Lyn-Flex West, Inc. v. Dieckhaus
24 S.W.3d 693, 1999 WL 1215946, 1999 Mo. App. LEXIS 2430 (1999)
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Rule of Law:
A compilation of business data, such as a detailed customer price and specification book, constitutes a trade secret if it derives independent economic value from not being generally known and is subject to reasonable efforts to maintain its secrecy. Corporate officers have a fiduciary duty to protect such secrets, and using a misappropriated trade secret to compete is not a justified business practice.
Facts:
- Lyn-Flex West, Inc. (plaintiff), a shoe insole manufacturer, compiled its customer identities, technical specifications, materials, pricing, and unique codes into a 'Detailed Price and Specifications Book' (price book).
- The price book was kept in an office with limited access, locked at night, and employees understood it to be confidential, though it was not formally stamped as such and employees had not signed confidentiality agreements.
- Wayne Dieckhaus, Dick Dieckhaus, and George Convy were officers of Lyn-Flex who unsuccessfully attempted to purchase the company from its owner's estate.
- Shortly after Wallace McNeill purchased Lyn-Flex, the three officers resigned.
- Immediately before his departure, Dick Dieckhaus had an employee print him a new copy of the price book, which was subsequently missing from Lyn-Flex's premises.
- The day after resigning, the three former officers established a competing company, Walk Easy Manufacturing Co., Inc., having already negotiated a lease and shopped for equipment.
- A copy of Lyn-Flex's price book was later seen being used at Walk Easy's offices and was recovered by police.
- Walk Easy began servicing many of Lyn-Flex's former customers, using identical product codes and charging slightly lower prices, causing Lyn-Flex significant financial losses.
Procedural Posture:
- Lyn-Flex West, Inc. filed suit against Wayne Dieckhaus, Dick Dieckhaus, George Convy, and Walk Easy Manufacturing Co., Inc. in the Circuit Court in Franklin County (trial court).
- The complaint alleged misappropriation of trade secrets, tortious interference with a business expectancy, and conspiracy.
- At the conclusion of the plaintiff's case-in-chief at trial, the defendants made an oral motion for a directed verdict.
- The trial court judge granted the defendants' motion, concluding that the plaintiff failed to produce sufficient evidence that its price book was a trade secret, and entered judgment for the defendants.
- Lyn-Flex West, Inc. (plaintiff-appellant) appealed the trial court's judgment to the Missouri Court of Appeals, Eastern District.
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Issue:
Does a detailed compilation of customer-specific product data, pricing, and technical specifications constitute a trade secret under the Uniform Trade Secrets Act when it is kept in a limited-access office and treated as confidential by employees, even without being stamped 'confidential' or employees signing non-disclosure agreements?
Opinions:
Majority - Simon, J.
Yes, a detailed compilation of customer-specific data can constitute a trade secret under these circumstances, and the plaintiff presented sufficient evidence of misappropriation to proceed to a jury. The court determined that the price book met the two-part definition of a trade secret under the Uniform Trade Secrets Act. First, it derived independent economic value from not being generally known, as evidenced by testimony that it gave a competitor a significant advantage. Second, Lyn-Flex made reasonable efforts to maintain its secrecy by limiting access, locking the office, shredding old copies, and fostering an understanding of its confidentiality among employees. The lack of a 'confidential' stamp or formal non-disclosure agreements was not dispositive, particularly because the defendants, as corporate officers, owed an independent fiduciary duty to protect the company's trade secrets. By taking the book and using it at their new competing business, the defendants misappropriated it, which also negated any 'justification' defense for their tortious interference with Lyn-Flex's business expectancies and provided the unlawful act necessary for a civil conspiracy claim.
Analysis:
This decision clarifies the 'reasonable efforts' standard for trade secret protection under the Uniform Trade Secrets Act in Missouri, establishing that formal measures like confidentiality stamps or non-disclosure agreements are not prerequisites if other actions demonstrate an intent to maintain secrecy. The ruling reinforces the principle that corporate officers have an intrinsic fiduciary duty to protect company trade secrets, which exists independently of any express contract. This precedent allows trade secret claims to proceed to a jury even without perfect, formalized secrecy protocols, especially in cases involving alleged misappropriation by former fiduciaries who were in a position of trust.
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