Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Colo.: Tortious interference, trade secret misappropriation, unfair competition claims proceed, (Jun 27, 2013)

By John W. Arden, J.D., LL.M.

A trade and barter business franchisor’s tortious interference with prospective business relations, unjust enrichment, trade secret misappropriation, and unfair competition claims against its franchisee—a business barter association—were entitled to proceed to trial, the federal district court in Denver has ruled (Tradebank International Franchising Corp. v, Community Connect, LLC, June 25, 2013, Matsch, R.). Tradebank International’s factual allegations were adequate to state the elements of the claims, according to the court.

Intentional interference with prospective business advantage does not require proof of an underlying contract having a definite term. It is not a defense that the underlying business relationship could have been terminated at will, the court stated. Whether Community Connect’s conduct constituted “wrongful means” or “justifiable business competition” depended on disputed factual matters to be determined at trial. Tradebank’s identification of business relationships purportedly lost was a question of damages and a matter of proof for trial.

The unjust enrichment claim adequately alleged that Community Connect received a benefit in the form of profits from “poached” customer relationships, and the misappropriation of trade secrets claim adequately identified the subject “trade secrets” as customer names and information.

Contrary to Community Connect’s argument, trade secrets are not limited to “scientific or technical information, design, process, procedure, formula, or improvement,” the court found. The complaint alleged that Tradebank protected its trade secrets, including customer names and information, through confidentiality provisions in the franchise agreement and other means, such as maintaining a password-protected database. Whether Tradebank had adequate proof of damages resulting from the alleged misappropriation of its confidential information was a matter to be determined at trial.

A plaintiff asserting an unfair competition claim in Colorado must show (1) the defendant copied the plaintiff’s products or services or misappropriated its name or operations; (2) the defendant’s conduct was likely to deceive or confuse the public; and (3) the plaintiff incurred damages as the direct result of the unfair competition. In this case, Tradebank alleged that defendants used its telephone numbers, offices, and email addresses while actually soliciting customers for Community Connect, providing the appearance that such solicitations were made on behalf of Tradebank. Whether such evidence was sufficient to provide those factual allegations had to be determined at trial.

The case is No. 1:11-cv-01530-RPM.

Attorneys: William Bradley Ney (Ney Russell Hoffecker & Erk) for Tradebank International Franchising Corporation. Gregory A. Goodman (Goodman Legal Consulting, LLC) for Community Connect, LLC.

Companies: Tradebank International Franchising Corporation; Community Connect, LLC

Cases: FranchisingDistribution ColoradoNews