The Ohio 12th District Court of Appeals recently upheld a lower court’s injunction against two former employees and their new employer in light of defendants’ apparent breach of duty of loyalty, misappropriation of trade secrets, and tortious interference with business relations. DK Prods., Inc. v. Miller, Case No. CA2008-05-060, 2009 WL 243089 (Ohio Ct. App. 12 Dist. Feb. 2, 2009)
System Cycle, a branch of DK Products, Inc., located in Springboro, Ohio, distributes BMX bicycles, parts and accessories to bicycle retailers throughout the United States. System Cycle employed Matthew Miller and Charles Johantges until System Cycle learned that Miller and Johantges had disclosed sensitive financial information to vendors and attempted to broker distribution deals on behalf of Two Zero Distribution, Inc., a company created by Miller while Miller and Johantges were still employed by System Cycle (“Two Zero”). Per a Dayton Daily News article discussing the case, System Cycle learned about Miller and Johantges’s activities by intercepting an e-mail from the defendants to one of System Cycle’s customers.
The Ohio courts granted System Cycle ’s request for injunctive relief on each of the counts in the complaint, rejecting each and everyone of defendants’ counter-arguments. With respect to System Cycle’s tortious interference claim that defendants improperly interfered with System Cycle’s existing business relationships through improper disclosure of financial information, defendants argued that System Cycle had not showed evidence of malice on their part, but the Court of Appeals declined to find that malice is a necessary showing for a claim of tortious interference. Additionally, there was ample evidence of irreparable harm to System Cycle. Even defendant Miller admitted that his disclosure of confidential financial information regarding System Cycle was “pretty devastating.”
The courts also rejected Defendants’ challenge to the injunction as it related to the trade secret misappropriation claim. Defendants had asserted that the injunction was improper because System Cycle did not proffer evidence that they used System Cycle’s trade secrets Yet, the Court of Appeals pointed to Defendant Miller’s admission that he had discussed certain trade secret information with a vendor, which falls within the definition of “misappropriation” under the Ohio Uniform Trade Secret Act.
Defendants’ final challenge was to the injunction as a remedy for the apparent breach of defendants’ duties of good faith and loyalty. The defendants contended that System Cycle failed to show irreparable injury in connection with this claim, but the defense fell on deaf ears. The Court of Appeals deflected that criticism by pointing to the very real potential for irreparable injury in connection with the other two claims.
As a result, the Court of Appeals affirmed the trial court’s order enjoining Defendants from solicitng System Cycle’s customers and from misappropriating System Cycle’s confidential information for the benefit of Two Zero. The case now returns to the trial court, where System Cycle may pursue a permanent injunction and money damages.
The key to System Cycle’s success likely had much to do with the early interception of the e-mail from Miller to a System Cycle customer. Procedures designed to prevent the loss of trade secrets through electronic means are becoming more commonplace and more important to protecting a company’s intellectual property.