While a former employer cannot impose a non-compete restrictive covenant against an ex-employee in perpetuity, the recent case of Coeur, Inc. v. Wygal, No. 6:20-CV-06473 EAW, 2021 WL 4225657 (W.D.N.Y. Sept. 16, 2021) has shown that trade secrets can indeed remain secret forever.
By way of background, Defendant Chris Wygal (“Wygal”) was employed by Plaintiff Couer, Inc. (“Couer”) and subject to an Employee Non-Disclosure, Non-Solicitation, Invention and Technology Use Agreement (the “Employment Agreement”). The Employment Agreement contained the following restrictions: (1) a two-year post-termination restriction on the use, disclosure, or dissemination of Couer’s confidential information; (2) an ongoing post-termination restriction on the use, disclosure, or dissemination of Couer’s trade secrets; and (3) a two-year post-termination restriction on solicitation of Couer’s customers.
Couer claimed that Wygal worked for it until 2020, when he resigned and went to work for co-Defendant Antmed Corporation (“Antmed”). Couer further alleged that — prior to resigning — Wygal emailed himself various confidential and proprietary information and trade secrets belonging to Couer. Defendants then used this information to solicit Couer’s clients and distributors.
Couer brought an action for breach of contract, misappropriation of confidential information and trade secrets, as well as a breach of fiduciary duty against Wygal and claims of tortious interference with contract and misappropriation of confidential information and trade secrets against Antmed. Defendants thereafter filed a motion to dismiss pursuant to lack of standing and failure to state a cause of action.
As a first point, Wygal set forth evidence that he actually ended his employment with Couer in 2012 and became an employee of its parent company Illinois Tool Works, Inc. (“ITW”). Based on this, Wygal argued that Couer had no standing and that the restrictive covenants are no longer enforceable. The Court agreed with Wygal concerning the claims of faithless servant and breach of fiduciary duty since there was no employment relationship or other special relationship between Couer and Wygal at the time the alleged wrongdoing occurred. Indeed, he was employed by ITW. Further, the first at the third restrictive covenants expired after two and three years respectively, so they no longer applied.
However, the second covenant for the restriction on the use, disclosure, or dissemination of Couer’s trade secrets was an ongoing restriction and this still in force at the time of the alleged wrongdoing. In fact, the Court expressly found that “even accepting that Wygal ceased to be an employee of [Couer] in 2012, his contractual obligation not to use or disseminate [Couer’s] trade secrets continued in perpetuity.” Coeur, Inc., 2021 WL 4225657, at *4. Based on these terms, the Court refused to dismiss the breach of contract claim against Wygal or the tortious interference with contract claim against Antmed. The Court also refused to dismiss Couer’s claim for attorney’s fees.
As such, in drafting, evaluating and executing agreements containing restrictive covenants, it is important to note that while some restrictions may be limited by the agreement or by the law, trade secrets in particular have been allowed by the courts to be enforceable, along with the attendant attorney’s fees clause, in perpetuity.