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Help! My sales rep stole my business plan!

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J

JMere2002

Guest
I opened a restaurant in Tennessee 8 months ago. I had a sales representative from a large distributor from whom I bought food products. This man knew my recipe ingredients, business plan, target market, cost of sales, basically everything about my business. My type of restaurant was very unique to the area I live in. There were no other establishments other than mine offering take out and delivery of Southwestern menu items- until now. I just found out yesterday that the salesperson who represented me when I first opened is opening a Southwestern take-out and delivery restaurant of his own. It seems that he has stolen my idea. I understand that business is business, but it seems to me that the relationship he had towards me as my sales agent puts him in a special position. Does he have the right to use my proprietary secrets to his advantage?
Joan
 


JETX

Senior Member
Generally, you are correct in that you can protect your 'trade secrets'. However, you have to have at least made some attempt to 'make' people aware that they were secrets. This is normally done with a contract or 'secrecy agreement' between the parties.

Did you have one?? If you did, then you could have a case of breach of contract, among other remedies. If you didn't have one, you will have a much harder time (if at all possible) to show that his use of the information was protected and not a result of his thinking. This means that you would have to be able to PROVE a substantial amount of the 'idea' was taken. This could include ' the look and feel', menus, recipes, layouts, organization, etc.

Also, you need to consider that a suit like this is NOT cheap. You will need to have a considerable amount of Discovery process and legal ability to convince a court of the 'theft'. You might want to consult an attorney in your state to see what, if anything, you can actually do.
 
J

JMere2002

Guest
Unfortunately, there was no contract. In all my years in restaurant management, I have never heard of a sales rep having a contract with a client. So, my not having had one with this particular individual is not unusual. If I had this business to start over again, though, I wouldn't so much as breathe in someone's general direction without a contract. I seem to get burned at every turn.

It just seems to me that it would be implicit in his job description that he work on my behalf, not against me. Perhaps that has no legal bearing, though.

Joan
 

I AM ALWAYS LIABLE

Senior Member
My response:

On this issue, I tend to disagree with my esteemed collegue, Steve, and believe that our writer has a valid point - - although he didn't quite express it in the following manner.

In our writer's fact situation, there was in existence a Principle / Agent relationship; that, for these two people to conduct business, certain business ideas, processes and thoughts had to be exchanged between them.

While there was no actual written contract for "secrecy" between them, which would have made matters much easier for our writer, it was still most assuredly implied so that our writer could conduct business with his agent. The agent breached our writer's "confidence" by gaining information that may have taken our writer years to develope, and only days to copy and put into practice by the agent; thus, wrongfully profiting from the many years of trial, labor, experimentation, and developement that our writer had to have endured on his own.

The California Supreme Court has never expressly decided whether an action for breach of confidence exists separately from a breach of contract action [Davies v Krasna (1975) 14 Cal 3d 502, 121 Cal Rptr 705, 535 P2d 1161, 79 ALR3d 807], but numerous appellate decisions have recognized this separate tort cause of action [Tele-Count Engineers, Inc. v Pacific Tel. & Tel. Co. (1985, 1st Dist) 168 Cal App 3d 455, 214 Cal Rptr 276].

The tort of breach of confidence is based on the concept of an implied obligation or contract between the parties. It is an obligation in law where in fact the parties may have made no promise. The tort is not based on apparent intentions of the involved parties. The gravamen of the tort is an understanding between the parties that an idea is offered upon a condition of confidence. [Tele-Count Engineers, Inc. v Pacific Tel. & Tel. Co. (1985, 1st Dist) 168 Cal App 3d 455, 214 Cal Rptr 276]

This cause of action involves the extra element of an important relationship. The damages flow from the disruption of that relationship. Copyright protectability of a literary work is not a necessary element of proof in a cause of action for breach of confidence. [See Balboa Ins. Co. v Trans Global Equities (1990, 3rd Dist) 218 Cal App 3d 1327, 267 Cal Rptr 787]

The action differs from one for breach of a confidential relationship. A fiduciary type relationship need not be established, and breach of a confidence is not constructive fraud. [Davies v Krasna (1975) 14 Cal 3d 502, 121 Cal Rptr 705, 535 P2d 1161, 79 ALR3d 807]

