Georgia Case Shows When Not to File a Trade-Secrets Lawsuit

When an employee leaves to start her own business and takes clients with her, the former employer often reacts emotionally. There may be a sense of betrayal, which can be followed by a desire to lash out, frequently through filing suit against the former employee. Many times, there are real grounds for a lawsuit. But other times, a lawsuit is a waste of time and money. Drawdy CPA Services, P.C. v. North GA CPA Services, P.C., 2013 WL 1189274 (Ga. Ct. App. March 25, 2013) appears to be an example of a case that never should have been brought in the first place.

The plaintiff, an accounting firm, sued its former employee (Pritchett) and her accounting firm for breach of a nonsolicitation agreement and misappropriation of trade secrets. After Pritchett left the plaintiff, it determined through a log-in history report that she had accessed its client portal (through which clients and former clients could review their prior years’ tax returns). The plaintiff filed an emergency motion for injunctive relief, which sought to prevent the defendants from accessing the plaintiff’s client portals and soliciting the plaintiff’s clients.

Following Pritchett’s use of the portal to obtain tax returns, the plaintiff eliminated portal access for all former clients. Thus, the court denied the plaintiff’s request for an injunction barring Pritchett from using the client portal.

At the hearing, the plaintiff offered the affidavit of one of its clients stating that he had received a direct-mail flyer from Pritchett. In response, Pritchett called four of the plaintiff’s former clients, who all testified that they sought out Pritchett once she opened her own firm. One of these clients testified that his company printed and distributed a mailer for Pritchett to a list of 2,500 people compiled by a third-party company; by using this list, Pritchett apparently contacted the plaintiff’s client inadvertently.  Pritchett also offered 113 affidavits from her clients who were formerly the plaintiff’s clients, all of whom stated that she did not solicit them to leave the plaintiff.

Given this evidence, the court refused to enter an injunction.

When presented with evidence that a former employee violated her employment contract, it is critical to fully investigate what actually happened. While it’s impossible to know what steps the plaintiff and its attorneys took here, it certainly seems like communicating with the former employee could have revealed that there was no deliberate effort to violate the employment agreement, and that it would be very difficult to prove violations.

We all know that litigation is time-consuming and expensive. It should be used as a last resort, and only when it is impossible to resolve the dispute amicably. Even then, attorneys need to know when to tell their client that there simply isn’t enough evidence to support a claim.

On the flip side, this case is a great example of how to defend against a restrictive covenant and trade-secret misappropriation claim.

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