IP Law Daily, TRADE SECRETS—6th Cir.: Trial decision affirmed in logistics broker non-compete dispute, (Oct 3, 2024)

By Kevin M. Finson

An employee did not misappropriate trade secrets in the form of customer contact information stored on his personal cell phone because that information was publicly available.

A trial court did not err in finding that a logistics company failed to show misappropriation of trade secrets by a former employee, the U.S. Court of Appeals for the Sixth Circuit has held. The claimed secrets were phone numbers that were readily accessible to the public (Total Quality Logistics, LLC v. EDA Logistics LLC, No. 23-3713 (6th Cir. Oct. 2, 2024)).

Total Quality Logistics, LLC (TQL) was a shipping logistics broker that employed Ryan Daniels as a Logistics Account Executive, and in that role, Daniels signed non-compete and non-disclosure agreements. For a period of one year, the agreements prohibited Daniels from working for a competing business, from working in any capacity in any “transportation intermediary business,” or soliciting TQL customers, and from using any of TQL’s confidential information after leaving the company. Daniels eventually resigned from TQL due to its post-COVID return to office policy. After leaving TQL, Daniels eventually formed EDA Logistics, LLC (EDA), and through that company began competing directly with TQL, working with several of the same companies that Daniels had worked with as a TQL account executive.

TQL brought suit for breach of contract and misappropriation of trade secrets. The trial court found Daniels had breached the non-compete, but declined to enjoin participation in the logistics industry generally. Instead, the court only prohibited Daniels from soliciting customers he knew from his time at TQL. The court also found a fee-shifting provision unenforceable and held that TQL had failed to prove either monetary damages or its trade secrets claim. TQL appealed.

Damages. The trial court had declined to award monetary damages because it found that TQL’s evidence of damages was impermissibly speculative. The court found that TQL’s failure to show that its claimed lost profits were attributable to Daniels’s solicitation, as opposed simply to his leaving TQL and the lack of evidence of any efforts TQL made to retain those customers, showed that the trial court decision was not clearly erroneous.

Non-solicitation. TQL argued that the trial court erred in reducing the scope of the non-compete from the logistics industry generally to just those customers with whom Daniels had worked while at TQL. The court found that the trial judge had properly considered the reasonableness of the restrictions, explicitly using the three factors required by Ohio law and had not clearly erred in that analysis.

Trade secrets. TQL argued that the trial court erred in finding it had not proven Daniels misappropriated its trade secrets. The claimed secrets were customer contact information Daniels kept on his personal cell phone during his time at TQL. The court found that because this information was publicly available and there was no indication Daniels had retained access to any customer database or anything of that nature, the trial court had not erred. The court also noted that claims related to pricing policies failed because TQL did not articulate what pricing information was allegedly misappropriated.

Attorney fees. TQL argued that the trial court erred in not enforcing a contractual attorney fees provision. The court found that the trial judge had properly applied Ohio law allowing unilateral fee-shifting only when there was not unequal bargaining power, and that it appeared from the facts of the case that Daniels as prospective employee had far less bargaining power than TQL as prospective employer.

The court affirmed the decision of the trial court in all respects.

The Case is No. 23-3713.

Judge: Larsen, J.

Attorneys: Scott K. Jones (Scott K. Jones, Attorneys at Law) for Total Quality Logistics, LLC. Brian Joseph Butler (Mezibov Butler) for EDA Logistics LLC.

Companies: Advanced Bionics, LLC; EDA Logistics LLC

Cases: TradeSecrets KentuckyNews MichiganNews OhioNews TennesseeNews