Elements of actionable breach of confidence
In order to prove an actionable breach of confidence, the holder of an idea must establish the following [Tele-Count Engineers, Inc. v Pacific Tel. & Tel. Co. (1985, 1st Dist) 168 Cal App 3d 455, 214 Cal Rptr 276]:

(1). That he or she disclosed novel information;

(2). That he or she made known the confidential nature of the idea;

(3). That the recipient of the idea had an opportunity to reject receipt of the idea on a confidential basis before it was disclosed;

(4). That the recipient voluntarily accepted the idea with the understanding that it would be kept confidential;

(5). That the recipient disclosed or used the idea in breach of confidence;

(6). That disclosure or use of the idea was the proximate cause of damage to the holder of the idea; and

(7). The nature and extent of the damages suffered.

If the holder of an idea seeks to make a third person to whom the idea was disclosed by the original recipient liable, the holder must show that the third person had notice that the idea was confidential and used it anyway. [Tele-Count Engineers, Inc. v Pacific Tel. & Tel. Co. (1985, 1st Dist) 168 Cal App 3d 455, 214 Cal Rptr 276]

Proof of elements of breach of confidence
A confidential relationship will not be created from the mere submission of an idea to another; there must exist evidence of the communication of the confidentiality of the submission or evidence from which a confidential relationship may be inferred. The factors from which such an inference may be drawn include the following [Faris v Enberg (1979, 2nd Dist) 97 Cal App 3d 309, 158 Cal Rptr 704]:

(1). Proof of the existence of an implied-in-fact contract;

(2). Proof that the material submitted was confidential and protected by reason of sufficient novelty and elaboration; or

(3). Proof of a confidential or fiduciary relationship, such as a partnership, joint adventureship, agency, or a buyer and seller relationship under certain circumstances.

Statute of limitations for breach of confidence actions
The limitations period for a cause of action for breach of confidence is 2 years. [CCP §339(1)] The period begins to run when the plaintiff learns of the unauthorized disclosure. [Davies v Krasna (1975) 14 Cal 3d 502, 121 Cal Rptr 705, 535 P2d 1161, 79 ALR3d 807]

I do, however, agree with Steve that such litigation is going to cost, as we both like to say, "a boatload of money".

I wish you well, my friend, with whatever course you decide upon.

IAAL

[Edited by I AM ALWAYS LIABLE on 05-12-2001 at 05:04 PM]
 

JETX

Senior Member
Ah, but we do agree, Master.

My post said:
"Generally, you are correct in that you can protect your 'trade secrets'. However, you have to have at least made some attempt to 'make' people aware that they were secrets. This is normally done with a contract or 'secrecy agreement' between the parties."
AND
IAAL's post said (the following is required to prove beach of confidence):
""(1). That he or she disclosed novel information;
(2). That he or she made known the confidential nature of the idea;
(3). That the recipient of the idea had an opportunity to reject receipt of the idea on a confidential basis before it was disclosed;
(4). That the recipient voluntarily accepted the idea with the understanding that it would be kept confidential;"

Also, My post said that a written agreement wasn't required, but was certainly desirable ("you will have a much harder time (if at all possible) to show that his use of the information was protected and not a result of his thinking.")
AND
IAAL's post (which was more technical (and accurate) said:
"While there was no actual written contract for "secrecy" between them, making matters much easier for our writer, it was still most assuredly implied so that our writer could conduct business with his agent."

Personally, I think that our positions are in virtual agreement, though mine may have been an 'oversimplification of the specifics'.
 

I AM ALWAYS LIABLE

Senior Member
My response:

I do enjoy having discussions with you. Yes, you are correct that we were closer together in this matter than I first opined. But, in my defense, it seemed, at least to me, that you gave our writer the "impression" that there may be nothing, or very little, he could do against this miscreant. I guess, that's where I took my flight of fancy thinking that we disagreed.

Anyway, as an extra bonus, the following should be helpful to our writer:

While the following is an example of a California Complaint for Breach of Confidence, I'm sure that our writer, should he wish to take action, could "massage" it for use in Tennessee. Hey, it's his only chance ! And who knows, he could hit the jackpot.

