Violating Injunctions is a "Big Deal"
Am. Fam. Mutual Ins. Co. v. Roth, No. 05 C 3839 & 3869, 2008 WL 168693 (N.D. Ill. Jan. 15, 2008) (Guzman, J.).
Judge Guzman adopted Magistrate Judge Cole’s Report and Reconsideration in full, holding defendants in contempt for violating the Court’s injunctions requiring that defendants return various customer information taken from plaintiff, defendant’s former employer – click here for more on the prior opinions in the Blog’s archives. It was defendants’ responsibility to ensure that defendants’ former counsel, who had copies of relevant documents, comply with the injunction by turning the documents over to plaintiff. The fact that defendants did not have direct control over their former counsel’s copies did not matter.
Additionally, the Court held that it did not matter that plaintiff did not originally make a “big deal” out of defendant’s non-compliance. Defendants argued that they presumed there was no need to comply with the Court’s injunctions because nobody was making a “big deal” about the return of the materials. That presumption was flawed. Neither party moved to modify either the preliminary injunction or the amended preliminary injunction. Thus, defendants had a duty to comply with the Court’s injunctions as written.
Practice Tip: Do not fall in to the trap of believing that substantial compliance with a court order is sufficient. While that could be true in some cases, you should always contact the court if you have a problem complying with an order. Compliance with orders is one case where the adage that you are better off asking forgiveness than asking permission does not hold true.
We thought when we provided the materials to our attorney, he had returned the materials. Unfortunately, we had no knowledge that the opposing counsel and our former attorney made a special agreement to hold on to materials until litigation had ended. However, when we secured new legal representation, we stated to our counsel to make sure that this had happened. Unfortunately, we were not told that a special agreement had been made between opposing counsel and the Roth's former counsel. It is unfortunate that attorney's are not held accountable in our court systems. We hire attorney's to represent, BUT yet a lay person is held accountable. It seems to us that the opposing counsel and former attorney should have been sanctioned and not the people who turned over the materials and did not know of the agreement made between the two attorneys. We are totally confused as to the rationale of this by our courts to hold a lay person accountable but yet attorney's are not held accountable???? Perhaps someone from the Legal System can explain this rationale? We would truly like to understand this.
Does Trade Secrets have to be defined as such and proven that certain items are trade secrets?
Read what the President of the National Association of American Family Agents has to say about Trade Secrets and American Family:
Posted on:
http://www.naafa.com
PRESIDENT’S CORNER
Dear NAAFA Members:
Here are my thoughts regarding Trade Secrets
When a contract is written, normally all important words and terms are defined somewhere within
the contract. The term “trade secrets†is not included in either the agent’s contract or in the
computer agreement; however, should any agent who is thinking of leaving American Family and
going independent NOT know and understand the definition of what American Family is calling
“trade secrets,†they’re in deep trouble.
The original agent’s contract spells out the relationship and expectations between the agent and
American Family. Part of that agreement pertains to termination benefits, how termination
benefits are paid, if the agent qualifies for extended earnings, and a non-compete clause to
prevent an agent from going independent and directly competing against American Family for a
period of one year.
The earliest of agent agreements contained a rather loose non-compete clause. But each time a
new agent contract was introduced, American Family attempted to tighten the language in the
non-compete clause to make it more difficult for an agent to continue in the insurance selling
business and still receive their extended earnings. The non-compete clauses in all previous
agent’s contracts have been defeated in court. The current agent’s agreement is a non-solicit
contract which allows an agent to go independent, but the agent agrees not to solicit any existing
clients for a period of one year in order to receive their extended earnings.
In later years American Family entered into the computer era with Wang and the Defacto
contract. This contract was a lease agreement between the agent and American Family for the
rental and servicing of the computer and software. After Wang, American Family started
purchasing newer and better computer equipment but still maintained a rental agreement with the agent for their use of the computers. Eventually, the company did away with the rental agreement
and began paying the cost of the agent’s computers at which time they introduced the computer
agreement which is the same agreement in effect today. That agreement states that the company
will provide the computers and software to the agent and all information entered into the
computer becomes the exclusive property of American Family and what the company claims as
Trade Secrets.
