Competition Litigation in Georgia: Did Waste Connections just turn a confidentiality agreement into a non-compete?

Competition Litigation in Georgia: Did Waste Connections just turn a confidentiality agreement into a non-compete?

Client Resources | August 1, 2017

A new suit in Fulton County offers reminders to anyone that may be involved in restrictive covenant or trade secret litigation—that is anyone who has signed a non-compete, anyone that has signed a non-disclosure or confidentiality agreement, any company that uses a non-compete, any company that has confidential information, or anyone that has business competitors.  Or, simply, just about everyone.

A few weeks ago, Waste Connections and an affiliate sued their former Louisiana-based district sales manager, Jonathan Dewitt, and his new employer, Atlanta-based Rubicon Global.  Rubicon Global is a relatively new waste management and recycling company that markets itself as a disrupter of the waste management industry using technology and sustainability.  Waste Connections is an older, publicly traded waste management and recycling company.

The complaint alleges that the hiring of Mr. Dewitt “is the latest chapter in Rubicon’s unlawful competition.”  The complaint contains many details unearthed through forensic investigation about what Mr. Dewitt allegedly took: “Rubicon [is] now armed with Plaintiffs’ confidential pricing information, bid proformas, and key financial information [and] with approximately 4,800 pages of confidential cultural, training and development program materials.”  The complaint also refers to the employment agreement Mr. Dewitt executed. Finally, besides asking for return of its information and for the court to bar all future use of its information, Waste Connections asks that Mr. Dewitt “is restrained and enjoined, directly or indirectly, from continuing his employment with Rubicon.”

Though only a few weeks old, the case offers several reminders.

No Noncompete May Still Mean No Competition

Nowhere does the complaint mention that Mr. Dewitt had a non-compete.  Instead, Waste Connections only refers to a confidentiality provision in an employment agreement.  Yet Waste Connections has tried to prevent Mr. Dewitt from working at Rubicon.

How?

Waste Connections has likely planned to rely on the so-called inevitable disclosure doctrine.  Applied by courts in varied ways, the inevitable disclosure doctrine generally permits a court-ordered injunction through evidence that an employee’s new employment will inevitably lead to relying on a previous employer’s trade secrets.  What information the employee has and what the employee’s new job duties are tend to be the most important issues in deploying the doctrine.

Yet the inevitable disclosure doctrine varies from state to state.  And, while Georgia law will be part of this Georgia case, the employment agreement may have a choice of law provision requiring Louisiana law.

Both Georgia and Louisiana courts have emphasized that a plaintiff cannot avoid proving actual or threatened misappropriation of trade secrets just by involving the inevitable disclosure doctrine.[1]  Making Waste Connections’ job somewhat more difficult, the Supreme Court of Georgia has refused to enforce injunctions based solely on non-disclosure covenants.[2]

Whichever state’s law applies, to bar Mr. Dewitt from competing, Waste Connections would probably have to make a stronger showing of actual or threatened misappropriation.  The complaint contains—unsurprisingly given that Rubicon and Mr. Dewitt would have any information—has few allegations about what, if anything, Mr. Dewitt and Rubicon have done with Waste Connections’ information.

But Waste Connections has not had to make a stronger showing because Rubicon fired Mr. Dewitt.

Proving Confidentiality Is Hard

Claiming something is confidential is easy; proof is difficult. And proving something is a trade secret requires going beyond proving confidentiality.

In its complaint, Waste Connections alleges the following examples of its trade secrets: pricing information (a pricing sheet, confidential compactor and bid proformas, and a 10-85 calculator), customer data (including customer identification data and contract expiration dates), and specialized training materials.  The complaint does a good job of giving specific examples and of explaining the value of the examples to Waste Connections’ business.

Still, Rubicon will have at least several ways to attack confidentiality.    First, at least some of Waste Connections’ customers are municipal.  Information about municipal contracts, including service provider, pricing, and contract length may be publicly available.

Second, Waste Connections is a publicly traded company, meaning that some of the information in the proformas (cost of operations, expenditures, etc.) is likely available in public reports.

Third, Waste Connections must prove that it made reasonable efforts to keep its trade secrets confidential.  The complaint has few details about how Waste Connections protected these materials.  For example, Mr. Dewitt’s access to information outside his area suggests that many Waste Connections employees might have had access to a broad range of information, which will hurt attempts to prove reasonable efforts to protect.  As for the specialized training, the complaint concedes that some of the materials were developed by consultants or otherwise outside of Waste Connections.  Showing how these materials are different from other available training materials in the industry will be hard.

