbonus and to complete two Bimbo projects for which he hadresponsibility.After Botticella accepted the Hostess offer and whileBimbo still employed him, Hostess directed him to execute an“Acknowledgment and Representation Form,” whichessentially indicated that Hostess was not interested in anyconfidential information, trade secrets, or other proprietaryinformation that Botticella had acquired from Bimbo, and thatBotticella would not disclose such information to Hostess. 11The agreement stated:I acknowledge that [Hostess] has advisedme that it is not interested in, nor does it want,any confidential information or trade secrets orother proprietary information that I may haveacquired through any prior employment orbusiness relationship, including without limitationany information or ‘know-how’ related to themanufacturing of Thomas brand products. Ifurther acknowledge that I have not previously,and will not in the future, disclose to Hostess anyconfidential or proprietary information belongingto any previous employer. Specifically, Iacknowledge that Hostess has instructed me not todisclose to it or to use in the course of any job forit that I may be [sic] have at any time, anyconfidential or proprietary information belonging6

54App. at 272. Botticella signed the form on December 7, 2009.Botticella informed his supervisor at Bimbo on January4, 2010, that he was planning to leave Bimbo on January 15. 2But Botticella did not at that time indicate that he was leavingApp. at 272.to any previous employer. I represent that I haveand will not bring to Hostess’[s] work place, usefor the benefit of, or in any way share withHostess any confidential or proprietaryinformation belonging to any previous employer.I represent that I am not a party to anycurrently effective employment contract, covenantnot to compete or other agreement that couldpotentially have any bearing on my ability toaccept employment with Hostess, and thatHostess has instructed me that I am not to performany action, directly or indirectly, in the course ofany duties or responsibilities that I may have atany time for it, that would violate the terms of anycurrently effective contract to which I am a party.2Botticella asserts that he testified in his deposition that headvised “his boss” at Bimbo in early December of 2009 “that hewould be leaving” Bimbo. Appellant’s br. at 8 n.1. But heindicates that this testimony was not introduced at the hearingon the preliminary injunction. He does not claim, however, thatat that time he advised Bimbo that he was joining Hostess.7

55to work for a competitor. Moreover, there is no indication inthe record that Bimbo asked him about his future employmentplans. On January 12, Hostess announced that its VicePresident of Bakery Operations for the eastern region wasretiring and that Botticella would be replacing him, effectiveJanuary 18. Bimbo personnel learned of the announcementand the next day, January 13, the company’s Vice Presidentfor Human Relations requested that Botticella contact him.Botticella did so at approximately 10:00 a.m. PST and in thecourse of the ensuing telephone conversation disclosed hisintention to work for Hostess. Bimbo directed Botticella tovacate its offices that day. 3C. Botticella’s Use of Confidential InformationFollowing the Hostess OfferIn the period between when Botticella accepted theHostess offer on October 15, 2009, and when he ceasedworking for Bimbo on January 13, 2010, he continued to haveall the access to Bimbo’s confidential and proprietaryinformation befitting a trusted senior executive. For instance,Botticella attended a meeting with Bimbo’s president andother Bimbo officers in December 2009 at which theparticipants discussed confidential information regarding the3Because Botticella had accrued eleven weeks of vacation timewith Bimbo, he remained on the company’s payroll throughoutthe District Court proceedings. Botticella’s present employmentstatus is not apparent from the record.8

56company’s strategic plan for California. Botticella concedesthat if he had disclosed his intention to work for Hostess,Bimbo would have restricted his access to this and other typesof information. Indeed, Botticella maintains that he no longerfelt “comfortable” being privy to Bimbo’s confidentialinformation following his acceptance of the Hostess offer andthat, accordingly, when he received emails and electronicdocuments containing confidential information, he deletedthem, and that when he was exposed to confidentialinformation during presentations at meetings, he “blocked it”4out of his head. App. at 195, 197.In one instance over the Christmas holiday, Botticelladeleted a number of documents from his company-issuedlaptop computer. These documents included both items of apersonal nature, such as his resume, and a number of workrelateddocuments containing confidential information.Botticella claimed that he deleted these documents because he“didn’t think th[ey] would [have] any value to anybody.”App. at 198. Nevertheless, when Botticella returned to hisoffice at Bimbo on January 4, 2010, he asked a computertechnician to restore the files because “he wanted to havethem back just in case for the next weeks we needed to have ameeting or something.” App. at 198. Bimbo’s technicianthen restored the files to the computer.4We are quite uncertain as to how an individual can block outinformation from his head for a human mind does not functionlike a computer from which, through an electronic process,materials may be deleted.9

57Following Botticella’s departure, Bimbo hired E. BrianHarris, a computer forensics expert, to investigate Botticella’suse of his company laptop during December 2009 andJanuary 2010. Harris’s testing revealed that a user whologged in as Botticella had accessed a number of confidentialdocuments during the final weeks of Botticella’s employmentat Bimbo. In particular, the testing revealed that the personlogging in as Botticella had accessed twelve files within aspan of thirteen seconds on January 13, 2010, Botticella’s last5day at Bimbo. Significantly this access occurred minutesafter the phone call in which Botticella finally disclosed toBimbo his plans to work for Hostess and Bimbo told him tocease working for it.There were several similar patterns of access in theweeks leading up to January 13. According to Harris, thistype of activity—multiple files being accessed more or lesssimultaneously—was “inconsistent with an ordinary usagewhereby individual files are opened and either read or edited.”App. at 238. Harris concluded that the activity was, however,consistent with copying a group of files at the same time, buthe could not determine conclusively whether the filesBotticella had accessed had been copied and deleted or nevercopied at all. App. at 238. The testing also revealed thatthree external storage devices—a portable device known as a“thumb” or “flash” drive and two external hard drives—had atone time or another been connected to Botticella’s computer,although it was unclear exactly when these devices had been5Botticella does not deny that he was the person logging in underhis name.10

58used. Bimbo located the thumb drive and one of the harddrives but Harris could not determine conclusively whether ornot any files had been copied onto the devices fromBotticella’s computer. Harris was not provided with thesecond external hard drive. According to Bimbo, that device“is unaccounted for.” Appellee’s br. at 11.A number of the files accessed from Botticella’s laptopduring his final days at Bimbo were highly sensitive and theirpossession by a competitor would have been damaging toBimbo. As described by the District Court, these documentsinclude “Bimbo’s cost-reduction strategies, product launchdates, anticipated plant and line closures, labor contractinformation, production strengths and weaknesses of manyBimbo bakeries, and the cost structure for individual productsby brand.” Bimbo Bakeries, 2010 WL 571774, at *7. Therewere, however, more mundane documents such as apresentation titled “Safety Short - Wet Floors” included inthese groups of files. App. at 237. In his video-tapeddeposition, portions of which were presented at thepreliminary injunction hearing, Botticella admitted to copyingfiles periodically from his laptop to external devices duringhis final weeks at Bimbo, but maintained that he had done soonly to practice his computer skills in preparation for his newposition at Hostess. Despite an earlier denial, he eventuallyadmitted to conducting such “practice” exercises in January2010. The District Court found that Botticella’s explanationof his use of the laptop computer and the external devices was“confusing at best” and “not credible.” Bimbo Bakeries, 2010WL 571774, at *6.11

59D. Procedural HistoryAfter Botticella left Bimbo and joined Hostess, Bimbobrought this action seeking to protect its trade secrets and thenpromptly moved for preliminary injunctive relief. TheDistrict Court held a hearing on Bimbo’s motion at whichBimbo presented portions of Botticella’s video tapeddeposition as well as live testimony from Harris and DanielBabin, one of Bimbo’s senior executives. Botticella’s counselcross-examined Bimbo’s witnesses but did not present anyevidence on Botticella’s behalf. The District Court grantedBimbo’s motion and preliminarily enjoined Botticella fromcommencing employment with Hostess and from divulging toHostess any confidential or proprietary information belongingto Bimbo. The Court further ordered Botticella to return toBimbo any of the company’s confidential or proprietaryinformation in his possession. The Court issued thepreliminary injunction on February 9, 2010, and provided thatit was to remain in effect until a determination on the meritsof the controversy at a trial, which the Court scheduled tobegin on April 12, 2010. Nevertheless, notwithstanding theearly trial date, Botticella appealed from the February 9, 2010order to this Court on February 16, 2010. The case remainsuntried and pending in the District Court as that Court onMarch 5, 2010, after a conference with the attorneys,postponed the trial and stayed all proceedings until its furtherorder. We have expedited our consideration of this appeal.III. JURISDICTION AND STANDARD OF REVIEW12

60The District Court had jurisdiction over this diversity6of citizenship action pursuant to 28 U.S.C. § 1332(a). Weexercise jurisdiction over Botticella’s interlocutory appealpursuant to 28 U.S.C. § 1292(a)(1). When reviewing adistrict court’s grant of a preliminary injunction, we reviewthe court’s findings of fact for clear error, its conclusions oflaw de novo, and the ultimate decision granting thepreliminary injunction for an abuse of discretion. Miller v.Mitchell, 598 F.3d 139, 145 (3d Cir. 2010) (citing McTernanv. City of York, 577 F.3d 521, 526 (3d Cir. 2009)).IV. DISCUSSIONIn determining whether to grant a preliminaryinjunction, a court must consider whether the party seekingthe injunction has satisfied four factors: “(1) a likelihood ofsuccess on the merits; (2) he or she will suffer irreparableharm if the injunction is denied; (3) granting relief will notresult in even greater harm to the nonmoving party; and (4)the public interest favors such relief.” Miller, 598 F.3d at 147(citing Child Evangelism Fellowship of New Jersey Inc. v.Stafford Twp. Sch. Dist., 386 F.3d 514, 524 (3d Cir. 2004)).We turn first to the question of whether Bimbo hasdemonstrated a likelihood of success on the merits, an inquirythat was the primary focus of the District Court, and,6Bimbo is a citizen of Delaware and Pennsylvania and Botticellais a citizen of California.13

61consequently, also is the primary focus of the parties on thisappeal.A. Likelihood of Success on the MeritsThe District Court found that Bimbo was likely toprevail on the merits of its misappropriation of trade secretsclaim. Under the Pennsylvania Uniform Trade Secrets Act(“PUTSA”), which is applicable in this case, a trade secret isdefined as:Information, including a formula, drawing,pattern, compilation including a customer list,program, device, method, technique or processthat:(1) Derives independent economic value,actual or potential, from not beinggenerally known to, and not beingreadily ascertainable by proper means by,other persons who can obtain economicvalue from its disclosure or use.(2) Is the subject of efforts that arereasonable under the circumstances tomaintain its secrecy.14

6212 Pa. Cons. Stat. Ann. § 5302 (West 2004); see also Rohmand Haas Co. v. Lin, 992 A.2d 132, 143 n.4 (Pa. Super. Ct.2010) (“A trade secret may consist of any formula, pattern,device or compilation of information which is used in one’sbusiness, and which gives him an opportunity to obtain anadvantage over competitors who do not know or use it.”)(internal citation omitted). The Pennsylvania courts look tothe following factors to determine whether information isprotected as a trade secret: (1) the extent to which theinformation is known outside of the company’s business; (2)the extent to which the information is known by employeesand others involved in the company’s business; (3) the extentof the measures taken by the company to guard the secrecy ofthe information; (4) the value of the information to thecompany and its competitors; (5) the amount of effort ormoney the company spent in developing the information; and(6) the ease or difficulty with which the information could be7acquired or duplicated legitimately by others. Crum v.Bridgestone/Firestone North American Tire, LLC, 907 A.2d578, 585 (Pa. Super. Ct. 2006).Applying these standards, the District Courtdetermined that during Botticella’s employment at Bimbo, hehad access to and acquired a number of Bimbo’s trade secrets,including:7“The PUTSA displaced Pennsylvania’s common law tort formisappropriation of trade secrets, but there is no indication thatthe statute effected a substantive shift in the definition of ‘tradesecret.’” Youtie v. Macy’s Retail Holding, Inc., 626 F. Supp. 2d511, 522 n.10 (E.D. Pa. 2009).15

63a. Information in Bimbo’s code books, as wellas and including formulas and designs forThomas’ English Muffins, Oroweat brandproducts, Sandwich Thins products, and otherBimbo products.b. Bimbo’s strategy for increasing profitability,embodied in a road map in January of 2009,which included line closures, plant closures,n e w proc e ss imp rovem e n ts, formu laoptimizations, and new product launches, andwhich achieved cost savings of $75 million overthe course of a year.c. Knowledge of how Bimbo produces bread‘from scratch’ instead of using pre-mixedingredients.d. Documents copied by [Botticella] from hiswork computer onto an external storage devicewith no credible explanation. . . .e. Bimbo’s promotional strategies with respectto specific customers.f. Bimbo’s cost positions.g. Identities of Bimbo’s customers targeted forupcoming bids.Bimbo Bakeries, 2010 WL 571774, at *10. The DistrictCourt then determined that Bimbo likely would be able to16

64prove at trial that Botticella would misappropriate these tradesecrets if allowed to work at Hostess.A person has misappropriated a trade secret underPennsylvania law when he acquires knowledge of another’strade secret in circumstances giving rise to a duty to maintainits confidentiality and then discloses or uses that trade secretwithout the other’s consent. 12 Pa. Cons. Stat. Ann. § 5302(West 2004). A court may enjoin the actual or threatenedmisappropriation of a trade secret. Id. § 5303(a). Afterdetermining that Bimbo was seeking an injunction on thebasis of threatened misappropriation, the District Court foundthere was “a substantial likelihood, if not an inevitability, that[Botticella] will disclose or use Bimbo’s trade secrets in thecourse of his employment with Hostess.” Bimbo Bakeries,2010 WL 571775, at **11-14. Accordingly, the Courtconcluded that Bimbo had demonstrated a likelihood ofsucceeding on the merits of its claim.Botticella contends this conclusion was wrong as amatter of law because (a) a court only can enjoin a defendantfrom beginning a new job to protect a former employer’stechnical trade secrets, (b) such an injunction only can issuewhere it would be “virtually impossible” for the defendant toperform his new job without disclosing trade secrets, (c)Bimbo did not present any evidence from which the DistrictCourt could conclude that Botticella’s responsibilities atHostess would lead him to disclose Bimbo’s trade secrets, and(d) the District Court drew impermissible adverse inferencesagainst Botticella in a way that effectively shifted the burdenof proof from Bimbo to Botticella.17

651. Air Products and Inevitable DisclosureThe parties disagree about the circumstances that mustbe found to exist before a court can enjoin a defendant frombeginning new employment. In its opinion granting thepreliminary injunction, the District Court stated:When analyzing threatened misappropriation oftrade secrets, Pennsylvania courts apply the‘inevitable disclosure doctrine.’ That doctrineessentially posits that ‘a person may be enjoinedfrom engaging in employment or certain aspectsof his employment where that employment islikely to result in the disclosure of information,held secret by a former employer, of which theemployee gained knowledge as a result of hisformer employment situation.[’] The scope ofthe injunctive relief depends on the particularcircumstances of the case.Bimbo Bakeries, 2010 WL 571774, at *11 (citing VictaulicCo. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (omittingcitations); Air Prods. & Chems., Inc. v. Johnson, 442 A.2d1114, 1120 (Pa. Super. Ct. 1982)). In other words, theDistrict Court concluded, albeit somewhat paradoxically, thatPennsylvania courts apply the “inevitable disclosure doctrine”to grant injunctions based not on a trade secret’s inevitabledisclosure but on its likely disclosure. Cf. Pepsico, Inc. v.Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995) (“[a] plaintiffmay prove a claim of trade secret misappropriation by18

66demonstrating that defendant’s new employment willinevitably lead him to rely on the plaintiff’s trade secrets.”)(emphasis added). While we agree with the District Courtthat Pennsylvania law empowers a court to enjoin thethreatened disclosure of trade secrets without requiring aplaintiff to show that disclosure is inevitable, we do notconsider that an injunction granted absent such a showing wasissued pursuant to the “inevitable disclosure doctrine.”The leading Pennsylvania decision to discuss theinevitability of trade secret disclosure is Air Products &8Chemicals, Inc. v. Johnson. In that case Air Products, amanufacturer and distributor of industrial gas, sought an orderenjoining Johnson, one of its former employees who primarilywas responsible for selling on-site gas, from working in theon-site gas division of a competitor, Liquid Air, that lagged9behind Air Products in the on-site gas market. 442 A.2d at1116-18. The trial court determined that Johnson, who had anengineering background, had acquired a number of technicaland commercial trade secrets relevant to the operation and8While courts across the country have considered theapplicability and scope of the inevitable disclosure doctrine, seegenerally Brandy L. Treadway, An Overview of IndividualStates’ Application of Inevitable Disclosure: Concrete Doctrineor Equitable Tool?, 55 SMU L. Rev. 621, 626-49 (2002), ourfocus in this diversity action is on the decisions of thePennsylvania courts.9“‘On-site’ gas serves large industrial customers. Gas is pipedto the customer.” Air Prods., 442 A.2d at 1116.19

67sale of on-site gas during his employment at Air Products, andthat an injunction prohibiting Johnson from working in on-sitesales at Liquid Air was necessary because “[i]t would beimpossible [for Johnson] to perform his managerial functionsin on-site work without drawing on the knowledge hepossesses of Air Product[s]’s confidential information.” Id. at1122 (quoting trial court opinion).On appeal, the Superior Court affirmed, agreeing withthe trial court that Johnson possessed trade secrets belongingto Air Products that included technological innovations aswell as commercial information such as “the status ofnegotiations with customers, proposed plant configurationsand methods of delivery as well as analysis of marketopportunities.” Id. at 1121 (quoting trial court opinion). Inreaching this conclusion, the Court emphasized that “tradesecrets need not be technical in nature” to be protected underPennsylvania law. Id. at 1124 (citing Macbeth-Evans GlassCo. v. Schnelbach, 86 A. 688 (Pa. 1913)).With respect to the probability of disclosure required towarrant an injunction, the Superior Court stated at the outsetof its analysis that Pennsylvania law permits the issuance ofan injunction where a defendant’s new employment “is likelyto result in the disclosure” of a former employer’s tradesecrets. Id. at 1120 (emphasis added). The Court thendetermined that it was reasonable for the trial court to issue aninjunction based on the inevitability that Johnson woulddisclose trade secrets, but the Superior Court explicitly chose“not [to] adopt the reasoning of the trial court or its use of theterm inevitable.” Id. at 1124. Based on these statements itseems clear that the Superior Court believed that the trial20

68court permissibly could have granted the injunction even ifthe disclosure of trade secrets was not inevitable.2. Protection for Non-Technical TradeSecretsBotticella argues that “[w]hile confidential informationconcerning either technical or commercial issues can beprotected as a trade secret, the inevitable disclosure doctrine,which prevents the defendant from taking on employment inhis chosen field, applies only to technical trade secrets.”Appellants br. at 28 (citing Iron Age Corp. v. Dvorak, 880A.2d 657, 665 (Pa. Super. Ct. 2005); Oberg Indus., Inc. v.Finney, 555 A.2d 1324, 1327 (Pa. Super. Ct. 1989)). Ourreview of the relevant decisional law leads us to rejectBotticella’s proposed distinction between technical and otherinformation. To start with, it is clear that “trade secrets neednot be technical in nature” to be protected fully byPennsylvania law, Air Prods., 442 A.2d at 1124; see also Den-Tal-Ez, Inc. v. Siemens Capital Corp., 566 A.2d 1214, 1228(Pa. Super. Ct. 1989) (en banc) (“[T]he particular character ofthe information is not relevant . . . . [It] may consist ofcompilations of purely commercial information.”) (citingMorgan’s Home Equip. Corp. v. Martucci, 136 A.2d 838 (Pa.1957)). Furthermore, courts applying Pennsylvania law areempowered to enjoin both the actual and the threatenedmisappropriation of trade secrets. 12 Pa. Cons. Stat. Ann. §5303(a) (West 2004). An injunction against employmenttherefore is simply one weapon in an equity court’s arsenal toprevent the threatened misappropriation of trade secrets,21

69regardless of those secrets’ technical or non-technicalcharacter.In arguing that a court only may enjoin a defendantfrom beginning a new job to protect a former employer’stechnical trade secrets, Botticella relies primarily on twoopinions of the Pennsylvania Superior Court applying AirProducts. In Oberg Industries, Inc. v. Finney, the trial courthad enjoined the general sales manager of a company thatmanufactured carbide stamping dies from working for one ofthat company’s competitors. 555 A.2d at 1325. The courtbelieved the employee, Finney, inevitably would disclose thetrade secrets of his former employer, Oberg Industries, ifallowed to work in the new position. Id. at 1326. Theinformation the trial court classified as trade secrets consistedof customer information reports, including a master customerdirectory and histories of quoted prices and completed salesfor various customers. Id. at 1325.On appeal the Superior Court did not clearly statewhether or not it considered this information to constitutetrade secrets under Pennsylvania law. Nevertheless, the Courtvacated the injunction because (1) the case did not involve arestrictive covenant, (2) there was no evidence that Finneytook Oberg’s confidential information to use in his newposition, (3) some of the confidential reports at issue, “such asthe list of customers and their contact persons, were sovoluminous that they could not have been committed tomemory,” and (4) Finney’s position at Oberg and theknowledge he obtained while in that position did notdemonstrate an inevitability of disclosure comparable to thatfound in Air Products. Id. at 1327. With respect to the latter22

70point, the Court opined that the focus of Air Products was onthe employee’s “engineering background and the specialknowledge he possessed relating to a method of oil recoverynot yet developed by the competitor company,” despite thecircumstance that the employee, like Finney, was involved insales. Id. at 1327.In Iron Age Corp. v. Dvorak, both the trial court andthe Superior Court refused to enjoin a former district salesmanager of a footwear manufacturer from using or contactingany of the company’s current or prospective customers. 880A.2d 567. The employee, Dvorak, had left the company, IronAge, to work for a competitor. Id. at 661. The SuperiorCourt affirmed the denial of the requested injunction becausethe trial court reasonably concluded that the information atissue—Iron Age’s customer lists—was “available tocompetitors through legitimate means and cannot be declareda trade secret.” Id. at 664. The Court went on to distinguishAir Products on the ground that:In Air Products, the employee possessedintimate knowledge of his former employer’sresearch and development data for on-site gasdelivery technologies. The employee’s newemployer was attempting to develop similartechnologies, and the employee was hired toprovide research and development data obtainedthrough his previous employment. In the instantcase, [Dvorak] possesses no such technicalknowledge, and [his] new employer already hasan extensive customer base. [Dvorak] was not23

71hired to provide information he obtainedthrough his employment with [Iron Age].Id. at 665 (citing Air Prods., 442 A.2d at 1117). The Courtalso noted that Dvorak had signed an agreement with his newemployer promising not to disclose any of Iron Age’s secrets.Id.Though some passages in Oberg and Iron Age suggestthat Pennsylvania courts will enjoin new employment morereadily when the disclosure of technical trade secrets, asdistinguished from other materials, is threatened, those casesdo not purport to establish an inflexible rule defining thescope of materials that can be subject to trade secretprotection, nor do they limit the granting of injunctive reliefaffecting new employment to circumstances involvingtechnical trade secrets. Rather, these opinions reach factspecificconclusions that the former employer was not entitledto injunctive relief against its departing employee barring himfrom working for a competitor. Overall, we conclude that therelevant Pennsylvania decisions, viewed as a group, suggestthat (1) a determination of whether to grant injunctive relief ina trade secrets case and, if so, the proper scope of the relief,depends on a highly fact-specific inquiry into the situation inthe case the court is considering and (2) a court conductingthis inquiry has discretion to enjoin a defendant frombeginning new employment if the facts of the casedemonstrate a substantial threat of trade secretmisappropriation.24

72Putting aside the fact that Botticella had access to andacquired confidential information of a technical nature aboutthe formulas and ingredients for a variety of Bimbo products,he also had access to and acquired confidential informationabout Bimbo’s long term strategies, operating costs, andcustomer negotiations. Botticella does not dispute that thesetypes of information qualify as trade secrets under10Pennsylvania law. See Air Prods., 442 A.2d at 1121-22.Accordingly, the District Court had discretion to enjoinBotticella from working at Hostess to the extent this proposedemployment threatened to lead to the misappropriation ofthese trade secrets.3. The District Court Applied the CorrectStandardBotticella next argues that an injunction againstemployment can issue under Pennsylvania law only when it10By contrast, in Iron Age the Superior Court found that therelevant information in that case did not even qualify as a tradesecret. 880 A.2d at 664-65. Hence, there was no threat that thedefendant’s change in employment would cause him tomisappropriate a trade secret. Likewise, the court in Oberg didnot find any threat that trade secrets would be misappropriated,although its reasoning underlying that conclusion was notparticularly clear. See 555 A.2d at 1327 (“Finney’s position inthe company and the knowledge he obtained while in thatposition do not demonstrate an inevitability of disclosure as thatfound in Air Products which would require the issuance of aninjunction in this case.”).25

73would be “virtually impossible” for an employee to fulfill hisresponsibilities for a new employer without disclosing aformer employer’s trade secrets. Appellant’s br. at 23.Accordingly, Botticella contends that the District Court erredas a matter of law when it granted Bimbo an injunction on thebasis that Botticella’s employment with Hostess would lead toa “sufficient likelihood or substantial threat of disclosure of atrade secret,” a lesser showing than it would have been“virtually impossible” to avoid the disclosure of trade secretsduring Botticella’s employment at Hostess. Appellant’s br. at22. Notwithstanding dictum to the contrary in one of our ownrecent opinions, see Victaulic, 499 F.3d at 234, we concludethat the District Court applied the correct standard.The trial court in Air Products enjoined the defendantfrom working in on-site gas sales at his new employerbecause it concluded it would be impossible for the defendantto work in that field without disclosing his former employer’strade secrets. 442 A.2d at 1122. On appeal the SuperiorCourt affirmed, but noted it was “not adopt[ing] the reasoningof the trial court or its use of the term inevitable.” Id. at 1124.The Superior Court subsequently has stated that “[t]he properinquiry” in determining whether to grant an injunction toprevent the threatened disclosure of trade secrets is “whetherthere is sufficient likelihood, or substantial threat” of a11defendant disclosing trade secrets. Den-Tal-Ez, 566 A.2d at11While the threat of trade secret disclosure in Den-Tal-Ez arosefrom a proposed merger between two companies and not froman employee leaving one company to work for another, there isno indication that the Superior Court’s discussion of the relevant26

741232 (citing Air Prods., 442 A.2d at 1122-25; SI HandlingSys., Inc. v. Heisley, 753 F.2d 1244, 1263-64 (3d Cir. 1985));see also A.M. Skier Agency, Inc. v. Gold, 747 A.2d 936, 942(Pa. Super. Ct. 2000) (citing Den-Tal-Ez, 566 A.2d at 1232).The District Court in this case applied the standard that theSuperior Court applied in Den-Tal-Ez.In arguing for a “virtual impossibility” standard,Botticella understandably relies heavily on our decision inVictaulic. In that case, Tieman, a sales representative, hadviolated a covenant not to compete with his former employerVictaulic, a mechanical device manufacturer, by working fora competitor. Victaulic, 499 F.3d at 230-31. Victaulicbrought a misappropriation of trade secrets claim in additionto asserting several claims based on the covenant not tocompete. Victaulic sought injunctive relief in the action. Id.at 231. The District Court dismissed Victaulic’s covenantclaims and requested additional briefing on the trade secretsclaim. Id. But before the trade secrets claim was resolvedVictaulic filed an interlocutory appeal, asserting that we hadjurisdiction under 28 U.S.C. §1292(a)(1) on the ground thatthe District Court’s dismissal of the covenant claimseffectively denied Victaulic’s request for a preliminaryinjunction. Id.In determining that we had jurisdiction to hear theappeal, we concluded that “Victaulic did not request astandard for injunctive relief in trade secrets cases, which wasgleaned from Air Products, was intended to be limited to themerger situation. See Den-Tal-Ez, 566 A.2d at 1232-33.27

75preliminary injunction on its trade secrets claim, so theDistrict Court’s dismissal of the covenant claims left it withno means of receiving preliminary relief.” Id. at 232. Wethen went on to state that “[e]ven if we believed that Victaulicrequested a preliminary injunction on its trade secrets claim,we would find jurisdiction” because any trade secretsinjunction potentially available to Victaulic necessarily wouldbe narrower than that requested on the covenant claims. Id.We stated:[S]omething like Victaulic’s requested relief(preventing Tieman from selling similarproducts for [his new employer] for a year)could fit a trade secrets claim, as it is possiblefor a court to enjoin an employee working in therelevant industry or soliciting customers forsome period of time. But such a wide-ranginginjunction is atypical; rather, the usualinjunction merely prevents the employee fromdisclosing specified trade secrets. . . . UnderPennsylvania law, a broader injunction only lieswhen it is ‘virtually impossible . . . [for theemployee] to perform his . . . duties for [his newemployer] without in effect giving [it] thebenefit of [his] confidential information.’Id. at 234 (quoting Air Prods., 442 A.2d at 1123). BecauseVictaulic “had not alleged or argued inevitable disclosure” inits trade secrets claim, we concluded that the District Courtlacked the authority to issue a broad injunction based on thatclaim. Id.28

76In light of the scope of the District Court’s injunctionin the case now on appeal before us, we acknowledge thatafter one reads Victaulic it is possible to conclude that theDistrict Court erred by granting the injunction withoutrequiring Bimbo to show that it would be “virtuallyimpossible” for Botticella to work at Hostess withoutdisclosing Bimbo’s trade secrets. But that reading wouldleave the following questions: (1) did Victaulic correctlyinterpret Pennsylvania law, and (2) if not, are we neverthelessbound by that interpretation in the present case becauseVictaulic is a precedential opinion issued by a prior panel ofthis Court?Our review of Victaulic leads us to conclude that inthat case we did not interpret Air Products in a way preciselyconsistent with Pennsylvania state precedents. The Court inAir Products took the passage that Victaulic quoted andcontaining the “virtually impossible” language directly from adecision of a United States District Court in Ohio in a caseunder Ohio law that had facts very similar to those in AirProducts. See 442 A.2d at 1123 (quoting Emery Indus., Inc.v. Cottier, 202 U.S.P.Q. 829 (S.D. Ohio 1978)). The SuperiorCourt in Air Products found the reasoning of the Emerydecision “persuasive” and held that the trial court in AirProducts acted reasonably by granting a preliminaryinjunction based on “precisely the reasoning of the court inEmery.” Id. at 1124-25. Nevertheless, the Superior Courtexplicitly chose “not [to] adopt the reasoning of the trialcourt.” Id. at 1125. It follows that the Superior Court alsochose not to adopt the reasoning of the Emery court, it being“precisely” the same as that of the trial court in the case onappeal before the Superior Court.29

77The Superior Court subsequently stated that the“proper inquiry” in determining whether to grant aninjunction to prevent the threatened disclosure of trade secretsis not whether a defendant inevitably will disclose a tradesecret in the absence of injunctive relief, but instead whether“there is sufficient likelihood, or substantial threat, ofdefendant doing so in the future.” Den-Tal-Ez, 566 A.2d at1232 (citing Air Prods., 442 A.2d at 1122-25; SI HandlingSys.,753 F.2d at 1263-64). We therefore conclude that AirProduct’s repetition of the phrase “virtually impossible” indescribing the Emery holding should not be interpreted as astatement of Pennsylvania’s standard for granting injunctionsin trade secrets cases, our suggestion to the contrary inVictaulic notwithstanding.Inasmuch as we have concluded that Victaulicquestionably interpreted Pennsylvania law, we next mustdetermine whether we nevertheless are bound by its statementof that law. In this regard we start by recognizing that it is“the tradition of this court that the holding of a panel in aprecedential opinion is binding on subsequent panels” and12cannot be overruled absent consideration en banc. Internal12A second panel has the obligation to follow the law that a priorpanel set forth even when the prior panel decision applied statelaw unless “there is persuasive evidence that [the law] hasundergone a change” in which case “we are not bound by ourprevious panel decision if it reflected our reliance on state lawprior to its modification.” Robinson v. Jiffy ExecutiveLimousine Co., 4 F.3d 237, 239-40 (3d Cir. 1993) (citing Smithv. Calgon Carbon Corp., 917 F.2d 1338, 1343 (3d Cir. 1990)).30

78Operating Procedure 9.1. It is also well established, however,that we are not bound by dictum in an earlier panel opinion.Abdelfattah v. Dept. of Homeland §., 488 F.3d 178, 185 (3dCir. 2007) (citing Mariana v. Fisher, 338 F.3d 189, 201 (3dCir. 2003)).We conclude that the Victaulic panel’s discussion ofAir Products and the interplay between virtual impossibilityand the inevitable disclosure doctrine was dictum and doesnot bind us in the present case. That discussion was notnecessary to the panel’s jurisdictional holding that Victaulichad failed to request a preliminary injunction on its tradesecrets claim. On the contrary, the discussion occurred onlyin the context of a counterfactual hypothetical in which theVictaulic panel posited that, even if Victaulic had requested apreliminary injunction on its trade secrets claim, the Courtnevertheless would have had jurisdiction. While werecognize that “where a decision rests on two or moregrounds, none can be relegated to the category of obiterdictum,” Philadelphia Marine Trade Ass’n -Int’lLongshoremen’s Ass’n. Pension Fund v. Comm’r, 523 F.3d140, 147 n.5 (3d Cir. 2008) (quoting Woods v. InterstateRealty Co., 337 U.S. 535, 537, 69 S.Ct. 1235, 1237 (1949)),we do not consider the Victaulic decision on jurisdiction toWe decided Victaulic in 2007, and since that time so far as weare aware there has not been a “clear statement by thePennsylvania Supreme Court to the contrary or other persuasiveevidence of a change in Pennsylvania law.” See Smith, 917F.2d at 1343 (emphasis removed). Accordingly, the holdings ofthe Victaulic panel bind us in the present case.31