Also, I encourage our writer to search the Internet for "Confidentiality Agreement" for the future. That way, when he has to discuss his "plans" with anyone in the future, he'll be prepared. There are a plethora of different agreements on the Net - - find one closest to your situation and "massage" it also, to meet your specific needs.


Complaint for breach of confidence


_________[Name, office address, telephone number, and
state bar number of attorney]
Attorney for Plaintiff


SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF _________
_________[Name],
a California corporation, Case No. _________
Plaintiff, COMPLAINT FOR DAMAGES,
ACCOUNTING,

vs.
AND INJUNCTIVE RELIEF
_________[Name], (BREACH OF CONFIDENCE)
a _________ corporation,
and DOES 1 through
20, inclusive,
Defendants.


____________________________________________________________
Plaintiff alleges:
1. Plaintiff, _________[name], is now, and at all times mentioned in this complaint was, a corporation organized and existing under the laws of the State of _________ and doing business as a _________[describe business, for example: telephone cable counting contractor]. Plaintiff has registered with the Secretary of State of California as required by Corporations Code section 15692. Plaintiff’s principal place of business is in _________ County, California.
2. Defendant, _________[name], is now, and at all times mentioned in this complaint was, a corporation organized and existing under the laws of the State of _________ and doing business as a _________[describe business, for example: telephone cable counting contractor and a telephone company]. Defendant has registered with the Secretary of State of California as required by Corporations Code section 15692. Defendant’s principal place of business is in _________ County, California.
3. Plaintiff is unaware of the true names and capacities of defendants Does 1 through 20, inclusive, and each of them, and therefore sues these defendants by these fictitious names. Plaintiff will ask leave to amend this complaint to state their true names and capacities when ascertained. Plaintiff is informed and believes, and on that basis alleges, that each of the defendants named as a Doe was in some manner responsible for the injury and damage suffered by plaintiff as alleged in this complaint. Plaintiff is informed and believes, and on that basis alleges, that some of the defendants were the agents and employees of their codefendants, and each of them, and in doing the things alleged in this complaint were acting within the scope of their authority as agents and employees, with the permission and consent of their codefendants.
4. Since _________[date], plaintiff has devoted over _________ hours and $_____ to develop a novel and unique idea for _________[describe idea, for example: forms used to compile information gathered in counting cable, part of the process of taking inventory of telephone systems]. Details of plaintiff’s ideas for the _________[describe idea, for example: form] had not been disclosed to the public generally or to persons in the industry.
5. On or about _________[date], plaintiff met with defendant, _________[name], at _________[specify place, for example: defendant’s office]. At the meeting, plaintiff stated that plaintiff had developed a new _________[describe idea, for example: form] and briefly described it to defendant. Plaintiff stated that plaintiff was willing to offer a detailed description of the _________[describe idea, for example: form] to defendant on a confidential basis so that defendant could decide whether defendant was interested in purchasing from plaintiff the right to use, produce, and sell the _________[describe idea, for example: form].
6. Plaintiff made it clear that defendant could reject receipt of the information on a confidential basis.
7. Defendant then indicated that defendant was interested in looking over plaintiff’s materials on the _________[describe idea, for example: form], and plaintiff then delivered the materials to defendant. _________[If appropriate, add: Each page of the materials was clearly marked "Confidential Property of _________ (plaintiff’s name).]
8. Defendant later refused to return calls from or to meet with plaintiff. Within _________[time period] after the meeting with defendant, plaintiff saw that the _________[describe idea, for example: form] was being used by defendant and distributed to those hired by defendant to _________ [count cable or as the case may be]. The _________[describe idea, for example: form] used by defendant was substantially similar to that disclosed by plaintiff to defendant, in that _________[specify similarities].
9. Defendant violated defendant’s duty to protect the confidentiality of plaintiff’s idea by using the _________[describe idea, for example: form] for defendant’s own economic benefit in defendant’s own business and disclosing it without plaintiff’s consent.
10. At no time did defendant offer to purchase the _________[describe idea, for example: form] from plaintiff or offer plaintiff any compensation for the use of the idea. At the time plaintiff offered the confidential idea to defendant, the confidential idea had a reasonable value of $_____.
11. In the absence of an injunction, defendant will continue to violate plaintiff’s rights in the ways discussed above. Because of this, and because defendant is in direct competition with plaintiff, use of a product copied from plaintiff’s ideas will mean that defendant will inevitably continue to wrongfully disclose and use plaintiff’s confidential idea and unfairly compete with plaintiff, and misappropriate plaintiff’s confidential and proprietary idea, unless defendant is enjoined from continuing to use or disclose plaintiff’s confidential and proprietary idea. If defendant is allowed to continue the wrongful acts, plaintiff will suffer further immediate and irreparable injury, loss, and damage, including, without limitation, damages, the amount of which will not be readily ascertainable, loss of sales, the amount of which will not be readily ascertainable, and irreparable injury to plaintiff’s reputation and goodwill.
12. Plaintiff has no adequate remedy at law to compel defendant to cease its wrongful actions, and unless an injunction is granted, plaintiff will be compelled to prosecute a multiplicity of actions, in each of which it will be difficult to ascertain the amount of compensation that will afford plaintiff adequate relief.
13. As a proximate result of defendant’s breach of confidence and use of plaintiff’s confidential and proprietary idea, defendant has and will profit in an amount of which plaintiff is presently uncertain, but for which defendant should be required to account to plaintiff.
14. Plaintiff is informed and believes, and on that basis alleges, that defendant committed the act of breach of confidence willfully and maliciously in that defendant knowingly used and distributed plaintiff’s confidential idea without compensating plaintiff. Defendant’s conduct justifies an award to plaintiff of punitive damages.
15. Defendant’s violation of its duty of confidence to plaintiff was the proximate cause of the injuries and damages suffered by plaintiff as alleged above.
WHEREFORE, plaintiff requests judgment against defendant for the following:
1. Temporary and permanent orders enjoining defendants from destroying, disposing of, disclosing, or using any of plaintiff’s property;
2. An accounting to plaintiff of the profits, including all funds and property, received by defendant as a result of defendant’s breach of confidence and use of plaintiff’s confidential and proprietary idea, and payment over of those funds and property
3. Punitive damages;
4. Costs of this action;
5. Any alternative and additional relief as may be just and proper.

