With the advent of telecommuting and employers generally reducing paper files, it seems out of the ordinary for anyone to memorize a telephone number, much less an extensive list of clients. But occasionally, the out-of-the-ordinary occurs, and in Fidelity Brokerage Services LLC v. Callinan, a Massachusetts court held that a customer list allegedly compiled from memory by a financial consultant could be considered confidential information.

Case Overview

The defendant, a financial consultant at Fidelity Brokerage Services (“Fidelity”), signed an employment agreement in 2016 that prohibited him from using any confidential information belonging to Fidelity to directly or indirectly solicit customers to divert their business from or otherwise cease their relationship with Fidelity. In his time with Fidelity, the defendant serviced approximately 500 clients. The vast majority of these clients were not developed by the defendant, but came to him through reassignments or referrals from other consultants employed by the company.

In 2018, the defendant resigned from the company to join a competitor. Immediately upon arriving at the competitor company, the defendant created a list of his former clients from memory and shared the list with his colleagues, who proceeded to contact each client and notify them that the defendant left the plaintiff company. In some instances, the defendant used his contact with former clients to expound on the reasons he left Fidelity and the benefits he perceived in working with the competitor company.

In response to a motion for preliminary injunction filed by Fidelity, the defendant argued that the information he retained in his memory regarding the identity of his former clients did not constitute “confidential information” governed by his employment agreement. Judge Brian A. Davis, sitting in the Superior Court of Massachusetts’ Business Litigation Session, disagreed. In granting Fidelity’s motion, Judge Davis held that “[i]f the identity of Fidelity’s clients constitutes ‘Confidential Information’ when the information is embodied in written form, such as a customer list, it remains confidential when it resides in the memory of a former employee.” “The manner in which confidential information is retained by a former employees does not affect whether the information itself is, in fact, confidential.”

What Employers Should Know

Fidelity follows similar decisions in Ohio, Washington, and California that have held that memorized client lists and other confidential business information are still protectable as trade secrets and/or confidential information despite not being in tangible form. See Al Minor & Assoc., Inc. v. Martin, 117 Ohio St.3d 58, 64 (2008); Ed Nowogroski, Ins., Inc. v. Rucker, 137 Wash.2d 427, 449 (1999); Morlife, Inc. v. Perry, (1997) 56 Cal.App.4th 1514, 1522. Courts in other jurisdictions—including a 2017 Georgia decision—however, have reached the opposite conclusion, holding that only tangible customer lists constitute confidential information or trade secrets. See TMX Finance Holdings, Inc. v. Drummond Financial Services, LLC, 300 Ga. 835 (2017).

Given the varied approach, companies are well-advised to consult with employment counsel to determine the appropriate approach in jurisdictions relevant to their business. Notwithstanding the jurisdiction-specific state of the law on memorized material, employers should strongly consider including express language governing memorized client lists, and other confidential information or trade secrets, in employment agreements and employee handbooks. Ultimately these protective measures may prove the key to success in a company’s next trade secret case.