IP Law Daily, TRADE SECRETS—W.D. Tex.: Law firm recruiter ordered to pay $3.6 million to former employer, (Sep 19, 2022)
Law Firms Mentioned:KJC Law Group | Loanzon LLP
Organizations Mentioned:DLA Piper | Kirkland & Ellis, LLP | Latham & Watkins, LLP | MWK Recruiting Inc. | Mort Law Firm, PLLC
By Brian Craig, J.D.
The damages award includes over $500,000 for misappropriation of trade secrets related to information about law firm clients.
Following a bench trial, the federal district court in Austin, Texas has ordered a legal recruiter to pay more than $3.6 million and attorney fees to his former employer, a legal staffing company, for misappropriation of trade secrets. The court awarded the legal staffing company more than $500,000 for misappropriation of trade secrets relating to confidential information about law firm clients and attorney candidates. The court also awarded the legal staffing company more than $3 million for breach of the employment agreement and attorney fees (MWK Recruiting, Inc. v. Jowers, September 15, 2022, Pitman, R.).
A legal staffing company sued a former employee who worked as a legal recruiter for misappropriation of trade secrets and breach of contract. The legal recruiter focused on placement of lawyers with large law firms in Asia, including Kirkland & Ellis, Latham & Watkins, and DLA Piper. The legal staffing company alleged the legal recruiter misappropriated trade secrets in violation of the federal Defend Trade Secret Act (“DTSA”), and the Texas Uniform Trade Secret Acts (“TUTSA”) relating to information about law firm clients and attorney candidates. The legal staffing company also alleged the legal recruiter breached an employment agreement and two loan agreements. The court held a bench trial in December 2021. After considering post-trial briefs, the court entered its decision.
Misappropriation of trade secrets. The court concluded the legal recruiter misappropriated trade secrets relating to information about law firm clients and attorney candidates under both the DTSA and the TUTSA. The court found that the information the legal recruiter gathered as to the six candidates—including their names, their clients, how much their practices were worth, their language skills, their goals for switching firms, and their law school records—constituted the legal staffing company’s trade secrets.
The court found specific evidence regarding the trade secret misappropriation for six candidates placed with law firms in Asia. The legal recruiter shared the information he learned during his employment about these candidates with another legal staffing company and law firms seeking to hire the candidates. Moreover, the legal recruiter had an obligation to maintain the privacy of these candidates through his employment agreement and through the nature of the recruiting business, which depends on establishing long-term trust relationships. The court found the legal recruiter misappropriated those trade secrets and awarded $515,326 in damages.
Breach of contract. The court also concluded the legal recruiter breached the employment agreement. The court rejected the legal recruiter’s argument that he signed the employment agreement under duress. The court enforced the 12-month long non-competition and non-solicitation clauses. The court likewise enforced the liquidated damages clause to assess damages. The liquidated damages clause provides that damages comprise the placement fees involving services to clients and candidates in the year following the recruiter’s termination. Accordingly, the court awarded the legal staffing company $3,082,842 in damages for breach of the employment contract. Furthermore, the court found the legal recruiter breached the loan agreements awarding $26,405 for a forgivable loan and $15,760 for a revolving loan.
Attorney fees. Finally, the court awarded reasonable attorney fees to the legal staffing company for breach of the employment agreement and the loan agreements. The agreements included a provision for recovery of attorney fees. But the court declined to award exemplary damages or attorney fees and costs for misappropriation of trade secrets. The court will award attorney fees based upon presentation of attorney fee evidence.
Therefore, the court awarded the legal staffing company more than $3.6 million in damages, in addition to attorney fees.
The case is No. 1:18-cv-00444-RP.
Attorneys: Tristan C. Loanzon (Loanzon LLP) and Raymond W. Mort, III (Mort Law Firm, PLLC) for MWK Recruiting Inc. Kevin J. Cole (KJC Law Group) for Evan P. Jowers.
Companies: MWK Recruiting Inc.
Cases: TradeSecrets TechnologyInternet TexasNews GCNNews