79have rested on its interpretation of Pennsylvania’s law oftrade secrets with respect to its actual holding because with orwithout discussion of the counterfactual hypothetical, wewould have held that we had jurisdiction. At bottom wemerely held that the District Court had denied Victaulic allpreliminary relief and thus we had jurisdiction. Accordingly,Victaulic does not prevent us from concluding that the13District Court in this case applied the correct legal standard.13Botticella further argues for an “impossibility” standard bypointing to an unpublished memorandum opinion of thePennsylvania Superior Court in Bacharach, Inc. v. Testo, Inc.,No. 1257 WDA 2001 (Pa. Super. Ct. 2000), App. at 279-301.In that case, an employer argued that the Court could issue aninjunction pursuant to Air Products based on “the mere‘likelihood’” that a trade secret might be disclosed. App. at 291.The Superior Court rejected this argument noting that in AirProducts it only had “determined that the inevitable disclosuredoctrine might be properly applied because ‘it would beimpossible for the employee to perform his duties at the newemployer without disclosing trade secrets.’” App. at 291-92(quoting Air Prods., 442 A.2d at 1124-25). Pursuant toPennsylvania Superior Court Rule 65.37, an unpublisheddecision such as Bacharach cannot be considered as precedentor cited for any purpose relevant to the present case. Thus,Bacharach’s interpretation of Air Products deserves little weightto the extent it conflicts with the Superior Court’s precedentialopinions. See A.M. Skier Agency, 747 A.2d at 942; Den-Tal-Ez, 566 A.2d at 1232. In any event, Bacharach stopped wellshort of requiring rigid adherence to the legal reasoning used bythe trial court in Air Products. App. at 287 (rejecting notion that32

804. Evidence of Botticella’s Responsibilitiesat HostessBotticella next contends that the District Court erred bydetermining the probability that Botticella would disclosetrade secrets while working at Hostess without requiringBimbo to provide more detailed evidence of Botticella’santicipated responsibilities at Hostess. The record before theDistrict Court contained little evidence in this regard apartfrom what could be inferred from Botticella’s compensationpackage at Hostess and his title as the Vice President of14Baking Operations for the eastern region. Nevertheless theDistrict Court concluded that Botticella’s prospective positionat Hostess was “substantially similar” to his former position atBimbo, noting that the Hostess position was “an executivelevel position, with a salary comparable to his salary atBimbo.” Bimbo Bakeries, 2010 WL 571774, at *13. Weagree that the record supports the conclusion that in his newposition at Hostess, Botticella would have broad oversightover bakery operations, just as he had at Bimbo.Accordingly, the District Court did not abuse its discretion bypreliminarily determining that the Bimbo and Hostesspositions were substantially similar.“Air Products enshrines the ‘inevitable disclosure’ doctrine asan inviolable rule of law”).14The District Court also noted that in his position at Hostess,Botticella would report to Hostess’s Senior Vice President forBakery Operations. Bimbo Bakeries, 2010 WL 571774, at *13.33

815. Adverse Inference Based on Botticella’sFailure to TestifyThe District Court determined that Botticella’s conductfollowing his acceptance of the Hostess job offerdemonstrated his intention to use Bimbo’s trade secrets duringhis employment with Hostess. The District Court bolsteredthis determination by drawing an adverse inference fromBotticella’s failure to testify at the preliminary injunctionhearing. In so doing, the District Court relied on our decisionin SI Handling Systems, Inc. v. Heisley, where we stated thatbecause the misappropriation of a trade secret often must beproved by “construct[ing] a web of perhaps ambiguouscircumstantial evidence” that outweighs the defendants’ directdenial, the failure of defendants to testify in the face of astrong showing that a misappropriation or misuse occurred“justifies the inference that their testimony would beunfavorable to their cause.” 753 F.2d at 1261 (internalcitations omitted). On the other hand, Botticella contends thatan adverse inference was inappropriate because he chose notto put forward any evidence at the preliminary injunctionhearing. In support of this position he points to StoweTownship v. Standard Life Ins. Co. of Indiana, where westated that “whatever inference might otherwise be availablefrom the failure to call a witness is not permissible when adefendant chooses to put on no evidence at all, in apparentreliance on its determination that plaintiff has not met itsburden.” 507 F.2d 1332, 1338 (3d Cir. 1975).Even assuming that the District Court erred by drawingan adverse inference from Botticella’s failure to testify, theconclusion that Botticella intended to use Bimbo’s trade34

82secrets during his employment with Hostess rests on a solidevidentiary basis, namely, Botticella’s “not disclosing toBimbo his acceptance of a job offer from a direct competitor,remaining in a position to receive Bimbo’s confidentialinformation and, in fact, receiving such information aftercommitting to the Hostess job, and copying Bimbo’s tradesecret information from his work laptop onto external storagedevices.” Bimbo Bakeries, 2010 WL 571774, at *13.Accordingly, the District Court did not abuse its discretion bydetermining that Bimbo demonstrated a likelihood of successon its misappropriation of trade secrets claim.B. Irreparable HarmThe District Court concluded that Bimbo would sufferirreparable harm absent injunctive relief because thedisclosure of its trade secrets to Hostess would put Bimbo at acompetitive disadvantage that a legal remedy could notredress. On appeal, Botticella does not contest this findingapart from arguing that any harm Bimbo potentially mightsuffer from Botticella’s employment at Hostess could beprevented by a narrow injunction—to which Botticella wouldstipulate—prohibiting Botticella only from disclosingBimbo’s trade secrets. We recognize that the evidence at trialmay show that if Bimbo is entitled to relief that relief mightbe narrow yet adequate, just as Botticella suggests.Nevertheless, at this preliminary stage of the proceedings, theDistrict Court did not abuse its discretion when, faced withevidence of Botticella’s suspicious conduct during his finalweeks at Bimbo, it determined that a stronger remedy was35

83needed in the interim to protect Bimbo from imminentirreparable harm. See Den-Tal-Ez, 566 A.2d at 1232 (“It isclear that under Pennsylvania law a court of equity mayfashion a trade secrets injunction that is broad enough toensure that the information is protected.”) (quoting SIHandling Sys., 753 F.2d at 1265) (internal alterationremoved).C. Harm to Botticella Caused by Injunctive ReliefThe District Court concluded that the harm of Bimbo’strade secrets being disclosed to Hostess outweighed the harmto Botticella of not being able to commence employment atHostess until the Court made a final determination of themerits following a trial, which it scheduled to start about twomonths from the date it issued the preliminary injunction. 15The Court noted that Botticella would continue to receivecompensation for the eleven weeks of vacation time that hehad accrued before leaving Bimbo. We agree with theDistrict Court’s determination. In so doing, however, we notethat even a temporary injunction prohibiting someone frompursuing his livelihood in the manner he chooses operates as asevere restriction on him that a court should not imposelightly. Nevertheless, such a temporary restriction on his15Botticella in effect extended the duration of the preliminaryinjunction by pursuing an interlocutory appeal for, as weindicated above, the District Court has stayed this case duringthis appeal.36

84employment is warranted where, as here, the factsdemonstrate that the restriction is necessary to prevent greaterirreparable harm from befalling another party. Following adisposition on the merits which in the normal course of eventswill follow the disposition of this appeal and the remand ofthe case to the District Court, if the Court holds that Bimbo isentitled to relief, the Court should fashion a remedyappropriate to protect Bimbo’s trade secrets without undulyimposing on Botticella’s right to pursue his chosenoccupation.D. The Public InterestWe agree with the District Court’s conclusion thatgranting the preliminary injunction was consistent with thepublic interest. There are several public interests at play inthis case. As noted by the District Court, there is ageneralized public interest in “upholding the inviolability oftrade secrets and enforceability of confidentialityagreements.” Bimbo Bakeries, 2010 WL 571774, at *16.Additionally, there is a public interest in employers being freeto hire whom they please and in employees being free to workfor whom they please. Of these latter two interests,Pennsylvania courts consider the right of the employee to bethe more significant. See Renee Beauty Salons, Inc. v. Blose-Venable, 652 A.2d 1345, 1347 (Pa. Super. Ct. 1995) (“[T]heright of a business person to be protected against unfaircompetition stemming from the usurpation of his or her tradesecrets must be balanced against the right of an individual tothe unhampered pursuit of the occupations and livelihoods for37

85which he or she is best suited.”) (internal citation omitted);see also Wexler v. Greenberg, 160 A.2d 430, 434-35 (Pa.1960) (noting a societal interest in employee mobility). Weare satisfied on the facts of this case that the public interest inpreventing the misappropriation of Bimbo’s trade secretsoutweighs the temporary restriction on Botticella’s choice ofemployment. See SI Handling Sys., 753 F.2d at 1265 (findingunnecessary an “extended analysis of the public interest[because] extensive precedent supports an injunctive remedywhere the elements of a trade secret claim are established”).V. CONCLUSIONFor the reasons stated above, we will affirm the orderof the District Court dated February 9, 2010, and entered onFebruary 12, 2010, granting Bimbo’s motion for a preliminaryinjunction and will remand the case to that Court for furtherproceedings.38

07/08/2011 86 11:51 FAX HANSLEY AROHCHICK 1ll003/019Case 2:11-cv-04303-RB Document 7 Filed 07/08/11 Page 1 of 1UNITED STATES DISTRICT COURT EASTERN· DISTRICT. OF PENNSYLVANIA LINDA EAGLE,Plaintiff,v.Civil Action No. 11-4303 (RB)SANDI MORGAN, HAITBAM SAEAD, JOSEPH MELLAC!, ELIZABETH SWEENEY, LISA ARNSPERGER, QAMAR. ZAMAN, aad EDCOMM, INC. Defendants.ORDERAND NOW. upon consideration ofPlaintiffLinda Eagle's Motion for a TemporaryRestraining Order aMl-ftetttJftlHtf"I"':trmmette&"OJ:E,t-Stilftllel9GM4I:1-li!JII'et.:in further support of theJII~ttoft. it is hereby ORDERED and DEC ED tha;.pefendants Sandi Morgan. Haitham Saead,Joseph Mellaci. Elizabeth S\'IVeeney, Lisa Amsperger, Qamar Zaman and Edcomm, Inc. shall notalter, CfQDceal or destroy the LinkedIn account at issue in this aotio~ that was, at least untilJune 20.2011, accessib1e at the internet address ''http://1inkedin.comlinllindaeagle."AND IT IS FUR TIiER ORDERED that Plaintiff shall' serve this Order upon counsel forEdcomm, Inc. and upon the individual defendants.BY THE COURT:(;c..-J. tII\rLLU. S :_J._

87IN THE UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF ILLINOISEASTERN DIVISIONJILL E. MAREMONT, ))Plaintiff, )) Case No. 10 C 7811v. ))SUSAN FREDMAN DESIGN GROUP, )LTD. and SUSAN FREDMAN, ))Defendants. )AMY J. ST. EVE, District Court Judge:MEMORANDUM OPINION AND ORDERIn her Second Amended Complaint, Plaintiff Jill E. Maremont alleges violations of theLanham Act, 15 U.S.C. § 1125(a), and Stored Communications Act, 18 U.S.C. § 2701, et seq.,against Defendants Susan Fredman Design Group, Ltd. (“SFDG”) and Susan Fredman (Counts Iand II). See 28 U.S.C. § 1331. Pursuant to the Court’s supplemental jurisdiction, Maremont alsoalleges a claim under the Illinois Right of Publicity Act, 765 ILCS 1075, et seq. (Count III) and acommon law right to privacy claim (Count IV). See 28 U.S.C. § 1367(a).Before the Court is Defendants’ motion for summary judgment and Plaintiff’s motion forpartial summary judgment as to Counts I, II, and III of the Second Amended Complaint – bothpursuant to Federal Rule of Civil Procedure 56. For the following reasons, the Court grants inpart and denies in part Defendants’ motion for summary judgment and denies Plaintiff’s motionfor partial summary judgment. The Court dismisses Plaintiff’s Illinois Right of Publicity Actclaim as alleged in Count III and common law right to privacy claim as alleged in Count IV withprejudice.

88BACKGROUNDI. Northern District of Illinois Local Rule 56.1Local Rule 56.1 assists the Court by “organizing the evidence, identifying undisputedfacts, and demonstrating precisely how each side propose[s] to prove a disputed fact withadmissible evidence.” Bordelon v. Chicago Sch. Reform Bd. of Trs., 233 F.3d 524, 527 (7th Cir.2000). “The Rule is designed, in part, to aid the district court, ‘which does not have theadvantage of the parties’ familiarity with the record and often cannot afford to spend the timecombing the record to locate the relevant information,’ in determining whether a trial isnecessary.” Delapaz v. Richardson, 634 F.3d 895, 899 (7th Cir. 2011) (citation omitted). LocalRule 56.1(a)(3) requires the moving party to provide “a statement of material facts as to whichthe moving party contends there is no genuine issue.” Cracco v. Vitran Exp., Inc., 559 F.3d 625,632 (7th Cir. 2009). “The opposing party is required to file ‘a response to each numberedparagraph in the moving party’s statement, including, in the case of any disagreement, specificreferences to the affidavits, parts of the record, and other supporting materials relied upon.” Id.(citing N.D. Ill. R. 56.1(b)(3)(B)). Also, Local Rule 56.1(b)(3)(C) requires the nonmoving partyto present a separate statement of additional facts that requires the denial of summary judgment.See Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643-44 (7th Cir. 2008).The purpose of Local Rule 56.1 statements is to identify the relevant admissible evidencesupporting the material facts, not to make factual or legal arguments. See Cady v. Sheahan, 467F.3d 1057, 1060 (7th Cir. 2006) (“statement of material facts did [] not comply with Rule 56.1 asit failed to adequately cite the record and was filled with irrelevant information, legal arguments,and conjecture”). Therefore, the Court will not address the parties’ legal and factual arguments2

89made in their Rule 56.1 statements and responses. See System Dev. Integration, LLC v.Computer Sciences Corp., 739 F.Supp.2d 1063, 1068 (N.D. Ill. 2010). Moreover, therequirements for responses under Local Rule 56.1 are “not satisfied by evasive denials that donot fairly meet the substance of the material facts asserted.” Bordelon, 233 F.3d at 528.The Court may also disregard statements and responses that do not properly cite to therecord. See Cady, 467 F.3d at 1060; Cichon v. Exelon Generation Co., LLC, 401 F.3d 803, 809-10 (7th Cir. 2005). Because Defendants failed to respond to Maremont’s Rule 56.1 Statement ofAdditional Facts, all of Maremont’s additional facts are deemed admitted. See N.D. Ill. LocalRule 56.1(b)(3)(C); Parra v. Neal, 614 F.3d 635, 636 (7th Cir. 2010).II.Relevant FactsDefendant SFDG is an interior design firm headquartered in Chicago and incorporated inthe State of Illinois. (R. 39, Defs.’ Rule 56.1 Stmt. Facts 1.) Defendant Fredman owns SFDG.(Id. 2.) During the relevant time period, SFDG employed Maremont as the Director ofMarketing, Public Relations, and E-commerce. (Id. 3.) Maremont’s annual compensationincluded a bonus contingent upon SFDG’s gross sales exceeding certain threshold levels. (Id. 14.) Accordingly, Maremont’s social media efforts to promote SFDG’s sales qualified her forbonuses. (Id. 15.) During the course of Maremont’s employment at SFDG, she became wellknown in the Chicago design community and had developed a personal Twitter following ofapproximately 1,250 people. (R. 44, Pl.’s Rule 56.1 Stmt. Add’l Facts 34.)As part of a social media marketing campaign for SFDG, Maremont created the SFDGblog titled “Designer Diaries: Tales from the Interior” that was hosted on SFDG’s website. (Id. 40; Defs.’ Stmt. Facts 5.) Although it is undisputed that Maremont opened a Twitter account3

90using an SFDG computer at SFDG’s offices, it is also undisputed that Maremont’s personalTwitter and Facebook accounts were not for the benefit of SFDG. (Defs.’ Stmt. Facts 6; Pl.’sStmt. Facts 35.) Maremont, however, also opened a Facebook account for SFDG that was nother personal Facebook account. (Defs.’ Stmt. Facts 9.) Maremont used Facebook and Twitterposts to promote SFDG by linking them to SFDG’s blog and website. (Defs.’ Stmt. Facts 10.)Maremont entered and stored all account access information, including passwords for herTwitter and Facebook accounts, on the SFDG server by utilizing a SFDG-owned computer,although the folder in which she stored this information was locked and Maremont never gaveauthority to anyone to access her personal Twitter and Facebook accounts. (Id. 11; Pl.’s Stmt.Facts 42.)On September 15, 2009, an automobile struck Maremont and a SFDG co-worker whilethey were on a work-related errand. (Defs.’ Stmt. Facts 16.) The accident seriously injuredMaremont and her co-worker. (Id.) Specifically, Maremont suffered serious brain trauma andstill suffers from post-concussion syndrome and post-traumatic stress disorder. (Id. 25.) Whileshe was hospitalized for her injuries between September 15 and 24, 2009, Maremont found outthat SFDG had posted entries on her Facebook page promoting SFDG. (Id. 17.) Maremontadmits, however, that she did not see these Facebook entries and has no copies of them. (Id. 18.) Also when she was hospitalized, Maremont discovered that SFDG posted Tweets on herTwitter account promoting SFDG. (Id. 19; Pl.’s Stmt. Facts 51, 63.) Maremont has copiesof seventeen Tweets posted during her absence from SFDG. (Defs.’ Stmt. Facts 20.) The firstof these Tweets was posted on September 21, 2009 and was linked to an SFDG blog written byFredman explaining Maremont’s accident. (Id. 21.) This blog entry also announced that4

91during Maremont’s absence, a guest blogger, Olivia Fink-Larsen, would assume Maremont’srole at SFDG. (Id.) The other Tweets promoted SFDG and in some cases linked readers to theSFDG blog or website. (Id.)Meanwhile, Maremont asked Fredman and her employees to refrain from posting updatesto her Facebook page and Twitter account while she was in the hospital and not working atSFDG, yet SFDG employees failed to refrain from doing so. (Pl.’s Stmt. Facts 53, 54.) OnDecember 11, 2009, Maremont and her husband changed the password on her Twitter account.(Id. 59, 60; Defs.’ Stmt. Facts 23.) Maremont maintains that she suffered severe emotionaldistress when she realized that Defendants had sent out Tweets and Facebook posts from herpersonal Twitter and Facebook accounts promoting SFDG’s business. (Pl.’s Stmt. Facts 65.)On May 17, 2010, Maremont returned to work at SFDG on a part-time basis. (Defs.’Stmt. Facts 27.) The next day, May 18, 2010, Maremont wrote Facebook and Twitter poststhat she linked to a May 17, 2010 entry on SFDG’s blog in which she announced “Your Editor isBack!” (Id. 28.) In these posts, Maremont thanked her temporary replacements, Olivia Fink-Larson and Michelle Doorman, “for their amazing posts on Designer Diaries in my absence andMichelle’s giant contribution to the Chicago Interior Designers at the Susan Fredman DesignGroup as the acting Marketing Director.” (Id.) On June 1, 2010, Maremont’s doctorrecommended that she stop work completely due to her post-concussion syndrome symptoms.(Id. 29.) Thereafter, Maremont followed her doctor’s recommendation and stopped working atSFDG. (Id.)On December 10, 2010, Maremont filed the present lawsuit and on February 28, 2011,Maremont sent a letter by certified mail to Susan Rosie, SFDG’s President, announcing her5

92intention to return to work part-time at SFDG on March 17, 2011. (Id. 30, 31.) On March 8,2011, SFDG’s lawyer responded by letter to Maremont’s attorneys advising them that SFDG hadfilled Maremont’s position after her father directed SFDG employees not to contact Maremontunder any circumstances. (Id. 32.) By March 17, 2011, a public relations firm known as “JoChicago” had hired Maremont. (Id. 33.)SUMMARY JUDGMENT STANDARDSummary judgment is appropriate “if the movant shows that there is no genuine disputeas to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P.56(a). A genuine dispute as to any material fact exists if “the evidence is such that a reasonablejury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S.242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). In determining summary judgmentmotions, courts must view facts “in the light most favorable to the nonmoving party only if thereis a ‘genuine’ dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167L.Ed.2d 686 (2007). The party seeking summary judgment has the burden of establishing thatthere is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317,323, 106 S. Ct. 2548, 91 L.Ed.2d 265 (1986). After “a properly supported motion for summaryjudgment is made, the adverse party ‘must set forth specific facts showing that there is a genuineissue for trial.’” Anderson, 477 U.S. at 255 (quotation omitted).ANALYSISI. Lanham Act Claim – Count IIn Count I of her Second Amended Complaint, Maremont alleges a false associationclaim, also known as a false endorsement claim, under the Lanham Act, 15 U.S.C. §6

931125(a)(1)(A). As the Seventh Circuit explains, one basis of liability under the Lanham Actincludes “false representations concerning the origin, association or endorsement of goods orservices through the wrongful use of another’s distinctive mark, name, trade dress or otherdevice.” L.S. Heath & Son, Inc. v. AT & T Info. Sys., Inc., 9 F.3d 561, 575 (7th Cir. 1993).“False endorsement occurs when a person’s identity is connected with a product or service insuch a way that consumers are likely to be misled about that person’s sponsorship or approval ofthe product or service.” Stayart v. Yahoo! Inc., 651 F.Supp.2d 873, 880 (E.D. Wis. 2009). Morespecifically, a “false endorsement claim based on the unauthorized use of a [person’s] identity isa type of false association claim, for it alleges the misuse of a trademark, i.e., a symbol or devicesuch as a visual likeness, vocal imitation, or other uniquely distinguishing characteristic, whichis likely to confuse consumers as to the plaintiff’s sponsorship or approval of the product.”Waits v. Frito-Lay, Inc., 978 F.2d 1093, 1110 (9th Cir. 1992).In their motion for summary judgment, Defendants argue that Maremont does not havestanding to bring her false endorsement claim. To have standing to bring a false endorsementclaim under the Lanham Act, a “party need not be in direct competition with a defendant tochallenge a defendant’s practices under the Act,” instead, “[a]ll a commercial party needs tobring suit under the Act is a ‘reasonable interest to be protected’ against activities that violate theAct.” Dovenmuehle v. Gilldorn Mortgage Midwest Corp., 871 F.2d 697, 700 (7th Cir. 1989)(citations omitted); see also Waits, 978 F.2d at 1110. In short, to satisfy the prudential standingrequirement for a false endorsement claim under the Lanham Act, a plaintiff must show an intentto commercialize an interest in her identity. See Dovenmuehle, 871 F.2d at 700; Stayart, 651F.Supp.2d at 881.7

94Although promoting SFDG on Facebook and Twitter was part of Maremont’s marketingstrategy while she was employed as SFDG’s Director of Marketing, Public Relations, and E-Commerce, it is undisputed that Maremont created a personal following on Twitter andFacebook for her own economic benefit and also because if she left her employment at SFDG,she would promote another employer with her Facebook and Twitter followers. (Pl.’s Stmt.Facts 47-49.) As such, Maremont has satisfied the prudential standing requirement for a falseendorsement claim because she has a protected, commercial interest in her name and identitywithin the Chicago design community. See Dovenmuehle, 871 F.2d at 700.Next, Defendants argue that because Maremont did not suffer a financial injury, and herfalse endorsement claim must fail. See L.S. Heath & Son, Inc., 9 F.3d at 575; Web PrintingControls Co. v. Oxy–Dry Corp., 906 F.2d 1202, 1204-05 (7th Cir. 1990). To clarify, in “order torecover damages for a purported Lanham Act violation, the plaintiff ‘must demonstrate that ithas been damaged by actual consumer reliance on the misleading statements.’” L.S. Heath &Son, Inc., 9 F.3d at 575 (quoting Web Printing, 906 F.2d at 1205). As such, Maremont mustshow that she “suffered actual injury, i.e., a loss of sales, profits, or present value (goodwill)” orthat Defendants were unjustly enriched. See Web Printing, 906 F.2d at 1205; see also BadgerMeter, Inc. v. Grinnell Corp., 13 F.3d 1145, 1157 (7th Cir. 1994).Defendants filed their summary judgment motion on September 9, 2011 – over twomonths before the discovery cutoff date of November 18, 2011. Meanwhile, the Court grantedMaremont’s motion to extend the discovery deadline on December 1, 2011. In addition, theparties recently informed the Court that they need expert discovery on the issue of damages.Because the parties have yet to complete fact discovery in this matter, especially as it relates to8

95damages based on their representations to the Court, it is premature to address whetherMaremont suffered actual injury or if Defendants were unjustly enriched. See Fed.R.Civ.P.56(a). Accordingly, the Court denies the parties’ cross-motions for summary judgment on CountI of the Second Amended Complaint.II.Stored Communications Act Claim – Count IIIn Count II of the Second Amended Complaint, Maremont alleges that Defendants,without permission or authorization, used Maremont’s personal Twitter password to access herpersonal Twitter account authoring seventeen Tweets and similarly accessed her Facebookaccount and entered Facebook postings, in violation of the Stored Communications Act(“SCA”), 18 U.S.C. § 2701, et seq. In 1986, Congress enacted the SCA as Title II of theElectronic Communications Privacy Act of 1986, Pub.L. No. 99–508, 100 Stat. 1848 (1986),codified as amended at 18 U.S.C. §§ 2701-2711. See Devine v. Kapasi, 729 F.Supp.2d 1024,1026 (N.D. Ill. 2010). “Congress enacted the relevant provision of the SCA, id. § 2701, toprotect privacy interests in personal and proprietary information from the mounting threat ofcomputer hackers ‘deliberately gaining access to, and sometimes tampering with, electronic orwire communications’ by means of electronic trespass.” Id. (citation omitted). The SCA has aprovision for a private cause of action, which authorizes lawsuits for unauthorized, intentionalaccess to communications that are held in electronic storage. See Shlahtichman v. 1-800Contacts, Inc., 615 F.3d 794, 803 (7th Cir. 2010); 18 U.S.C. §§ 2701(a), 2707(a). The SCAprovision at issue states that whoever “(1) intentionally accesses without authorization a facilitythrough which an electronic communication service is provided; or (2) intentionally exceeds anauthorization to access that facility” and by doing so “obtains, alters, or prevents authorized9

96access to a wire or electronic communication while it is in electronic storage in such system”violates the SCA. See 18 U.S.C. § 2701(a); see also Shefts v. Petrakis, 758 F.Supp.2d 620, 635(C.D. Ill. 2010).Although Maremont admits that she never saw the Facebook posts that SFDG employeesposted without her consent and that she has no copies of these entries, there is undisputedevidence in the record that Defendants accessed Maremont’s personal Facebook account andaccepted friend requests at least five times from September 23, 2009 through November 24,2009. (Pl.’s Stmt. Facts 55-58.) Moreover, evidence in the record reveals that Defendantsposted seventeen Tweets to Maremont’s personal Twitter account during the relevant timeperiod. As such, there are disputed issues of material fact whether Defendants exceeded theirauthority in obtaining access to Maremont’s personal Twitter and Facebook accounts.Nonetheless, Defendants argue that Maremont’s SCA claim fails because she cannotestablish actual damages as required under the SCA, more specifically, 18 U.S.C. § 2707(c). SeeDoe v. Chao, 540 U.S. 614, 640, 124 S.Ct. 1204, 157 L.Ed.2d 1122 (2004) (damages underSection 2707(c) include sum of actual damages suffered by plaintiff and profits made by violatoras result of violation). To clarify, although the SCA allows for statutory damages, proof of“actual damages” is a prerequisite to recover any such statutory damages. See Van Alstyne v.Electronic Scriptorium, Ltd., 560 F.3d 199, 205 (4th Cir. 2009); Cornerstone Consultants, Inc. v.Production Input Solutions, LLC, 789 F.Supp.2d 1029, 1043 (N.D. Iowa 2011); Cf. Chao, 540U.S. at 626-27 (under Privacy Act, $1,000 minimum statutory damages award was available“only to plaintiffs who suffered some actual damages”). Because the parties have yet tocomplete discovery as it pertains to damages, it is premature for the Court to address this issue.10

97Therefore, the Court denies both Maremont’s and Defendants’ cross-motions for summaryjudgment as to Count II of the Second Amended Complaint.III.Illinois Right of Publicity Act Claim – Count IIIIn Count III of the Second Amended Complaint, Maremont alleges that Fredman and/orSFDG used her likeness for the purpose of promoting Defendants’ design business and retailstore without Maremont’s written consent in violation of Illinois’ Right to Publicity Act. Theelements for an Illinois Right to Publicity Act claim include: (1) an appropriation of one’s nameor likeness; (2) without written consent; and (3) for another’s commercial benefit. See Blair v.Nevada Landing P’ship, 369 Ill.App.3d 318, 322, 307 Ill.Dec. 511, 859 N.E.2d 1188 (2d Dist.2006); 765 ILCS 1075/60 (the Act does “not affect an individual’s common law rights as theyexisted before the effective date of this Act.”). “According to the Restatement, the purpose ofthis tort is to protect the ‘interest of the individual in the exclusive use of his own identity, in sofar as it is represented by his name or likeness.’” Villalovos v. Sundance Assoc., Inc., No. 01 C8468, 2003 WL 115243, at *3 (N.D. Ill. Jan. 13, 2003) (quoting Restatement (Second) of Torts §652C, cmt. a (1977)); see also Dwyer v. American Exp. Co., 273 Ill.App.3d 742, 210 Ill.Dec.375, 652 N.E.2d 1351 (1st Dist. 1995). In addition, “the Restatement of Torts makes it clear thatit is not the use of the plaintiff’s name which constitutes a tort but rather the appropriation of thevalue of his name and reputation.” Hooker v. Columbia Pictures Indus., Inc., 551 F.Supp. 1060,1062 (N.D. Ill. 1982). Thus, “[i]t is not enough that the defendant has adopted for himself aname that is the same as that of the plaintiff, so long as he does not pass himself off as theplaintiff or otherwise seek to obtain for himself the values or benefits of the plaintiff’s name or11

98identity.” Id. (quoting Restatement (Second) of Torts § 652C, cmt. c (1977)). 1Because there is no evidence in the record concerning the actual Facebook postings andtheir content, the Court focuses on the seventeen Tweets posted in the fall of 2009 to determinewhether Maremont’s Right to Privacy Act claim survives summary judgment. Viewing the factsand all reasonable inferences in Maremont’s favor, she cannot fulfill the appropriation elementunder the Right to Privacy Act because Defendants did not pass themselves off as Maremont inthe relevant Tweets. More specifically, the first of these Tweets was posted on September 21,2009 and was linked to an SFDG blog written by Fredman explaining Maremont’s accident.This blog entry also announced that during Maremont’s absence, a guest blogger, Olivia Fink-Larsen, would assume Maremont’s role at SFDG. It is also undisputed that once Maremontreturned to SFDG in May 2010, she wrote Facebook and Twitter posts that she linked to a May17, 2010 entry on SFDG’s blog in which she announced “Your Editor is Back!” (Defs.’ Stmt.Facts 28.) In these posts, Maremont thanked her temporary replacements, Olivia Fink-Larsonand Michelle Doorman, “for their amazing posts on Designer Diaries in my absence andMichelle’s giant contribution to the Chicago Interior Designers at the Susan Fredman DesignGroup as the acting Marketing Director.” (Id.) Because Defendants did not appropriateMaremont’s identity and Maremont herself recognizes that SFDG temporarily replaced herduring her absence, Maremont’s Right to Publicity Act claim must fail. The Court thus grantsDefendants’ summary judgment motion and denies Maremont’s motion for partial summary1 Except for citing legal authority listing the elements of her Illinois Right of PublicityAct and Intrusion Upon Seclusion claims, Maremont fails to develop her arguments supportingthese state law claims with any legal authority. See Judge v. Quinn, 612 F.3d 537, 557 (7th Cir.2010) (“undeveloped arguments, and arguments that are unsupported by pertinent authority, arewaived.”) (citation omitted).12

99judgment as to Count III of the Second Amended Complaint.IV.Common Law Right to Privacy Claim – Count IVThe Court previously dismissed Maremont’s common law right to privacy claim –without prejudice – because the Right to Publicity Act replaced the common law tort ofappropriation of likeness. See Flentye v. Kathrein, 485 F.Supp.2d 903, 923 (N.D. Ill. 2007).Maremont then re-alleged Count IV, bringing a common law intrusion upon seclusion claim,which is also a right to privacy claim under Illinois law. An intrusion upon seclusion claimincludes the following elements: “(1) an unauthorized intrusion into seclusion; (2) the intrusionwould be highly offensive to a reasonable person; (3) the matter intruded upon was private; and(4) the intrusion caused the plaintiffs anguish and suffering.” Cooney v. Chicago Public Sch.,407 Ill.App.3d 358, 366, 347 Ill.Dec. 733, 943 N.E.2d 23 (1st Dist. 2010). Under the thirdelement of an intrusion upon seclusion claim, the matter must be private and the plaintiff mustshow that she “attempted to keep private facts private.” Acosta v. Scott Labor, LLC, 377F.Supp.2d 647, 650 (N.D. Ill. 2005). In other words, “persons cannot reasonably maintain anexpectation of privacy in that which they display openly.” Id. (citation omitted).Here, it is undisputed that Maremont had a Twitter following of approximately 1,250people and that she also had Facebook followers. (Pl.’s Stmt. Facts 34, 44.) It is alsoundisputed that Maremont’s posts on Twitter were targeted to the design community. (Id. 50.)Further, Maremont signed her business emails as SFDG’s Marketing Director with an invitationto “Become a fan of SFDG on Facebook” and to “Follow us on Twitter.” (Defs.’ Stmt. Facts 13.) Also, Maremont’s Facebook and Twitter posts were often linked to the SFDG blog,“Designer Diaries: Tales from the Interior,” which was accessible to the public and was created13

100to enhance SFDG’s sales. (Id. 5, 8.)Viewing these facts and all reasonable inferences in Maremont’s favor, there is nodispute as to the material facts that the matters discussed in Maremont’s Facebook and Twitterposts were not private and that Maremont did not try to keep any such facts private. 2In short,Maremont fails to point to any private information upon which Defendants intruded. SeeCooney, 407 Ill.App.3d at 367; see also Lovgren v. Citizens First Nat’l Bank of Princeton, 126Ill.2d 411, 417, 128 Ill.Dec. 542, 534 N.E.2d 987 (Ill. 1989) (“the core of this tort is the offenseprying into the private domain of another”). Therefore, the Court grants Defendants’ summaryjudgment motion as to Count IV of the Second Amended Complaint.2Facebook posts are accessible only to those whom the user selects, and thus they arenot strictly public. See Crispin v. Christian Audigier, Inc., 717 F.Supp.2d 965, 980 (C.D. Cal.2010); see also Cohen v. Facebook, Inc., ___ F.Supp.2d ___, 2011 WL 3100565, at *1 (N.D.Cal. June 28, 2011) (“As a ‘social networking’ internet site, Facebook exists because its userswant to share information – often about themselves – and to obtain information about others,within and among groups and subgroups of persons they already know or with whom theybecome acquainted through using Facebook.”) (emphasis in original). Twitter posts or Tweets,on the other hand, are usually visible and accessible to the general public. See Senese v. Hindle,No. 11-CV-0072 (RJD), 2011 WL 4536955, at *5 n.28 (E.D.N.Y. Sept. 9, 2011); see alsoTwitter: New Challenges to Copyright Law in the Internet Age, 10 J. Marshall Rev. Intell. Prop.L. 231, 236 (2010) (although Tweets are publicly visible by default, senders can restrictmessages to their followers).14

101CONCLUSIONFor the these reasons, the Court grants in part and denies in part Defendants’ motion forsummary judgment and denies Plaintiff’s motion for partial summary judgment brought pursuantto Federal Rule of Civil Procedure 56.Date: December 7, 2011ENTERED_______________________________AMY J. ST. EVEUnited States District Court Judge15

102Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page1 of 1512UNITED STATES DISTRICT COURTFor the Northern District of California345678910111213141516171819202122232425262728PHONEDOG,v.NOAH KRAVITZ,UNITED STATES DISTRICT COURTPlaintiff,Defendant._____________________________________/Northern District of CaliforniaI. INTRODUCTIONNo. C 11-03474 MEJORDER ON DEFENDANT’S MOTIONTO DISMISS PURSUANT TO FRCP12(B)(1) AND 12(B)(6)[Docket No. 4]Plaintiff PhoneDog brings this action against one of its former employees, Defendant NoahKravitz, based on his continued use of a Twitter account that PhoneDog alleges it owns and containstrade secrets, namely the compilation of subscribers and the password used to access the account.Currently pending before the Court is Mr. Kravitz’s Motion to Dismiss PhoneDog’s Complaint forlack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(1), andfor failure to state a claim pursuant to Rule 12(b)(6). Mot., Dkt. No. 4. PhoneDog has filed anOpposition (Dkt. No. 13), and Mr. Kravitz has filed a Reply (Dkt. No. 17). On October 13, 2011, theCourt held a hearing on the matter. After carefully considering the parties’ arguments and thecontrolling legal authorities, the Court DENIES without prejudice Mr. Kravitz’s 12(b)(1) motion andGRANTS IN PART and DENIES IN PART his 12(b)(6) motion as set forth below.II. BACKGROUNDThe relevant allegations, taken from PhoneDog’s Complaint, are as follows.PhoneDog is an “interactive mobile news and reviews web resource,” that reviews mobileproducts and services and provides users with resources needed to research, compare prices, and shopfrom mobile carriers. Compl. 8. PhoneDog uses a variety of social media, including Twitter,Facebook, and YouTube, to market and promote its services to users. Id. 9.

Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page2 of 15103UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728Beginning in April 2006, Mr. Kravitz began working for PhoneDog as a product reviewer andvideo blogger. Id. 14. PhoneDog alleges that “[a]s an employee of PhoneDog, [Mr. Kravitz] wasgiven use of and maintained the Twitter account “@PhoneDog_Noah” (the “Account”). Id. 15. Aspart of Mr. Kravitz’s employment, he submitted written and video content to PhoneDog, which wasthen transmitted to its users via a variety of mediums, including PhoneDog’s website and the TwitterAccount. Id. 14. Mr. Kravitz accessed the Twitter Account using a password and used the Accountto disseminate information and promote PhoneDog’s services on behalf of PhoneDog. Id. Accordingto PhoneDog, all @PhoneDog_Name Twitter accounts used by its employees, as well as thepasswords to such accounts, constitute proprietary, confidential information. Id. 12. PhoneDogavers that, during the course of Mr. Kravitz’s employment at PhoneDog, the @PhoneDog_NoahAccount generated approximately 17,000 Twitter followers. Id. 16.In October 2010, Mr. Kravitz ended his employment with PhoneDog. Id. 17. At that time,PhoneDog requested that he relinquish use of the Twitter Account. Id. In response, Mr. Kravitzchanged the Account handle to “@noahkravitz,” and continues to use the Account. Id. As a result,PhoneDog alleges that it has suffered at least $340,000 in damages. Id. at 9.Based on these allegations, on July 15, 2011, PhoneDog filed this lawsuit against Mr. Kravitz,asserting claims under California law for: (1) misappropriation of trade secrets; (2) intentionalinterference with prospective economic advantage; (3) negligent interference with prospectiveeconomic advantage; and (4) conversion. Id. at 3-7.Mr. Kravitz now moves to dismiss PhoneDog’s Complaint pursuant to Rule 12(b)(1) for lackof subject matter jurisdiction and pursuant to Rule 12(b)(6) for failure to state a claim.III. DISCUSSIONA. Motion to Dismiss for Lack of Subject Matter JurisdictionIn its Complaint, PhoneDog alleges that this Court has subject matter jurisdiction over thisaction pursuant to 28 U.S.C. § 1332(a). Compl. 3. It alleges that it diversity of citizenship existsbetween the parties and more than $75,000 is in controversy. Id. There is no dispute as to thediversity of citizenship of the parties. Mr. Kravitz, however, argues that PhoneDog cannot meet its2

104Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page3 of 15UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728burden of establishing that the amount in controversy is satisfied in this case. Mot. at 2. Specifically,he challenges PhoneDog’s alleged damages premised on the value of the Twitter Account. Id. at 3.In response, PhoneDog asserts that it has sufficiently alleged that the amount in controversy exceeds$75,000. Opp’n at 3, Dkt. No. 13. It further argues that Mr. Kravitz’s extrinsic evidence does notprove to a legal certainty that its damages fall below the jurisdictional minimum. Id.1. Legal StandardFederal courts are courts of limited jurisdiction, possessing only that power authorized byArticle III of the United States Constitution and statutes enacted by Congress pursuant thereto.Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). Thus, federal courts have nopower to consider claims for which they lack subject matter jurisdiction. Chen–Cheng Wang ex rel.United States v. FMC Corp., 975 F.2d 1412, 1415 (9th Cir. 1992). The Court is under a continuingduty to dismiss an action whenever it appears that it lacks jurisdiction. Id.; see also Spencer Enters.,Inc. v. United States, 345 F.3d 683, 687 (9th Cir. 2003). The burden of establishing that a cause lieswithin this limited jurisdiction rests upon the party asserting jurisdiction. Kokkonen v. Guardian LifeIns. Co. of America, 511 U.S. 375, 377 (1994). Thus, in the present action, PhoneDog bears theburden of demonstrating that subject matter jurisdiction exists over its Complaint. Tosco Corp. v.Communities for a Better Env’t, 236 F.3d 495, 499 (9th Cir. 2001).On a motion to dismiss pursuant to Rule 12(b)(1), the applicable standard turns on the natureof the jurisdictional challenge. A Rule 12(b)(1) jurisdictional attack may be “facial” or “factual.”White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000) (citation omitted). In evaluating a facial attack onjurisdiction, the Court must accept the factual allegations in PhoneDog’ complaint as true and drawall reasonable inferences in its favor. Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009). As partof its ruling on such a motion, the Court may also consider additional facts that “are contained inmaterials of which the court may take judicial notice.” McCarthy v. United States, 850 F.2d 558, 560(9th Cir. 1988).By contrast, in a factual attack, the challenger disputes the truth of the allegations that, bythemselves, would otherwise invoke federal jurisdiction. Safe Air for Everyone v. Meyer, 373 F.3d3

Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page4 of 15105UNITED STATES DISTRICT COURTFor the Northern District of California123456789101112131415161718192021222324252627281035, 1039 (9th Cir. 2004). In such a case, “[n]o presumptive truthfulness attaches to plaintiff’sallegations, and the existence of disputed material facts will not preclude the trial court fromevaluating for itself the merits of jurisdictional claims.” Thornhill Publ’g v. Gen. Tel. & Elec. Corp.,594 F.2d 730, 733 (9th Cir. 1979). “In resolving a factual attack on jurisdiction, the district courtmay review evidence beyond the complaint without converting the motion to dismiss into a motionfor summary judgment.” Safe Air, 373 F.3d at 1039 (citation omitted). However, “[a] jurisdictionalfinding of genuinely disputed facts is inappropriate when the jurisdictional issue and substantiveissues are so intertwined that the question of jurisdiction is dependent on the resolution of factualissues going to the merits of the action.” Id. “Dismissal is then appropriate ‘where it appears beyonddoubt that the plaintiff can prove no set of facts in support of his claim which would entitle him torelief.’” Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987) (quoting Conley v. Gibson, 355U.S. 41, 45-46 (1957)). “This standard, often cited in Rule 12(b)(6) motions, . . . is equallyapplicable in motions challenging subject matter jurisdiction when such jurisdiction may becontingent upon factual matters in dispute.” Id. (internal quotations and citation omitted). “TheNinth Circuit has held that, where the jurisdictional issue is intertwined with the merits, a courtcannot determine the jurisdictional issue until the merits of the case are appropriately resolved.” Chiev. Reed Elsevier, Inc., 2011 WL 3879495, at *3 (N.D. Cal. Sep. 02, 2011) (citing Roberts, 812 F.2d at1177).2. DiscussionAs indicated above, in its Complaint PhoneDog alleges that Mr. Kravitz’s unauthorized use ofthe Twitter Account (and other confidential information associated with the Account), have caused itto incur $340,000 in damages. Compl. 16, 41. To reach this calculation, PhoneDog alleges thatthe account generated approximately 17,000 followers, which according to industry standards, areeach valued at $2.50. Id. Thus, PhoneDog contends that its damages amount to $42,500 ($2.50 x17,000) for each month that Mr. Kravitz has used the account, which at the time of filing amounted to$340,000 for eight months. Id.In his Motion, Mr. Kravitz contends that PhoneDog cannot establish damages over the4

106Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page5 of 15UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728$75,000 jurisdictional threshold. Mot. at 9. Contrary to PhoneDog’s calculation, Mr. Kravitz assertsthat “PhoneDog cannot establish that it is entitled to any monetary recovery because it does not havecompetent proof that it has ownership or right to possession over the Account or the followers.” Mot.at 9. According to Mr. Kravitz, pursuant to Twitter’s Terms of Service, “the Account, as all Twitteraccounts are, is the exclusive property of Twitter and its licensors, not PhoneDog.” Id. As to thefollowers, Mr. Kravitz argues that “‘[f]ollowers’ are human beings who have the discretion tosubscribe and/or unsubscribe to the Account without the consent of PhoneDog,” and are not propertyand cannot be owned. Id. Because PhoneDog cannot own either the Account or its followers, Mr.Kravitz contends that PhoneDog has no basis for its damages calculation and, as a result, cannot showthat the amount in controversy requirement is met. Id.Mr. Kravitz also argues that, “[t]o date, the industry precedent has been that absent anagreement prohibiting any employee from doing so, after an employee leaves an employer, they arefree to change their Twitter handle.” Id. at 10.Further, Mr. Kravitz contends that, irrespective of whether PhoneDog owns the account, itcannot establish more than $75,000 in damages because there is no evidence that a Twitter accounthas any monetary value. Mot. at 10. He argues that “PhoneDog neither states that there is an actualrecognized method to measure the value of a Twitter ‘account’, not does it allege that its method ofcalculating the value of the Account is in accordance with an ‘industry standard.’” Id. He argues thatany value attributed to the Account comes from his efforts in posting tweets and the individual’sinterest in following him, not from the Account itself. Mot. at 11.Finally, Mr. Kravitz challenges PhoneDog’s methodology for assessing the value of a Twitteraccount. Mot. at 12. He argues that if any value can be determined, it requires more than simplymultiplying each user by $2.50; rather multiple factors must be considered, including: (1) the numberof followers; (2) the number of tweets; (3) the content of the tweets; (4) the person publishing thetweets; and (5) the person placing the value of the account. Id.PhoneDog, however, maintains that it has sufficiently alleged that it has incurred more than$75,000 in damages as a result of Mr. Kravitz’s conduct, thereby satisfying Rule 8(a)(1)’s liberal5

Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page6 of 15107UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728pleading standard. Opp’n at 8. It asserts that it is not required to provide a detailed calculation ofhow its Account is valued in its Complaint. Id.PhoneDog also counters that it has an ownership interest in the Account based on the licensegranted to it by Twitter to use and access the Account, in the Account’s list of followers, and in thecontent submitted to the Account. Opp’n at 6-7. It argues that, even if Mr. Kravitz created theAccount, he did so at PhoneDog’s request and for its benefit and in the course and scope of hisemployment with PhoneDog. Id. at 6. It argues that the list of followers is akin to a businesscustomer list, in which it has an intangible property interest. Id. at 7.PhoneDog further argues that, notwithstanding any ownership interest or right to possession ithas in the Account, it is entitled to damages based upon Mr. Kravitz’s interference with its access toand use of the Account. Opp’n at 5. PhoneDog states that it requests that its representatives maintainTwitter accounts to increase traffic to its website, which generates income from advertisers. Id. Itargues that, “contrary to the agreement between PhoneDog and [Mr. Kravitz] that the Account was tobe used for the benefit of PhoneDog, [Mr. Kravitz] failed to respond to requests from PhoneDog totweet and submit contend to the Account promoting PhoneDog and instead used the Account topromote himself and TechnoBuffalo, a competitor of PhoneDog. By failing to use the Account forPhoneDog’s benefit, [Mr. Kravitz] interfered with PhoneDog’s access to the Followers, which in turninterfered with PhoneDog’s economic relations with its advertisers,” thereby interfering with its“advantageous relations” and giving rise to a claim for damages Id. at 5-6. Thus, it argues thatTwitter’s prohibition on purchasing or selling a Twitter account is inconsequential because “[t]hevalue of the Account lies in the Account’s list of Followers and the traffic that those Followersgenerate to the PhoneDog website.” Id. at 8-9.Finally, PhoneDog argues that Mr. Kravitz cannot establish that there is a legal certainty thatits damages do not exceed $75,000. Id. at 9. It contends that “the method of valuing a Twitteraccount is afforded many different interpretations,” and Mr. Kravitz’s method which leads to adifferent valuation is insufficient to defeat subject matter jurisdiction. Id.As the foregoing summary illustrates, the question whether the amount in controversy6

108Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page7 of 15UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728requirement is satisfied in this case is intertwined with factual and legal issues raised by PhoneDog’sclaims. Whether PhoneDog has any property interest in the Twitter account cannot be resolved onthe record at this stage of the case. Likewise, should PhoneDog be able to establish that it has someproperty interest in the Twitter account or the password and follower list, the question becomes whatis the proper valuation of such items. Again, the parties have proffered competing methodologies forvaluing the account, and on this limited record, the Court is unable to resolve this dispute at thisjuncture.At the same time, PhoneDog has expressly alleged $340,000 in damages stemming from itsmisappropriation and interference with economic advantage claims. The Court cannot say thatPhoneDog’s allegation as to the amount in controversy is in bad faith or that it appears beyond a legalcertainty that the claim is really for less than the jurisdictional amount.Taken together, the Court finds that a determination of whether the Court has subject matterjurisdiction over this action based on diversity jurisdiction cannot be resolved at this stage of theproceeding. Rather, because the issue is tied up with PhoneDog’s claims, the issue cannot beresolved until summary judgment on a fully developed evidentiary record. The Court thereforeDENIES Mr. Kravitz’s motion to dismiss for lack of subject matter jurisdiction WITHOUTPREJUDICE to Mr. Kravitz re-asserting his challenge on summary judgment.B. Motion to Dismiss for Failure to State a ClaimMr. Kravitz also moves to dismiss each of PhoneDog’s claims pursuant to Rule 12(b)(6). TheCourt will address each challenge in turn.1. Legal StandardA court may dismiss a complaint under Rule 12(b)(6) when it does not contain enough facts tostate a claim to relief that is plausible on its face. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570(2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the courtto draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.Iqbal, 129 S.Ct. 1937, 1949 (2009). “The plausibility standard is not akin to a ‘probabilityrequirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.7

Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page8 of 15109UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728(quoting Twombly, 550 U.S. at 557.) “While a complaint attacked by a Rule 12(b)(6) motion todismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ ofhis ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation ofthe elements of a cause of action will not do. Factual allegations must be enough to raise a right torelief above the speculative level.” Twombly, 550 U.S. at 555 (internal citations and parentheticalsomitted).In considering a motion to dismiss, a court must accept all of the plaintiff’s allegations as trueand construe them in the light most favorable to the plaintiff. Id. at 550; Erickson v. Pardus, 551U.S. 89, 93-94 (2007); Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir. 2007).If the court dismisses the complaint, it should grant leave to amend even if no request toamend is made “unless it determines that the pleading could not possibly be cured by the allegation ofother facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (quoting Cook, Perkiss and Liehe,Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990)).2. Discussiona. Misappropriation of Trade Secrets ClaimMr. Kravitz challenges PhoneDog’s misappropriation of trade secrets claim.Mr. Kravitz first argues that the claim is subject to dismissal because “the identity of theAccount followers and the ‘password’ to the Account which PhoneDog alleges were misappropriatedby Kravitz are not a ‘trade secret’ within the meaning of the California Uniform Trade Secrets Act(“UTSA”).” 1Mot. at 14. Specifically, he argues that “[t]he followers of the Account are not secretbecause they are and have been publicly available for all to see at all times.” Id. With respect to thepassword to the Account, Mr. Kravitz contends that passwords to Twitter accounts do not derive any1 The UTSA, California Civil Code section 3426.1(d), provides that “‘[t]rade secret’ meansinformation, including a formula, pattern, compilation, program, device, method, technique, orprocess, that: (1) Derives independent economic value, actual or potential, from not being generallyknown to the public or to other persons who can obtain economic value from its disclosure or use;and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”8

110Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page9 of 15UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728actual or potential independent economic value under the UTSA because they do not provide anysubstantial business advantage. Mot. at 15. Rather, he argues that the passwords merely allow theindividual logging on to view information already widely known. Id. Mr. Kravitz also argues that he– not PhoneDog – initially created the password and that PhoneDog did not make any reasonableefforts to maintain the secrecy of the password. Id.Additionally, Mr. Kravitz contends that PhoneDog has failed to allege any act by him thatfalls within the definition of misappropriation. 2 Mot. at 16. Rather, he argues that “PhoneDog onlymakes the conclusory allegation that Kravitz used ‘improper means, as such are defined in Civil Code§ 3426.1(a), 3 to obtain and misappropriate the Confidential Information’ without providing anyfactual support of the actual alleged improper act committed by Kravitz.” Id. (quoting Compl. 23).Finally, Mr. Kravitz argues that PhoneDog has failed to plead misappropriation withparticularity, as required by Rule 9(b) for any claim sounding in fraud. Mot. at 16. Again, Mr.2 California Civil Code section 3426.1(b) provides:(b) “Misappropriation” means:(1) Acquisition of a trade secret of another by a person who knows or has reason to know that thetrade secret was acquired by improper means; or(2) Disclosure or use of a trade secret of another without express or implied consent by a personwho:(A) Used improper means to acquire knowledge of the trade secret; or(B) At the time of disclosure or use, knew or had reason to know that his or her knowledge ofthe trade secret was:(i) Derived from or through a person who had utilized improper means to acquire it;(ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use;or(iii) Derived from or through a person who owed a duty to the person seeking relief tomaintain its secrecy or limit its use; or(C) Before a material change of his or her position, knew or had reason to know that it was atrade secret and that knowledge of it had been acquired by accident or mistake.3 California Civil Code section 3426.1(a) provides: “‘Improper means’ includes theft,bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, orespionage through electronic or other means. Reverse engineering or independent derivation aloneshall not be considered improper means.”9

Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page10 of 15111UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728Kravitz asserts that PhoneDog has not alleged any facts regarding his conduct, but has merely allegedthat he used “improper means” to obtain and misappropriate the Twitter password. Mot. at 16-17.In its Opposition, PhoneDog contends that it has sufficiently stated its misappropriation oftrade secrets claim, arguing that it has alleged the existence of a trade secret in paragraphs 12 and 22of the Complaint. Opp’n at 10. It also contends that it has alleged that when it requested that Mr.Kravitz relinquish use of the Account, he “merely changed the Twitter handle on the Account,”continued to use the Account, and “used improper means, as such are defined in Civil Code section3426.1(a), to obtain and misappropriate the Confidential Information.” Opp’n at 11 (citing Compl. 17, 23).PhoneDog also disputes that Rule 9(b)’s heightened pleading standard applies to themisappropriation of trade secrets claim because the claim does not sound in fraud or mistake. Id.Finally, PhoneDog argues that Mr. Kravitz’s challenges to whether PhoneDog has aprotectable trade secret are beyond the scope of a 12(b)(6) motion and should be addressed onsummary judgment. Opp’n at 12.The Court has carefully considered the parties’ arguments and finds that Mr. Kravitz has notshown any basis for dismissal of the misappropriation of trade secrets claim under Rule 12(b)(6).With respect to the applicable pleading standard, although courts have applied conflicting standards,the Court finds that PhoneDog’s misappropriation claim does not sound in fraud or mistake and thusRule 9(b) does not control. See TMX Funding, Inc. v. Impero Tech., Inc., 2010 WL 2509979, at *2(N.D. Cal. June 17, 2010). PhoneDog has sufficiently described the subject matter of the trade secretwith sufficient particularity and has alleged that, despite its demand that Mr. Kravitz relinquish use ofthe password and Account, he has refused to do so. At this stage, these allegations are sufficient tostate a claim. Further, to the extent that Mr. Kravitz has challenged whether the password andAccount followers are trade secrets and whether Mr. Kravitz’s conduct constitutes misappropriationrequires consideration of evidence beyond the scope of the pleading. Thus, such challenges shouldbe raised at summary judgment on a fully-developed evidentiary record. The Court thereforeDENIES Mr. Kravitz’s request to dismiss PhoneDog’s misappropriation of trade secrets claim.10

112Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page11 of 15UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728b. Intentional Interference with Prospective Economic AdvantageMr. Kravitz next urges the Court to dismiss PhoneDog’s claim for intentional interferencewith prospective economic advantage, arguing that PhoneDog has failed to allege: (1) the existenceof an actual economic relationship between it and the Account followers; (2) an economic benefitwould have probably resulted had Mr. Kravitz not disrupted that relationship; and (3) any intentionalacts of Mr. Kravitz that actually disrupted the economic relationship. Mot. at 18.Under California law, to prevail on a claim for intentional interference with prospectiveeconomic advantage, a plaintiff must establish: (1) an economic relationship between the plaintiff andsome third party with the probability of future economic benefit to the plaintiffs; (2) the defendant’sknowledge of the relationship; (3) intentional acts, apart from the interference itself, by defendantdesigned to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harmto the plaintiff proximately caused by the acts of defendant. CRST Van Expedited v. Werner Enter.,Inc., 479 F.3d 1099, 1108 (9th Cir. 2007). “Interference with prospective economic advantagerequires a plaintiff to allege an act that is wrongful independent of the interference itself.” Bekele v.Ford, 2011 WL 4368566, at 11 (N.D. Cal. Sept. 17, 2011) (citing Della Penna v. Toyota MotorSales, 11 Cal. 4th 376, 392–93 (2007)). Notably, “[t]he tort of interference with prospectiveeconomic advantage does not, however, protect mere ‘potential’ relationships that are ‘at most a hopefor an economic relationship and a desire for a future benefit.’” Id. (quoting Westside Ctr. Assoc. v.Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 527 (1996)).With respect to an economic relationship with the probability of future economic benefit,PhoneDog contends that in paragraph 29 of its Complaint, it has sufficiently alleged that “PhoneDoghas had and continues to enjoy relationships with existing and prospective users of its mobile newsand review services.” Opp’n at 13. However, the Court agrees with Mr. Kravitz that this allegationis conclusory and fails to meet the plausibility standard. In particular, it is unclear who the “users”are, .i.e., whether they are the 17,000 Account followers, consumers accessing PhoneDog’s website,or some other individuals, and what the nature of PhoneDog’s purported economic relationship iswith these users.11

Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page12 of 15113UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728The Court also agrees with Mr. Kravitz that PhoneDog has failed to sufficiently allege actualdisruption of the relationship between it and its users and economic harm caused by Mr. Kravitz’sactions. In response to Mr. Kravitz’s challenge, PhoneDog cites to paragraph 30 of the Complaint.Opp’n at 14. However, this paragraph does not contain any facts regarding how Mr. Kravitz’sconduct disrupted PhoneDog’s relationship with its users or resulted in economic harm. In itsOpposition, PhoneDog also indicates that Mr. Kravitz’s conduct disrupted its economic relationshipswith its advertisers and cites to testimony from Tom Klein in support. Id. (citing Klein Decl. 3, 8).However, to the extent that Mr. Klein’s statements contain facts not alleged in PhoneDog’sComplaint, it is improper for the Court to consider such facts when assessing the adequacy ofPhoneDog’s allegations. If PhoneDog contends that an economic relationship existed between it andcustomers who advertised on its website, PhoneDog must allege such facts in its Complaint.Reviewing the entirety of PhoneDog’s Complaint, the Court finds that PhoneDog has failed to allegefacts regarding how Mr. Kravitz’s conduct disrupted its relationships and what economic harm itcaused. The Court therefore GRANTS Mr. Kravitz’s request to dismiss the misappropriation of tradesecrets claim.c. Negligent Interference with Prospective Economic AdvantageMr. Kravitz moves to dismiss PhoneDog’s claim for negligent interference with prospectiveeconomic advantage on the grounds that it has failed to sufficiently allege: (1) the existence of aneconomic relationship that would have probably resulted in economic benefit; or (2) a negligent actby Mr. Kravitz that actually disrupted that relationship. Mot. at 19. To state a claim for negligentinterference with prospective economic advantage, a plaintiff must allege: (1) an economicrelationship existed between the plaintiff and a third party which contained a reasonably probablefuture economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of therelationship and was aware or should have been aware that if it did not act with due care its actionswould interfere with this relationship and cause plaintiff to lose in whole or in part the probablefuture economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4)such negligence caused damage to plaintiff in that the relationship was actually interfered with or12

114Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page13 of 15UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonablyexpected from the relationship. N. Am. Chem. Co. v. Super. Ct., 59 Cal. App. 4th 764, 786 (1997).With respect to the existence of an economic relationship and the causation elements, thisclaim suffers from the same pleading deficiencies as PhoneDog’s intentional interference claim. It istherefore subject to dismissal on this ground.Additionally, Mr. Kravitz argues that PhoneDog has failed to allege that he owed it a duty ofcare, which is a necessary element of the claim. Id. “The tort of negligent interference witheconomic relationship arises only when the defendant owes the plaintiff a duty of care .... [A]mongthe criteria for establishing a duty of care is the blameworthiness of the defendant’s conduct. Fornegligent interference, a defendant’s conduct is blameworthy only if it was independently wrongfulapart from the interference itself.” Lange v. TIG Ins. Co., 68 Cal. App. 4th 1179, 1187 (1998)(quotations omitted). With respect to PhoneDog’s allegation that Mr. Kravitz interfered with theeconomic relationship between it and its users, the Court agrees with Mr. Kravitz that PhoneDog hasfailed to allege that Mr. Kravitz owed it a duty of care. See AHO Enter., Inc. v. State Farm Mut.Auto. Ins. Co., 2008 WL 4830708, at *4 (N.D. Cal. Nov. 6, 2008) (granting dismissal of negligentinterference with economic advantage claim pursuant to 12(b)(6) because the complaint failed toallege that defendant owed a duty of care to the plaintiff). The claim is also subject to dismissal onthis basis. The Court therefore GRANTS Mr. Kravitz’s Motion with respect to PhoneDog’snegligent interference with prospective economic advantage claim.d. Conversion ClaimFinally, Mr. Kravitz urges the Court to dismiss PhoneDog’s conversion claim. Mot. at 19.Under California law, the elements of conversion are: (1) ownership of a right to possession ofproperty; (2) wrongful disposition of the property right of another; and (3) damages. See G.S.Rasmussen & Assoc. v. Kalitta Flying Serv., 958 F.2d 896, 906 (9th Cir. 1992).Mr. Kravitz first argues that PhoneDog has failed to sufficiently allege that it owns or has theright to immediately possess the Account. Id. PhoneDog, however, maintains that it has adequatelyalleged that it was and still is the owner of the Account and is entitled to possession of the Account.13

Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page14 of 15115UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728Opp’n at 16. It points out that it has alleged that it gave Mr. Kravitz permission to use the Accountduring his employment, but he has refused to surrender the Account following his departure fromPhoneDog. Id. at 16-17 (citing Compl. 39-40). At this stage of the proceedings, the Court findsthat PhoneDog has adequately alleged that it owns or has the right to possess the Account. Asdiscussed above, the nature of that claim is at the core of this lawsuit and cannot be determined on thepresent record.Mr. Kravitz also argues that PhoneDog has failed to allege that Mr. Kravitz’s act ofconversion was done “knowingly” or “intentionally.” Mot. at 19-20. He further contends that theconversion claim fails because PhoneDog informed him that he could continue to use the Accountand assented to his continued use after he separated from his employment with PhoneDog. Id. at 20.In its Opposition, PhoneDog responds that it has alleged that it expressly requested that Mr. Kravitzrelinquish use of the Account, but Mr. Kravitz merely changed the Twitter handle. Opp’n at 17(citing to Compl. 17). The Court agrees with PhoneDog that this allegation is sufficient forpurposes of alleging that the conversion was knowing or intentional.The Court therefore DENIES Mr. Kravitz’s request to dismiss PhoneDog’s conversion claim.IV. CONCLUSIONFor the reasons sets forth above, the Court GRANTS IN PART and DENIES IN PART Mr.Kravitz’s Motion to Dismiss (Dkt. No. 4) as follows.The Court DENIES WITHOUT PREJUDICE Mr. Kravitz’s Motion to Dismiss for lack ofsubject matter jurisdiction.The Court GRANTS Mr. Kravitz’s Motion to Dismiss PhoneDog’s claims for intentionalinterference with prospective economic advantage and negligent interference with prospectiveeconomic advantage with leave to amend.The Court DENIES Mr. Kravitz’s Motion in all other respects./ / // / // / /14

116Case3:11-cv-03474-MEJ Document28 Filed11/08/11 Page15 of 15UNITED STATES DISTRICT COURTFor the Northern District of California12345678910111213141516171819202122232425262728PhoneDog shall file its First Amended Complaint no later than November 29, 2011.IT IS SO ORDERED.Dated: November 8, 201115_______________________________Maria-Elena JamesChief United States Magistrate Judge

Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)117Synopsis587 F.Supp.2d 548United States District Court,S.D. New York.PURE POWER BOOT CAMP, et al., Plaintiffs,v.WARRIOR FITNESS BOOTCAMP, et al., Defendants.No. 08 Civ. 4810(JGK). | Oct. 23, 2008.Background: Former employer brought action seekingan injunction and damages, accusing former employeeof stealing employer's business model, customers, andinternal documents, breaching employee fiduciary duties,and infringing employer's trademarks, trade-dress, andcopyrights. Employee filed motion to preclude the use ordisclosure of thirty-four of employee's e-mails, obtained byemployer.Holdings: In adopting report and recommendation of UnitedStates Magistrate Judge Theodore H. Katz, the District Court,John G. Koeltl, J., held that:1 employer's access of employee's personal e-mails, whichwere stored and accessed directly from accounts maintainedby outside electronic communication service provider, wasunauthorized, and thus violated Stored Communications Act(SCA);2 crime-fraud exception to attorney-client privilege was notapplicable; and3 as a sanction for employer's violations of SCA, courtwould preclude employer from admitting e-mails as evidence,however, such evidence could be used for impeachmentpurposes should employee open the door.Order in accordance with opinion.Opinion*551 ORDERJOHN G. KOELTL, District Judge.The plaintiffs' motion for a preliminary injunction is deniedwithout prejudice to renewal.The parties were authorized to begin expedited discovery onor after October 13, 2008. The parties should provide theCourt with a Scheduling Order by October 29, 2008.The Court has reviewed the Report and Recommendationof Magistrate Judge Katz dated August 22, 2008. Noobjections have been filed and the time for objections haspassed. Moreover, the Court finds that the Report andRecommendation is thorough and well founded and the Courttherefore adopts it. Accordingly, the Court orders that thethirty-four of defendant Alexander Fell's e-mails obtained bythe plaintiffs be precluded from use in the litigation, but notfor impeachment purposes should the defendants open thedoor. The plaintiffs are also directed to return or destroy allcopies of E-mail 28, and so certify.SO ORDERED.Report and RecommendationTHEODORE H. KATZ, United States Magistrate Judge.TO: HON. JOHN G. KOELTL, United States DistrictJudge.Plaintiffs bring this action seeking an injunction and damages,accusing Defendants of (1) stealing Plaintiffs' businessmodel, customers, and internal documents, (2) breachingemployee fiduciary duties, and (3) infringing Plaintiffs'trademarks, trade-dress, and copyrights. This case wasreferred to this Court for general pretrial management.Currently before the Court is Defendants' motion topreclude the use or disclosure of thirty-four of DefendantAlexander Fell's (“Fell”) e-mails, obtained by LaurenBrenner (“Brenner”), the principal and owner of the Plaintiffcorporations (“Plaintiffs”), and Fell's former employer.Defendants also seek an order requiring the e-mails'immediate return and attorneys' fees and costs.The parties have fully briefed the issues, and, on July 18,2008, the Court heard oral argument on the motion. Althoughthe preclusion of evidence as a discovery sanction mightnormally be a non-dispositive matter for the Court to decideas part of its general pretrial supervision of a case, in this case,because of the potentially dispositive nature of the instantmotion and its evidentiary implications for matters before theDistrict Court, the District Court has requested that this Courtprovide a Report and Recommendation containing findings© 2012 Thomson Reuters. No claim to original U.S. Government Works. 1

118Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)of fact, an analysis of the legal issues, and a discussion of therange of possible remedies available to the Court.As explained in greater detail below, the Court concludes thatBrenner accessed Fell's e-mails without authorization, in whatwould be a violation of the Stored Communications Act, 18U.S.C. § 2707, had a cause of action been brought pursuantto that statute. The Court also concludes that, pursuant to itsinherent equitable authority over the litigation process, thee-mails should be precluded, in part or in whole. Finally,the Court concludes *552 that one e-mail is protectedby the attorney-client privilege and should be returned toDefendants.BACKGROUNDFell was hired by Brenner in August of 2005, and worked atPure Power Boot Camp (“PPBC”), a physical fitness center,until March 16, 2008, when Brenner fired him. On April 1,2008, Defendant Ruben Belliard (“Belliard”), who is nowFell's business partner, and was also employed at PPBC,entered Brenner's office when she was not there, stayed therefor half an hour, called Brenner on her office telephone, andquit. 1 A few months before he left his employ at PPBC,Belliard entered Brenner's office, again when she was notpresent, removed a copy of a restrictive covenant he hadsigned, and shredded it. (See Belliard Aff. 31.) Soon afterFell and Belliard left PPBC, they opened a competing fitnesscenter, Warrior Fitness Boot Camp (“WFBC”), togetherwith their girlfriends—Defendants Jennifer Lee (“Lee”) andNancy Baynard (“Baynard”).After Fell and Belliard were no longer working atPPBC, Brenner, on April 28, 2008, and for a weekthereafter, accessed and printed e-mails from three of Fell'spersonal accounts: “kappamarine@hotmail.com” (“Hotmailaccount”), “kappamarine@gmail.com” (“Gmail account”),and “alex@warriorfitnessbootcamp. com” (“WFBCaccount”). (See Brenner July 10 Aff. 22; see also Exhibit(“Ex.”) A, annexed to Declaration of Daniel Schnapp,Esq. (“Schnapp Decl.”), dated July 1, 2008, E-mails 1–34;Transcript of Oral Argument, dated July 18, 2008 (“Tr.”), at14–15.) 2Brenner states that she was able to access Fell's Hotmailaccount because he left his username and passwordinformation stored on PPBC's computers, such that, when theHotmail website was accessed, the username and passwordfields were automatically populated, (See Brenner July 10Aff. 13.) She also alleges that Fell gave his username andpassword to another PPBC employee, Elizabeth Lorenzi, sothat she could check on an Ebay sale he was conducting. (SeeAffidavit of Elizabeth Lorenzi, dated July 10, 2008 (“LorenziAff.”), 3, 6.) Plaintiffs allege, and Fell does not deny, thatFell accessed his Hotmail account while at work at PPBC,which is how his username and password came to be storedon the company's computers. At oral argument, Plaintiffsadmitted that Brenner was able to access Fell's Gmail accountbecause the username and password for the Gmail accountwere sent to Fell's Hotmail account, which Brenner accessed.(See Tr. at 17.) Brenner also explained that she was able toaccess Fell's WFBC account by making a “lucky guess” at hispassword, which turned out to be the same password he usedfor his other accounts. (See id. at 15–16.)Plaintiffs have an Employee Handbook which explicitlyaddresses e-mail access on company computers. It states:“e-mail users have no right of personal privacy in anymatter stored in, created on, received from, or sentthrough or over the system. This includes the use ofpersonal e-mail accounts on Company equipment. TheCompany, in its discretion as owner of the E–Mailsystem, reserves the right to review, monitor, access,retrieve, *553 and delete any matter stored in, createdon, received from, or sent through the system, for anyreason, without the permission of any system user, andwithout notice.”(Ex. A, annexed to Supplemental Affidavit of LaurenBrenner, dated June 6, 2008 (“Brenner June 6 Aff.”)(emphasis added).) An additional part of the policy states:“Internet access shall not be utilized for shopping orfor conducting other transactions or personal businessmatters.” (Id.) Plaintiffs have not conducted a forensicevaluation of the company computers to determine what e-mails Fell actually received, sent through, read, or accessedfrom the company's computers. (See Tr. at 22,)E-mails 1–26 and 28, were obtained from Fell's Hotmailaccount; of those, E-mails 1–13 and 16 are dated prior toMarch 16, 2008, the date Fell stopped working at PPBC, E-mails 27, 29–31, 33, and 34 were obtained from Fell's Gmailaccount. E-mail 32 was obtained from Fell's e-mail accountat WFBC.Fell states in his affidavit that all of the e-mails were draftedor received on his own home computer. (See Affidavit of AlexFell, dated July 1, 2008 (“Fell Aff.”), 5.) Fell denies thathe ever gave his Hotmail information to anyone at PPBC.© 2012 Thomson Reuters. No claim to original U.S. Government Works. 2

Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)119(See id. 4.) Fell does not deny, however, that he may haveviewed some of his e-mails on PPBC's computers while hewas working there.While it is not possible to determine from the submissionswhen the e-mails were read, they do indicate the date andtime they were sent. E-mails sent by Fell indicate that theywere sent at all times during the day, on various days of theweek. For example, E-mail 4 shows that Fell sent a messageon Monday, February 11, 2008 at 3:09 p.m. in the afternoon.E-mail 6 was sent on Wednesday, February 20, 2008 at 2:37p.m. On Thursday, February 28, 2008, Fell sent E-mail 9 at3:35 in the morning. E-mail 16 was sent the day before Fellwas fired, Saturday, March 15, 2008 at 5:06 p.m. Each ofthese e-mails relates to, or discusses his efforts to set up hiscompeting business—WFBC. 3Plaintiffs have relied heavily upon the e-mails and haveconsidered them critical to their case. The e-mails provide adetailed picture of Fell's and Belliard's efforts to set up WFBCbefore they left PPBC, the work that Lee and Baynard did tosupport those efforts—including recruiting PPBC clients forWFBC while they themselves were still clients of PPBC, andthe fallout after Fell and Belliard left PPBC. For example, E-mail 29 is a candid admission that Belliard shredded his noncompetecontract with PPBC, a fact Defendants attempted toavoid revealing during prior state court proceedings. (See Ex.B annexed to Declaration of Daniel Schnapp, dated July 3,2008, transcript of proceedings before Hon. Helen Freedman,New York Supreme Court, dated May 8, 2008 (“NY Tr.”),at 28.) E-mail 21 shows a dramatic expansion of WFBC'scustomer list, and includes a large number of former PPBCclients and their e-mail addresses, which Plaintiffs rely uponto show that Belliard stole PPBC's client list. (See Declarationof Richard Herzfeld, Esq., dated July 11, 2008, 25.)Some of the e-mails were sent to, or received from,Defendants' attorneys. (See E-mails 12, 13, 14, 28.) 4 E-mail13 *554 was sent from a legal assistant at Fox Rothschild,Defendants' counsel, attaching an IRS document containingWFBC's employer ID number. E-mail 14, from the sameparalegal, attached WFBC's Articles of Organization, andinformed Fell that they were filed with the State of New York.E-mail 28 is from an attorney at Fox Rothschild, and appearsto have been printed from Fell's “sent” file; it is part of an e-mail chain consisting of back-and-forth e-mails from the sameFox Rothschild attorney, and contains advice about how tohandle telephone calls from Brenner.When Plaintiffs first filed suit seeking a temporary restrainingorder and preliminary injunction in state court, they used thechallenged e-mails as exhibits. However, at the time the e-mails were provided to Defendants, the bottom part of thepage, which shows when an e-mail was printed, was obscuredor removed. (See all e-mails in Ex. A.) Defendants allege thatthis amounts to spoliation of evidence. In response, duringoral argument, Plaintiffs stated that they had the originalcopies of the e-mails, showing when they were printed, andagreed to provide unredacted copies to Defendants. (See Tr.at 33–34.)DISCUSSIONDefendants seek the preclusion and return of Fell'se-mails, claiming that Brenner violated the ElectronicCommunications Privacy Act, 18 U.S.C. § 2510 (“ECPA”),the Stored Communications Act, 18 U.S.C. § 2707 (“SCA”),and New York Penal Law § 250.05, when she accessed Fell'se-mail accounts. Defendants also argue that some e-mailsare protected by attorney-client privilege. Finally, Defendantsargue that Plaintiffs' production of the e-mails with the dateson which they were printed obscured, amounts to spoliationof evidence, further justifying preclusion.Plaintiffs argue that the ECPA and New York Penal Lawdo not apply, and that, in any event, Fell gave impliedconsent which authorized Brenner's access. Plaintiffs alsoargue that the crime-fraud exception to confidentiality shouldapply not only to any e-mails covered by the attorney-clientprivilege, but to all the e-mails accessed by Brenner. Finally,Plaintiffs argue that the redaction of the printing dates doesnot constitute sanctionable spoliation.It is important to note from the outset, that this is not asituation in which an employer is attempting to use e-mailsobtained from the employer's own computers or systems.Rather, the e-mails at issue here were stored and accesseddirectly from accounts maintained by outside electroniccommunication service providers. Furthermore, Defendantshave not directly asserted any claims under the statutesthey allege Brenner violated, and instead, appeal only tothe Court's inherent equitable authority to preclude evidencewrongfully obtained, outside of the litigation process, frombeing used in the litigation. Thus, while Defendants invokefederal and state law, those laws are invoked solely for theCourt to consider as part of the process of weighing thecompeting equitable considerations raised by the conduct ofboth sides to this dispute.© 2012 Thomson Reuters. No claim to original U.S. Government Works. 3

120Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)I. The StatutesAll three of the statutes Defendants rely upon are criminalstatutes that also provide relief to aggrieved parties in civilcauses of action. Of the three statutes, however, only theStored Communications Act is applicable.*555 A. The Stored Communications Act1 The Stored Communications Act, 18 U.S.C. § 2701, et seq.(“SCA”), part of the Wiretap Act, provides in part:(a) Offense.—Except as provided in subsection (c) of thissection whoever—(1) intentionally accesses without authorization a facilitythrough which an electronic communication service isprovided; or(2) intentionally exceeds an authorization to access thatfacility; and thereby obtains, alters, or prevents authorizedaccess to a wire or electronic communication while it isin electronic storage in such system shall be punished asprovided in subsection (b) of this section.18 U.S.C.A. § 2701 (emphasis added). The Act “aims toprevent hackers from obtaining, altering or destroying certainstored electronic communications.” In re DoubleClick Inc.Privacy Litigation, 154 F.Supp.2d 497, 507 (S.D.N.Y.2001)(citing Sherman & Co. v. Salton Maxim Housewares, Inc.,94 F.Supp.2d 817, 820 (E.D.Mich.2000)). Thus, a personviolates the SCA if she accesses an electronic communicationservice, or obtains an electronic communication while it isstill in electronic storage, without authorization.“Electronic storage,” defined in an earlier part of theWiretap Act is: “(A) any temporary, intermediate storageof a wire or electronic communication incidental to theelectronic transmission thereof; and (B) any storage of suchcommunication by an electronic communication service forpurposes of backup protection of such communication ....”18 U.S.C. §§ 2510(17), 2711(1) (definitions of Wiretap Actapplicable to Stored Communications Act).The majority of courts which have addressed the issue havedetermined that e-mail stored on an electronic communicationservice provider's systems after it has been delivered, asopposed to e-mail stored on a personal computer, is astored communication subject to the SCA. See United Statesv. Councilman, 418 F.3d 67, 79 (1st Cir.2005) (en banc)(describing in detail the nature of e-mail, and concludingthat “the term ‘electronic communication’ includes transientelectronic storage that is intrinsic to the communicationprocess for such communications.”); see also Fraser v.Nationwide Mut. Ins. Co., 352 F.3d 107, 115 (3rd Cir.2003)(holding that e-mail stored on the defendant's system wassubject to the SCA); cf. Hall v. EarthLink Network, Inc.,396 F.3d 500, 503 n. 1 (2d Cir.2005) (finding unpersuasivethe argument that an e-mail in storage is not an “electroniccommunication”).In a case analogous to this one, Bailey v. Bailey, No. 07 Civ.11672, 2008 WL 324156 (E.D.Mich. Feb. 6, 2008), the exhusbanddefendant installed a keystroke logger on a computershared by him and his then-wife, which allowed him to learnher password to her Yahoo account (among others), andwhich he used to access her e-mail directly from her Yahooaccount. See id. at *3. The wife filed suit pursuant to theSCA, as well as under 18 U.S.C. § 2511, the ECPA. See id.The court denied a motion for summary judgment brought bythe defendant, who claimed that neither statute applied, anddetermined that e-mails, “received by the intended recipientwhere they remain stored by an electronic communicationservice,” are covered by the SCA. Id. at *6 (citing Theofel v.Farey–Jones, 359 F.3d 1066 (9th Cir.2003)).In this case, Brenner obtained Fell's username and passwordto his Hotmail account because he left that information storedon Plaintiffs' computers. She then used that information to gointo his Hotmail account, and read and printed his e-mails.Some of those e-mails may have been read by Fell while hewas at work, but there is no evidence indicating which *556e-mails he may have viewed on Plaintiffs' computers, andthere is no evidence that the e-mails were downloaded ontoPPBC's computers. At most, only e-mails dated prior to hislast day of work could have been viewed by him and thuspotentially stored on the company's systems.In any event, Brenner did not use an examination of PPBC'scomputer's memory to determine what Fell accessed at work.Instead, she logged directly onto Microsoft's Hotmail systemwhere the e-mails were stored, and viewed and printed themdirectly off of Hotmail's system. She accessed Fell's otheraccounts in the same manner, and there is no evidenceindicating that Fell accessed his Gmail or WFBC accountsat any time while he worked at PPBC. By Plaintiffs' ownadmission, Brenner obtained the username and password forthe Gmail account from Fell's Hotmail account, and made a“lucky guess” that Fell would use the same password for allthree accounts, including his WFBC account.© 2012 Thomson Reuters. No claim to original U.S. Government Works. 4

Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)121Thus, Brenner accessed three separate electroniccommunication services, and she obtained Fell's e-mails while they were in storage on those serviceproviders' systems. Either of those actions, if done withoutauthorization, would be a violation of the SCA. See WyattTechnology Corp. v. Smithson, No. CV 05–1309(DT), 2006WL 5668246, *9 (C.D.Cal. Aug.14, 2006) (granting summaryjudgment in favor of counter-claimant alleging that theplaintiff violated the SCA by accessing the defendant'spersonal e-mail on a private foreign server, and monitoringthe personal e-mail account, without authorization).B. The Electronic Communications Privacy Act2 The Electronic Communications Privacy Act, 18 U.S.C.§§ 2510–2511 (“ECPA”), creates criminal sanctions anda civil cause of action against persons who “intercept”electronic communications. 5 In the context of unauthorizedaccess to e-mail, the question that courts have struggled withis determining whether one can “intercept” an e-mail that hasalready been delivered. The Second Circuit has not directlyaddressed this question, but has discussed the issue in at leastone case. See Hall, 396 F.3d at 503 n. 1.In Hall, the Second Circuit held that the ECPA wasapplicable to the e-mails at issue because “the case involve[d]the continued receipt of e-mail messages rather than theacquisition of previously stored electronic communication.”396 F.3d at 503 n. 1 (emphasis in original). The Circuitwas unpersuaded by the defendant's argument that “an‘interception’ [as required by the ECPA,] can only occurwhen messages are in transit,” but did not elaborate further.Id. Rather, it factually distinguished the cases cited by thedefendant—which held that e-mails no longer in transitcannot be “intercepted.” See id. (distinguishing: Fraser, 352F.3d at 110; United States v. Steiger, 318 F.3d 1039, 1048–49 (11th Cir.2003); Konop v. Hawaiian Airlines, Inc., 302F.3d 868, 873, 876–79 (9th Cir.2002); Steve Jackson Games,Inc. v. United States Secret Serv., 36 F.3d 457, 460–64 (5thCir.1994)).Hall is itself factually distinguishable from this case.Hall involved the continued *557 and contemporaneousacquisition of e-mails as part of the ordinary course of thedefendant's business—which was the internet communicationservice provider for the e-mails in question. See id. Here,PPBC is not an internet communications provider, andBrenner did not access the e-mails on a continuous basis,contemporaneous with their transmission. Rather, by the timeBrenner viewed the e-mails, they had been delivered to Fell'saccounts, and may have already been viewed by him; thus,they were “previously stored electronic communications”—precisely the situation which Hall relied upon to distinguishthe decisions the defendants relied upon in that case. See id.Other courts which have considered the question of whetheraccessing an electronic communication that has alreadybeen delivered is “intercepted,” have found that the ECPAdoes not apply. See Fraser, 352 F.3d at 113–14 (holdingthat the defendant did not “intercept” the plaintiff's e-mail by accessing e-mail stored on its central file server,because “an ‘intercept’ under the ECPA must occurcontemporaneously with transmission”); Steiger, 318 F.3d at1048–49 (declining to suppress evidence obtained by a hackerfrom defendant's computer, pursuant to the ECPA, because“a contemporaneous interception—i.e., an acquisition during“flight”—is required to implicate the [ECPA] with respectto electronic communications”); Konop, 302 F.3d at 873,878–80 (noting subsequent changes in the Wiretap Actsupport the conclusion that accessing a secure website did notconstitute an “interception” of an electronic communicationunder the ECPA, and narrowly defined interception as“contemporaneous interception”).As the court in Bailey explained: “The general reasoningbehind these decisions is that based on the statutorydefinition and distinction between ‘wire communication’and ‘electronic communication,’ the latter of whichconspicuously does not include electronic storage, Congressintended for electronic communications in storage to behandled solely by the Stored Communications Act.” Bailey,2008 WL 324156, at *4; see also Fraser, 352 F.3d at 113–14(explaining the statutory interpretation issues). Thus, in thosecases which have examined whether the ECPA or the SCAshould apply to delivered e-mails, courts have concluded thatthe SCA, not the ECPA, is the proper statute to apply insituations similar to this case. See Steiger, 318 F.3d at 1049(noting that “the SCA may apply [in this case] to the extentthe source accessed and retrieved any information stored withSteiger's Internet service provider”).Defendants concede that the ECPA has a requirement ofcontemporaneous interception. (See Tr. at 12.) Nonetheless,Defendants suggest that Brenner's access to Fell's e-mail was“contemporaneous” if it occurred during some undefined,short period of time after the e-mail had been delivered. (SeeTr. at 12–13.) However, they have not provided any authorityfor that proposition, nor have they suggested how long a“contemporaneous time frame” would be. (Id.) In any event,© 2012 Thomson Reuters. No claim to original U.S. Government Works. 5

122Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)there is no evidence of when Brenner accessed Fell's e-mails,but its clear that the majority of the e-mails were sent orreceived prior to April 28, 2008, the earliest date that Brenneradmits that she accessed and printed them. Additionally, thereis no evidence that the later e-mails were intercepted at thesame time that they were delivered. Rather, the evidenceindicates that Brenner periodically accessed Fell's e-mailaccounts and printed e-mails after they had been delivered.Applying the definition of “intercept” accepted by themajority of courts to have examined the issue, the Courtconcludes that Brenner did not access and print *558 Fell'se-mails contemporaneous with their transmission. See Fraser,352 F.3d at 113–14. Therefore, the Court concludes thatBrenner did not violate the ECPA.C. New York Eavesdropping and Civil Procedure LawsDefendants argue that Brenner also violated New York'seavesdropping law, and, pursuant to a New York proceduralrule, Fell's e-mails should be precluded. New York Penal Law§ 250.05 makes it a crime for a person to “unlawfully engagein wiretapping, ... or intercepting or accessing [an] electroniccommunication.” N.Y. Penal Law § 250.05 (McKinney2008). New York Civil Practice Law and Rule § 4506(“CPLR § 4506”) states:“The contents of any overheard or recordedcommunication, conversation or discussion, or evidencederived therefrom, which has been obtained by conductconstituting the crime of eavesdropping, as defined bysection 250.05 of the penal law, may not be received inevidence in any trial, hearing or proceeding before anycourt ....”N.Y. C.P.L.R. § 4506 (Consol.2008).3 If a party to a civil action seeks preclusion pursuant to §4506, it must bring a motion “before a justice of the supremecourt ....” Id. at § 4506(4). In contrast to the federal laws, NewYork's rule does not provide a separate civil cause of action,but, rather, is only a vehicle through which evidence may beexcluded in an underlying case. See id. It also does not providefor damages, attorneys' fees, costs, or any remedy other thanexclusion of the evidence. See id.There is a notable dearth of state law construing CPLR §4506. Defendants have not cited, and the Court has not found,any published cases applying CPLR § 4506 to unauthorizedaccess to e-mail. On its face, however, the statute does notappear to apply in this situation. The plain language ofthe statute seems to limit its application to the contents ofan “overheard or recorded communication.” CPLR § 4506.Furthermore an aggrieved person is defined as one whose“communication, conversation or discussion was unlawfullyoverheard or recorded.” Id. at § 4506(3)(a). In addition, thestatute only makes reference to “telephonic or telegraphiccommunication[s],” not electronic communications. Id. at §4506(2)(a). This language seems to limit the application ofthe statute to communications obtained aurally, rather than toelectronic communications such as e-mail. 6Furthermore, neither party has briefed the fundamental andmore complex issue of whether CPLR § 4506, a rulegoverning the exclusion of evidence in New York statecourts, ought to be applied by this Court pursuant to ErieR. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed.1188 (1938). 7 Cf. United States v. Canniff, 521 F.2d 565,568 (2d Cir.1975) (“Under New York law (which, however,is not controlling in this federal proceeding), [evidence]of a youthful offender adjudication for the purpose ofimpeachment is prohibited ....” (internal citation omitted)).Ultimately, a determination of the meaning of CPLR § 4506is unnecessary, and better left to the New York state courts.The Court could preclude use of the e-mails pursuant to theSCA or its inherent authority, without applying CPLR § 4506.Thus, there is no need to resolve the issues *559 of whetherCPLR § 4506 is applicable to this action and, if so, whetherit mandates the preclusion of the e-mails.D. AuthorizationAccessing and obtaining e-mails directly from an electroniccommunication service provider is a violation of the SCA ifdone without authorization. Having determined that the SCAis applicable to Brenner's conduct, she therefore may not haveviolated the SCA if she was authorized to access Fell's e-mailaccounts.Plaintiffs argue that Brenner was authorized to view andprint Fell's e-mails, and assert two theories in support ofthis position. First, Plaintiffs claim that PPBC's e-mail policyput Fell on notice that his e-mails could be viewed byBrenner, and thus he had no expectation of privacy in hisHotmail account. Second, Plaintiffs argue that even if hehad an expectation of privacy, Fell, by leaving his usernameand password on PPBC's computers, gave Brenner impliedconsent to access his accounts.Defendants respond by denying that Fell gave PPBC, orany of its agents or employees, authorization to access his© 2012 Thomson Reuters. No claim to original U.S. Government Works. 6

Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)123accounts, and specifically deny that Fell gave his usernameand password to Brenner's assistant. Defendants also denythat PPBC had its e-mail policy in place during Fell'semployment, and suggest that it is a recent creation byBrenner. (See Tr. at 4–5.) In any event, they argue that it doesnot cover e-mails sent after Fell left PPBC's employ.Brenner claims Fell had no expectation of privacy in his e-mails and that Fell gave implied consent to unlimited access toall of Fell's personal e-mail accounts, with no time constraints(not even for the period after Fell's employment at PPBCended), based on her assertion that Fell accessed his personalHotmail account, at least once, on Plaintiffs' computer. Thesearguments have no sound basis in fact, law, or logic.As an initial matter, Plaintiffs' position is not supported byPPBC's policy. PPBC's e-mail policy—the basis of Plaintiffs'consent defense—is, by its own terms, limited to “Companyequipment.” The reservation of rights is explicitly limitedto “any matter stored in, created on, received from, or sentthrough [PPBC's] system.” 8 Therefore, it could not applyto e-mails on systems maintained by outside entities suchas Microsoft or Google. In addition, there is no evidencethat the e-mails in issue were created on, sent through,or received from PPBC's computers. Moreover, Plaintiffs'position makes no distinction between the Hotmail accountFell accessed while at work, and the other accounts, which byall appearances were never accessed by Fell at work, and maynot even have existed until after he left PPBC's employ.Plaintiffs' position-that Brenner was authorized to accessFell's e-mails on his personal e-mail service providers'systems through his implied consent—also has no supportin the law. To understand the basis of Plaintiffs' argument,and why it has no legal support, it is important to firstunderstand the framework within which the typical employeee-mail case usually arises. Courts have routinely found thatemployees have no reasonable expectation of privacy in theirworkplace computers, *560 where the employer has a policywhich clearly informs employees that company computerscannot be used for personal e-mail activity, and that theywill be monitored. See United States v. Simons, 206 F.3d392, 398 (4th Cir.2000) (“Therefore, regardless of whetherSimons subjectively believed that the files he transferred fromthe Internet were private, such a belief was not objectivelyreasonable after FBIS notified him that it would be overseeinghis Internet use.”); Thygeson v. U.S. Bancorp, No. CV–03–467–ST, 2004 WL 2066746, *21 (D.Or. Sept.15, 2004)(“when, as here, an employer accesses its own computernetwork and has an explicit policy banning personal use ofoffice computers and permitting monitoring, an employee hasno reasonable expectation of privacy.”); Muick v. GlenayreElectronics, 280 F.3d 741, 743 (7th Cir.2002) (“But Glenayrehad announced that it could inspect the laptops that itfurnished for the use of its employees, and this destroyedany reasonable expectation of privacy that Muick might havehad and so scotches his claim.”). In these cases, becausethe employee had no reasonable expectation of privacy, theemployer did not need consent to search the employee'scomputer files.4 This is not, however, a case where an employee was usingan employer's computer or e-mail system, and then claimedthat the e-mails contained on the employer's computers areprivate. Here, the employee—Fell—did not store any of thecommunications which his former employer now seeks to useagainst him on the employer's computers, servers, or systems;nor were they sent from or received on the company e-mailsystem or computer. These e-mails were located on, andaccessed from, third-party communication service providersystems. There is not even an implication that Fell's personale-mail accounts were used for PPBC work, or that PPBC paidor supported Fell's maintenance of those accounts. See, e.g.,Rozell v. Ross–Hoist, No. 05 Civ. 2936(JGK)(JCF), 2006 WL163143, *2–3 (S.D.N.Y. Jan. 20, 2006) (ordering productionof e-mails taken from a personal third-party communicationservice provider account, which served as a back-up for workrelated communications). Furthermore, there is nothing inthe PPBC policy that even suggests that if an employeesimply views a single, personal e-mail from a third partye-mail provider, over PPBC computers, then all of the hispersonal e-mails on whatever personal e-mail accounts heuses, would be subject to inspection. In short, this case isdistinguishable from those cases which hold that employeeshave no expectation of privacy in e-mails sent from orreceived and stored on the employer's computers.Even in cases involving an employer's search of anemployee's work computer, courts have held that, undercertain circumstances, employees have a reasonableexpectation of privacy in the contents of their work computer.For example, in Leventhal v. Knapek, 266 F.3d 64, 74 (2dCir.2001), the Second Circuit held that an employee hada reasonable expectation of privacy in the contents of hiscomputer where the employee occupied a private officewith a door, had exclusive use of the computer in hisoffice, and did not share use of his computer with otheremployees or the public, notwithstanding the fact that therewas a policy which “prohibited ‘using’ state equipment ‘forpersonal business.’ ” In Leventhal, there was no clear policy© 2012 Thomson Reuters. No claim to original U.S. Government Works. 7

124Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)or practice regarding regular monitoring of work computers;technical staff conducted infrequent and selective searches formaintenance purposes only. See id.In Curto v. Medical World Communications, No. 03 Civ.6327 (DRH) (MLO), 2006 WL 1318387 (E.D.N.Y. May 15,2006), the employer hired a forensic consultant *561 torestore portions of the computer files that the employee haddeleted, nearly two years earlier, from a home-based workcomputer, including e-mails of communications with theemployee's lawyer. See id. at *1. Even though the computerbelonged to the employer, and the employer had a policythat warned employees they had no reasonable expectationof privacy in “anything they create, store, send, or receivedon the computer, or through the Internet or any computernetwork,” the employee successfully asserted attorney-clientprivilege over those e-mails, in part because she had areasonable expectation of privacy in a home-computer whichwas not connected to the employer's network. See id. at *8.And, in a recent case from the Ninth Circuit Court ofAppeals, in which violations of both the SCA and the FourthAmendment were alleged, that court held that a police officerhad a reasonable expectation of privacy in text messages sentusing a city-owned pager. See Quon v. Arch Wireless, 529F.3d 892, 908 (9th Cir.2008) (concluding that “a reasonablejuror could conclude ... that plaintiff expected that his callto his wife would be private, and that expectation wasobjectively reasonable”).Here, Fell had a subjective belief that his personal e-mailaccounts, stored on third-party computer systems, protected(albeit ineffectively) by passwords, would be private. Thatexpectation of privacy was also reasonable, as nothing inPPBC's policy suggests that it could extend beyond Plaintiffs'own systems, and beyond the employment relationship.Furthermore, there is no evidence that PPBC's policy wasclearly communicated to its employees, or that it wasconsistently enforced in a manner that would have alertedemployees to the possibility that their private e-mail accounts,such as Hotmail, could also be accessed and viewed by theiremployer.Because Fell had a reasonable expectation of privacy in hise-mail accounts, Brenner could only be authorized to accessthose accounts if Fell had given consent. She argues that Fellgave her implied consent to search his e-mails because he lefthis login information stored on PPBC's computers where itcould be discovered and used by Brenner. The Court does notaccept Plaintiffs' argument.There is no sound basis to argue that Fell, by inadvertentlyleaving his Hotmail password accessible, was therebyauthorizing access to all of his Hotmail e-mails, no less thee-mails in his two other accounts. If he had left a key to hishouse on the front desk at PPBC, one could not reasonablyargue that he was giving consent to whoever found thekey, to use it to enter his house and rummage through hisbelongings. And, to take the analogy a step further, had theperson rummaging through the belongings in Fell's housefound the key to Fell's country house, could that be taken asauthorization to search his country house. We think not. TheCourt rejects the notion that carelessness equals consent. SeeLipin v. Bender, 193 A.D.2d 424, 426, 597 N.Y.S.2d 340,341 (1st Dep't 1993) (rejecting the argument that becausedocuments “had been left unsecured, directly in front of theplaintiff, in a public area, ... plaintiff had been ‘invited’ to readthe documents”).Implied consent, at a minimum, requires clear notice thatone's conduct may result in a search being conducted ofareas which the person has been warned are subject tosearch. Cf. United States v. Workman, 80 F.3d 688, 694 (2dCir.1996) (holding that a posted sign and an inmate handbook,providing notice that telephone calls would be monitored,together with inmate's “plain awareness that his conversationswere subject to monitoring,” amounted to implied consent tosurveillance); United States v. *562 Amen, 831 F.2d 373,378–79 (2d Cir.1987) (prisoners gave implied consent tointerception of telephone calls because they were on noticefrom at least four sources, including actual direct notice);Sec. and Law Enforcement Employees v. Carey, 737 F.2d187, 202 n. 23 (2d Cir.1984) (noting that an importantconsideration in determining whether a person has consentedto being searched is “evidence that the person had knowledgeof the right to refuse to give consent;” and rejecting theargument that correction officers consented to being stripsearched“merely by accepting employment and by receiving[a] rule book [giving notice that the Department's employees,while on correctional facility property, were subject to beingsearched]”); Anobile v. Pelligrino, 303 F.3d 107, 124–25 (2dCir.2002) (rejecting an assertion that racetrack employees, bysigning a license with a “a blanket waiver of the right to objectto any future searches,” gave an effective consent to searchtheir dormitory rooms, because “there [was] no evidencedemonstrating that the plaintiffs were aware of their right torefuse to give consent to this unconstitutional search or indeedwhether they could refuse and still obtain employment”).© 2012 Thomson Reuters. No claim to original U.S. Government Works. 8

Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)125In this case, Fell only had notice that PPBC's computers couldbe searched for evidence of personal e-mail use, not that hisHotmail, Gmail, or WFBC e-mail accounts would also besearched. He was also never given the opportunity to refuseBrenner any authorization to search his e-mails. At most, onecould argue that Fell have consented to Brenner viewing hispassword. But he did not consent to her to using it. Absentclear knowledge of the extent of what could be searched, andthe opportunity to refuse or withdraw his consent, the Courtrejects Plaintiffs' argument that Fell gave implied consent toBrenner to search his Hotmail account simply by leaving hispassword on her computer.Even less sustainable is the proposition that correctly“guessing” a person's password, as Brenner did, amounts toauthorization to access all accounts which use that password.Were that the case, computer hackers across the countrycould escape liability for breaking into computer systems bycorrectly “guessing” the codes and passwords of their victims.This absurd result stands in direct conflict with the entirepurpose of the SCA and basic principles of privacy. See In reDoubleClick, 154 F.Supp.2d at 507.The Court is convinced that Fell accessed his Hotmail accountat some point when he was working at PPBC, and lefthis username and password stored on PPBC's computer.Otherwise, Brenner could not have obtained Fell's password,thereby making it possible for her to access his Hotmailaccount. 9 Nonetheless, the Court concludes that Brenner'saccess to Fell's Hotmail account violated the SCA and Fell'sprivacy. While Fell arguably “authorized” access to any e-mails which he viewed and saved on PPBC's computers,Brenner was not authorized to access those e-mails directlyfrom Fell's Hotmail account, and was clearly not authorizedto access e-mails from Fell's Gmail and WFBC accounts.II. Privilege and the Crime–Fraud ExceptionIndependent of whether the e-mails should be precludedbecause they were improperly secured, Defendants also assertthat certain of these e-mails should be precluded, and theyshould be returned, *563 because they are subject to theattorney-client privilege.Plaintiffs' respond that the e-mails in question are notprivileged communications. Plaintiffs also argue that Fellforfeited any right of privacy to all of his e-mails becausethose e-mails were in furtherance of what Plaintiffs describeas “civil and criminal misconduct.” (Plaintiffs' Memorandumof Law in Opposition to the Motion to Preclude Use of E-mails (“Pls.' Mem.”), at 9.) Thus, Plaintiffs invoke the crimefraudexception to confidentiality, normally applicable toattorney-client privilege claims, and assert that Fell forfeitedhis right to privacy in all of his e-mails, including, but notlimited to, e-mails covered by the attorney-client privilege.5 6 7 The attorney-client privilege affords confidentialityto communications among clients and their attorneys, forthe purpose of seeking and rendering an opinion on law orlegal services, or assistance in some legal proceeding, solong as the communications were intended to be, and werein fact, kept confidential. See United States v. Int'l Bhd. ofTeamsters, 119 F.3d 210, 214 (2d Cir.1997); United Statesv. Doe (In re Six Grand Jury Witnesses), 979 F.2d 939,943 (2d Cir.1992); John Doe Corp. v. United States (In reJohn Doe Corp.), 675 F.2d 482, 487–88 (2d Cir.1982); BankBrussels Lambert v. Credit Lyonnais (Suisse) S.A., 160 F.R.D.437, 441 (S.D.N.Y.1995) (citing United States v. United ShoeMach. Corp., 89 F.Supp. 357, 358–59 (D.Mass.1950)). Theprivilege is among the oldest of the common law privilegesand “exists for the purpose of encouraging full and truthfulcommunication between an attorney and his client.” In revon Bulow, 828 F.2d 94, 100 (2d Cir.1987); accord UnitedStates v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir.1991).However, because the privilege “stands as an obstacle ofsorts to the search for truth,” it must be applied “only tothe extent necessary to achieve its underlying goals.” XYZCorp. v. United States (In re Keeper of the Records), 348F.3d 16, 22 (1st Cir.2003); see also Salomon Bros. TreasuryLitig. v. Steinhardt Partners (In re Steinhardt Partners),9 F.3d 230, 235 (2d Cir.1993) (finding that the privilegedoes not apply in situations where the client's conduct doesnot serve to “improve [ ] the attorney-client relationship”)(quoting Permian Corp. v. United States, 665 F.2d 1214,1221 (D.C.Cir.1981)). Thus, in order to merit protection,the “predominant purpose” of the communication must beto render or solicit legal advice, as opposed to business orpolicy advice. See In re County of Erie, 473 F.3d 413, 420 (2dCir.2007). Finally, “the burden of establishing the existenceof an attorney-client privilege, in all of its elements, rests withthe party asserting it.” United States v. Doe (In re Grand JuryProceedings), 219 F.3d 175, 182 (2d Cir.2000) (quoting Int'lBhd. of Teamsters, 119 F.3d at 214).8 9 The attorney-client privilege is waived if the holder ofthe privilege voluntarily discloses or consents to disclosure ofany significant part of the communication to a third party orstranger to the attorney-client relationship. See In re GrandJury Proceedings, No. M–11–189 (LAP), 2001 WL 1167497,at *7 (S.D.N.Y. Oct.3, 2001); In re Kidder Peabody Sec.© 2012 Thomson Reuters. No claim to original U.S. Government Works. 9

126Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)Litig., 168 F.R.D. 459, 468 (S.D.N.Y.1996). Finally, a partywho seeks to uphold the privilege must take affirmativemeasures to maintain the confidentiality of attorney-clientcommunications. See In re Steinhardt Partners, 9 F.3d at 235;In re von Bulow, 828 F.2d at 100; In re Horowitz, 482 F.2d72, 82 (2d Cir.1973).A. E-mails Protected by Attorney–Client PrivilegeDefendant claims that E-mails 12, 13, 14, and 28 are protectedby the attorney-client *564 privilege. E-mail 12, thoughreferred to by the parties, was not provided with Defendants'motion papers. Defendants' counsel represents that it is ane-mail sent to Fell by a legal assistant at Fox Rothschild,the law firm representing Defendants. E-mail 13 was sent toFell from a paralegal at Fox Rothschild, merely transmittingWFBC's employer ID number; attached is correspondencefrom the IRS. E-mail 14, from the same paralegal, indicatesthat WFBC's Articles of Organization were filed with theState of New York, and the Articles are attached. E-mail 28 isfrom an attorney at Fox Rothschild, and appears to be printedfrom Fell's “sent” file because the first part of the e-mail isa message from Fell to the attorney, as the end of a chain ofback-and-forth e-mails from the same attorney. The e-mailcontains advice about how to handle telephone calls fromBrenner.10 E-mails 13 and 14, sent to Fell from a paralegalat Fox Rothschild, are not communications seeking orrendering an opinion on law or legal services, and theinformation they contain is business information that is amatter of public record. The fact that the e-mails containa warning indicating they contain “PRIVILEGED ANDCONFIDENTIAL INFORMATION,” does not transformthem from non-privileged communications into privilegedcommunications. See In re Grand Jury Proceedings, 2001WL 1167497, at *10 (“[T]he determination of whether adocument is privileged does not depend upon ... a privilegelegend.”). The Court therefore concludes that E-mails 13 and14 are not privileged.Defendants have not met their burden of demonstrating thatE-mail 12 should be protected by the attorney-client privilege.This e-mail has not been provided to the Court for review, andthe description provided in Defendants' memorandum of lawis far too vague, and simply makes the conclusory assertionthat it is subject to attorney-client privilege. Accordingly,the Court concludes that E-mail 12 is not privileged. SeeFed.R.Civ.P. 26(b)(5)(A)(ii) (“the party must ... describe thenature of the documents, communications, ... and do so in amanner that ... will enable other parties to assess the claim”).E-mail 28 is different. That e-mail is actually a series ofcommunications, sent a month after Fell left PPBC, in whichFell, using his Hotmail account, sought advice from a FoxRothschild attorney about how to handle telephone callsfrom Brenner. The attorney responds by providing adviceand seeking additional information. Fell then responds withthe additional information, and the attorney again providesspecific legal advice. The communication ends with Fellthanking the attorney for the advice.The Court concludes that this e-mail is protected by attorneyclientprivilege. It was clearly conveying informationand legal advice, as well as the attorney's thoughts andimpressions about the strengths of Fell's, and the otherDefendants', legal position. There is some question, however,about the measures Fell took to keep the communicationsconfidential, and whether it was objectively reasonable forhim to expect that his communications would be kept private.11 On the one hand, according to his affidavit, Fell wasusing his own personal home computer to communicatewith his attorney on a private e-mail account. It isgenerally accepted that lawyers and clients may communicateconfidential information through unencrypted e-mail andreasonably maintain an expectation that the communicationsare private and confidential. See In re Asia Global Crossing,322 B.R. at 256 (citing N.Y. C.P.L.R. § 4548 (McKinney1999), stating that a privileged communication does notlose its privilege *565 for the sole reason it was sentby e-mail); cf. In re County of Erie, 473 F.3d at 422(finding e-mails between county attorney and sheriff's office,sent with the predominant purpose of legal advice, wereprivileged so long as they were not shared with others);Geer v. Gilman Corp., No. 06 Civ. 889(JBA), 2007 WL1423752, *4 (D.Conn. Feb.12, 2007) (“[P]laintiff's attorneyclientprivilege in communications with her counsel was notwaived by virtue of her having used her fiance's computerand e-mail address ... [because] plaintiff took affirmativesteps to maintain the confidentiality of the attorney-clientcommunications.”).On the other hand, Fell left his Hotmail account vulnerableto the prying eyes of other parties by leaving his passwordstored on PPBC's computer, and possibly by giving his loginand password information to a PPBC employee.Nonetheless, the Court has already concluded above thatFell had a reasonable subjective and objective belief that© 2012 Thomson Reuters. No claim to original U.S. Government Works. 10

Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)127his communications would be kept confidential—and thisincludes his communications with his attorney. Even if Fellwas fully aware of Plaintiffs' policy concerning e-mail, thereis nothing in that policy that would have alerted him that, afterhe left Plaintiffs' employ, Brenner might search his personale-mails sent though his personal computer, and stored on hispersonal internet providers' systems. Although Fell ultimatelyfailed to properly protect his Hotmail password, there is noevidence that leaving it on PPBC's computers was anythingbut inadvertent. Thus, it remained reasonable for him toexpect that the contents of his personal e-mails, particularlythose written and sent after his employment at PPBC hadended, would be kept private when he sought the advice ofhis attorney. See In re County of Erie, 473 F.3d at 422; Geerv. Gilman Corp., 2007 WL 1423752, at *4.However, finding E-mail 28 is protected by the attorneyclientprivilege does not end the inquiry. Plaintiffs also arguethat the privilege should be overcome based on the crimefraudexception.B. The Crime–Fraud ExceptionThe protections of the attorney-client privilege may be lostif the crime-fraud exception applies. “[T]he purpose of thecrime-fraud exception to the attorney-client privilege [is]to assure that the ‘seal of secrecy,’ between lawyer andclient does not extend to communications ‘made for thepurpose of getting advice for the commission of a fraud’or crime.” United States v. Zolin, 491 U.S. 554, 562–563,109 S.Ct. 2619, 2626, 105 L.Ed.2d 469 (1989); see also Inre John Doe, Inc., 13 F.3d 633, 636 (2d Cir.1994) (“Thecrime-fraud exception strips the privilege from attorneyclientcommunications that ‘relate to client communicationsin furtherance of contemplated or ongoing criminal orfraudulent conduct.’ ” (quoting In re Grand Jury SubpoenaDuces Tecum Dated September 15, 1983, 731 F.2d 1032,1038 (2d Cir.1984))).12 “A party wishing to invoke the crime-fraud exceptionmust demonstrate that there is a factual basis for a showingof probable cause to believe that a fraud or crime has beencommitted and that the communications in question were infurtherance of the fraud or crime.” United States v. Jacobs,117 F.3d 82, 87 (2d Cir.1997). It is not enough to show merelythat privileged communications “might provide evidence of acrime or fraud.” In re Richard Roe, Inc., 168 F.3d 69, 71 (2dCir.1999). “Rather, the communication itself must have beenin furtherance of a fraud or crime and must have been intendedto facilitate the fraud or crime.” Shahinian v. Tankian, 242F.R.D. 255, 258 (S.D.N.Y.2007) (citing Jacobs, 117 F.3d at88).*566 1. Application to E-mail 2813 Having reviewed the contents of E-mail 28, the Courtconcludes that there is no evidence that it was sent infurtherance of a fraud or crime. The communication clearlyaddresses the legal issues which Fell and other Defendantsface, and the advice is limited to addressing those legal issues,and indicates how Fell and other Defendants should respondto Brenner, with whom a legal conflict had arisen. The factthat the communication arose in the larger context of theDefendants' attempt to set up a competing business, anddiscusses matters which might, in Plaintiffs' eyes, constitutepast criminal or fraudulent actions, does not transform thisparticular communication into one which furthers a crimeor fraud. Accordingly, the Court concludes that E-mail28 is protected by the attorney-client privilege, should beprecluded from use by Plaintiffs, and should be returned toDefendants. Further, Plaintiffs should certify that all copieshave been returned or destroyed. See Fed.R.Civ.P. 26(b)(5)(B).2. Application to All E-mails14 Plaintiffs' crime-fraud exception argument is not limited,however, to only those e-mails for which attorney-clientprivilege was asserted. Plaintiffs also ask the Court to extendthe principles underlying the crime-fraud exception to all ofthe e-mails in order to justify, and thereby excuse, Brenner'swrongful access to Fell's e-mail accounts. The Court declinesto do so.First, Plaintiffs' have not presented any authority forextending the crime-fraud exception beyond the borders ofits standard application to material covered by the attorneyclientprivilege. Second, had Brenner waited and actedappropriately, she would have had access to all of Fell's e-mails, as well as all of the other Defendants' e-mails, in thenormal course of pre-trial discovery. While Brenner's fearsthat Defendants might attempt to conceal evidence cannot,in this case, be written off as unfounded paranoia, neitherfederal law nor the Federal Rules of Civil Procedure can beignored simply because a party believes herself to be wrongedby the actions of a dishonest person. If the Court were to adoptPlaintiffs' suggestion, the crime-fraud exception would engulfall of the rules designed to ensure orderly and legal discoveryof evidence, and could be invoked to justify any party'sresort to illegal, extra-judicial measures to secure evidence.Accordingly, the Court rejects Plaintiffs' suggestion that the© 2012 Thomson Reuters. No claim to original U.S. Government Works. 11

128Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)crime-fraud exception should excuse Brenner's violations ofthe SCA.III. SpoliationDefendants' final argument is that Plaintiffs' initial productionof the e-mails, with their print date obscured, amountsto spoliation of evidence, justifying sanctions, includingpreclusion. The Court does not agree,15 “ ‘Spoliation is the destruction or significant alterationof evidence, or failure to preserve property for another's useas evidence in pending or reasonably foreseeable litigation.’” Allstate Ins. Co. v. Hamilton Beach/Proctor Silex, Inc., 473F.3d 450, 457 (2d Cir.2007) (quoting West v. Goodyear Tire& Rubber Co., 167 F.3d 776, 779 (2d Cir.1999)). Typically,when evidence is spoiled, a party requests dismissal or an“adverse inference” instruction to counteract the fact that theevidence is no longer available. See West, 167 F.3d at 780(noting that dismissal is not the only sanction for spoliation,and that other sanctions, including jury instructions, alsoserve to vindicate the prejudice suffered by a party due tospoliation); cf. *567 Residential Funding Corp. v. DegeorgeFin. Corp., 306 F.3d 99, 106 (2d Cir.2002) (noting that“adverse inference instruction [s] [are] usually [ ] employedin cases involving spoliation of evidence”). This is not,however, a typical case, because the evidence is availablein its original form. Accordingly, neither of these severesanctions—dismissal or an adverse inference instruction—are commensurate or appropriate sanctions.16 When the nature of the breach is non-production ofevidence, as opposed to actual destruction or significantalteration, a district court “has broad discretion in fashioningan appropriate sanction”. Residential Funding Corp., 306F.3d at 107. In Residential Funding, a case similar to this case,the plaintiff did not destroy “the e-mails on the back-up tapes.Rather, [the plaintiff] failed to produce the e-mails in timefor trial.” Id. at 106. The Second Circuit remanded the case,and instructed the district court to consider lesser sanctions,including awarding costs, if it determined that the defendantwas not prejudiced by the delay. See id. at 112. Thus, theharm caused by delay in production is a relevant factor indetermining sanctions, if a court determines that sanctions arewarranted. See West, 167 F.3d at 780 (noting that addressingprejudice is an important aim of sanctions imposed for abusesof discovery).17 In this case, the original e-mails were not destroyedor altered, and Defendants inspected them prior to makingtheir final argument to the District Court, regarding themotion for a preliminary injunction. The date the e-mailswere printed was made known to Defendants and theCourt before the preliminary injunction hearing. Thus, atmost, Defendants could argue that production was delayed.However, Defendants were not harmed by the delay, as theywere not prevented from addressing the evidence or makingany arguments related to the e-mails—including the currentpreclusion motion. 10 Cf. Residential Funding Corp., 306F.3d at 107.This is not to say that altering evidence, as Plaintiffs did, anddelaying production of unaltered evidence until the day of thehearing, is excusable. However, Plaintiffs' current counsel hasrepresented that prior counsel provided the e-mails in the statecourt litigation, and was responsible for obscuring the dates.(See Tr. at 14–15.) His explanation for doing so is unknown.Accordingly, the Court finds that obscuring the dates, alone,does not amount to spoliation warranting the imposition ofsanctions, let alone total preclusion.IV. RemediesA. Authority to Impose SanctionsThe SCA allows a person who is “aggrieved by anyviolation of this chapter” to obtain “such relief as may beappropriate” in a civil cause of action. 18 U.S.C. § 2707(a).The statute further provides in sub-section (b): “appropriaterelief includes—(1) such preliminary and other equitableor declaratory relief as may be appropriate; (2) damagesunder subsection (c); and (3) a reasonable attorney's feeand other litigation costs reasonably incurred.” Id. However,Defendants have not asserted a claim under the SCA;therefore, these provisions do not define or limit the sanctionsthe Court may impose in this case. Rather, Defendants appealto the Court's inherent equitable authority to *568 fashionappropriate sanctions for Brenner's actions.18 19 Federal courts do have “inherent ‘equitable powersof courts of law over their own process, to prevent abuses,oppression, and injustices,’ ” International Prods. Corp. v.Koons, 325 F.2d 403, 408 (2d Cir.1963) (quoting Gumbel v.Pitkin, 124 U.S. 131, 144, 8 S.Ct. 379, 31 L.Ed. 374 (1888));see also Schlaifer Nance & Co., Inc. v. Estate of Warhol 742F.Supp. 165, 166 (S.D.N.Y.1990) (quoting Koons ). Courtsmay impose sanctions and rely upon their inherent authorityeven “where the conduct at issue is not covered by one of theother sanctioning provisions.” Chambers v. NASCO, Inc., 501U.S. 32, 50, 111 S.Ct. 2123, 2135, 115 L.Ed.2d 27 (1991).Furthermore, a district court may resort to its “inherent power© 2012 Thomson Reuters. No claim to original U.S. Government Works. 12

Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)129to fashion sanctions, even in situations similar or identical tothose contemplated by [a] statute or rule.” DLC Mgmt. Corp.v. Town of Hyde Park, 163 F.3d 124, 136 (2d Cir.1998) (citingChambers ).20 In this situation, the sanctions available under the FederalRules of Civil Procedure are not directly applicable, sinceBrenner's misconduct occurred prior to the filing of thelitigation and outside the normal discovery process, and didnot violate any court orders. See Fayemi v. Hambrecht andQuist, Inc., 174 F.R.D. 319, 325 (S.D.N.Y.1997) (concludingthat the Federal Rules of Civil Procedure did “not provide theauthority for regulating the use of information obtained bya party independent of the discovery process”). Nonetheless,as the court in Fayemi found, pursuant to “its inherentequitable powers to sanction a party that seeks to usein litigation evidence that was wrongfully obtained,” thecourt may preclude the use of stolen evidence in litigation,notwithstanding the fact that it would have been otherwisediscoverable. See id. at 325–26.In another analogous case, Herrera v. The Clipper Group,L.P., Nos. 97 Civ. 560 & 561(SAS), 1998 WL 229499(S.D.N.Y. May 6 1998), the defendant sought to preclude theplaintiff from using at trial documents improperly obtainedoutside the discovery process. Relying on its inherentauthority, the court concluded that the plaintiff acted in badfaith and imposed sanctions, consisting of payment of costsand fees. See id. at *3 However, because the plaintiff couldhave properly obtained the evidence through the discoveryprocess, the court declined to preclude the use of the evidence.See id. at *5. The court was also hesitant to provide thedefendants with a “windfall” strategic advantage at trial. Seeid.B. Bad FaithThe Second Circuit “has required a finding of bad faith for theimposition of sanctions under the inherent power doctrine.”Herrera, 1998 WL 229499, at *4 (citing United States v. Int'lBhd. of Teamsters, 948 F.2d 1338, 1345 (2d Cir.1991)). TheCourt concludes that Brenner acted in bad faith. The Courtunderstands Brenner's impulse to unearth evidence of herdisloyal employees' betrayal, after having reason to believethey had stolen important business documents and plans,and after they opened up a competing business after leavingPPBC. This is particularly true in light of Belliard's decisionto invade her office, shred his non-compete agreement, andtake other actions which caused Brenner to believe thathe stole PPBC's client list, including e-mail addresses andtelephone numbers.But it is precisely this conduct which is the subject of thislitigation and for which, if proved, Brenner has adequate legalremedies. Her actions—accessing of Fell's Hotmail account,and using that access to open his Gmail account, and thenresorting *569 to “guessing” a password in order to gainaccess to Fell's WFBC account—violated federal law andoffend general notions of personal privacy. Furthermore, heruse of that information in this litigation taints the judicialprocess. Thus, even though Brenner's improper actions tookplace prior to the filing of the litigation, the fruits ofBrenner's improper conduct have been heavily relied upon byPlaintiffs in pleading and arguing the merits of their case. TheCourt may therefore fashion sanctions for Brenner's wrongfulaccess to Fell's personal e-mail accounts. See Herrera, 1998WL 229499 at *5.C. SanctionsDefendants seek the complete preclusion of all of the e-mails,including their use in support of motions, at trial, and evenfor impeachment purposes. There are a variety of options,however, that are available to the Court.On the mild side of the spectrum, the Court could precludethe use of e-mails obtained from Fell's accounts, but not e-mails properly obtained in the course of discovery from otherDefendants or parties—even if the permitted e-mails might,in actuality, be the same as those precluded. Although thiswould amount to imposing almost no sanction, it recognizesthe fact that the evidence would be otherwise discoverable. 11However, the notion that the evidence would be otherwisediscoverable also cuts in the other direction. Had Brennerallowed the litigation process to move forward, and notviolated federal law to by-pass the rules of discovery,she could have properly obtained the e-mails in question.Moreover, many of the e-mails in issue were authored byother people and sent to Fell, and in those cases, thoseindividuals were also aggrieved by Brenner's intrusion intoFell's e-mail accounts. Permitting precluded e-mails to beadmitted from other sources would therefore fail to takeinto account the fact that Brenner's actions also violated theprivacy rights of everyone with whom Fell communicated. Asdiscussed, parties should not be excused from complying withthe law and following the rules because of outrage, legitimateor otherwise, over another party's actions.© 2012 Thomson Reuters. No claim to original U.S. Government Works. 13

130Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)On the harsh side of the spectrum, the Court could completelypreclude use of the e-mails for all purposes, in any context,regardless of whether they could be secured from someother source. This option could be tempered, however, byallowing the e-mails to be used for impeachment purposes. 12Thus, while precluding the use of the e-mails as affirmativeevidence, the Court would not permit Fell or others to testifyfalsely, or open the door to a line of testimony that iscontradicted by the e-mails, knowing that the e-mails couldnot be used to impeach or rebut their testimony. Additionally,if there are e-mail chains between Defendants that merelycontain a precluded e-mail from Fell, the chain of *570conversation would be admissible, and only the precluded e-mail would be redacted.Alternatively, selective preclusion of the e-mails could alsobe accomplished by carving out categories of e-mails. Forexample, e-mails dated before March 16, 2008, the lastdate of Fell's employment with PPBC, could be allowedin evidence, but later e-mails could be precluded; in fact,Defendants recognized this categorical distinction duringoral argument. (See Tr. at 27.) Alternatively, only Gmailand WFBC account e-mails could be precluded, but notHotmail account e-mails, since Fell clearly accessed hisHotmail account on Plaintiffs' computers and left his Hotmailpassword on PPBC's computers. Limited preclusion, suchas one based on the date on which the e-mail was written(for example, e-mails sent after Fell left PPBC), or thetype of account from which it was retrieved (e-mails fromthe Gmail or WFBC accounts), might be justified by thefact that both parties appear to have “unclean hands;” sucha sanction would punish Brenner's wrongful acts, whilelimiting an evidentiary “windfall” going to Defendants, whoalso engaged in wrongful behavior. See Fayemi, 174 F.R.D.at 326 (permitting evidence that would otherwise have beenprecluded because of the “unclean hands” of the aggrievedparty); Herrera, 1998 WL 229499, at *5 (declining to grantopposing party an evidentiary “windfall”).The problem with this alternative is that, ultimately, there islittle justifiable basis to distinguish the e-mails according totheir source or date. Brenner was not authorized to accessany of Fell's e-mails directly from accounts maintainedby third-party electronic communication service providers.Thus, while it is possible to create categories of e-mails, itis difficult to justify why one category should be precluded,while another should be admissible.Finally, the Court could impose financial sanctions suchas payment of the costs and fees incurred in bringing theinstant motion. 13 These could be imposed in conjunctionwith a preclusion sanction, or, as the court did in Herrera,as an alternative to preclusion. Monetary sanctions, asopposed to full preclusion, would serve the Court's interestin favoring full disclosure of evidence. In the context oflifting a protective order, the Second Circuit has noted that“full disclosure of all evidence that might conceivably berelevant [is an] objective represent[ing] the cornerstone of ouradministration of civil justice.” Martindell v. InternationalTel. and Tel. Corp., 594 F.2d 291, 295 (2d Cir.1979).The disadvantage of imposing a monetary sanction is that itdoes not really address the underlying injury to Fell's privacy.Furthermore, preclusion of the e-mails is the remedy mostcompatible with maintaining the integrity of the litigationprocess. As one court noted: “The [c]ourt is concernedwith preserving the integrity of this judicial proceeding.What matters is balancing the scales. That can be done byprohibiting [a party] from making any use of the [wrongfullyobtained] documents ....” In re Shell Oil Refinery, 143 F.R.D.105, 108–09 (E.D.La.1992).CONCLUSIONIn fashioning a remedy pursuant to its inherent equitablepowers, the Court has a great deal of discretion. See *571DLC Mgmt., 163 F.3d at 136 (upholding sanctions imposedby Magistrate Judge pursuant to the court's inherent equitableauthority) (citing Sassower v. Field, 973 F.2d 75, 80–81 (2dCir.1992)). The selection of a remedy for Brenner's actionsis not, however, an easy task. Brenner wrongfully obtainedFell's e-mails, and her actions amount to a violation of theSCA. But the Court also recognizes that Brenner was reactingto what she perceived as Defendants' betrayal, theft of herproperty, and breaches of their fiduciary duties. Thus, theparties seeking equitable relief, Defendants, stand accusedof having extremely unclean hands themselves. Furthermore,although Brenner's actions may have given Plaintiffs anadvantage at the outset of this litigation, they did not, in theend, give them an advantage over Defendants they would nototherwise have had—all of the e-mails at issue here, exceptthe one protected by the attorney-client privilege, would havebeen secured through the normal discovery process.Nevertheless, at this stage in the litigation, the Court has notresolved the merits of Plaintiffs' claims, which will determinejust how much dirt is on Defendants' hands. While the day© 2012 Thomson Reuters. No claim to original U.S. Government Works. 14

Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)131may come when Defendants will face the consequences fortheir alleged misconduct, Brenner's wrongdoing has beenestablished, and should not be counter-balanced by, asyet,unproven allegations of wrongdoing on the part ofDefendants. Accordingly, the imposition of sanctions againstPlaintiffs is justified.In the end, the one thing that should remain unsullied isthe integrity of the judicial process. In this Court's view,that integrity is threatened by admitting evidence wrongfully,if not unlawfully, secured. See REP MCR Realty, L.L.C. v.Lynch, 363 F.Supp.2d 984, 1012 (N.D.Ill.2005) (“ ‘Litigantsmust know that the courts are not open to persons whowould seek justice by fraudulent means.’ ”) (quoting Pope v.Federal Exp. Corp., 138 F.R.D. 675, 683 (W.D.Mo.1990)).Therefore, in light of the unique circumstances of this case,the Court recommends that the e-mails be precluded from usein the litigation, but not for impeachment purposes shouldDefendants open the door. The Court also recommends thatPlaintiffs should return or destroy all copies of E-mail 28, andso certify.Pursuant to 28 U.S.C. § 636(b)(1)(C) and Rule 72 of theFederal Rules of Civil Procedure, the parties shall have ten(10) days from service of this Report to file written objections.See also Fed.R.Civ.P. 6(a) and (d). Such objections shall befiled with the Clerk of the Court, with extra copies deliveredto the chambers of the Honorable John H. Koeltl, UnitedStates District Judge, and to the chambers of the undersigned,Room 1660. Any requests for an extension of time for filingobjections must be directed to Judge Koeltl. Failure to fileobjections will result in a waiver of those objections forpurposes of appeal. See Thomas v. Arn, 474 U.S. 140, 145,106 S.Ct. 466, 470, 88 L.Ed.2d 435 (1985); Frank v. Johnson,968 F.2d 298, 300 (2d Cir.1992); Small v. Sec'y of Health &Human Servs., 892 F.2d 15, 16 (2d Cir.1989).August 22, 2008.Footnotes1 Brenner alleges that Belliard stole PPBC's client list and other items while he was in her office. (See Affidavit of Lauren Brenner,dated July 10, 2008 (“Brenner July 10 Aff.”), 16.) Belliard denies he stole anything. (See Affidavit of Rubin Belliard, dated July29, 2008 (“Belliard Aff.”), 33.)2 All references to e-mails are to the e-mails annexed to Schnapp's Declaration.3 Fell makes a general claim that he never did any work related to WFBC while he was at PPBC or on PPBC computers. (See FellAff. 6.) However, he has not provided his PPBC work schedule, so there is no way to confirm whether or not he was at PPBCwhen he sent any of these e-mails.4 Defendants did not include “E-mail 12” in their submissions, although it is described and referred to in the pleadings. (SeeDefendants' Memorandum of Law in Support of Their Motion for an Order Precluding the Use or Disclosure of Specific Emails(“Defs.' Mem.”), at 7.) According to Defendants, E-mail 12 is a privileged e-mail from Defendants' attorneys. (See id.)5 18 U.S.C.A. § 2515 reads;Whenever any wire or oral communication has been intercepted, no part of the contents of such communication and no evidencederived therefrom may be received in evidence in any trial, hearing, or other proceeding in or before any court, grand jury,department, officer, agency, regulatory body, legislative committee, or other authority of the United States, a State, or a politicalsubdivision thereof if the disclosure of that information would be in violation of this chapter.6 The Court also notes that Penal Law § 250.05 explicitly includes “electronic communications” while CPLR § 4506 does not,suggesting that e-mails obtained in violation of Penal Law § 250.05 are not subject to exclusion under CPLR § 4506.7 There are both federal and state law substantive claims in this action.8 Even the case Plaintiffs rely upon, in support of the argument that Fell waived his right to privacy in his Hotmail account,acknowledges that an employer's e-mail policy is limited only to e-mails viewed by employees while at work. See Scott v. BethIsrael Med. Ctr. Inc., 17 Misc.3d 934, 938, 847 N.Y.S.2d 436, 440 (N.Y.Sup.2007) (noting that “the effect of an employer e-mailpolicy ... is to have the employer looking over your shoulder each time you send an e-mail”).9 Defendants' suggestion that Brenner used a keystroke logging program is rank speculation, and, even if it were true, would onlyconfirm that Fell entered his Hotmail password into PPBC's computers to access his Hotmail account.10 Defendants only claim as to the relevance that the obscured dates would have to their claims is that the dates the e-mails were printedmight show contemporaneous “interception” under the ECPA. However, the Court has concluded that the ECPA does not apply todelivered e-mails, and the date the e-mails were printed is not relevant to the analysis because only delivered e-mails could be printed.11 In the Fourth Amendment context, the Independent Source Exception and the Inevitable Discovery Exception both allow evidenceotherwise illegally obtained to be admissible in a criminal case if it could and would have been lawfully obtained anyway. SeeMurray v. United States 487 U.S. 533, 108 S.Ct. 2529, 101 L.Ed.2d 472 (1988); Nix v. Williams, 467 U.S. 431, 104 S.Ct. 2501,81 L.Ed.2d 377 (1984).© 2012 Thomson Reuters. No claim to original U.S. Government Works. 15