Now American Family has a way of controlling the activities of all agents who leave the company
whether they qualify for extended earnings or not. While the agent’s contract may be almost
impossible for the company to enforce, the computer contract is not. American Family takes the
position that EVERYTHING entered onto the computer is theirs! Agents are now required to enter
all client information into the CIM system. It does not matter if you convert the prospect to a client
or not, once the prospect/client information is entered into the computer, it belongs to American
Family.
What you thought was your own X-date list now becomes company property if you entered these names into the company computer. At least this is what American Family is trying to make you believe.
You may ask how a person’s name or phone number can be the property of American Family since it is public information and obtainable in any phone book.
American Family claims once the information is entered into their system it is theirs (trade secrets) according to the computer agreement and any use of that information is confidential and protected by HIPPA. It is NAAFA’s opinion (and also that of many attorneys) that no judge or jury would consider names, addresses and phone numbers a trade secret, but the problem is that cases such as this never get before ajudge or jury because most agents cannot afford the legal fees to fight it. They end up selling
their souls by settling with American Family on the court house steps.
Agents are frustrated with the repetitiveness of entering data from one system into another.
Agents want to know why when quoting a prospect all the prospect information has to be entered.
Perhaps you can now see part of the reason the company insists all this information be entered.
It is so American Family can say it now belongs to them. If an agent leaves American Family and
decides to go independent any attempt at contacting anyone who has been entered into the
company computer violates trade secrets in their opinion. Judges jump at the mention of a trade
secret violation and quickly allow such cases to come before the bench without delay.
American Family has not officially given their definition of trade secrets. In fact, it is in their
interest not to define what trade secrets are. Instead, they are suing agents for trade secret
violations who leave the company to go independent whether or not they qualify for theirextended earnings. In defending themselves American Family is making the agent prove they ave not “stolen†trade secrets, but one has to ask, “how do agents defend themselves against
something which is undefined?
American Family has recently gotten themselves into a dilemma by promoting customer service.
Clients relate customer service to the agent and not to the company. Therefore the client’s loyalty
is to the agent, a fact we have known for years. But American Family is about to have a rude
awakening. American Family is only beginning to realize the sacredness of the client’s loyalty to
their agent. As more and more agents leave American Family to go independent, more and more
clients leave American Family and follow their agent. Perhaps the company’s great customer
service goal is backfiring. They are learning that loyal customers follow their agents!
Until recently, one could say the non-solicit clause in the agent’s contract only affected agents
who qualified for extended earnings because these earnings could be halted. American Family
had to come up with a way to stop this loss of customers because of this loyalty to agents.
The trade secret violation has become their solution, and until someone finally challenges this in court before a jury, they will get by with claiming that public information readily available in a public phone book is a trade secret.
If American Family would have been more price-conscious and less customer service oriented,
perhaps there would be more loyalty towards the company and not as much toward the agent.
However, that is not the case, so American Family is now forced to sue agents who leave to
company to go independent in order to safeguard their client base. And because the agent’s
agreement pertaining to non-solicitation is virtually unenforceable, they are now suing under the computer contract claiming trade secrets.
In speaking with other captive agent associations, it has become apparent that American Family
is probably leading the industry in suing their former agents. In addition, more American Family
agents are suing the company for wrongful termination than are agents from other captive
companies. It is obvious something has gone horribly wrong at American Family.
No agent and no company want to lose their client base, but American Family seems to be totally unable to recognize and solve their masochistic problem other than to continue their practice of wrongfully terminating agents and/or suing them after they have gone independent.
NAAFA predicts that if the current company strategy against agents persists, American Family will soon implode. Not a pretty picture!
There you have it till next time.
Your NAAFA President