Trade Secret MisappropriationUber and Lyft are both internet and mobile application based technology companies offering a peer-to-peer ridesharing platform. Or for less tech-speak, they are involved in what is generally described as the “sharing economy.” However, a recent lawsuit makes clear that sharing has its limits.

Specifically, Lyft is suing a former executive (Lyft v Uber (PDF)), Travis VanderZanden, for breaching his confidentiality agreement and fiduciary duty and after he jumped ship to join Lyft’s chief rival, Uber. According to the complaint filed in the lawsuit, the former executive copied vast amounts of confidential information on his way out the door. Uber has denied that Mr. VanderZanden has “shared” any of this information with Uber. 

These claims and allegations are by no means extraordinary. But they do provide a perfect roadmap for both employers and employees to follow when it comes ending one employment relationship in order to join a competitor. But instead of taking an all-out road trip to address all of those issues, two points stand-out.

How to Get Guarantee Your Former Employer Will Sue You

As to the firs issue, a little background for what not to do if you are an employee about to join a competitor: Lyft’s lawsuit alleges that VanderZanden informed the company’s founders of his plans to resign on August 12 and agreed to meet with the founders on August 15. But VanderZanden cancelled that meeting and suggested they speak after the weekend.

According to the complaint, it was a busy weekend for Mr. VanderZanden. Lyft alleges that he backed up a number of emails and confidential documents to his personal home computer and mobile phone before handing his company computer back. These actions were discovered after Lyft conducted a forensics analysis of VanderZanden’s company-issued laptop. The analysis further revealed that months prior to the departure, Mr. VanderZanden synchronized his personal Dropbox account with his Lyft laptop, copying a “significant number of Lyft’s most sensitive documents” in the process.

So the first issue for both employers and employees is really two sides of the same coin. From an employee’s perspective, assume your digital fingerprints will point to every piece of digital information you touched, e.g., every file, every email, every document, etc. And if those fingerprints suggest you took you former employer’s information to your new employer, be prepared to be sued.

And because these digital fingerprints provide valuable insight, employers need to have a plan in place to preserve this likely treasure trove of digital evidence. This is because the absence of such evidence may eliminate an expensive Don Quixote-like endeavor against the former employee. There is nothing worse than spending A+ resources on a C- employee or situation.

Conversely, the presence of such evidence will be needed to convince a judge that injunctive relief is appropriate and to otherwise support claims against the former employee. As part of your company’s plan, you’ll need to address how to preserve, analyze, and use the digital evidence.

Play a Strong Hand; Bluffing in Litigation Can Be Costly

The second point is for employers. Litigation should be considered to be an investment of time and money. So it is critical to make sure your company has a sound investment. In this regard, too often employers (and more accurately) their attorneys overreach, which undercuts any return on investment or worse.

Going back to the Lyft lawsuit as positive example, one claim Lyft chose not to make was a Computer Fraud and Abuse Act (CFAA) claim. The CFAA is a federal computer related statute, originally enacted to combat criminal computer hacking. However, Congress created a private right of action for “any person who suffers damage or loss by reason of a violation of this section.” And running with this private right, some creative lawyers have come up with theories to morph this criminal statute into a weapon against any former employee who is alleged to have accessed computer related data prior to departing for a competitor.

But such CFAA theories are not universally accepted. For example, judges in the Eastern and Western federal district courts of Michigan have both rejected such claims. And going back to Lyft’s lawsuit, it was filed in a jurisdiction that has also resoundingly refused to apply the CFAA to the departing employee scenario discussed above. In other words, assuming everything alleged in Lyft’s lawsuit is true, Lyft did the smart thing by not watering down its claims with weak or otherwise unsupportable legal theories. 

But in contrast, it is not uncommon for attorneys representing companies in Lyft’s position to overreach either by trying to manufacture a CFAA claim or otherwise shoehorning the criminal computer hacking statute to fit the facts actually presented.

For example, our law firm represents an individual being sued in Michigan federal court by the former employer for claims under the CFAA. Setting aside the merits (or lack thereof), this claim was brought despite both the Eastern and Western federal courts of Michigan have refused to apply the CFAA to facts similar to this case. In fact, the judge presiding over the current matter is essentially down the hall from one of the judges who previously dismissed a substantially identical CFAA claim against the former employer.

Also, our law firm recently represented a former employee, an administrative assistant, who was sued for breach of a noncompete agreement and trade secret misappropriation claim. Normally noncompete breaches are relatively a black and white issue. Conversely, trade secret claims are often more involved and complex. Trade secret misappropriation claims also carry statutory penalties if brought in bad faith.

On this point, the litigation process quickly made it clear that not only was it questionable as to whether the plaintiff employer had any statutory trade secrets to begin with, but there was no evidence to support the contention that our client misappropriated paperclips or Post-it notes let alone the former employer’s trade secrets. Instead of continuing on with the litigation and risking statutory damages, the plaintiff agreed to waive any claims for enforcing the noncompete agreement, dissolve the injunctive relief issued at the beginning of the lawsuit, and additional relief that is subject to a confidentiality provision. In sum, what could have been a likely slamdunk noncompete breach win for the former employer, was not and actually cost the employer on multiple fronts.

The Take-Away

When it comes to ending the employment relationship and joining a competitor, careful planning by both employees and employers can eliminate the need for costly litigation. Such planning starts with the truism that, like most things in life, there is a right and a wrong way for how the employment relationship should end.

For information about dealing with both ends of this spectrum, especially investigating trade secret misappropriation or Computer Fraud and Abuse Claims, contact Michigan attorney Jason Shinn. Since 2001, Mr. Shinn has represented both employees and employers in relation to such claims, as well as all aspects of the employment relationship.