132Pure Power Boot Camp v. Warrior Fitness Boot Camp, 587 F.Supp.2d 548 (2008)12 Defendants urge the Court to reject an impeachment exception to preclusion, and cite to a Sixth Circuit case which explicitly holdsthat the ECPA does not provide for one. See United States v. Wuliger, 981 F.2d 1497, 1506 (6th Cir.1992). As the Court hasdetermined that the ECPA does not apply, and the remedies available under the SCA are left to the discretion of the Court, and asthis Court is acting pursuant to its inherent authority, nothing prevents the Court from allowing an impeachment exception.13 Defendants have not specified precisely the costs or fees they are seeking. The SCA permits awarding fees and costs, and, if theviolation was willful, the imposition of punitive damages. See 18 U.S.C. § 2707(c); see also Wyatt Technology Corp., 2006 WL5668246, at *9 (awarding punitive damages to a counter-claimant under the SCA, because the plaintiff accessed the defendant'spersonal e-mail on a private foreign server, monitored the personal e-mail account, and did not obtain the defendant's authorizationto do so).End of Document© 2012 Thomson Reuters. No claim to original U.S. Government Works.© 2012 Thomson Reuters. No claim to original U.S. Government Works. 16

Faiveley Transport Malmo AB v. Wabtec Corp., 559 F.3d 110 (2009)90 U.S.P.Q.2d 1312133559 F.3d 110United States Court of Appeals,Second Circuit.FAIVELEY TRANSPORTMALMO AB, Plaintiff-Appellee,v.WABTEC CORPORATION, Defendant-Appellant.SynopsisDocket No. 08-5126-cv. | Argued:Feb. 9, 2009. | Decided: March 9, 2009.Background: Swedish company manufacturing andsupplying railway systems and services brought tradesecret misappropriation action against American company,with which it had a licensing agreement, seeking topreliminarily enjoin American company from undertakingcertain commercial activities. The United States DistrictCourt for the Southern District of New York, Jed S. Rakoff,J., 572 F.Supp.2d 400, granted in part and denied in partplaintiff's application for preliminary injunction. Defendantappealed.Holdings: The Court of Appeals, José A. Cabranes, CircuitJudge, held that:1 manufacturer had Article III standing to assert trade secretclaims against competitor under expired licensing agreement;2 licensing agreement, providing that disputes arising underagreement were to be “finally settled” in arbitration, did notbar manufacturer's application for preliminary injunction ontrade secret claim;3 manufacturing drawings pertaining to “dimensions andtolerances, surface finishes, material selection and treatments,lubrication specifications, and special instructions formanufacture, testing, and assembly” of product containedtrade secrets;4 competitor likely had used manufacturer's trade secrets inbreach of agreement, confidential relationship, or duty, or asresult of discovery by improper means; and5 manufacturer would not have been irreparably harmedin absence of preliminary injunction for competitor'smisappropriation of trade secrets; disapproving Ivy Mar Co.v. C.R. Seasons, Ltd., 907 F.Supp. 547, 567 (E.D.N.Y.1995).Vacated and remanded.Attorneys and Law Firms*112 A. John P. Mancini (Vanessa M. Biondo, ChristineM. Hernandez, and Daniel B. Kirschner, on the brief), MayerBrown LLP, New York, NY, for Faiveley Transport MalmoAB.James C. Martin (Daniel K. Winters, Reed Smith LLP,New York, NY, and Colin E. Wrabley, Reed Smith LLP.Pittsburgh, *113 PA, on the brief), Reed Smith LLP,Pittsburgh, PA, for Wabtec Corporation.Before CABRANES and WESLEY, Circuit Judges, andKORMAN, District Judge. *OpinionJOSÉ A. CABRANES, Circuit Judge:The question presented in this case-whether a manufacturerwho likely misappropriated trade secrets may be preliminarilyenjoined from (a) entering into contracts that will causeit to use those trade secrets and (b) disseminating furtherthose trade secrets-concerns a rarely celebrated but instantlyrecognizable feature of everyday life in New York City:subway brakes. To the parties in this case, subway brakesare known as “Brake Friction Cylinder Tread BreakUnits” (“BFC TBU”). For the rest of us, BFC TBU are “thatloud squeaking, sparking braking system that so reliably stopsthe New York City Transit subway system.” In re FaiveleyTransp. Malmo AB, 522 F.Supp.2d 639, 640 (S.D.N.Y.2007)(“Faiveley I ”) (internal quotation marks omitted). Twentyfourhours a day and 365 days a year, the City's subway carssafely stop at 468 passenger stations-and, as any straphangerknows, many times in between-depositing riders of all classesand descriptions at homes, workplaces, ballparks, and everyother destination imaginable. See generally MacWade v.Kelly, 460 F.3d 260, 264 (2d Cir.2006) (“The New York Citysubway system ... is an icon of the City's culture and history,an engine of its colossal economy, a subterranean repositoryof its art and music, and, most often, the place where millionsof diverse New Yorkers and visitors stand elbow to elbow asthey traverse the metropolis.”).The subway is an indelible feature of the City's culture. Itslegend and lore fascinate locals and visitors alike. See, e.g.,Carrie Melago, It's the Rail Thing: Subway Ride Record isOfficial, N.Y. Daily News, Aug. 8, 2007, at 24 (reportingthat six alumni of Regis High School set a new world recordfor stopping at all 468 stations on a single fare: 24 hours, 54minutes, and 3 seconds). A point of personal pride for many© 2012 Thomson Reuters. No claim to original U.S. Government Works. 1

134Faiveley Transport Malmo AB v. Wabtec Corp., 559 F.3d 110 (2009)90 U.S.P.Q.2d 1312New Yorkers, the City's subterranean transit has appearedin song, on stage and screen. See, e.g., Leonard Bernstein,et al., “New York, New York,” from On the Town (“NewYork, New York-a helluva town,/The Bronx is up but theBattery's down,/And the people ride in a hole in the ground;/New York, New York-It's a helluva town [!]”), as quoted inThe Oxford Dictionary of Humorous Quotations 329 (NedSherrin, ed., 1995) (attributed to Betty Comden and AdolphGreen, lyricists). The subway's rhythm and sound have alsorumbled into the canon of American literature. See, e.g., TomWolfe, The Bonfire of the Vanities 36 (Farrar Straus Giroux1998) (1987) (“On the subway, the D train, heading for theBronx, Kramer stood in the aisle holding on to a stainlesssteelpole while the car bucked and lurched and screamed.”).Moving forward, our next stop is the trade secret disputeconcerning the distinctive brakes used by the New York Citysubway system.BACKGROUNDDuring the 1970s, SAB Wabco-a corporate descendant of theWestinghouse Air Brake Company and the predecessor-ininterestto plaintiff-appellee Faiveley Transport Malmo AB(“Faiveley”)-developed *114 BFC TBU, a unique air brakesystem designed to stop trains quickly and smoothly, if notalways quietly. The original patents for the BFC TBU havesince expired.In 1993, SAB Wabco entered into a license agreement (“the1993 Agreement”) with Wabco, then a sister company. 1Pursuant to the 1993 Agreement, Wabco was authorizedto use SAB Wabco “know-how”-including “manufacturingdata, specifications, designs, plans, trade secrets” and otherinformation, J.A. 37 (1993 Agreement)-as well as “Patents,Patent Applications, and New Technology,” id. at 38, toproduce and market BFC TBU. The 1993 Agreement wasoriginally scheduled to expire on December 31, 2003, butcould be renewed annually for one-year terms after that timeby agreement of the parties. Upon the expiration of the 1993Agreement, Wabco was to “cease manufacture” of licensedproducts, except insofar as required to meet contracts enteredinto prior to the expiration of the agreement. Id. at 46.In 2004, Faiveley acquired SAB Wabco. As part of theacquisition, Faiveley assumed ownership of SAB Wabco'sintellectual property, including that related to BFC TBU, aswell as SAB Wabco's rights and obligations under the 1993Agreement. At that time, Wabtec Corporation (“Wabtec”),the successor-in-interest to Wabco, was still producing BFCTBU parts and components pursuant to the 1993 Agreement.In December 2004, Faiveley notified Wabtec that the 1993Agreement would not be renewed, as a result of which the1993 Agreement terminated on December 31, 2005.Beginning in 2005, Wabtec began to develop its own lineof BFC TBU through “reverse engineering.” In 2007, theNew York City Transit Authority (the “Transit Authority”) 2awarded a “sole source” contract to Wabtec whereby Wabtecwas to provide BFC TBU for the City's overhaul of a certainclass of subway cars. According *115 to Faiveley, followingthe termination of the 1993 Agreement, Wabtec continuedto use Faiveley's proprietary information to produce BFCTBU for its contract with the Transit Authority. In May 2007,Faiveley submitted a letter to the Transit Authority protestingthe Wabtec-Transit Authority contract but did not succeed inhaving itself substituted for Wabtec.The 1993 Agreement provided that disputes arising underit would be settled in arbitration proceedings in Stockholm,Sweden. On October 18, 2007, Faiveley filed for sucharbitration with the Secretariat of the International Courtof Arbitration of the International Chamber of Commerce(“ICC”) in Paris, alleging that Wabtec breached the 1993Agreement by continuing to use plaintiff's trade secrets tomanufacture BFC TBU after the 1993 Agreement terminatedon December 31, 2005. In those arbitration proceedings,which are ongoing, Faiveley seeks, among other things,damages for breach of the 1993 Agreement and an injunctionthat prevents Wabtec from producing BFC TBU or thecomponents thereof and prevents Wabtec from disclosingFaiveley's proprietary information to third parties. On thesame day that it filed for arbitration, Faiveley filed suit in theUnited States District Court for the Southern District of NewYork, seeking a preliminary injunction to prevent Wabtecfrom manufacturing or marketing BCF TBU or disclosingto third parties any trade secrets associated with BCF TBUpending the outcome of the arbitration.After a four-day evidentiary hearing, the United StatesDistrict Court for the Southern District of New York (JedS. Rakoff, Judge ) granted Faiveley's application in part anddenied it in part. In an August 22, 2008 decision and order, theDistrict Court granted the application insofar as it enjoinedWabtec from (1) “providing [the Transit Authority] with[BFC TBU] manufacturing drawings during the course of the[the Transit Authority] contract,” Faiveley Transp. MalmoAB v. Wabtec Corp., 572 F.Supp.2d 400, 409 (S.D.N.Y.2008)(“Faiveley II ”) (italics omitted), (2) “providing to any thirdparty in some other context those manufacturing drawings© 2012 Thomson Reuters. No claim to original U.S. Government Works. 2

Faiveley Transport Malmo AB v. Wabtec Corp., 559 F.3d 110 (2009)90 U.S.P.Q.2d 1312135or any other materials that contain Faiveley's trade secrets,”id. at 410 (italics omitted), and (3) “entering into, or biddingfor, any new contracts to manufacture, supply, or sell anyBFC TBUs, or BFC TBU parts, kits or components until theArbitral Tribunal renders a final determination on the parties'dispute, and all appeals therefrom have been exhausted orconcluded,” id. (italics omitted). The District Court deniedFaiveley's application to enjoin Wabtec from carrying outcontracts entered into before the expiration of the 1993Agreement, id., and, although it enjoined Wabtec fromdisclosing Faiveley's proprietary information to the TransitAuthority, the District Court expressly declined to enjoinWabtec from using BFC TBU to carry out the TransitAuthority contract, id. at 409.Wabtec then filed this appeal.DISCUSSIONOn appeal, Wabtec contends that (1) Faiveley has notestablished its standing to assert trade secret claims againstWabtec under the 1993 Agreement, (2) the 1993 Agreementbarred Faiveley's resort to the District Court prior to theconclusion of the arbitral proceedings, and (3) the preliminaryinjunction issued by the District Court is not supported byevidence in the record and, in any event, is overbroad.Only Wabtec's challenge to the contours of the preliminaryinjunction merits more than brief consideration.1 The record provides ample evidence of Faiveley's standingin light of the *116 District Court's findings that (1) Faiveleyowned the alleged trade secrets at issue, (2) Wabtec's useor further dissemination of those trade secrets constituted aconcrete injury to Faiveley, and (3) any such injury couldbe redressed by the relief sought by Faiveley. See Lujan v.Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130,119 L.Ed.2d 351 (1992) (describing injury-in-fact, causation,and redressibility as the “irreducible constitutional minimum”of Article III standing); Pullman Group, LLC v. PrudentialIns. Co., of Am., 288 A.D.2d 2, 3, 733 N.Y.S.2d 1 (1st Dep't2001) (noting that a plaintiff in a trade secret misappropriationcase cannot establish standing under New York law unless hecan establish that he owned the trade secret).2 We also agree with the District Court that the 1993Agreement did not bar the plaintiff's application for apreliminary injunction. See Faiveley I, 522 F.Supp.2d at641. 3 Paragraph 27.1 of the 1993 Agreement provides thatdisputes arising under the agreement are to be “finally settled”in arbitration, but it does not prohibit resort to appropriateforums for preliminary relief in aid of arbitration. In fact,the same paragraph of the 1993 Agreement provides thatthe Rules of Conciliation and Arbitration of the InternationalChamber of Commerce (“ICC rules”) govern disputesbetween the parties. In turn, the ICC rules expressly providethat, before the matter “is transmitted to the Arbitral Tribunal,and in appropriate circumstances even thereafter, the partiesmay apply to any competent judicial authority for interim orconservatory relief.” Rules of Arbitration art. 23(2) (emphasisadded). That is precisely what Faiveley did in this case. SeeFaiveley I, 522 F.Supp.2d at 641-42.3 4 5 With respect to Wabtec's challenge to thepreliminary injunction, we review the District Court's grantof such relief for abuse of discretion. See, e.g., Somoza v. NewYork City Dep't of Educ., 538 F.3d 106, 112 (2d Cir.2008); cf.In re Sims, 534 F.3d 117, 132 (2d Cir.2008) ( “A district courthas abused its discretion if it based its ruling on an erroneousview of the law or on a clearly erroneous assessment ofthe evidence, or rendered a decision that cannot be locatedwithin the range of permissible decisions.” (internal citations,alterations, and quotation marks omitted)). A party seekinga preliminary injunction must demonstrate: (1) “either (a) alikelihood of success on the merits or (b) sufficiently seriousquestions going to the merits to make them a fair groundfor litigation and a balance of hardships tipping decidedly inthe movant's favor,” County of Nassau, N.Y. v. Leavitt, 524F.3d 408, 414 (2d Cir.2008), and (2) “irreparable harm in theabsence of the injunction,” id.A. Likelihood of Success on the Merits6 Faiveley is not entitled to preliminary relief unless it hasdemonstrated that *117 Wabtec likely misappropriated atrade secret. Both parties agree that New York law governsthat issue in this case. “To succeed on a claim for themisappropriation of trade secrets under New York law, a partymust demonstrate: (1) that it possessed a trade secret, and(2) that the defendants used that trade secret in breach of anagreement, confidential relationship or duty, or as a result ofdiscovery by improper means.” N. Atl. Instruments, Inc. v.Haber, 188 F.3d 38, 43-44 (2d Cir.1999) (applying New Yorklaw).7 “A trade secret is any formula, pattern, device orcompilation of information which is used in one's business,and which gives the owner an opportunity to obtain anadvantage over competitors who do not know or use it.”Id. at 44 (internal quotation marks and brackets omitted). In© 2012 Thomson Reuters. No claim to original U.S. Government Works. 3

136Faiveley Transport Malmo AB v. Wabtec Corp., 559 F.3d 110 (2009)90 U.S.P.Q.2d 1312determining whether information constitutes a trade secret,New York courts have considered:(1) the extent to which the information is known outsideof the business; (2) the extent to which it is known byemployees and others involved in the business; (3) theextent of measures taken by the business to guard thesecrecy of the information; (4) the value of the informationto the business and its competitors; (5) the amount ofeffort or money expended by the business in developingthe information; (6) the ease or difficulty with which theinformation could be properly acquired or duplicated byothers.Id. (quoting Ashland Mgmt., Inc. v. Janien, 82 N.Y.2d 395,407, 604 N.Y.S.2d 912, 624 N.E.2d 1007 (1993)).We detect no error in the District Court's conclusion that theBFC TBU manufacturing drawings pertaining to “dimensionsand tolerances, surface finishes, material selection andtreatments, lubrication specifications, and special instructionsfor manufacture, testing, and assembly,” Faiveley II, 572F.Supp.2d at 404, contain trade secrets under New York law.That this information is not widely known is evinced bythe fact that no company other than Faiveley-and Wabtecpursuant to the 1993 Agreement-has produced a completeBFC TBU. Faiveley has strictly limited the access of its ownemployees to the information and does not permit customersto view it. It is undisputed that SAB Wabco, Faiveley'spredecessor-in-interest, devoted substantial resources to thedevelopment of the BFC TBU. As demonstrated in thetestimony of those who took part in Wabtec's engineeringprocess, BFC TBU and BFC TBU components are extremelydifficult to duplicate. The information contained in themanufacturing drawings provided Faiveley, as the DistrictCourt found, with “far more tha[n][a] ‘slight competitiveedge.’ ” Id. at 405.8 Having established that Faiveley “possessed a tradesecret,” N. Atl. Instruments, Inc., 188 F.3d at 43, we nowconsider whether Wabtec likely used Faiveley's trade secrets“in breach of an agreement, confidential relationship orduty, or as a result of discovery by improper means,” id. at44. Wabtec argues that it did not misappropriate Faiveley'strade secrets because it independently discovered the sameinformation through a “reverse engineering” process. As theSupreme Court has noted, “trade secret law ... does not offerprotection against discovery by fair and honest means, suchas by independent invention, accidental disclosure, or by socalledreverse engineering, that is by starting with the knownproduct and working backward to divine the process whichaided its development or manufacture.” Kewanee Oil Co. v.Bicron Corp., 416 U.S. 470, 476, 94 S.Ct. 1879, 40 L.Ed.2d315 (1974).*118 In this case, the record provides ample supportfor the District Court's conclusion that Wabtec's reverseengineering process made “important use of Faiveley'strade secrets,” Faiveley II, 572 F.Supp.2d at 408, and was“[a]t a minimum ... fatally tainted,” id. at 407, by theinvolvement of Roland Moore, a Wabtec employee whohad “frequent contact with Faiveley drawings during thecourse of the [1993] Agreement,” id. at 406. Wabtec'sfirst effort to reverse engineer BFC TBU, which did notinvolve Moore, produced no usable drawings. However,when Wabtec attempted for a second time to reverse engineerBFC TBU, Moore was selected to play a key role because“he [was] knowledgeable about the product.” Tr. 617:9-10(Testimony of Paul E. Jamieson, Chief Engineer, WabtecCorp.). Notwithstanding Moore's “self-serving testimony thathis role in the reverse engineering process was minimal,”Faiveley II, 572 F.Supp.2d at 407, the record indicates thatMoore made several specific recommendations to draftsmen.Wabtec has not presented us with any compelling reasonnorare we aware of any-to question the District Court'sassessment that Moore's testimony was “self-serving.” SeeJoseph v. New York City Bd. of Educ., 171 F.3d 87, 93 (2dCir.1999) (“Assessments of the credibility of witnesses arepeculiarly within the province of the trier of fact and areentitled to considerable deference.”).Accordingly, we hold that the District Court did not err infinding that Faiveley is likely to succeed on the merits of itsclaim that Wabtec misappropriated Faiveley's trade secrets.B. Irreparable Harm9 10 A showing of irreparable harm is “the single mostimportant prerequisite for the issuance of a preliminaryinjunction.” Rodriguez v. DeBuono, 175 F.3d 227, 234(2d Cir.1999) (internal quotation marks omitted). We haveexplained that “[t]o satisfy the irreparable harm requirement,[p]laintiffs must demonstrate that absent a preliminaryinjunction they will suffer an injury that is neither remote norspeculative, but actual and imminent, and one that cannot beremedied if a court waits until the end of trial to resolve theharm.” Grand River Enter. Six Nations, Ltd. v. Pryor, 481F.3d 60, 66 (2d Cir.2007) (internal quotation marks omitted).“Where there is an adequate remedy at law, such as an awardof money damages, injunctions are unavailable except in© 2012 Thomson Reuters. No claim to original U.S. Government Works. 4

Faiveley Transport Malmo AB v. Wabtec Corp., 559 F.3d 110 (2009)90 U.S.P.Q.2d 1312137extraordinary circumstances.” Moore v. Consol. Edison Co.of N.Y., 409 F.3d 506, 510 (2d Cir.2005).11 We have previously observed that “the loss of tradesecrets cannot be measured in money damages” wherethat secret, once lost, is “lost forever.” FMC Corp. v.Taiwan Tainan Giant Indus. Co., 730 F.2d 61, 63 (2dCir.1984) (per curiam ). Some courts in this Circuit haveread this passing observation to mean that a presumption ofirreparable harm automatically arises upon the determinationthat a trade secret has been misappropriated. See, e.g.,Ivy Mar Co. v. C.R. Seasons, Ltd., 907 F.Supp. 547, 567(E.D.N.Y.1995) (“[I]rreparable harm is presumed where atrade secret has been misappropriated.”). That reading is notcorrect. A rebuttable presumption of irreparable harm mightbe warranted in cases where there is a danger that, unlessenjoined, a misappropriator of trade secrets will disseminatethose secrets to a wider audience or otherwise irreparablyimpair the value of those secrets. Where a misappropriatorseeks only to use those secrets-without further disseminationor irreparable impairment of value-in pursuit of profit, nosuch presumption is warranted because an award of damageswill often provide a complete *119 remedy for such aninjury. Indeed, once a trade secret is misappropriated, themisappropriator will often have the same incentive as theoriginator to maintain the confidentiality of the secret in orderto profit from the proprietary knowledge. As Judge Connerhas observed, where there is no danger that a misappropriatorwill disseminate proprietary information, “the only possibleinjury that [the] plaintiff may suffer is loss of sales to acompeting product ... [which] should be fully compensable bymoney damages.” Geritrex Corp. v. Dermarite Indus., LLC,910 F.Supp. 955, 966 (S.D.N.Y.1996) (Conner, J.).12 In cases where the presumption applies (and has not beenrebutted) or where irreparable injury has been demonstrated,a “narrowly drawn” preliminary injunction that protects thetrade secret from further disclosure or use may be appropriate.In all cases, the relief should be “narrowly tailored to fitspecific legal violations” and to avoid “unnecessary burdenson lawful commercial activity.” Waldman Pub. Corp. v.Landoll, Inc., 43 F.3d 775, 785 (2d Cir.1994).13 Here, the evidence showed that, for over twelve years,Wabtec used what is now Faiveley's proprietary informationto manufacture and market BFC TBU and BFC TBU partspursuant to the 1993 Agreement. Faiveley has not alleged thatWabtec unlawfully disseminated any trade secrets associatedwith the BFC TBU during that period, nor did the DistrictCourt find that Wabtec disclosed the trade secrets to anythird party after the 1993 Agreement expired. The evidencealso indicated that Wabtec incurred considerable expense indeveloping BFC TBU so that it would gain a competitiveadvantage in bidding for contracts like the Transit Authority'ssubway car overhaul. Disclosure of Faiveley's trade secretsin connection with a contract to sell BFC TBU or BFCTBU parts would only undermine the competitive advantageWabtec has sought.Based on this and other evidence, the District Court found thatWabtec is not disseminating Faiveley's manufacturingdrawings or other know-how to any third parties; indeed,Wabtec appears to be treating them with the sameconfidentiality that they give to their own proprietaryinformation, that they gave to Faiveley's proprietaryinformation during the course of the [1993] Agreement,and that they presumably are continuing to give toFaiveley's proprietary information in the context of theso-called grandfathered contracts.... [T]here is no reasonto conclude that Faiveley's trade secrets will be “lostforever” absent injunctive relief.Faiveley II, 572 F.Supp.2d at 409 (emphasis added). Italso concluded that “neither Faiveley nor Wabtec, in theordinary course of business, pass on manufacturing drawings(which Faiveley claimed in this case were the documentsmemorializing its trade secrets) to customers like New YorkCity Transit.” Id. Accordingly, the facts found by the DistrictCourt indicate that there is little or no risk that Wabtec willfurther disclose or otherwise irreparably impair Faiveley'strade secrets.In light of Faiveley's failure to demonstrate, and the DistrictCourt's failure to find, that Faiveley would suffer irreparableharm unless Wabtec was enjoined from disseminating itstrade secrets, the District Court was without authority (1) toenjoin Wabtec from disclosing Faiveley's trade secrets to theTransit Authority or other third parties “as a precautionarymeasure,” id. at 409-10; and (2) to enjoin Wabtec fromentering into new contracts to sell BFC TBU or BFC TBUparts, *120 id. at 410. 4 The District Court did not point toany evidence in the record, nor can we find any, to supportthe conclusion that Faiveley would suffer irreparable harmunless Wabtec was enjoined from doing what the evidenceindicated it was unlikely to do in the absence of an injunctiondisseminateor otherwise irreparably impair Faiveley's tradesecrets. In addition, nothing in the record supports the DistrictCourt's speculation that new sales contracts would result inan “unacceptably high” risk of dissemination of Faively's© 2012 Thomson Reuters. No claim to original U.S. Government Works. 5

138Faiveley Transport Malmo AB v. Wabtec Corp., 559 F.3d 110 (2009)90 U.S.P.Q.2d 1312trade secrets. Id. at 410. In the absence of evidentiary supportof irreparable harm, there was no basis for the entry of apreliminary injunction against Wabtec in this action.CONCLUSIONFor the reasons stated above, the August 22, 2008 order of theDistrict Court is VACATED and the cause is REMANDEDfor further proceedings consistent with this opinion.No costs.Parallel Citations90 U.S.P.Q.2d 1312Footnotes* The Honorable Edward R. Korman, of the United States District Court for the Eastern District of New York, sitting by designation.1 Wabco, like SAB Wabco, is a corporate descendant of the Westinghouse Air Brake Company.2 The Transit Authority is a public benefit corporation whose principal business is the operation of public subways and buses withinNew York City. It was created by New York State in the early 1950s to consolidate the multiple subway and bus lines that operatedmore-or-less independently since the turn of the century. See The Encyclopedia of New York City 827 (Kenneth T. Jackson, ed.,1995); see also Gilchrist v. Interborough Rapid Transit Co., 279 U.S. 159, 190-91, 49 S.Ct. 282, 73 L.Ed. 652 (1929) (summarizing,in a dispute over a proposed fare hike from five cents to seven cents, the early financing and development of New York City'ssubway system). We use in this opinion the Transit Authority's legal name, see, e.g., Transp. Workers Union, Local 100 v. N.Y.City Transit Auth., 505 F.3d 226 (2d Cir.2007), but note that since the mid-1990s the agency has “branded” itself “M.T.A. NewYork City Transit.” See James C. McKinley, Jr., What's in a Symbol? A Lot, the M.T.A. Is Betting, N.Y. Times, Aug. 28, 1994,at A31 (“Among the changes being made, the venerable Transit Authority, the subsidiary that runs the subways and most of thecity's buses, becomes M.T.A. New York City Transit.”). The “M.T.A.” prefix refers to the Metropolitan Transportation Authority,a public benefit corporation created by the State of New York in 1968 to oversee the various transportation agencies serving NewYork City and its environs, including the Transit Authority. See Jackson, supra, at 758. According to what was once known as the“newspaper of record,” the word “Authority” was dropped from the agency's public name “as a way to make the service [ ] a littlemore friendly.” McKinley, supra, at A31. Cf. Daniel Okrent, Editorial, Paper of Record? No Way, No Reason, No Thanks, N.Y.Times, April 25, 2004, at D4 (stating that the moniker “paper of record” is now “a compliment used as a cudgel,” but noting that“[t]he Times once sort of was”). We, however, are not disturbed by the use of “Authority,” and refer to the agency by its legal name.3 Wabtec appealed the District Court's order immediately after it was entered. However, we dismissed the appeal for want ofjurisdiction, as the District Court's order-a denial of Wabtec's motion to dismiss Faiveley's petition for preliminary relief-was not afinal order within the meaning of 28 U.S.C. § 1291 and was therefore not immediately appealable. See Wabtec Corp. v. FaiveleyTransp. Malmo AB, 525 F.3d 135, 141 (2d Cir.2008). We now have jurisdiction to consider the order as part of the District Court'sfinal decision to grant preliminary injunctive relief to Faiveley. See Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454,57 L.Ed.2d 351 (1978) (noting that “[f]ederal appellate jurisdiction generally depends on the existence of a decision by the DistrictCourt that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment” (internal quotationmarks omitted)).4 We are also concerned that the District Court's preliminary injunction against new sales contracts impinges on lawful commercialactivity. See Waldman Pub. Corp. v. Landoll, Inc., 43 F.3d 775, 785 (2d Cir.1994) (“[A]n injunction should not impose unnecessaryburdens on lawful activity.”). Many of the parts that make up the BFC TBU are in no way associated with Faiveley's trade secrets;they are produced by other companies and are readily available on the market. Although this concern is not the basis for our decisionin this case, it may be relevant to any further exploration of the matter on remand.End of Document© 2012 Thomson Reuters. No claim to original U.S. Government Works.© 2012 Thomson Reuters. No claim to original U.S. Government Works. 6

139Sasqua Group, Inc. v. Courtney, Slip Copy (2010)2010 WL 3613855Only the Westlaw citation is currently available.United States District Court,E.D. New York.SASQUA GROUP, INC. and Christopher G. Tors,Plaintiffs,v.Lori COURTNEY and Artemis Consulting, Inc.,Defendants.No. CV 10-528(ADS)(AKT). Aug. 2, 2010.Attorneys and Law FirmsEmily A. Kim, Richard P. Swanson, Arnold & PorterLLP, New York, NY, for Plaintiffs.Martin J. Murray, Nora Von Stange, Law Offices ofMartin J. Murray, New York, NY, for Defendants.OpinionREPORT AND RECOMMENDATIONA. KATHLEEN TOMLINSON, United States MagistrateJudge.*1 This action arises out of a dispute between the ownerof Plaintiff Sasqua Group, Inc. (“Sasqua”), namely,Plaintiff Christopher G. Tors (“Tors”) (collectively withSasqua, the “Plaintiffs”), and an executive who left thecompany, Defendant Lori Courtney (“Courtney”). Thebusiness relationship between the parties is furtherimpacted by the fact that Sasqua’s owner, Tors, is theuncle of the departing executive niece Courtney. Thismatter was referred to me by Judge Leonard Wexler, who,acting as the miscellaneous district judge on duty onFebruary 9, 2010, heard argument on Plaintiffs’application for a temporary restraining order, seeking toprevent Defendants (1) from using, disclosing, orproviding access to any of the Plaintiff company’sconfidential, propriety and/or trade secret information and(2) contacting or communicating with Plaintiffs’ clientcontacts. Judge Wexler found the trade secrets issue to bea “close question,” but denied the application, withoutprejudice, and with the right to renew. See DE 6.Having determined that the issue should be decided in thecontext of a hearing, Judge Wexler referred the case to me(1) for a hearing on the nature of the information soughtto be protected and (2) to issue a Report andRecommendation as to the propriety of granting atemporary restraining order. Id. The hearing on the tradesecrets issue was conducted on February 11, 2010. Oncethis matter was officially opened on ECF, the case wasassigned to the Hon. Arthur D. Spatt, to whom this Reportand Recommendation is now directed.I. FACTUAL BACKGROUNDPlaintiff Christopher Tors is a resident of Vermont andthe president and founder of Sasqua, an executive searchconsulting firm specializing in the recruitment andplacement of professionals for the financial servicesindustry. Compl. 5-6. Prior to starting Sasqua, Tors hadworked for 15 years at Goldman Sachs as a preciousmetals and foreign currency trader, six years at AIGheading up currency sales, and two years at UBS wherehe was in charge of foreign exchange sales tocorporations. Id., 15. Sasqua works with a small groupof high-caliber clients, including businesses such asBarclays Capital, The Royal Bank of Scotland, NomuraAmerica Holding, Inc., Standard Chartered Bank, BNPParibas and others. Lehman Brothers was one of Sasqua’smajor clients until it closed in 2008. Id., 9.Up until mid-January 2010, Sasqua employed fiveindividuals aside from Tors. Sasqua’s personnel consistedof Defendant and Managing Director Lori Courtney,Vice-President Bridget Schulten, Senior Associate DeboraDoerr Larsen, Research Consultant Kathleen Kelly and acomputer technical expert, Douglas Steinschneider. Theseindividuals were hired on an “independent consultancybasis under contracts that were renewable annually.” Id.Courtney is a New York resident who started working atSasqua in 2000 as a consultant. As Managing Director,Courtney ran the day-to-day business of Sasqua and theother “consultants” served as Sasqua’s recruitment staff.Id., 10. At Tors’ direction, Courtney formed ArtemisConsulting LLC in New York in or before 2003 to serveas a vehicle to receive compensation from Sasqua. SeeDeclaration of Christopher G. Tors in Support ofPlaintiffs’ Motion for a Temporary Restraining Order andPreliminary Injunction (“Tors Decl.”), 10. In 2007,Courtney converted the LLC into defendant ArtemisConsulting Inc. (“Artemis”), a New York corporationwhich continued to receive Courtney’s compensationfrom Sasqua. Id.*2 Plaintiffs assert that Tors hired Courtney in September2000 as an entry-level research consultant for Sasqua. Shewas paid an hourly fee with bonus opportunities forsuccessful placement of candidates. According to the© 2011 Thomson Reuters. No claim to original U.S. Government Works. 1

