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RIA International, LLC v. Siegel

A-4002-01-T5 (N.J. Super. App. Div. 2003) (Unpublished)

EMPLOYER-EMPLOYEE; CONFIDENTIALITY—New Jersey law provides protection to the customer lists of service businesses as trade secrets, but for other businesses a former employee’s use of mere knowledge of those customers with whom the employee dealt may not rise to the level of use of confidential information.

A company hired a bookkeeper and gave her duties as a sales representative. She signed an agreement requiring the employer’s consent before disclosing any confidential information to third parties. It was binding during her employment and for three years thereafter and contained a non-compete clause that only applied during the duration of her employment. She resigned and entered a competing business. The employer did not complain until one of its prized customers discontinued its business relationship, about three years later. It then sued, alleging that its former employee had used confidential customer lists. The lower court disagreed because although she had “contacted [her former employer’s] customers and vendors with whom she had prior dealings, there [was] no evidence that she took customer written lists or other information.” As a matter of law, the lower court determined that the information she used: “her ‘knowledge of those customers with whom she dealt with while working for [her employer],’ did not rise to the level of confidential information.” The Appellate Division agreed with the lower court’s interpretation and cited the lower court’s statement, “there are industry listings for all of the vendors and customers containing all of the information necessary to contact them, and that relationships with customers and suppliers are not necessarily exclusive and that prices regularly fluctuate.” Although New Jersey law affords protection for customer lists of service businesses as trade secrets, this business was not a service business. Also, although it was clear that the former employee “acted contrary to the interests of [her former employer] thereby breaching the duty of loyalty,” the information she took was not confidential, and she was free to use it when she was no longer employed. The information used while she was employed “constituted a breach of the duty of loyalty, but because it was lawfully used post-employment, any breach ceased.”

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