Dicks v. Jensen
768 A.2d 1279, 57 U.S.P.Q. 2d (BNA) 2007, 172 Vt. 43 (2001)
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Rule of Law:
Under the Vermont Trade Secrets Act, a customer list does not qualify for protection unless its owner takes reasonable efforts to maintain its secrecy, such as through confidentiality agreements or restricted access, regardless of the effort invested in its creation.
Facts:
- James Dicks owned the Lodge at Mount Snow, a business that relied heavily on bus tours arranged for senior citizen groups.
- In 1991, Dicks hired Cary and Brenda Jensen to manage the Lodge and its bus tour operations without a written employment or non-compete agreement.
- The Jensens developed the Lodge's customer base by culling names from public sources through mass mailings and extensive telephone solicitations, a process that took approximately six months of lead time per booking.
- Dicks took no measures to protect the customer list; there were no confidentiality agreements, access was not restricted, and tour group names were posted on a large reservation board in an office accessible to all employees and visitors.
- In 1997, the Jensens resigned from the Lodge to open their own competing inn in a nearby town.
- After leaving, the Jensens successfully solicited the Lodge's regular bus tour customers for their new business.
- Nine of the eleven tours the Jensens booked in their first season were with customers who canceled their existing reservations at the Lodge to rebook with the Jensens' new inn.
Procedural Posture:
- James Dicks (plaintiff) filed suit against Cary and Brenda Jensen (defendants) in the Windham Superior Court (trial court).
- The complaint alleged misappropriation of trade secrets, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, and tortious interference with business relations.
- The trial court granted the Jensens' motion for summary judgment on the trade secrets claim, finding the list was readily ascertainable.
- The trial court consolidated the fiduciary duty and good faith claims into the tortious interference claim, which proceeded to a jury trial.
- The jury returned a verdict for the defendants on the tortious interference claim.
- Dicks (Appellant) appealed the trial court's grant of summary judgment on the trade secrets and other claims to the Supreme Court of Vermont.
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Issue:
Does a customer list, compiled through significant effort but not subject to any measures to maintain its confidentiality, qualify as a trade secret under the Vermont Trade Secrets Act?
Opinions:
Majority - Johnson, J.
No. The customer list does not qualify as a trade secret because the plaintiff failed to take reasonable efforts to maintain its secrecy. The Vermont Trade Secrets Act establishes a two-part test: the information must 1) derive economic value from not being readily ascertainable, and 2) be the subject of reasonable efforts to maintain its secrecy. While the court found a genuine issue of material fact regarding the first prong (whether the list was 'readily ascertainable'), it affirmed summary judgment for the defendants on the second prong. The plaintiff, Dicks, presented no evidence of any measures taken to indicate the customer list was confidential, such as requiring confidentiality agreements, restricting access, or securing the information. Because the plaintiff made no effort to protect the list, it fails the statutory test for a trade secret as a matter of law. To rule otherwise would essentially create an implied covenant not to compete, which the court refuses to do in the context of an at-will employment relationship.
Analysis:
This decision emphasizes that both prongs of the Uniform Trade Secrets Act's definition must be satisfied for information to receive legal protection. It serves as a crucial warning to employers that the value of information or the effort expended to create it is, by itself, insufficient. An owner must take active, demonstrable steps to protect the information's confidentiality. The ruling also reinforces the principles of at-will employment, clarifying that courts will not use trade secret law or the implied covenant of good faith to impose post-employment restrictive covenants that were not explicitly part of an employment agreement.
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