What’s Good for a New Employer May Be Bad for the Employee

In July 2017, Rubicon fired Mr. Dewitt.  What could this mean for the case?

First, Waste Connections will have a more difficult time proving damages.  It now must basically show that whatever Rubicon learned from Mr. Dewitt, in the brief period it employed him, either lost Waste Connections some business or generated business for Rubicon.

Second, Waste Connections will have a tough time relying on any concept of the inevitable disclosure doctrine and securing an injunction because Rubicon seems to have cut off its access to the information alleged to be trade secret or confidential.

Third, Mr. Dewitt no longer has the apparent backing of Rubicon and will likely have to pay his own attorney fees and look for other employment. Plus, he is likely to lose the breach of contract claim (that Mr. Dewitt took Waste Connections’ information seems clear).

Fourth, Waste Connections will have a much harder time proving that Rubicon intentionally interfered with Mr. Dewitt’s employment agreement.  Indeed, the firing suggests that Rubicon has not condoned Mr. Dewitt’s supposed actions and that, thus, Rubicon lacked and lacks intent to interfere with the agreement.

Fifth, assuming Mr. Dewitt and Rubicon had their own employment agreement both Mr. Dewitt and Rubicon may have counterclaims against Waste Connections for interfering with an agreement.

Sixth, the firing likely signals an early settlement of the suit unless Waste Connections can connect any marketplace effects—e.g., losing customers or not getting new business—to the information Mr. Dewitt allegedly took.

In short, though Mr. Dewitt’s actions prompted this lawsuit, Rubicon and Waste Connections are the ongoing competitors. Even the complaint refers to this case as the “latest chapter.”  With perhaps its most obvious goal accomplished (keeping Mr. Dewitt from working for a competitor), Waste Connections may quickly turn the page and put this case behind it.

Injunctions Matter Because Damages Are Hard

Though not a perfect analogy, it’s easier to put up a stop sign than investigate a car crash.

Injunctions are the stop sign.  They often require a defendant to stop doing something. Injunction hearings themselves are less focused on the law, are fast, and can effectively put a defendant out of business by, for example, preventing contact with customers.  A full defense may not even be possible at the injunction stage.

Conversely, a damages case permits a full defense and investigation.  A defendant will have more time to pick apart a plaintiff’s case.  And a plaintiff will have to prove that a defendant probably used specific information and then put a dollar figure on that specific use.  That dollar figure will no doubt be higher than the figure defendant puts on the trade secrets.

You Do Not Want To Take Documents When You Move Jobs; You Do Not Want Your New Hires To Bring You Old Documents

To repeat the obvious, employees should not take information with them when they leave a job.  Nothing.  Even removing information that—to the employee—is clearly personal from a work device will look suspicious to the employer.  Indeed, the employer may start an expensive investigation for which it expects the former employee to pay.

So, before deciding to leave an employer for another job in the industry, all employees with employment agreements should read the agreements and then seek legal advice from an attorney specializing in restrictive covenants, trade secrets, and competition law.  The risk of ending up jobless is too high.

On the flip side, employers should clarify to potential hires that the employer does not want any files or papers from the employee’s old job.  The employer should have potential hires acknowledge in writing that they will not bring old employers’ information and that the new employer does not want any old papers or files.  And the employer should put a similar requirement in any employment agreement.

Even if information brought by a new employee is useless, if the information infects an employer’s system, it will be hard to remove.  If a plaintiff has a difficult time tracing its trade secrets or confidential information through a defendant’s systems, a defendant also has a difficult time proving to a court that it has none of a plaintiff’s information— anywhere—on its system.

Ultimately though, the lesson is once again this: if an employee with significant customer relationships or technical knowledge changes jobs, prepare for litigation.

The case is Waste Connections US, Inc. and Progressive Waste Solutions of LA, Inc. v. Rubicon Global, LLC and Jonathan M. Dewitt, No. 2017CV291331, in the Superior Court of Fulton County, State of Georgia.

[1] See, e.g., Holton v. Physician Oncology Servs., LP, 292 Ga. 864, 870 (2013); Innovative Manpower Sols., LLC v. Ironman Staffing, LLC, 929 F. Supp. 2d 597, 612 (W.D. La. 2013).

[2] See Am. Software USA, Inc. v. Moore, 264 Ga. 480, 483 (1994).

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