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A new Supreme Court, New York County case highlights the challenges companies face regarding intellectual property protection, Quest Partners LLC sued former member and director of research Brian Brugman. Quest alleged Brugman misappropriated and misused trade secrets and confidential information.

The court’s decision by Justice Lebovits (65514/2023), offers insights into how organizations can safeguard against similar scenarios.

Case Summary

• Brugman was accused of using Quest’s proprietary trading strategies after leaving the company to create his own hedge fund.
• The court dismissed several of Quest’s legal claims, including misappropriation of trade secrets, breach of fiduciary duty, unfair competition, and conversion. These were deemed duplicative of the breach of contract claim.
• The court did, however, uphold Quest’s breach of contract claim.

Key Takeaways

• Detailed Agreements are Essential: Organizations must have well-defined contracts that clearly stipulate obligations regarding trade secrets, confidential information, and non-compete clauses.
• Specificity Matters in Trade Secret Protection: It’s not enough to generally label information as proprietary. Organizations need to precisely outline the specific trade secrets being protected. This helps strengthen legal cases.
• Actions Outside of Contracts: Even with contracts, former employees might use acquired knowledge in ways that don’t directly violate agreements. Organizations should be aware of this risk and proactively monitor for potential misuse.

What Organizations Can Do

• Robust Non-Disclosure Agreements (NDAs): NDAs with departing employees should specifically address trade secret usage and non-competition periods.
• Trade Secret Inventories: Maintain detailed records of trade secrets, including their nature, how they’re used, and access control.
• Monitoring and Surveillance: Be vigilant in tracking the activities of former employees and competitors. Watch for any suspicious resemblance to company strategies or product developments.

The case underscores the importance for companies to prioritize protecting trade secrets and confidential information. Strong contracts, clear definitions of proprietary data, and proactive monitoring strategies are crucial for minimizing the risks posed by departing employees.

Last week marked a significant development in the legal landscape affecting workplace discrimination claims in New York. The statute of limitations for filing complaints has been extended from one year to three years, providing employees with a more extended timeframe to seek justice for alleged discriminatory practices. This change necessitates a heightened awareness among employers, who must be proactive in safeguarding their interests and adapting to the evolving legal framework.

Protected Categories Under New York State Human Rights Law:

The New York State Human Rights Law enumerates various protected categories against workplace discrimination. These include, but are not limited to, age, race, creed, color, national origin, sexual orientation, military status, sex, marital status, and disability. Employers must ensure compliance with these provisions and foster an inclusive work environment that respects the rights of individuals belonging to these categories.

Record-Keeping and Liability:

In light of the extended statute of limitations, maintaining meticulous records becomes paramount for employers. The potential need to defend against claims that may arise up to three years after an alleged incident underscores the importance of comprehensive documentation. The Human Rights Law not only holds organizations liable but also extends potential liability to individuals who own the organization, exercise control over personnel decisions, or engage in conduct that aids and abets discrimination.

Individual Liability and Organizational Responsibility:

Employers need to recognize that the repercussions of workplace discrimination can extend beyond the organizational level. Individuals in positions of authority may find themselves personally accountable for discriminatory actions. Therefore, a thorough understanding of the legal responsibilities tied to personnel decisions and a commitment to fostering a discrimination-free workplace are crucial.

Impact on Employment Practices Liabilities Insurance (EPLI):

With the increased statute of limitations, employers should anticipate potential shifts in the cost of Employment Practices Liabilities Insurance (EPLI). Insurance carriers may adjust premiums to account for the extended risk exposure. It becomes imperative for businesses to reassess their insurance coverage and work closely with carriers to ensure adequate protection against the evolving legal landscape.

Takeways

The recent extension of the statute of limitations for workplace discrimination claims in New York demands heightened diligence from employers. Adhering to the New York State Human Rights Law, implementing robust record-keeping practices, and understanding the potential for individual liability are essential steps in mitigating risks. As businesses adapt to these changes, a proactive approach to legal compliance will be instrumental in fostering a workplace culture that values diversity and inclusion.

When it comes to negotiating a settlement, it’s important to choose your words carefully. Emails, texts, and other forms of communication can end up being legally binding, even if you haven’t signed a formal agreement. In a recent case, Elysium Health v. ChromoaDex, No. 22-cv-1059 (Lead), 22-cv-1153 (2d Cir. Oct. 26, 2023), the plaintiff learned this lesson the hard way. By saying “we can accept the additional terms you proposed” and “I understand that now that we have an agreement you will begin work on documentation” in an email, they inadvertently bound themselves to an agreement that wasn’t yet formalized in writing. So, be cautious with your words and make sure you fully understand the implications of what you’re agreeing to, even in informal communications.