Tenth Circuit Affirms Dismissal of Trade Secret Claims by Former Employee
The 10th Circuit has affirmed in part a summary judgment ruling dismissing trade secret claims by a former employee against his former employer.
The case is Snyder v. Beam Technologies, Inc.
As the decision notes,
In most cases involving a claim for trade secret misappropriation, an employer sues its former employee (and possibly their new employer) for allegedly stealing a trade secret, such as a customer list. This case, however, presents the inverse of that fact pattern. Plaintiff John Snyder filed suit against his former employer, Beam Technologies, Inc. He alleged two claims for misappropriation of trade secrets and several state law claims arising out of his employment at Beam.
In 2018, Snyder was employed by Beam as a Regional Director of Broker Success. Before joining Beam, he’d worked for Guardian Life Insurance Company for about ten years.
As the court noted,
While working for Guardian, Snyder acquired a national customer list of over 40,000 insurance broker names (the Guardian Broker List). In February 2015, while still a Guardian employee, Snyder downloaded this national customer list from Guardian’s client-relationship-management software, known as Seibel, to a Microsoft Excel spreadsheet titled “Guardian Broker List 2.19.2015.xlsx” (the Guardian Broker List). Later that same day, Snyder attached the Guardian Broker List to an email he sent to himself from his Guardian work email to his personal Hotmail account. All the customer information on the Guardian Customer List was taken from Guardian’s files. The metadata showed that Snyder last modified the Guardian Broker List only “three minutes after it was created,” confirming he made no meaningful additions after downloading it from Guardian’s files.
Guardian terminated Snyder’s employment in August 2016. In 2018, he accepted an employment offer from Beam.
According to the court,
Snyder also claims that “[t]o induce” him to “work for Beam and to disclose the [Guardian Broker List], Beam promised to pay” him “for the spreadsheets ‘off the books.”
Using the Guardian Broker List as a template, Snyder created three new spreadsheets for brokers in Texas, Utah, and Colorado. But he accidentally included the complete Guardian Broker List “as a separate tab” in all three of these new spreadsheets.
As the court notes,
When Snyder sent these critical emails, he did so without any safeguards or effort to maintain secrecy. He did not mark any of the three new spreadsheets or the Guardian Broker List as confidential or a trade secret, did not limit Beam employees or anyone else’s access to any of these documents, did not password protect any of these documents, and did not inform Beam that any of these customer lists was confidential or a trade secret.
Also, said the court,
After Snyder learned that he had accidentally distributed the Guardian Broker List to numerous Beam employees, “Snyder did not object to Beam’s use of the broker contacts or attempt to claw back the materials.”
A few months later, Beam terminated Snyder.
In 2020, Snyder sued Beam for alleged trade secret misappropriation in connection with the list.
Beam moved for summary judgment, arguing that:
- Snyder failed to present sufficient evidence that he owned the Guardian Broker List;
- Snyder failed to present sufficient evidence that he took reasonable measures or efforts to safeguard the Guardian Broker List; and
- Beam did not misappropriate the Guardian Broker List from Snyder; instead, Snyder voluntarily emailed it to several Beam employees.
The district court granted the motion, finding that there was no evidence from which a reasonable jury could conclude that Snyder owned the list.
On appeal, the court noted that the plaintiff in a trade secret case has the burden to “identify the trade secrets” at issue and to “show[] they exist.”
Also,
to maintain its status, a trade secret must be protected by measures and efforts that are considered “reasonable under the circumstances to maintain its secrecy.”
What is “reasonable,” said the court, is fact-dependent, but in all cases it requires a higher level of diligence than “normal business precautions.”
The court noted that
Snyder insists that he took reasonable measures and efforts to maintain secrecy by saving the Guardian Broker List on his personal computer, on a USB drive, and on his password-protected work laptop. But even taking the facts in the light most favorable to him, these relatively benign actions are not reasonable measures to maintain the secrecy of the Guardian Broker List. Standing on its own, saving the alleged trade secret on the employer’s laptop – without protecting the document with a password or marking it as a trade secret or even confidential – is unreasonable.
Also, said the court,
Snyder’s other actions can only be described as unreasonable, given the context and circumstances of the trade secret claim. In his summary judgment response, he admits that he did not label the state-specific lists as confidential, password-protect the lists, require a confidentiality agreement to be signed by any Beam employees, or inform the Beam recipients that the broker names were confidential. … In turn, by openly sharing the Guardian Broker List with multiple Beam employees without any restrictions or notice that the information was a trade secret, Snyder failed to take reasonable measures or efforts to maintain secrecy under federal or Colorado law.
In addition, said the court,
Snyder argues that he “limited the disclosure” to the Texas, Utah, and Colorado broker lists via his three emails to a total of ten Beam employees…. But even construing the facts in the light most favorable to Snyder, no reasonable jury could find that Snyder “limited” their access. In his cover email attaching these spreadsheets, he did not include any language stating that access was restricted or that these documents could not be shared – either internally within Beam or externally with the world. Nor did he mark any of the spreadsheets as confidential or a trade secret. And Snyder sent three separate emails with the complete Guardian Broker List attached; in total, he sent it to ten Beam employees.
Further,
Snyder amplified his claimed accidental disclosure by failing to claw back the Guardian Broker List, failing to notify Beam’s employees of his mistake, and failing to mark any of these spreadsheets as a trade secret (or even as confidential) before sharing them with Beam employees.
The court concluded that
We have recognized that disclosing a trade secret does not automatically defeat trade secret protection. However, once disclosed, a plaintiff must take affirmative steps to safeguard the information and mitigate the blast radius of the accidental disclosure.
Thus, said the court,
Snyder failed to offer sufficient evidence showing that he took reasonable measures or efforts to maintain secrecy regarding the Guardian Broker List…
