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BFV Perspectives, Noncompete & Trade Secrets, | Jul 06, 2011

Eleventh Circuit Rules Sending Company Documents One Day Prior to Execution of Non-Disclosure Agreement Does Not Constitute a Breach of the Agreement

News America Marketing In-Store, LLC v. Emmel, No. 09-11858, 2011 WL 2222040 (11th Cir. June 8, 2011), addresses the somewhat unusual question of whether sending documents one day prior to executing a non-disclosure agreement could constitute a violation of the agreement.

Mr. Emmel was employed with News America Marketing In-Store, LLC (“New America”) as an Account Director.  During his employment, he came to believe that the company was engaged in widespread illegal activity against its customers, competitors and shareholders.  According to Mr. Emmel, his relationship with News America soured as a result of his knowledge of the activities and his belief that management did not intend to do anything about them.

Mr. Emmel was terminated on November 30, 2006.  Shortly after his termination, he became interested in a job with another company.  He asked News America to advise this company that he was not subject to any non-competition covenants.  News America agreed to provide Mr. Emmel a letter stating he was not under a non-compete agreement, if he would sign an agreement promising not to disclose any of News America’s confidential information.  He signed such an agreement on December 21, 2006.

Before Mr. Emmel had left the company, however, he had been disclosing confidential company information to individuals in several government offices without the company’s knowledge.  On December 20, 2006, the day before he signed the non-disclosure agreement, Mr. Emmel sent a package containing fifty-five pages of the company’s internal documents and confidential information to a staffer for the United States Senate Finance Committee.  He intentionally sent this information before signing the non-disclosure agreement.

News America filed a lawsuit against Mr. Emmel asserting numerous causes of action.  One cause of action was for breach of the non-disclosure agreement.  News America based this claim in part on Mr. Emmel’s mailing the information on December 20, 2006 and the fact that the documents had not reached their destination by December 21, 2006.  As such, according to News America, the disclosure took place after Mr. Emmel executed the agreement.  The District Court accepted News America’s argument, denying summary judgment on this claim and finding that the mailing of the documents on December 20, 2006 could constitute a breach of agreement.

On appeal, the Eleventh Circuit reversed, finding that the District Court should have granted summary judgment on News America’s claim based on the December 20, 2006 mailing.  The Eleventh Circuit noted that the December 21, 2006 non-disclosure agreement “contains no language that indicates the parties intended for it to apply retroactively or that provides assurance about any past events or actions.”  As such, the agreement only covered activities occurring after it was executed, and Mr. Emmel could not have breached the December 21, 2006 agreement by mailing company information on December 20, 2006.

BFV Perspectives, Noncompete & Trade Secrets, | Jul 06, 2011
Neal F. Weinrich
Neal F. Weinrich

Neal Weinrich knows noncompetes and trade secrets inside and out. A shareholder at Berman Fink Van Horn, Neal counsels clients in all industries on matters involving restrictive covenants, trade secrets and other competition-related issues.