Trade secret cases almost always involve the misappropriation of confidential information by an employee (or former employee) or a competitor.  However, a federal judge recently found that an independent contractor can bring a trade secret theft case against the company he formerly worked for in the case of  Stevens v. Interactive Financial Advisors, Inc., in the United States District Court in the Northern District of Illinois.

Leland Stevens had worked as a licensed insurance broker for 20 years, and wished to provide investment advice as well.  Because he was not a registered investment advisor, he affiliated with Interactive, which was registered.

Stevens entered into an oral contract with Interactive to use its software and management services for his own clients, and to share fees with Interactive.

The Trade Secrets

Stevens uploaded information about his clients to a database provided by a company called Redtail, which licensed the software to Interactive. He considered this information a trade secret.

In June, 2009, six years into their business relationship, Stevens and Interactive entered into a written contract authorizing Stevens to provide investment advisory services “on behalf of” Interactive.

At a meeting before signing this agreement, Stevens asked the president of Interactive to confirm that Stevens “owned” the client information he had generated, and that the agreement would not affect his ownership rights.  The president agreed.

Interactive terminated its relationship with Stevens in October of 2009, apparently because of an investment that Stevens had recommended to some clients but later learned was fraudulent.

Interactive blocked Stevens’ access to the Redtail database, which included information about approximately 400 of Stevens’ clients who had never received any services from Interactive. It also disclosed some of this information to other independent contractors without Stevens’ consent.

The Lawsuit

Stevens sued Interactive for trade-secret misappropriation and other causes of action.

Interactive moved to dismiss.

The court noted that it was a “close question” whether Stevens had adequately alleged trade secret misappropriation, but concluded that he had sufficiently pled it for the purposes of the summary judgment motion.