Stampede Tool Warehouse, Inc. v. May
651 N.E.2d 209, 209 Ill. Dec. 281, 272 Ill. App. 3d 580 (1995)
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Rule of Law:
A customer list constitutes a protectable trade secret under the Illinois Trade Secrets Act (ITSA) if it is developed through substantial effort and expense, is not readily ascertainable from public sources, and is subject to reasonable measures to maintain its confidentiality. Misappropriation of such a trade secret can occur through memorization, not just physical taking.
Facts:
- Stampede Tool Warehouse, Inc. (Stampede) is a national distributor of automotive tools that sells to specialized 'jobbers,' such as service stations and tool dealers.
- Stampede developed its customer list of over 11,000 jobbers through a laborious and expensive 'prospecting' method, which involved calling end-users to identify their tool suppliers, costing approximately $50,000 per month.
- The names of these specialized jobbers were not available from a single public source or directory.
- Stampede implemented significant security measures to protect the list, including using computer access codes, keeping hard copies in locked offices, checking the garbage daily, and requiring employees to sign applications acknowledging the confidentiality of customer information.
- Employees, including Mark May and Fred Moshier, were not allowed to take customer cards or binders from the telemarketing room, and binders were locked up at the end of each shift.
- May and Moshier worked for Stampede from October 1990 until May 1991.
- Before leaving, Moshier was overheard at a meeting with other employees stating that he needed more time at Stampede to get the rest of his customers' names and telephone numbers.
- After leaving Stampede, May and Moshier began competing and contacted customers they had previously serviced, claiming they had reconstructed the list from memory.
Procedural Posture:
- Stampede Tool Warehouse, Inc. filed a lawsuit against its former employees, Mark May and Fred Moshier, in an Illinois trial court.
- On July 24, 1991, the trial court entered a temporary restraining order enjoining defendants from misappropriating the customer list.
- After conducting hearings, the trial court found that Stampede's customer list was a trade secret that defendants had misappropriated and granted permanent injunctions against them.
- Defendants May and Moshier, as appellants, appealed the trial court's order to the Illinois Appellate Court.
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Issue:
Does a customer list, developed through extensive and costly prospecting and protected by various security measures, qualify as a trade secret under the Illinois Trade Secrets Act, such that its use by former employees who recreated it from memory constitutes misappropriation that can be enjoined?
Opinions:
Majority - Justice Cerda
Yes, a customer list developed and protected in this manner is a trade secret that was misappropriated by the former employees. The court applied the two-part test under the Illinois Trade Secrets Act (ITSA). First, the list was sufficiently secret to derive economic value because it was not readily duplicable; it was created through a substantial investment of time, effort, and money, not from a single public directory. Second, Stampede took reasonable efforts to maintain secrecy through numerous measures like locked offices, computer codes, confidentiality agreements, and office security protocols. The court explicitly held that misappropriation does not require a physical taking of documents; memorizing confidential information and subsequently using it constitutes misappropriation under the Act. While the court affirmed that the list was a trade secret and was misappropriated, it found the permanent injunction overbroad in its duration. It modified the injunction to last for four years, reasoning this was the time it would reasonably take for the defendants to lawfully reproduce the information themselves.
Analysis:
This case solidifies the legal principle that a customer list can be a protectable trade secret under the ITSA if the owner demonstrates significant investment in its creation and reasonable efforts to maintain its secrecy. It is particularly significant for establishing that misappropriation does not require the physical theft of a list; the act of memorizing proprietary information and using it for competitive advantage is sufficient to violate the statute. The court's decision to limit the injunction's duration underscores the judicial aim of balancing the employer's right to protect its intellectual property against an employee's right to earn a livelihood. This creates a 'head start' period for the original company, equal to the time it would take a competitor to independently develop the same information legally.
