Lexplug logoLexplug

American Paper & Packaging Products, Inc. v. Kirgan

California Court of Appeal
228 Cal. Rptr. 713, 183 Cal.App. 3d 1318 (1986)
ELI5:

Rule of Law:

Under the California Uniform Trade Secrets Act (UTSA), a customer list is not a protectable trade secret if the information is readily ascertainable through public means by competitors and is not the subject of reasonable efforts to maintain its secrecy.


Facts:

  • In 1984 and 1985, Afton Kirgan and Cimbria Anderson, respectively, signed salesperson agreements with American Paper & Packaging Products, Inc.
  • The agreements prohibited them from soliciting American Paper's customers or disclosing customer information for three years after termination of their employment.
  • A dispute over commission payments arose between the parties.
  • In August 1985, Kirgan and Anderson stopped working for American Paper.
  • Shortly thereafter, Kirgan and Anderson began working for a competitor of American Paper.
  • Kirgan and Anderson stated they developed their customer leads by driving through industrial-zoned areas and making unsolicited "cold calls" on manufacturing companies they identified.
  • American Paper alleged that Kirgan and Anderson were soliciting customers from confidential lists provided by the company.
  • Kirgan and Anderson countered that, with minor exceptions, their customer lists were the fruit of their own labor and were not provided by American Paper.

Procedural Posture:

  • American Paper & Packaging Products, Inc. sued its former employees, Afton Kirgan and Cimbria Anderson, in the Ventura County Superior Court (a trial court).
  • American Paper applied for a preliminary injunction to prevent Kirgan and Anderson from soliciting its customers.
  • The trial court denied the application for a preliminary injunction.
  • American Paper & Packaging Products, Inc., as appellant, appealed the trial court's order to the Court of Appeal (an intermediate appellate court).

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does a customer list qualify as a protectable trade secret under the California Uniform Trade Secrets Act when the information on the list is readily ascertainable by competitors through public means?


Opinions:

Majority - Beck, J.

No. A customer list does not qualify as a protectable trade secret under the California Uniform Trade Secrets Act (UTSA) if it is not inherently secret and valuable because of that secrecy. The court determined that customer lists can be trade secrets under the UTSA, which supersedes prior common law tests. However, to qualify, the information must meet the statute's two-prong test: 1) it must derive independent economic value from not being generally known to competitors, and 2) it must be the subject of reasonable efforts to maintain its secrecy. Here, the customer information was not a protectable secret because it consisted of manufacturers in need of shipping supplies, whose identities were readily ascertainable by competitors through simple means like driving through industrial parks and making 'cold calls.' American Paper failed to provide evidence that the lists contained specialized, confidential information or that it took reasonable steps, beyond the employment agreement itself, to maintain their secrecy.



Analysis:

This decision is significant for being an early interpretation of the California Uniform Trade Secrets Act (UTSA) as applied to customer lists. It clarifies that the statute's two-prong test for defining a trade secret supplants older, multi-factor common law tests. The ruling establishes that merely labeling information as confidential in an employment contract is insufficient; employers must demonstrate that the information has independent economic value precisely because it is secret and that they have taken reasonable protective measures. This raises the evidentiary burden for employers seeking to enforce non-solicitation clauses, requiring them to prove that customer information is not easily obtainable through legitimate, public means.

G

Gunnerbot

AI-powered case assistant

Loaded: American Paper & Packaging Products, Inc. v. Kirgan (1986)

Try: "What was the holding?" or "Explain the dissent"