140Sasqua Group, Inc. v. Courtney, Slip Copy (2010)Complaint, Courtney had no experience in the recruitmentand placement of financial industry professionals prior tojoining Sasqua. Id., 12. Tors claims that he trainedCourtney and taught her every aspect of the business,including passing on many of his business contacts andrelationships. Id., 13. Courtney asserts that Tors hadonly 2½ years of experience in the industry when shestarted to work for him. See Declaration of Lori Courtneyin Opposition to Plaintiffs’ Motion for a TRO andPreliminary Injunction (“Courtney Decl.”), 16. Prior tocommencing work for Sasqua, Courtney had 11 years ofexperience in the financial industry and in sales andmarketing work for a publishing company. Id., 17.In 2008, Tors and Courtney entered into negotiations toform a partnership agreement. For a variety of reasons,these negotiations fell through and Courtney continued towork for Sasqua under consulting agreements negotiatedannually. Compl., 22. Beginning in January 2009, Torsand Courtney started sharing equally in the profits,expenses and losses of the business. Id. Under the termsof the 2009 contract, it was agreed that anyone whooriginated or executed a placement was able to earnadditional bonus amounts. Id., 24. Sasqua’s businesswas suffering from the decline in the economy at thebeginning of 2009, particularly in the financial sectorfollowing the Lehman failure and AIG bailout. Id ., 25.In light of these circumstances, Tors and Courtney agreedat the beginning of 2009 that neither of them would take itdistribution from the profits until the financial conditionof the company improved. Sasqua’s financial conditiondid improve in mid-2009 and during that summer, Sasquarepaid the loans that Tors and Courtney had paid to it andthey were both able to start drawing profits again on amonthly basis. Id., 28.According to the Complaint, Sasqua maintains on itsserver a central database of client information thatincludes client contact information, individual profiles,contact hiring preferences, employment backgrounds,descriptions of previous interactions with clients, resumesand other information. This information was placed in thedatabase over the years by Tors, Courtney, and therecruiters whenever they interacted with a client. Id., 30.Sasqua employs a computer technician to maintain thedatabase. Id., 31. Plaintiffs assert that the database andthe information it contains are highly confidential toSasqua and only Sasqua personnel have access to it. Id., 35.On January 13, 2010, Tors and Courtney were both inStamford, Connecticut for client meetings. Courtneyrequested a meeting with Tors at that time. Id., 38.During the meeting, Courtney advised Tors that she wasterminating her relationship with Sasqua and planned tostart her own executive search consulting firm in NewYork. Id., 39. According to the Complaint, Tors wastaken by surprise and had no prior indication thatCourtney contemplated leaving Sasqua or that she wasplanning to start a competing business. Id., 40.Concluding that there was little he could do, Torsnegotiated the terms of Courtney’s departure. Tors andCourtney agreed that the remaining engagements onwhich Sasqua’s recruitment personnel were currentlyworking would continue as usual until the engagementswere closed out. At that point, Courtney’s associationwith Sasqua would end and Sasqua would distribute toCourtney the amounts she had earned from thoseengagements, as provided in the 2009 contract. Id., 41.The company’s computer technician removed Courtney’saccess to the database and erased the copy of the databasefrom Courtney’s computer. Id., 43.*3 Within the week following Courtney’s resignation,Sasqua’s three recruitment consultants approached Torsand advised him that they were terminating theiremployment with Sasqua. They further stated that theywere going to work for Courtney and Artemis. Id., 44.Tors began immediate negotiations with Schulten, Larsenand Kelly to keep them at Sasqua. He was unsuccessfulwith Larsen and Kelly but was still negotiating withSchulten. Id., 46. When Tors began contacting Sasquaclients to inform them that there would be a change inSasqua’s business going forward, one of the clients,Standard Chartered Bank, informed Tors that he alreadyknew about the changes. Tors states that he understoodthis to mean that Courtney had contacted StandardChartered Bank and discussed her new business, incompetition with Sasqua. Id., 47. This litigationfollowed.II. THE PARTIES’ CONTENTIONSIn the Complaint, Plaintiffs assert that their trade secretsencompass “the confidential proprietary andcompetitively sensitive information about Sasqua’s clientcontacts, their individual profiles, their hiring preferences,their employment backgrounds, and descriptions ofprevious interactions with client contacts.” Compl., 58.Sasqua maintained all of this information in a centraldatabase. Tors Decl., 26. The company had hired acomputer technician to maintain the database. Id., 27.According to the Plaintiffs,32. The information in the database is the lifeblood ofSasqua’s business. The database records and reflectsthe company’s ten years of contact-and-relationshipbuilding,which relationship-building is how Sasquagenerates business.33. Such information is not available from a publicsource and it is not information that could be easily© 2011 Thomson Reuters. No claim to original U.S. Government Works. 2

141Sasqua Group, Inc. v. Courtney, Slip Copy (2010)duplicated.Compl., 32, 33; Tors Decl., 28, 29.Tors states that the amount of time and resources Sasquahas expended in developing the database cannot becalculated and the information contained in it is highlyconfidential, available only to Sasqua’s personnel. TorsDecl., 30, 31. Tors believes that since Courtney’sresignation from Sasqua, she has contacted Sasqua clientsin order to solicit business. He also asserts that Courtneyis “poaching all of Sasqua’s recruiters,” therebydebilitating Sasqua,” and that there is “real and substantialrisk that, if no immediate intervention occurs ... Courtneyand Artemis will use Sasqua’s own former consultantsand its confidential business information to put Sasquaout of business.” Id., 57, 58.In opposition, Defendant Courtney states that she has notmisappropriated, nor conspired with anyone tomisappropriate, “any trade secret or confidentialproprietary information belonging to Sasqua, nor have Iused such information since severing my relationship withPlaintiffs.” See Courtney Decl., 2. Courtney adds thatshe is not subject to any restrictive covenants, butnevertheless has not “solicited any entity or person whoserelationship with Plaintiffs was originated by Tors” andhas not “solicited any of Sasqua’s independent contractorsto come work for me.” Id., 3.*4 Noting that recruitment of professionals for thefinancial services industry is a highly competitive field,Courtney maintains that “Sasqua and other suchcompanies do not utilize any particular or proprietarymethodology to perform a search.” Id., 8. She furtherstates that “virtually all personnel in the capital marketsindustry that Sasqua serves have their contact informationon Bloomberg, LinkedIn, Facebook or other publiclyavailable databases.” Id. According to Courtney, thepeople who make up the financial services industryworkforce, “including the Decision-Makers and otherhigh level executives, typically change employersfrequently ...” and so “the contact information that asearch firm may assemble in a database is almostimmediately obsolete.” Id., 10.Courtney states that she informed Tors at the meeting onJanuary 13, 2010 that she would no longer serve as aSasqua consultant. She agreed that every deal initiatedprior to that date was attributed to Sasqua and she wouldclose the assignments for Sasqua so that Sasqua could billthem and then pay her compensation for initiating andclosing the deal. Id., 53. During the meeting with Torsthat day, Courtney states Tors agreed that herrelationships were hers to take with her and he wished herluck. Id., 56. Although she asserts that Tors invited herto copy her contacts from the Sasqua database, Courtneyrecalls that she declined the invitation, explaining to Torsthat she really “didn’t need to do any copying because ofthe accessibility of information from Bloomberg or otherpublic databases.” Id., 61, 62. According to Courtney,Sasqua’s computer technician removed the database fromher computer promptly. Moreover, Courtney contendsthat the database software used by Sasqua was out of dateand the program was not geared to the industry. She haspurchased new software “designed for recruiters” and sheis “building [her] own database from scratch in terms ofthe methodology and the data.” Id., 64, 65. Courtneymaintains that she has not appropriated any trade secretsfrom Sasqua and that the information Tors seeks toprotect is of very little value and is in no way proprietaryto any search firm. Id., 67.III. APPLICABLE STANDARD“A trade secret is ‘any formula, pattern, device orcompilation of information which is used in one’sbusiness and which gives [the owner an opportunity toobtain an advantage over competitors who do not know oruse it.’ New York courts consider several factors indetermining whether information constitutes a tradesecret, including (1) the extent to which the information isknown outside of the business; (2) the extent to which it isknown by employees and others involved in the business;(3) the extent of measures taken by the business to guardthe secrecy of the information; (4) the value of theinformation to the business and its competitors; (5) theamount of effort or money expended by the business indeveloping the information; and (6) the ease or difficultywith which the information could be properly acquired orduplicated by others.” Unisource Worldwide, Inc. v.Valenti, 196 F.Supp.2d 269, 278 (quoting Softel, Inc. v.Dragon Med. & Scientific Communications, Inc., 118F.3d 955, 968 (2d Cir.1997) (applying New York law)).These factors were first enumerated in AshlandManagement, Inc. v. Janien, 82 N.Y.2d 395, 407, 604N.Y.S.2d 912, 624 N.E.2d 1007 (1993) (quotingRestatement of Torts § 757, cmt. b).*5 “ ‘A customer list developed by a business throughsubstantial effort and kept in confidence may be treatedand protected at the owner’s instance against disclosure toa competitor, provided the information it contains is nototherwise readily ascertainable.’ In addition, knowledgeof a customer’s needs and specifications and the pricescharged to that customer are considered confidential.”Unisource Worldwide, Inc. v. Valenti, 196 F.Supp.2d 269,278 (quoting Defiance Button Mach. Co. v. C & C MetalProducts. Corp., 759 F.2d 1053, 1063 (2d Cir.), cert.denied, 474 U.S. 844, 106 S.Ct. 131, 88 L.Ed.2d 108(1985)). Therefore, “[a] plaintiff claimingmisappropriation of a trade secret must prove: ‘(1) it© 2011 Thomson Reuters. No claim to original U.S. Government Works. 3

142Sasqua Group, Inc. v. Courtney, Slip Copy (2010)possessed a trade secret, and (2) defendant is using thattrade secret in breach of an agreement, confidence, orduty, or as a result of discovery by improper means.’ “Computer Associates International, Inc. v. Bryan, 784F.Supp. 982, 987 (E.D.N.Y.1992) (citing Integrated CashMgt. Servs., Inc. v. Digital Transactions, Inc., 920 F.2d171, 173 (2d Cir.1990))It is clear that irreparable harm is presumed where a tradesecret has been misappropriated. In the words of theSecond Circuit, “[a] trade secret once lost is, of course,lost forever” and, as a result, and as a result, such a loss“cannot be measured in money damages.” FMC Corp. v.Taiwan Tainan Giant Indus. Co., 730 F.2d 61, 63 (2dCir.1984) (“the loss of a trade secret is not measurable interms of money damages”); Computer Assocs. Int’l v.Bryan, 784 F.Supp. 982, 986 (E.D.N.Y.1992) (forpurposes of a motion for a preliminary injunction, loss oftrade secrets is not measurable in terms of moneydamages and is thus considered irreparable harm). Lumex,Inc. v. Highsmith, 919 F.Supp. 624, 628 (E.D.N.Y.1996).IV. DISCUSSIONA. Nature of the Information Sought to be ProtectedIt is worth noting at the outset that there is no restrictivecovenant between the parties here which might otherwisegovern this dispute.1 Compare, BDO Seidman v.Hirschberg, 93 N.Y.2d 382, 388-89, 690 N.Y.S.2d 854,712 N.E.2d 1220 (N.Y.1999); Silipos, Inc. v. Bickel, No.1:06-cv-02205, 2006 WL 2265055, at *3 (S.D.N.Y.Aug.8, 2006) (if an employer can demonstrate at least onelegitimate interest, such as protection of trade secrets, acourt has discretion to partially enforce an otherwiseoverbroad covenant). Plaintiffs maintain that Defendantshave misappropriated Sasqua’s trade secrets. Pls.’ Mem.at 12. To qualify for protection against such allegedmisappropriation, Plaintiffs must demonstrate (1) “that[Sasqua] possessed a trade secret and (2) that theDefendants used that trade secret in breach of anagreement, confidential relationship or duty, or as a resultof discovery by improper means.” North AtlanticInstruments v. Haber, 188 F.3d 38, 43-44 (2d Cir.1999).Therefore, the threshold question which needs to bedetermined is whether the client database maintained bySasqua is entitled to trade secret protection at this stage ofthe litigation. See Kadant, Inc. v. Seeley Machine, Inc.,244 F.Supp.2d 19, 35 (N.D.N.Y.2003). “The question ofwhether a customer list is a trade secret is generally aquestion of fact.” Id. at 36 (citing North AtlanticInstruments, 188 F.3d at 44). To analyze the alleged“trade secret” information presented here in the absenceof a restrictive covenant, then, the Court now turns to anassessment of each of the Ashland Management factors asapplied to the specific circumstances of this case.1. Is the Information Known Outside the Business?*6 As Plaintiffs have noted, under Second Circuitprecedent, “[a] customer list ‘developed by a businessthrough substantial effort and kept in confidence may betreated as a trade secret and protected at the owner’sinstance against disclosure to a competitor, provided theinformation it contains is not otherwise readilyascertainable.’ “ North Atlantic Instruments, 188 F.3d at44 (quoting Defiance Button Mach. Co. v. C & C MetalProds. Corp., 759 F.2d 1053, 1063 (2d Cir.), cert. denied,474 U.S. 844, 106 S.Ct. 131, 88 L.Ed.2d 108 (1985)).This is indeed the nub of the arguments presented by bothsides in the instant case. Plaintiffs claim that Defendantspossess Sasqua’s confidential business information,including its client list and contacts, its list of recruitmentcandidates, its business strategies, its search andplacement methods, its fee structures and otherinformation. Tors Decl., 52; Pls.’ Mem. at 9. Accordingto the Plaintiffs, the information contained in the Sasquadatabase is not available from a public source. Tors Decl., 29; Pls.’ Mem. at 6. Over the past 10 years, Sasqua hascompiled “detailed contact information for Sasqua’sclients,” Tors Decl., 53, as well as confidentialinformation concerning each client’s needs, preferences,hiring practices, strategies for business expansion, andpersonal knowledge as well as acquaintance with keydecision-makers at the client firms. Id., 53-54.Plaintiffs argue that Sasqua has invested tremendous time,energy and resources into developing the contacts andrelationships that are now threatened by the Defendantsand that the confidential information was not knownoutside Sasqua until Defendant Courtney departed. Id., 55; Pls.’ Mem. at 10.On the other hand, Defendants maintain that Sasqua andother such companies “do not utilize any particular orproprietary methodology to perform a search. The stocktool of the trade is the Internet, where informationregarding prospective financial institution customers, aswell as job candidates, is equally and readily available toany recruiter.” Defs.’ Mem. at 2-3. The Defendants go onto note that “virtually all capital markets personnel havetheir contact information on Bloomberg, LinkedIn,Facebook or other publicly available databases, includinga firm’s own media advertising.” Id.Plaintiffs rely primarily on North Atlantic Instruments andWebcraft Technologies, Inc. v. McCaw, 674 F.Supp.1039, 1044 (S.D.N.Y.1987) to support their position thatSasqua’s client list, contact persons, preferences,operations and hiring practices are subject to trade secret© 2011 Thomson Reuters. No claim to original U.S. Government Works. 4

143Sasqua Group, Inc. v. Courtney, Slip Copy (2010)protection. These two cases, however, dealt with differentproducts and services than what is at issue in the currentaction and are factually distinguishable. In North AtlanticInstruments, plaintiff North Atlantic had entered into anAsset Purchase Agreement with Transmagnetics, Inc.(“TMI”), which was engaged in a related businesstargeted toward a particular niche market. TMI designed,manufactured and sold customized electronic devices to alimited number of engineers in the aerospace and hightechindustries. North Atlantic Instruments, 188 F.3d at40. North Atlantic’s CEO testified that the customizednature of TMI’s business “made the identity of therelatively small number of engineers who require itsproducts especially crucial to its business success.” Id.Consequently, knowing the identity and needs of theseengineers was an extremely valuable aspect of TMI’sbusiness and one which would have been difficult foranother company to ascertain on its own. Id. TMI’spresident, Fred Haber, was also TMI’s head of sales.North Atlantic conditioned its purchase of TMI onHaber’s continuing to work for North Atlantic in a rolesimilar to the one he occupied at TMI and for whichNorth Atlantic paid him a salary and bonuses. Id. at 40-41.*7 Some three years later, after Haber had access toinformation about North Atlantic’s technology andcustomer base, including lists of customers and contactswith their individual product needs, Haber left NorthAtlantic and joined a competing company. That companyhired Haber specifically because of the contacts hedeveloped at TMI/North Atlantic. At a hearing on NorthAtlantic’s motion for a preliminary injunction, NorthAtlantic produced a printout of confidential clientinformation from its customer database. That list had beenprinted by Haber over a month after he had left NorthAtlantic and it was found in the new company’s files. Id.at 42. In his Report and Recommendation, the magistratejudge found that the list of companies to whom NorthAtlantic’s TMI division sold was not a trade secret;however, the magistrate judge concluded that the identityof the individual contact people with whom Haber dealtwhile at North Atlantic/TMI was a protectable tradesecret. Id. at 44-45. In making that determination, themagistrate judge relied on the testimony of NorthAtlantic’s chief executive who described the “needle-inthe-haystackcharacter of the search for the handful ofengineers in companies of 100,000 employees who mighthave a use for one of North Atlantic’s customizedproducts.” Id. at 45. That is clearly not the scenario withregard to Sasqua’s clients.Similarly, in Webcraft Technologies, the plaintiff soldunusual custom printed materials, as distinguished fromservices, that were produced by an “in-line finishing”process. Webcraft Technologies, 674 F.Supp. at 1041,1045. There, the defendant had signed an employmentagreement containing covenants which prohibited herfrom competing with Webcraft or soliciting Webcraftcustomers for a period of two years from the date oftermination of her employment. The covenant alsoprohibited plaintiff from disclosing any trade secretsrelating to Webcraft’s business-specifically, names andneeds of customers, pricing information and certaindesignated specifications and lists. A competing companyoffered the defendant a job, which she accepted, but sheremained at Webcraft for three additional weeks. Duringthat period, she passed confidential Webcraft informationon to her next employer. Id. The defendant gave her newboss a list of Webcraft customers and viable prospects. Inaddition, she removed certain property from the Webcraftoffice. Id. at 1042. Among these items were defendant’sWebcraft rolodex and eight pages of Webcraft quotes andpricing sheets for three possible jobs the defendant waspursuing while at Webcraft, along with a statement ofWebcraft’s commission plan. Id. The court held that thedefendant violated both the letter and spirit of the tradesecrets provision by blatantly passing to the competitorcompany Webcraft’s customer information, projectspecifications and pricing details. Id. Moreover, Webcraftintroduced evidence of the long and difficult process toeducate and convert a prospective customer to the benefitsof the in-line finishing process. Defendant herself testifiedthat developing a customer in that business was an“arduous” process. Id. The evidence also established thatthe specialized nature of Webcraft’s business “was notuseful to many people, many kinds of advertising or directmail customers.” Id.*8 Plaintiffs’ reliance on Giffords Oil Co., Inc. v. Wild,106 A.D.2d 610, 483 N.Y.S.2d 104 (2d Dep’t 1984) isalso unavailing. Like the defendant in Webcraft,defendant Michael Wild was subject to an employmentagreement containing a restrictive covenant whichprevented him from soliciting customers for three yearsafter termination of his employment. Id. at 610, 483N.Y.S.2d 104. The Appellate Division held that thecustomer list at issue in Giffords Oil was entitled to tradesecret protection because the list also containedinformation such as the fuel oil capacity of eachcustomer’s tank and the amount certain customers werewilling to pay-information which could only be obtainedthrough personal solicitation. Id. at 611, 483 N.Y.S.2d104. In the instant action, aside from the absence of aretrictive covenant, Plaintiffs allege that Defendantspossess Sasqua’s fee structure but produced no evidenceat the hearing demonstrating that Defendant Courtney wasusing any Sasqua pricing information or customerspecifications. Moreover, from the information presentedthus far, it appears that each placement Sasqua makes isunique. As such, there is little, if any, competitiveadvantage to be gained from knowledge of Sasqua’spricing since there is no exact formula for pricing thatCourtney could use to her advantage. See Production© 2011 Thomson Reuters. No claim to original U.S. Government Works. 5

144Sasqua Group, Inc. v. Courtney, Slip Copy (2010)Resource Group, L.L.C. v. Oberman, No. 03 Civ. 5366,2003 WL 22350939, at *14 (S.D.N.Y., Aug. 27, 2003).Here, the circumstances involving Defendant Courtney’srelationship with and departure from Sasqua are quitedifferent. For example, there was no non-compete or nonsolicitationagreement in place which bound Courtney inany way at the time of her departure from Sasqua. Inaddition, the evidence adduced at the hearing establishedthat Courtney did not take the Sasqua database with her.In addition to Courtney’s own testimony, the Declarationof Douglas Steinschneider, Sasqua’s computer technician,submitted in opposition to Plaintiffs’ motion for a TROand preliminary injunction (“Steinschneider Decl.”), setsforth that Tors originally told Steinschneider to removethe database from Courtney’s computer at the time sheannounced she was leaving Sasqua and would becompeting with Sasqua through her own company,Artemis. Steinschneider Decl. 8. After Steinschneiderremoved the database, Tors changed his mind and toldSteinschneider he wanted Courtney to be able to accessthe database since Courtney had agreed to completesearches for Sasqua that she had already begun. At thatpoint, Steinschneider told Tors that he had alreadyremoved the database and that Courtney said she did notwant it. On that basis, Steinschneider did not reinstall thedatabase. Id.; Courtney Decl., 64.Significantly, Courtney did not sign on to work for acompetitor; rather, she went into business for herself. Sheis not selling a unique product to a few industry insiders,nor is she educating customers to an unusualmanufacturing process as did the defendants in NorthAtlantic Instruments and Webcraft. By contrast, any firmor entity in the financial services industry with amanagerial or executive position vacancy is a potentialcustomer of a business such as Courtney’s which offersexecutive placement services. The “product” here is notone “where a company’s availability as a potential patroncannot be readily ascertained. The potential list of[plaintiffs’] customers is not limited in such a way thatany list of ... prior purchasers is a trade secret.” IronMountain Info. Mgt., Inc. v. Taddeo, 455 F.Supp.2d 124,139 (E.D.N.Y.2006).*9 Courtney testified during the hearing that the identityof capital markets businesses is readily ascertainablethrough an Internet search, in the phonebook, in tradepublications or through a firm’s own media advertising.Transcript of the February 11, 2010 Hearing, at 28.2 Thepredominant business model that Sasqua followed was toget a search assignment from a capital markets businessand then go out and find a candidate to fill thatassignment. Id. at 31-32. Courtney’s specialty was foreignexchange trading, foreign exchange businesses andemerging markets. In the foreign exchange area, Courtneytestified that she could obtain the names of the globalhead of foreign exchange businesses, the sales and tradinghead, the regional heads, and specific traders from sourcessuch as Bloomberg, LinkedIn, Facebook and generalGoogle searches. Id. at 37. She added that many peoplewho are found in Bloomberg have their titles orspecialties listed, along with a substantial amount ofbackground information, including their resumes or, at thevery least, their past work history, education, personal cellphone number, e-mail address and often the very deskthey work on in the foreign exchange business, as well asa listing of their responsibilities. Id. at 39.Courtney further described how she would track downinformation at a capital markets business. Specifically,she would start with an Internet search and look for highturnover at banks. Having obtained that information, shewould then do a search on Bloomberg, LinkedIn orGoogle. Once she had gained as much knowledge aspossible regarding the bank or business, she would thencall the potential decision-maker, explain that she is arecruiter and has knowledge of that contacted person’sbusiness and the kinds of things that the business mightneed. Id. at 40-41. The goal would be to set up a meetingor phone call and try to gain the contact person’sconfidence. During the course of his examination ofCourtney, in an attempt to show that the foregoingscenario was not the actual manner in which Sasquadrilled down for information regarding specific decisionmakers,Plaintiffs’ counsel asked a series of questionsrelated specifically to the foreign exchange business atLehman Brothers. Prior to the economic downturn in theFall of 2008, Lehman Brothers accounted for two-thirdsof Sasqua’s business. Id. at 47. Plaintiffs’ counsel elicitedtestimony from Courtney establishing that Tors’ businesscard was originally passed down at least four levels froma high ranking senior executive at Lehman Brothers to thehead of foreign exchange who was the one responsible forutilizing recruiters for searches in that area. Courtneyacknowledged that Sasqua did not obtain foreignexchange searches by cold calling the high ranking seniorexecutive. Id. at 64-68. Her job was to get to know theappropriate decision-maker and cultivate a relationshipwith him or her. In addition to Lehman Brothers,Courtney worked with Barclay’s, Nomura and StandardChartered Bank. Id. at 72. When plaintiffs’ counsel asked“And whether or not you have access to Sasqua’sdatabase, you know how to be in touch with [the decisionmakers],”Courtney answered “yes, that’s true.” Tr. at 73.*10 With regard to the database used at Sasqua, Courtneytestified that it “served the purpose of a rolodex, keepingpeople’s names and phone numbers and then there wassome minimal qualification-type stuff, you know, verybasic.” Id. at 91. The software was very old according toCourtney, so the search capability was limited to onedescriptive item. Id. at 92. The database contained anindividual name with a code attached to the name. As an© 2011 Thomson Reuters. No claim to original U.S. Government Works. 6

145Sasqua Group, Inc. v. Courtney, Slip Copy (2010)example, Courtney testified that an individual’s namewould appear with a code such as “FX seniormanagement” (“FX” meaning foreign exchange) orsomething like that. Id. at 93. Sasqua recruiters could onlyattach one designation to a name. Id. These assertions aresupported by the Steinschneider Declaration in whichSasqua’s computer technician states that “the informationon the database was exceedingly old and stale, much of itwas never even accessed let alone used, and overall wasof little value.” Steinschneider Decl., 1(d).In applying the Ashland Management factors, the Courtneeds to consider “whether the effort invested indeveloping the customers simply involved widespreadcanvassing, as was the case in Leo Silfen, or whether theemployer actually worked to create a market for a newservice or good.” Webcraft Technologies, 674 F.Supp. at1045 (referencing Leo Silfen, Inc. v. Cream, 29 N.Y.2d387, 328 N.Y.S.2d 423, 427-29, 278 N.E.2d 636(N.Y.1972)). The service at issue here, executiverecruitment and placement, sometimes referred to as“headhunting,” is not one that is “so specialized that[Sasqua] actually created a new market; rather, the list ofpotential customers appears limitless.” Iron Mountain,458 F.Supp.2d 124, 140 (E.D.N.Y.2006). Put succinctly,the list of customer contact information was developedlargely through the efforts of Courtney both before andduring her employment with Sasqua, in a market that “isnot so highly specialized but has many, easily identifiable,potential customers.” Id.; see Reed Roberts Assocs., Inc.v. Strauman, 40 N.Y.2d 303, 308, 353 N.E.2d 590, 594,386 N.Y.S.2d 677, 680 (1976) (where former employee’spast or prospective customer names can be readilyascertained from sources outside its business, trade secretprotection will not attach).Courtney also admitted that since leaving Sasqua onJanuary 13, 2010, she has talked to many of the samebusiness contacts that she spoke with when she workedfor Sasqua and she did seek new search assignments. Tr.at 79. However, she testified that she never had aconversation prior to leaving Sasqua with any Sasquaclients about getting future work from them for her owncompany, Artemis. Tr. at 83. Courtney spoke withcontacts at Nomura after leaving Sasqua while she wascontinuing to conclude a search for them as part ofSasqua’s business. In those conversations, she advised theindividuals that she was on her own and that she hoped toget more business from them going forward. Id. at 88, 386N.Y.S.2d 677, 353 N.E.2d 590. According to Courtney,Tors told her at the January meeting that her relationshipswere hers to keep and that he did not expect her to refrainfrom contacting them because there was no non-competein place. Id. She has refrained from contacting any ofTors’ relationships, including Interactive Brokers, Hessand Sempra. Id . at 88-89, 386 N.Y.S.2d 677, 353 N.E.2d590. As to Nomura, Courtney has communicated with sixto eight contacts, including by e-mail. Those e-mailaddresses are in her personal Microsoft Outlook as well asin the Outlook folders for her new company. Id. at 89, 386N.Y.S.2d 677, 353 N.E.2d 590.*11 Defendants do not dispute the standard enunciated inNorth Atlantic Instruments for establishing a trade secretclaim or claim for misappropriation. See Defendants’Mem. at 12. Rather, drawing upon the argument thatwhether a customer list is a trade secret is generally aquestion of fact, defendants maintain that there are“readily apparent factual dissimilarities” between theinformation at issue in this case and customer lists that thecourts have found to be trade secrets. Id. at 13.Defendants rely on the Second Circuit’s recent decision inFaiveley v. Transport Malmo AB v. Wabtec Corp., 559F.3d 110 (2d Cir.2009), in which the court clarified itsprior holdings regarding misappropriation of trade secrets.In Faiveley, the trial court had granted a preliminaryinjunction to the plaintiff, finding that the defendant hadlikely misappropriated certain of plaintiff’s trade secretsinvolving the manufacture of an air brake system for theNew York City subway. The court enjoined the defendantfrom entering into contracts that would cause it to usethose trade secrets. Id. at 115. On appeal, the SecondCircuit addressed its prior holdings regarding themisappropriation of trade secrets and determined that theinjunction was not warranted. Specifically, the courtprovided the following guidance:we have previously observed that “the loss of tradesecrets cannot be measured in money damages” wherethat secret, once lost, is “lost forever.” FMC Corp. v.Taiwan Tainan Giant Indus. Co., 730 F.2d 61, 63 (2dCir.1984) (per curiam). Some courts in this Circuithave read this passing observation to mean that apresumption of irreparable harm automatically arisesupon the determination that a trade secret has beenmisappropriated. See, e.g., Ivy Mar Co. v. C.R. Seasons,Ltd., 907 F.Supp. 547, 567 (E.D.N.Y.1995)(“[I]rreparable harm is presumed where a trade secrethas been misappropriated.”). That reading is notcorrect. A rebuttable presumption of irreparable harmmight be warranted in cases where there is a dangerthat, unless enjoined, a misappropriator of trade secretswill disseminate those secrets to a wider audience orotherwise irreparably impair the value of those secrets.Where a misappropriator seeks only to use thosesecrets-without further dissemination or irreparableimpairment of value-in pursuit of profit, no suchpresumption is warranted because an award of damageswill often provide a complete remedy for such aninjury. Indeed, once a trade secret is misappropriated,the misappropriator will often have the same incentiveas the originator to maintain the confidentiality of thesecret in order to profit from the proprietaryknowledge. As Judge Conner has observed, where© 2011 Thomson Reuters. No claim to original U.S. Government Works. 7

146Sasqua Group, Inc. v. Courtney, Slip Copy (2010)there is no danger that a misappropriator willdisseminate proprietary information, “the only possibleinjury that [the] plaintiff may suffer is loss of sales to acompeting product ... [which] should be fullycompensable by money damages.” Geritrex Corp. v.Dermarite Indus., LLC, 910 F.Supp. 955, 966(S.D.N.Y.1996).*12 Id. at 118-119. The Second Circuit has thereforedrawn a distinction here-one that is important to theinstant case-between an individual who uses a trade secretand an individual who disseminates a trade secret. In thecurrent action, even crediting Sasqua’s claims to thefullest extent, the information presented shows that, atbest, defendant Courtney was a user of the informationand not someone who was disseminating the information.In fact, dissemination is not even alleged by the Plaintiffs.As the court in Faiveley noted, the defendant [Courtney]would have the same incentive as the plaintiff [Tors] tomaintain the confidentiality of the information in order toprofit from such knowledge. Id. at 119.During the hearing, to support Defendants’ contentionthat the information in Sasqua’s database is not a tradesecret and is readily ascertainable, Defendants’ counselhad Courtney walk through the manner in which shewould conduct a search “if she had amnesia tomorrow,lost her Blackberry” and “needed to identify ... thedecision-makers in the industry....” Tr. at 113. Courtneythen testified how she would go about finding thesepeople from publicly available information. Defendants’introduced Exhibit 1 (“DX 1”), a copy of which isattached to this Report and Recommendation. Id .Courtney testified that if she had only basic knowledge ofwhat a capital markets business is and was starting fromscratch to find information on key decision-makers, shewould start with an Internet search. With anunderstanding that many banks are hiring personnel inemerging markets, Courtney stated that she would beginby seeking an emerging markets salesperson or decisionmakerwhom she could contact at Standard CharteredBank. Tr. at 114. Courtney described a publication, FXWeek, which carries substantial information about foreignexchange businesses and also touches on emergingmarkets. FX Week has a searchable database, so shewould type into the search window the terms “emergingmarkets sales” and “Standard Chartered Bank”(www.fxweek.com/search?query=emerging+market+sales+StandardCharteredBank). The database brings up a list of topicsand articles which the searcher can click onto, as shownon DX 1 at 1. One of the articles listed is entitled“StanChart in U.S. build-up.” Id. By clicking on thatarticle, the computer displays the story on the monitor asreflected in DX 1 at 2. Courtney pointed out informationin the article which stated that Standard Chartered Bank(“SCB”) had made 17 new appointments and was lookingto become a core bank for US-based clients. Tr. at 115.The names of the 17 appointees are listed in the article,the first of whom is Harvey Black, who heads SCB’sinvestor sales business for the Americas. Black is clearlya decision-maker whom Courtney stated she would wantto contact. Id.; DX 1 at 2. Courtney testified that theprocess of obtaining Black’s name through this type ofsearch took approximately 5 minutes. Tr. at 115-116.*13 The next name appearing in the article is Hugo Faria,who recently left UBS to join SCB as the head of itsemerging markets structuring for the Americas. Tr. at116; DX 1 at 2. This is another decision-maker. Inaddition to contact information for Mr. Faria, this dataalso provides “another piece of intelligence,” according toCourtney, because it would enable her during a call toUBS to offer assistance in finding a replacement. Tr. at116. After getting these names, Courtney testified thatthere are several ways to obtain phone numbers. Here, shewent to Google and entered the name “Standard CharteredBank.” That search yielded the address of the bank, thephone number and a map showing how to get there. Tr. at117; DX 1 at 3. According to Courtney, her experience atSasqua did not play a role in her ability to find thisinformation on the Internet. Tr. at 17-118. What doesassist her in obtaining this kind of information andbuilding relationships with clients is her experience priorto joining Sasqua-prior jobs as an equity derivatives traderon the options floor of the New York Stock Exchange, acommodity derivatives trader on the COMEX, and amarketer of commodity derivatives for Paribas, theFrench investment bank. According to Courtney, withsuch background, clients “trust that you understand theirneeds” which strengthens your credibility. Tr. at 118-119.Courtney then described a similar process that she wouldutilize if she were approached by a foreign exchangetrader who was looking for a position at Nomura and ifshe were starting from scratch. Going to Google first thistime, Courtney typed in the phrase “global head of FX inNomura.” Tr. at 120. Approximately 72,400 hits came up,the first of which was entitled “Nomura Appoints Head ofFixed Income Research.” Clicking on that entry yieldedthe name of the appointee, the date, and the prior positionoccupied by the appointee at his previous bank. DX 1 at4. Further down the page was an entry entitled “NomuraBrings in Lehman FX Team.” Id. Clicking on that entrybrings the searcher to a website called “Profit &Loss.com” and a December 2009 article entitled“Nomura’s Richard Gladwin: Global Ambition.” DX 1 at5. Richard Gladwin is listed as the global co-head offoreign exchange at Nomura and the article is a six-pageinterview with him. The interview provides significantdetail concerning Nomura’s new technology andinitiatives. Gladwin discusses Nomura’s acquisition ofparts of Lehman Brothers as an element of its strategy to© 2011 Thomson Reuters. No claim to original U.S. Government Works. 8

