Nebraska Court: Agent Breached Contract but Client List Not a Trade Secret

By Stephanie K. Jones | April 8, 2014
Court

The Nebraska Supreme Court recently upheld the finding of a lower court that a crop insurance agent breached the terms of her contract with a former employer when she went to work for another agency.

However, in First Express Services Group Inc. v. Arlene A. Easter, et al, the Court ruled that the client list the agent took with her when she resigned from the agency could not be considered a trade secret because the information on the list was available from other sources.

Arlene Easter had long conducted business on her own as crop insurance agent when she joined the First Express Services Group in 1990, according to court documents. Her contract with First Express included a provision that during the term of the agreement and for five years afterward she would not share information about First Express’ business, including client lists, with another agency or broker.

In late 2009, Arlene Easter resigned from First Express and took with her a copy of the agency commission statement from one of the insurance companies with which she did business. The statement included a list of her First Express clients. Arlene Easter maintained that she took the list in order to track the commissions that were owed to her by First Express, according to the Supreme Court’s written opinion.

Arlene Easter later joined the agency in which her son, Mark Easter, was a partner and began contacting her former clients, asking them to renew with her at the new agency.

When First Express discovered that 90 percent of Arlene Easter’s clients had transferred their business to her new agency, it sued Arlene Easter for breach of contract. First Express also sued both Arlene and Mark Easter for misappropriation of trade secrets and unjust enrichment.

At trial, the jury returned multiple verdicts against the Easters. The district court entered judgment awards in varying amounts that included joint and several liability with Arlene Easter being liable for the bulk of the total award.

Breach of Contract

The Supreme Court was unmoved by Arlene Easter’s argument on appeal that there was no breach of contract on her part because the contract was unenforceable.

In its written opinion, the Court pointed out that while Arlene Easter had contested the enforceability of “the elements of breach, causation, and damages,” she had not contested the enforceability of the contract in earlier proceedings.

Arlene Easter “cannot now assert for the first time on appeal that the contract was unenforceable,” the Court’s written opinion states. “When a party raises an issue for the first time on appeal, we will disregard it because a lower court cannot commit error in resolving an issue never presented and submitted to it for disposition.”

Trade Secrets, Unjust Enrichment, Mark Easter

Arlene Easter claimed that the information on the client list, including customer names, contact information and insurance information was not a trade secret because that information was available from other sources.

The Court agreed, stating that “because the customers’ identities and contact information were ascertainable from public sources, and because the other information on the list was also ascertainable by proper means, the customer list was not a trade secret.”

Because the client list was not considered a trade secret, the Court reversed the trial jury’s finding against Arlene Easter on the misappropriation of trade secrets claim.

The Court also found that under Nebraska law Arlene Easter “cannot be liable for both breach of contract and unjust enrichment for the same conduct.”

The jury found against Arlene Easter on the breach of contract claim, the Court said, “and because liability under a contract displaces liability under an unjust enrichment theory, Arlene is not liable for unjust enrichment.”

The Court reversed all judgments against Mark Easter. Because the client list was not a trade secret, the misappropriation of trade secrets claim against Mark Easter is, as in the case of Arlene Easter, not valid, the Court said. The Court also found no evidence that Mark Easter personally profited from the use of the customer list, and therefore could not be found to have been unjustly enriched by it.

In the case of Mark Easter, “the record failed to show that he engaged in wrongful or unjust conduct, that his conduct proximately caused damage to First Express, or that piercing the corporate veil was appropriate,” the Court’s opinion states.

Ultimately, the state Supreme Court concluded that Arlene Easter was liable for breach of contract and awarded the amount of $360,121.72.

 

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