Dated _________.
_______________________
[Signature]
Attorney for Plaintiff



 
J

JMere2002

Guest
Thanks for the informative responses. I am sure the matter could become quite costly to pursue. Perhaps my father will give me some sort of discount. It sounds like it is worth further investigation.
Joan
 

I AM ALWAYS LIABLE

Senior Member
JMere2002 said:
Thanks for the informative responses. I am sure the matter could become quite costly to pursue. Perhaps my father will give me some sort of discount. It sounds like it is worth further investigation.
Joan
My response:

What !

Is your father an attorney ?

You're welcome. Your post was truly one of the more interesting posts we've received in a long time. You have no idea how many of the same or similar scenarios we get from most everybody. It sometimes gets boring.

But, yours surely lit a fire under my butt !

It probably would have lit a fire under Steve's butt also; however, lately it's been chewed off - - so he doesn't have one anymore (Inside joke). But, buttless or not, Steve is one of our premier contributors to this site.

Again, glad to have hopefully helped.

IAAL

[Edited by I AM ALWAYS LIABLE on 05-12-2001 at 06:03 PM]
 
J

JMere2002

Guest
Yes, my father is an attorney. Everyone should have at least one in the family. Like I said, I am going to talk to him tomorrow, but I always like to do a little research first. It helps me ask the right questions. So, your input is appreciated, and I am glad you found the topic interesting.

I have read of Steve's butt. I have to admit, I have been a bit of a forum junkie as of late. The business is wonderful, but it is the most stressful project I have ever undertaken. I read a lot on the Internet to get my mind on other things. I am always amazed at how offended people can get over remarks made to them by complete strangers - particularly when one's opinion is precisely what they have requested.

Joan
 

I AM ALWAYS LIABLE

Senior Member
JMere2002 said:
I am always amazed at how offended people can get over remarks made to them by complete strangers - particularly when one's opinion is precisely what they have requested.
My response:

Yes, they do. Even if it's for free.

Steve, myself, and others here, have issued "refunds" many times.

Please, after your discussion with your father, would you please come back with some feedback on our discussion ?

So long, for now.

IAAL
 

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