Implied Duty to Not Disclose Accounts and Trade Secrets and Exceptions to the Rule
by
Joseph C. Maya on Mar. 01, 2024
Summary: Booth Waltz Enterprises v. Kimlingen, 2004 Conn. Super. LEXIS 2682
Booth Waltz Enterprises was an automotive and industrial lubricant distributor based in Hartford, Connecticut that transacted with auto dealers, fleet owners, and public entities. Mr. Kevin Kimlingen worked for Booth Waltz as a sale representative from April 2000 to October 2003. Booth Waltz’s management was impressed by Mr. Kimlingen’s practice of “rolling”, the art of convincing his customers to follow him to a new employer. He “rolled” forty-five accounts to Booth Waltz within his first month at the company.
Booth Waltz took advantage of Mr. Kimlingen’s talents to acquire many new clients when the company hired him but it was very cognizant that it would have to take measures to protect its interests given his history of mobility and “rolling” within the industry. In the summer of 2003, Booth Waltz prepared a non-solicitation agreement for its employees to better regulate the activities of its sales staff. Mr. Kimlingen expressed great reluctance to sign the restrictive covenant when he received it in October 2003 and Booth Waltz assumed he resigned from its employ when he failed sign the agreement or attend a mandatory staff meeting.
Customer Solicitation
Mr. Kimlingen began to work for U.S. Lubes, a direct industry competitor, and he began “rolling” his Booth Waltz accounts to his new employer. Booth Waltz sued Mr. Kimlingen in Connecticut state court and sought injunctive relief to prevent any further solicitations of its customers. Booth Waltz argued that although Mr. Kimlingen may not have breached an actual restrictive covenant, his actions violated the Connecticut Uniform Trade Secrets Act, which by default prohibited certain competitive activities.
The company argued that the customer lists Mr. Kimlingen took with him to his new employer was Booth Waltz’s sensitive and proprietary information. Former employees may compete with a former employer in the absence of a non-compete agreement, but he or she is still bound by a duty to not disclose trade secrets or confidential information acquired during his or her employment to the detriment of the former employer.
The Court’s Decision
The court ultimately held that Mr. Kimlingen did not violate a covenant or implied duty by “rolling” clients from Booth Waltz to U.S. Lube. A vast majority of these accounts had long-standing relationships with Mr. Kimlingen that pre-dated his employment with Booth Waltz. The court concluded that these customer relationships were not property of Booth Waltz and the company had no authority or legal right to label the contact information as its proprietary information.
The court noted, “in the absence of a covenant not to compete, an employee who possessed the relevant customer information prior to the former employment is free to use the information in competition with the employer after termination of the employment relationship” (Restatement (Third), Unfair Competition § 42, comment f), and denied Booth Waltz’s request for an injunctive in light of no legally binding restrictive covenant or an implied duty.
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