147Sasqua Group, Inc. v. Courtney, Slip Copy (2010)“become a global wholesaler of foreign exchange.” Id.Since Gladwin’s phone number and contact informationwere not contained in the article, Courtney next went toBloomberg.com “because that is the database for financialprofessionals.” Tr. at 122. Doing a search on Bloomberg,Courtney was able to find the direct phone number forGladwin at Nomura’s offices in London, the Londonaddress itself and Gladwin’s direct email address. TheBloomberg site also allows the user to send an instantmessage to Gladwin. Tr. at 122.*14 Courtney also explained how such a search could beconducted on LinkedIn, which she described as being“like Facebook but for business” and as being moresearchable than Bloomberg “because people put theirwhole profile on LinkedIn.” Tr. at 123-124. UsingLinkedIn, Courtney demonstrated the results of puttingthe term “FX Nomura” into the search box. The first entrylisted the name “Michael Wilson,” Executive Director atNomura; the second entry listed the name “David Steck,FX at Nomura Securities.” DX 1 at 12. After looking atboth profiles, Courtney determined that David Steck’slisting yielded the information she was seeking. Clickingon the “David Steck” entry brought up a screen whichlisted Steck’s prior employers and positions, current title,undergraduate school and dates of attendance, e-mailaddress and Steck’s interests. DX 1 at 13; Tr. at 125-126.Further researching Steck, Courtney entered his name onBloomberg.com and found a news story regarding Steck’shiring by Nomura as well as “competitive intelligence”about Nomura’s plans and other new hires. DX 1 at 14.With regard to the level of information, Courtney testifiedthat[i]t used to be years ago, that people were veryprotective about their resumes and personal informationbecause no one ever wanted their employer to get windthat they were looking for another job. But in a post-Lehman bankruptcy world when everyone thought thatthe whole financial markets were going to the birds,and everyone was panicked about their jobs, the culturechanged absolutely overnight to one where people wereprotective of their information to one where almosteveryone ... puts it out there for the world to seebecause people want to be connected now. People wantto know-people want the recruiters knowing who theyare and how to find your information and how to findthem if they have a good opportunity. It has completelyshifted.Tr. at 127.Since the Bloomberg article did not provide contactinformation for David Steck, Courtney did a search onGoogle for Nomura New York, and came up with Steck’sNew York address, the office location in the WorldFinancial Center, and the office phone number. Tr. at 128;DX 1 at 15. Using Bloomberg.com, Courtney was thenable to obtain Steck’s direct phone line and personal e-mail address. DX 1 at 16. Courtney demonstrated similarsearches for information regarding decision-makers at theRoyal Bank of Scotland (“RBS”) and new senior-levelhires at RBS. DX 1 at 17; Tr. at 129-131. Significantly,when Courtney came upon the name of Craig Donaldson,head of RBS’ Financial Institutions Foreign Exchangeand Prime Brokerage Sales for North America, she notedthat Donaldson was responsible for expanding RBS’foreign exchange platform. Tr. at 130. She then went toLinkedIn and posted Donaldson’s name in the search box.Donaldson’s profile listed all of his prior employment andpositions, his current position, education and dates,licenses held, and interests. DX 1 at 20-21. In addition,the profile listed his wife’s name, his children’s namesand ages, the outdoor sports he enjoys, and his birthday.Within the time span of Courtney’s testimony, thedefendants produced evidence of the publicly availableinformation regarding decision-makers in foreignexchange firms and businesses that in most cases,according to Courtney, exceeded the amount and level ofdetail contained in the Sasqua database. Tr. at 132.Plaintiffs did not refute this testimony. Courtney alsonoted that much of the information in the Sasqua databasewas outdated and did not have any value to her. Tr. at136.*15 On further questioning by plaintiffs’ counsel,Courtney acknowledged that she did not utilize themethodology she had outlined in discussing DX 1 whencontacting Sasqua clients after January 13, 2010. Tr. at139-140. Plaintiffs’ counsel argued that what the clients’preferences are and “finding the right decision maker andgetting that right decision maker to act is not nearly aseasy as [Defendant Courtney] is articulating when shewalks through Exhibit 1.” Tr. at 143. However, there wasno contraverting testimony proffered to support Plaintiffs’contention in this regard.At the very least, Plaintiffs have failed to prove that thegeneral contact information for Sasqua clients is notreadily ascertainable through outside sources, such as theInternet or telephone books, or directories of firms in thefinancial services industry, like the ones demonstrated bythe Defendants at the hearing. Kadant, Inc., 244F.Supp.2d at 36. Plaintiffs go on to argue, however, thatwith respect to specific names of individuals who are keypersons in the chain of command for authorizingplacements and obtaining business at these firms, suchinformation cannot be so readily ascertained. Tr. at 147,149-150. Although Plaintiffs’ counsel argued this pointforcefully several times during the hearing, Plaintiffsnevertheless did not produce a single witness to providesworn testimony supporting this contention orcontradicting Courtney’s testimony in this regard, otherthan by generalized statements in Tors’ Declaration.© 2011 Thomson Reuters. No claim to original U.S. Government Works. 9

148Sasqua Group, Inc. v. Courtney, Slip Copy (2010)Moreover, since the general contact information is readilyascertainable through other sources, and may thereforereadily be used, “follow-up questions to the company ingeneral would reveal the specific names, e-mailaddresses, or phone numbers of individuals involved inthe [hiring/placement] process for those companies.”Kadant, Inc., 244 F.Supp.2d at 36 (citing InFlightNewspapers, Inc. v. Magazines In-Flight, LLC, 990F.Supp. 119, 129 (E.D.N.Y.1997)); Ability Search, Inc. v.Lawson, 556 F.Supp. 9, 16 (S.D.N.Y.1981) (executiveplacement firm not entitled to injunction with respect toinformation about corporate clients “since it failed toprove that defendants utilize any information about suchclients which was not available from public sources orreadily ascertainable by defendants in conducting theirown business”). If these referenced sources did notdirectly disclose the appropriate contacts, further inquirywith those firms and further research on the Internetcertainly would. InFlight Newspapers, 990 F.Supp. at129.Plaintiffs also allege that the Sasqua database containsinformation on certain firms’ placement preferences andhistories. It is true that while contact information may bereadily ascertainable through other sources, things such asclient preferences or placement histories may not. SeeNorth Atlantic Instruments, 188 F.3d at 46; InflightNewspapers, 990 F.Supp. at 127. This assertion isnonetheless subject to the same logic presented above.The general contact information is readily availablethrough other sources. Utilizing those sources to obtaingeneral contact information, Courtney or others maysimply have asked the clients about their preferences. SeeKadant, Inc., 244 F.Supp.2d at 37 (citing Tactica Int’l.,Inc. v. Atlantic Horizon Int’l, Inc., 154 F.Supp.2d 586,607 (S.D.N.Y.2001)) (“Information concerning thepreferences of [plaintiff’s] customers could easily berecalled by [defendants], or obtained by contacting thecustomers directly”); Innoviant Pharmacy, Inc. v.Morganstern, 390 F.Supp.2d 179, 195 (N.D.N.Y.2005)(where referral sources are readily ascertainable frompublicly available sources including the Internet, YellowPages, and the membership lists of various professionalorganizations providing services in those areas, thecustomer information does not possess the attributes of atrade secret); Walter Karl, Inc. v. Wood, 137 A.D.2d 22,27, 528 N.Y.S.2d 94, 98 (2d Dep’t 1988) (“Anemployee’s recollection of information pertaining tospecific needs and business habits of particular customersis not confidential.”). Defendant Courtney has certainlyalleged that this is how the process works. “Mere‘knowledge of the intricacies of a [former employer’s]business operation’ does not constitute a protectable tradesecret that would justify prohibiting the employee ‘fromutilizing his knowledge and talents in this area.’ “ Int’lPaper Co. v. Suwyn, 966 F.Supp. 246, 256(S.D.N.Y.1997) (quoting Reed Roberts, 386 N.Y.S.2d at680, 353 N.E.2d 590). The burden is on the plaintiffs toprovide sufficient proof that this is not what occurred. Id.They have not done so. As to this first AshlandManagement factor, Defendants have adequatelyestablished that the information Plaintiffs contend is atrade secret was/is known outside Sasqua.2. Extent ofEmployees’ Knowledge*16 There is no real dispute that the information in theSasqua database was readily available to those workingfor Sasqua. The company had purchased computers forCourtney and the three recruiters/consultants. Tors Decl., 32. Tors states that Sasqua’s entire personnel, includingthe recruiters, Courtney, Steinschneider and Tors himself,had access to the database because they required theinformation “in order to conduct their day-to-daybusiness.” Id., 31, 604 N.Y.S.2d 912, 624 N.E.2d 1007.According to Tors, Steinschneider downloaded a copy ofthe database to each of the computers and through a“secure connection,” the consultants were able to“manually upload and download any new information thateither they had entered into their respective copies of thedatabase or that others had updated the central databasewith.” Id., 33-34, 604 N.Y.S.2d 912, 624 N.E.2d 1007.Tors further notes that he instructed each consultant thatshe was the only one who was authorized to access thecomputer and that the computer was to be used for workpurposes only. Id., 35, 604 N.Y.S.2d 912, 624 N.E.2d1007. However, Tors did not require “that employees signconfidentiality agreements, which cuts against a tradesecret finding.” Freedom Calls Foundation v. Bukstel,No. 05CV5460, 2006 WL 845509, at *16 (E.D.N.Y.Mar.3, 2006). Nor did Sasqua limit the number of itsemployees who could access the information. Compare B.U.S.A. Corp. v. Ecogloves, Inc., No. 05-CIV. 9988, 2006WL 3302841, at *3 (S.D.N.Y. Jan. 31, 2006) (“plaintiffssufficiently protected their cost structures and biddinginformation as they limit the number of employees thathave access to such information”). All of Sasqua’spersonnel, therefore, knew or had access to theinformation for which Plaintiffs seek to assign trade secretprotection because they utilized this information to dotheir daily work. These facts militate against a finding oftrade secret protection as to this second factor.3. Measures to Protect Secrecy of the InformationAs noted above, Plaintiffs assert that in order to protectthe confidentiality of the database, Sasqua purchasedcomputers for Courtney and the three recruiters. TorsDecl., 32. The company’s computer techniciandownloaded a copy of the database to each of the© 2011 Thomson Reuters. No claim to original U.S. Government Works. 10

149Sasqua Group, Inc. v. Courtney, Slip Copy (2010)computers. Tors states that Sasqua purchased individuallicenses to permit the consultants to use certain softwareallowing access to the database. Id., 33. There was norestriction on the consultants manually uploading anddownloading new information to and from the centraldatabase. Id., 34.Of all the Ashland Management factors, the mostimportant consideration is whether the information waskept secret. See Earthweb, Inc. v. Schlack, 71 F.Supp.2dat 314 (citing Lehman v. Dow Jones & Co., 783 F.2d 285,298 (2d Cir.1986)); Greenblatt v. Prescription PlanServices Corp., 783 F.Supp. 814, 826 (S.D.N.Y.1992) (ifowner of a trade secret fails to take reasonableprecautions to protect the information, the informationloses the protection of trade secret law). WhetherSasqua’s information was kept secret is critical to theCourt’s determination of the trade secret issue.*17 The owner of a trade secret must take reasonablemeasures to protect its secrecy. Defiance Button MachineCo. v. C & C Metal Products, 759 F.2d 1053, 1063 (2dCir.1985); Earth Web, Inc., 71 F.Supp.2d at 314. Some ofthe measures courts have looked to in this regard are theuse of passwords, alarm systems, and installation offirewalls and security software. See, e.g., Paz Systems,Inc. v. The Dakota Group Corp., 514 F.Supp.2d 402, 406(E.D.N.Y.2007) (employer’s computer network wasstored in a building protected by both commercial locks,passwords and an alarm system, including motiondetectors); Wrap-N-Pack, Inc. v. Eisenberg, No. 04-cv-4887, 2007 WL 952069, at *9 (E.D.N.Y. Mar.29, 2007)(company implemented significant safeguards to protectinformation by requiring user identification and password;installing firewalls and security software that preventedsalesmen from accessing any information regarding othersalesmen’s customers; installing passwords andrestrictions of all laptop computers; circulating policy andprocedure manual containing a code of conduct definingdisclosure of confidential information as unacceptablebehavior; pursuing litigation to prevent the threateneddisclosure of confidential information); B.U.S.A. Corp. v.Ecogloves, Inc., No. 05 CIV. 9988, 2006 WL 3302841, at*4 (S.D.N.Y. Jan. 31, 2006) (“plaintiffs took appropriatemeasures, such as locking files and using computerpasswords, to protect the contact information”).In support of their argument that plaintiffs did notimplement reasonable measures to protect the secrecy ofSasqua’s information, Defendants have provided theDeclaration of Douglas Steinschneider, Sasqua’scomputer technician, who has worked for the companysince its inception in 2000. See Declaration of DouglasSteinschneider In Opposition to Plaintiffs’ Motion for aTRO and Preliminary Injunction (“Steinschneider Decl”), 1. Steinschneider tells a very different story fromPlaintiff Tors regarding measures taken to protect thesecrecy of Sasqua’s database. According toSteinschneider, the Sasqua database was not initiallyconstructed by Plaintiff Tors-rather, Tors purportedlymisappropriated the database from his prior employer,Futures International. Id.; Courtney Decl., 2. This is asignificant point in the Court’s consideration of whethertrade secret protection should be afforded. Courts havelooked to the method by which the data is acquired. Asthe court observed in Ecolab Inc. v. Paolo, 753 F.Supp.1100 (E.D.N.Y.1991),In determining whether matter is protectable as a tradesecret, courts frequently examine the method by whichdefendant acquired it, e.g., such as by stealing orcopying ....Id. at 1111. That same principle is applicable to Plaintiffs’acquisition of the database here. In light of the unrefutedallegation3 that Tors took the database from his prioremployer at the time of his departure, the issue ariseswhether Tors comes to this Court seeking equitable reliefwith unclean hands.*18 Further, Steinschneider goes on to note that• Tors directed him to leave the database on Courtney’scomputer so Courtney could use it for searches she hadagreed to complete after she left Sasqua.Steinschneider Decl., 1.• Sasqua was “extremely lax in their efforts tosafeguard the data.” Id., 3.• the Sasqua database was not password protected. Id., 4• the database was “freely distributed to many peopleover the years, including temporary workers who hadlittle longevity with the company.” Id., 5.• The database was not removed from an employee’scomputer after the employee left Sasqua and theindividuals who left still have the database. Id., 6.• the Sasqua database did not contain legendsdesignating confidential and proprietary informationembedded in its pages to remind employees of theconfidential nature of the information or their duty tosafeguard it. Id., 7.According to Steinschneider, he removed the databasefrom Courtney’s computer as instructed initially by Tors.Subsequently, Tors changed his mind, but Steinschneidertold Tors that he had already removed the database andCourtney said she did not want it, so Steinschneider didnot reinstall it. Id., 8. With regard to the usefulness ofthe database, Steinschneider states that it was“exceedingly old and stale.” Id., 9. In fact, because he© 2011 Thomson Reuters. No claim to original U.S. Government Works. 11

150Sasqua Group, Inc. v. Courtney, Slip Copy (2010)was able to see whether data had been accessed and, if so,when that access had occurred, Steinschneider states thathe was able to see that “a large part of the data was souseless that no Sasqua employee ever even accessed it, letalone used it.” Id. Moreover, Steinschneider claims that“much of plaintiffs’ database was more than 10 years old,because it was taken from Futures International andtherefore was 10 years old before Sasqua ever got it in2000.” Id. Plaintiffs did not introduce any evidence at thehearing to contradict Steinschneider’s sworn assertions. Infact, Tors has made no statement denying the claim byCourtney and Steinschneider that he took the databaseutilized at Sasqua from Futures International.Likewise, Courtney testified that there were people whonever worked for Sasqua who were in possession of thedatabase. Specifically, Courtney noted that a group inLondon called Edge Search with whom Sasqua wasattempting to establish a joint venture possessed thedatabase. Tr. at 94. In addition, a similar group, BakiaiInternational, partnered with Sasqua on a specific LehmanCanada search and Courtney testified that they had thedatabase and may still have it because it was never takenback to the best of her knowledge. Moreover, Torshimself confirmed that from the time the New York officeclosed in 2008, the consultants have been working out oftheir own homes. Tors Decl., 8. Courtney notes thatfamily members had access to the database by virtue ofthe fact that it was contained on the computers utilized byall of the consultants at home. Tr. at 94. It is also worthnoting that when I asked Plaintiffs’ counsel at the hearingwhether the Sasqua computers were password protected,counsel’s response was that she did not believe so. Id. at16.*19 The evidence here shows that Sasqua failed to takeeven basic steps to protect the secrecy of the informationcontained in its database-the very same information Torsrefers to as “the lifeblood of Sasqua’s business.” TorsDecl., 28. Consequently, even if the databaseinformation may once have had protection, the customerinformation lost its character as a trade secret becauseSasqua failed to take reasonable steps to protect theinformation from coming into other hands. DefianceButton Machine Co., 759 F.2d at 1063 (even thoughcompetitor may have obtained customer lists by impropermeans, any such impropriety does not create liability foruse of the trade secret since the failure to protect the listfrom ready access resulted in plaintiff forfeiting theprotections of trade secret law). This most critical of theAshland Management factors, therefore, favorsDefendants.4. Value of the Information to the Business and ItsCompetitorsAs to the value of the information contained in the Sasquadatabase, there is little doubt that the information as it wasdeveloped in the early years of Sasqua’s history wasessential to the business. However, Tors implies thatbecause of his prior career at Goldman Sachs, AIG andUBS, his “very good industry connections” in thefinancial industry were responsible for Sasqua’s success.Tors Decl., 5. According to Tors, Sasqua went fromgrossing several hundred thousand dollars of revenueannually to a multi-million dollar enterprise by 2010. Id.At the same time, however, Tors states that the only officewhich Sasqua maintained in New York closed as a costsavingmeasure during the economic downturn in 2008.Id., 8, 604 N.Y.S.2d 912, 624 N.E.2d 1007. See Doraziov. Capitol Specialty Plastics, Inc., No. CIV.A.01-6548,2002 WL 31750215, at *4 (E.D.Pa. Dec.9, 2002)(plaintiff failed to show that his contact with a substantialclient was the but-for cause of the company’s successes).Significantly, Courtney’s compensation was based oncommissions and an agreed-upon revenue share. CourtneyDecl., 18. Courtney asserts, and Plaintiffs have notrefuted, that she was responsible for 65% of thecompany’s income in 2007. That number grew to 75% in2008 and the remaining 25% was attributable to oneplacement that Tors initiated and Courtney executed. Id., 26. On the other hand, Tors did not make anyplacements that generated revenue for Sasqua in 2009. Id.Rather, Courtney’s efforts and those of another consultantgenerated 87% and 13% respectively of the company’stotal revenue for 2009. Id.In addition, both Steinschneider and Courtney haveprovided sworn statements that Tors took the informationwhich became the Sasqua database from his prioremployer, Futures International. Steinschneider Decl., 2;Courtney Decl., 2. Plaintiffs have not produced contrarytestimony showing that the contacts were exclusivelyTors in the first instance. Tors’ Declaration leads to theconclusion that at least some of his client contacts weredeveloped through his employment prior to establishingSasqua. Tors Decl., 4. Based on this information, it ismore difficult to view these client contacts as trade secretsbelonging to Tors when he developed them while workingfor other employers. See Ecolab, 753 F.Supp. at 1111.*20 Further, Tors’ assertion that the database is the“lifeblood of Sasqua’s business” is belied bySteinschneider’s sworn statement that the information onthe database was “exceedingly old and stale, much of itwas never even accessed let alone used, and overall wasof little value.” Steinschneider Decl., 1. According toSteinschneider, in the information technology field, datais generally considered stale if it is more than a year old.Similarly, Courtney maintains that10. Because the people who make up the financialindustry workforce, including the Decision-Makers and© 2011 Thomson Reuters. No claim to original U.S. Government Works. 12

151Sasqua Group, Inc. v. Courtney, Slip Copy (2010)other high level executives, typically change employersfrequently, the contact information that a search firmmay assemble in a database is almost immediatelyobsolete. Keeping tabs on Decision-Makers of potentialjob candidates is an ongoing part of a recruiter’s job.11.... Even if the recruiter makes a record of theinformation collected for one assignment, thatinformation generally is not that relevant to the nextassignment. For example, one month a firm may belooking for a junior salesperson to cover hedge fundaccounts, six months later the firm may need a directorlevelperson to trade currency derivatives.Courtney Decl., 10, 11. The database software used bySasqua, in addition to being out of date, according toCourtney, is also not geared to the industry. Id., 65. Shehas purchased new software designed for recruiters and isbuilding her own database from scratch, both in terms ofthe methodology and data. Id. Courtney states that prior to2008, only about 30% of Sasqua’s information wascurrent and that after the upheaval of 2008, only about10% of the information was current. Id., 66. She notedthat as soon as a candidate is placed, the candidate’sresume, salary history and contact information areoutdated. Id., 10. The Court finds there is some sense tothis latter assertion and Plaintiffs have not presented anyevidence refuting such contention. As a result, whatevervalue to Sasqua the database information once possessedclearly diminished over time as its utility to Sasqua’sconsultants declined, and, as a logical consequence, toany would-be competitor of Sasqua.5. Time and Effort Expended in Developing theInformationAlthough Sasqua has been in existence for ten years, thepassage of time alone does not equate to “time and effort”in assessing this particular factor. This is not an instancewhere the client lists were gained through extraordinaryeffort or expensive research, although no one woulddispute that Sasqua’s personnel worked long and hard tomake the company the success that it was. Yet, one doesnot have to look far and wide to determine the identity offirms operating in the financial services industry. Thesebusinesses regularly hire and terminate personnel andinteract with headhunters while their employees oftentransition to new positions and new firms. See In-FlightNewspapers, Inc., 990 F.Supp. at 129. The identity of thefirms and such individuals are not hidden.*21 As to Sasqua’s existing accounts, Courtneyacknowledged that for a long period of time, LehmanBrothers was a key client of Sasqua and that Torsoriginated that account. Both Tors and Courtneydeveloped contacts at Lehman Brothers after Torsoriginated the account. Tr. at 47, 49. Lehman Brothersaccounted for twothirds of Sasqua’s business up until2008. The financial market downturn in 2008 left Sasquawithout its two biggest clients, Lehman Brothers andBarclays. Courtney Decl., 31. Courtney testified that shemade an effort to keep tabs on the movements of peopleleaving Lehman Brothers and going other places in theFall of 2008 and thereafter. She stated that many of theseindividuals readily sent her their new contact information,and she placed that information into Sasqua’s database.Tr. at 54.The instant circumstances are different from those setforth in Freedom Calls Foundation, 2006 WL 845509 at *16, where the court found that the plaintiff organizationhad expended a great deal of resources in developing itsnetwork of supporters and clients, as evidenced by theresults. There, the organization had to develop areputation with both military officials and families inorder to acquire the video and tele-conferencingequipment, locations, and participants needed for itsactivities. Id. Sasqua did not need such equipment andapparently did not even need office space. According toCourtney, each of the Sasqua consultants/recruiters, likeher, worked from home throughout their relationship withSasqua. Courtney Decl., 22. The New York “office”was essentially what was known in the industry as a“headquarters,” where numerous companies “rent‘offices’ on the same floor ...” Id. Sasqua rented its“office” jointly with another search firm forapproximately a year or so and the office “was visited bySasqua’s consultants only about a dozen times during thatperiod, and primarily for the purpose of interviewing jobcandidates.” Id.Although Sasqua had periods of major success, the effortand research expended by Sasqua personnel were part oftheir daily routine. There was no elaborate computersystem compiling and analyzing data, there was nodeveloped infrastructure, and for most of the time, therewas not even an office. As Courtney noted, “recruiting ismatchmaking.” Courtney Decl., 6. The recruiter’s goalis to find and match an employer “needing an employeewho has particular expertise with the candidate who canfulfill that need.” Id. The successful way to acquire clientsin such a business is by “establishing a personalreputation for diligent work through personalrelationships with hiring personnel.” Id., 7. Repeatbusiness is based upon satisfied clients. Tors himself hasstated that “relationship-building is how Sasqua generatesbusiness.” Tors Decl., 28. Although the information inthe database may assist the process, the nature of thebusiness focuses on the relationship built by the recruiterwith the client and not what elemental information isstored in a computer. For the foregoing reasons, I find thatthis factor is, at best, neutral in these circumstances.© 2011 Thomson Reuters. No claim to original U.S. Government Works. 13

152Sasqua Group, Inc. v. Courtney, Slip Copy (2010)6. Ease With Which the Information Could Be ProperlyAcquired or Duplicated*22 The demonstration conducted by defendant Courtneyat the hearing established that the allegedly secretinformation from the Sasqua database could be properlyacquired or duplicated through a straightforward series ofInternet searches in a drilling down exercise that likelycould be duplicated by a recruiter in the executive searchbusiness for the financial services/foreign exchangeindustry. See Exhibit 1. Although plaintiffs rely onFreedom Calls Foundation, 2006 WL 845509, that case isdistinguishable. There, the court found that it would bevery difficult to acquire or duplicate plaintiff’ efforts incompiling its list of non-profit donors and clientsprecisely because the personal contact information wasnot publicly available. Id. at *53. As to Sasqua, it wouldnot be too difficult for someone to duplicate the names ofthe clients in the financial services industry with whomSasqua did business by canvassing the market throughgeneral research, Internet exploration and phone calls andthen obtaining more detailed information regarding theclient’s interests and preferences by subsequent researchand further calls. See Iron Mountain, 455 F.Supp.2d at140. This factor clearly favors the Defendants’s position..In sum, Plaintiffs have failed to prove a physicalappropriation or copying of confidential information orwrongful disclosure or use of a trade secret. See LeoSilfen, 29 N.Y.2d at 389, 328 N.Y.S.2d at 424, 278N.E.2d 636. The information in Sasqua’s databaseconcerning the needs of its clients, their preferences,hiring practices, and business strategies, as well asSasqua’s acquaintance with key decision-makers at thosefirms may well have been a protectable trade secret in theearly years of Sasqua’s existence when greater time,energy and resources may have been necessary to acquirethe level of detailed information to build and retain thebusiness relationships at issue here. However, for good orbad, the exponential proliferation of information madeavailable through full-blown use of the Internet and thepowerful tools it provides to access such information in2010 is a very different story.Having evaluated the information contained in Sasqua’sdatabase in the context of the Ashland Managementfactors as well as other applicable case law, I find thatsuch information does not constitute a trade secret and Irespectfully make that recommendation to Judge Spatt.B. Propriety of a Temporary Restraining OrderBecause Plaintiffs have not demonstrated a likelihood ofsuccess on the merits with respect to the misappropriationof trade secrets claim, the Court need not address theissue of irreparable harm as to that claim. See IronMountain, 455 F.Supp.2d at 141. Notwithstanding the factthat Courtney did not take Sasqua’s database with herwhen she left Sasqua-a fact supported by Sasqua’scomputer technician Steinschneider-much of the hearingtestimony established that the purportedly confidentialand proprietary information was available through othersources in the industry. See Int’l Paper Co., 966 F.Supp.at 258. Moreover, based upon Courtney’s testimony andSteinschneider’s Declaration, the Court concludes thatmuch of the information that was available to Courtney atthe time of her departure from Sasqua was stale andremains so. Here, the executive search/recruitmentbusiness, unlike some other highly technical industries, isa comparatively low-technology business and Courtney’swork at Sasqua “was driven by general managerialexpertise as opposed to the application of highlytechnical, proprietary, or secret information.” Int’l Paper,966 F.Supp. at 259. Even assuming that proprietaryinformation existed at one time, I find no evidencesupporting a conclusion that Courtney misappropriatedsuch information. Accordingly, the level of risk thatwould justify the grant of injunctive relief with regard toSasqua’s database is simply not present at this time, and Irespectfully recommend to Judge Spatt that no injunctionbe imposed.*23 The foregoing findings involve solely the claimasserted by Plaintiffs for misappropriation of tradesecrets. This Court makes no findings as to the claims forunfair competition, breach of fiduciary duty or claimsbrought under the common law duty of loyalty to theemployer. Likewise, although counsel for both sides spenttime at the hearing going over issues related to thedeparture and alleged solicitation of the Sasqua recruitersas well as Tors’ alleged alcoholism and its impact on thebusiness, these issues are not germane to thedetermination of whether the Sasqua database constitutesa protectable trade secret and therefore such issues are notaddressed here.V. CONCLUSIONFor the reasons set forth in this Report andRecommendation, I respectfully recommend to JudgeSpatt that (1) the information contained in Sasqua’sdatabase not be afforded trade secret protection and (2) noinjunction issue here.Pursuant to 28 U.S.C. § 636(b)(1)(c) and Rule 72 of theFederal Rules of Civil Procedure, the parties shall havefourteen (14) days from service of this Report andRecommendation to file written objections. See also© 2011 Thomson Reuters. No claim to original U.S. Government Works. 14

153Sasqua Group, Inc. v. Courtney, Slip Copy (2010)Fed.R.Civ.P. 6(a) and (e). Such objections shall be filedwith the Clerk of the Court via ECF. A courtesy copy ofany objections filed is to be sent to the chambers of theHonorable Arthur D. Spatt, and to the chambers of theundersigned. Any requests for an extension of time forfiling objections must be directed to Judge Spatt prior tothe expiration of the fourteen (14) day period for filingobjections. Failure to file objections will result in a waiverof those objections for purposes of appeal. Thomas v. Arn,474 U.S. 140, 155, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985);Beverly v. Walker, 118 F.3d 900, 901 (2d Cir.), cert.denied, 522 U.S. 883, 118 S.Ct. 211, 139 L.Ed.2d 147(1997); Savoie v. Merchants Bank, 84 F.3d 52, 60 (2dCir.1996).SO ORDERED.Footnotes1 Defendant Courtney’s 2008 contract with Sasqua did contain certain restrictive covenants. However, when Courtney and Torsentered into an agreement for 2009, they mutually agreed that neither of them would be held to any non-compete or otherrestriction, and, thus, the 2009 agreement contained no restrictive covenants. Courtney Decl. 38; Defendants’ Mem. at 7.Plaintiffs have not refuted this assertion. In fact, as part of the 2009 agreement, Courtney put up $40,000 to help pay theconsultants and other expenses. Courtney stated, and Tors has not refuted, that the outlook for Sasqua was so bleak that Tors didnot offer contracts for 2009 to the consultants at Sasqua. Courtney Decl. 39-40; Defendants’ Mem. at 7.2 All subsequent references to the record of the February 11, 2010 hearing are designated “Tr. at ____.”3 Plaintiff Tors did not appear at the hearing. According to Plaintiffs’ counsel, Tors was incapacitated based upon a fall the priorevening during which he broke his rib and spent the night in the hospital. Counsel noted that Tors had broken his ankle just twoweeks earlier and required surgery which counsel believes may have led to the fall. Tr. at 5. However, no request for anadjournment of the hearing was made.End of Document© 2011 Thomson Reuters. No claim to original U.S. Government Works.© 2011 Thomson Reuters. No claim to original U.S. Government Works. 15

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