Bernier v. Merrill Air Engineers
2001 ME 17, 770 A.2d 97, 2001 Me. LEXIS 15 (2001)
Rule of Law:
A nondisclosure clause in an employment contract is enforceable if it is reasonable, even for confidential information not rising to the level of a trade secret, and such a clause does not require durational limits to be valid.
Facts:
- James G. Bernier worked as an engineer for Merrill Air Engineers from 1988 through March 1997.
- In 1993, Merrill's president signed a memorandum promising engineers a three percent commission on projects, which Bernier periodically received but had three outstanding claims for when he left.
- From 1995, Merrill, with Bernier playing a key role as manager of contract engineering and design, invested time and resources in developing a custom product dryer for Henry Molded Products, Inc., including conducting tests and creating detailed proposals.
- On January 24, 1997, Merrill submitted a confidential proposal for the dryer to Henry Molded Products, expressly stating that the engineering design information was proprietary.
- After Henry made a preliminary commitment to purchase Merrill's dryer design, Bernier contacted Henry for a job opportunity, and he was informed of Henry's objective to obtain dryers at the lowest price.
- Bernier resigned from Merrill in March 1997 and accepted a position at Henry, which included bonuses for dryers built while he was employed there.
- Henry Molded Products subsequently canceled its order for Merrill's dryer.
- By the end of 1997, a new dryer was built at Henry under Bernier’s supervision, which varied from Merrill’s design but utilized common components and knowledge gained during the Merrill proposal process for Henry.
Procedural Posture:
- James G. Bernier filed suit against Merrill Air Engineers in the Superior Court (Cumberland County) for, among other claims, unpaid commissions.
- Merrill Air Engineers counterclaimed, alleging Bernier breached his employment contract and misappropriated trade secrets.
- Following a jury-waived trial (bench trial), the Superior Court found Merrill liable for past commissions, trebled the unpaid commissions, and awarded attorney fees to Bernier.
- The Superior Court also found that Bernier breached paragraphs three and four of his employment contract and awarded damages to Merrill for the breach.
- The Superior Court further found that Bernier did not use or disclose Merrill’s trade secrets in violation of the Uniform Trade Secrets Act (UTSA).
- Bernier appealed the Superior Court's judgment to the Supreme Judicial Court of Maine, challenging the finding of breach of the nondisclosure clause and the court's sua sponte amendment of pleadings.
- Merrill Air Engineers cross-appealed the Superior Court's judgment to the Supreme Judicial Court of Maine, challenging the award of attorney fees and trebled unpaid commissions to Bernier and the finding that Bernier did not violate the UTSA.
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Issue:
Is a nondisclosure clause in an employment contract enforceable to protect an employer's "particularized, highly specialized proprietary protected original work" that does not necessarily meet the full definition of a "trade secret" under the Uniform Trade Secrets Act, and is such a clause reasonable without specific durational limitations?
Opinions:
Majority - DANA, J.
Yes, a nondisclosure clause in an employment contract is enforceable to protect an employer's "particularized, highly specialized proprietary protected original work" that does not necessarily meet the full definition of a "trade secret" under the Uniform Trade Secrets Act, and such a clause is reasonable without specific durational limitations. The Supreme Judicial Court of Maine affirmed the Superior Court's judgment on all points. Regarding unpaid commissions, the Court found no clear error in the Superior Court's determination that Bernier's commissions were not contingent on the availability of cash. The original commission agreement lacked such language, and evidence, including Bernier's testimony and the acknowledgment of Merrill's perpetual cash flow issues, supported this finding. Consequently, the commissions were due, and the trebling of unpaid wages and the award of attorney fees under 26 M.R.S.A. § 626 were proper. On the breach of the nondisclosure clause (Paragraph 3), the Court held that an employer can contractually prevent a former employee from using "confidential knowledge gained in the course of the employment," even if this information does not strictly qualify as a trade secret under the UTSA, citing Roy v. Bolduc. The nondisclosure clause in Bernier's contract was deemed reasonable because it protected Merrill's "particularized, highly specialized proprietary protected original work" specific to the Henry dryer proposal, without imposing undue hardship on Bernier or being broader than necessary to protect Merrill's business. The clause did not prohibit Bernier from using general skills. The Court explicitly stated that durational limits are not required for nondisclosure clauses, unlike non-compete agreements, because confidentiality is not bound by time or geography. Sufficient evidence supported the finding that Bernier breached this clause by utilizing Merrill's "original work" (the conceptual design and process developed for Henry) while designing the dryer at Henry. Concerning the improper sua sponte amendment of pleadings, the Court found that the Superior Court erred in amending the pleadings to include a breach of Paragraph 4 (non-compete) without clear evidence of the parties' consent to try that issue under M.R. Civ. P. 15(b). However, this error was determined to be harmless, as the breach of Paragraph 3 (nondisclosure) alone provided a sufficient basis to affirm the breach of contract finding. Regarding the trade secrets claim (UTSA), the Court affirmed the Superior Court's finding that the information used by Bernier did not constitute a trade secret. Applying the five Spottiswoode factors, the lower court's conclusions that factors 1 (value), 2 (effort/money), 4 (ease of duplication), and 5 (public domain) weighed against trade secret status were not clearly erroneous. While acknowledging a potential misperception by the Superior Court regarding "proper means" for reverse engineering under factor 4, the Court concluded that the overall finding against trade secret status was still not clearly erroneous, considering the balance of factors.
Analysis:
This case significantly clarifies the scope and enforceability of nondisclosure clauses in employment contracts under Maine law. It establishes that employers can protect a broader category of confidential, proprietary information—"particularized, highly specialized proprietary protected original work"—that may not meet the strict definition of a "trade secret" under the UTSA. The key distinction from non-compete agreements is the ruling that nondisclosure clauses do not require durational or geographic limits, reinforcing their enduring nature. This decision provides employers with a robust tool for protecting valuable business intelligence, influencing how employment contracts are drafted and enforced concerning specialized knowledge and client-specific solutions developed during employment.
