The art, science of avoiding costly litigation

Sam, your salesmen, quits.  A competitor hires him.  Your small business has no non-compete or confidentiality agreements, but you reminded employees regularly that you assembled client lists through years of work that contain notes about clients and best approaches to each.

You want to avoid a trial, but what should you do?

First, we’ll send a letter to Sam, describing the facts that support your claim that the list is a trade secret – how you compiled it, your reasonable secrecy measures, your “confidential” label, and access limitations – and why you think he’s using it. We’ll ask him to stop and return all copies to you.  Of course, he’ll either ignore the letter, or claim it’s not secret, or that he’s not using it.

So, a letter goes to Sam’s new boss, Betty, explaining that Sam has so many clients because he took information unlawfully from you. Now Betty is on notice that she must make Sam abandon the list or she may also be liable. Betty doesn’t hire a lawyer, so she just replies that Sam told her he didn’t take the list, he just made notes from it in his notebook and, anyway, there are only a limited number of potential clients in the region. What Betty doesn’t understand is that it’s not the document that’s secret; it’s the information in the document.

Most states, including Colorado, enacted the Uniform Trade Secrets Act, letting us ask a court to order Betty and Sam to stop and to give you money for their misbehavior. We may decide to add other claims, too. Perhaps something like interference with a contract, if, for instance, Sam had contacted an ongoing client and stolen them away.

We’ll list the facts we know and ask a judge to issue a temporary restraining order – directing Sam and Betty to stop using your information. If the court orders it, you’ll have another hearing very quickly where Sam and Betty – with lawyers by now – will tell the court why the restraining order should be lifted. In any event, Betty and Sam will write an answer to our complaint (charges). The court will enter a scheduling order and we will begin “discovery.”

Years ago, there was no discovery phase. People went directly to trial.  Discovery was instituted to streamline things – if you’ve been involved in litigation, you probably don’t believe this, as discovery has become very slow and expensive and seems to drag things out. However, discovery allows each side to know what the other side knows so they can resolve the dispute without trial. Ninety-five percent of all cases settle before trial. Discovery is the main reason. 

Once Betty and Sam see our evidence and we each take statements (depositions) from witnesses and each party, we will have a better idea of the value of the case, and how to resolve it.

We can have a settlement conference.  The mediator, or settlement master, will listen to everyone, then help them decide the best way to settle.  Both sides might make a proposal, then try to find a middle ground.  Or, the mediator may use experiences to say, “It seems like the maximum you could get from Sam and Betty is $100,000 and it seems there is about an 80 percent likelihood you will win, so you should try to settle for $80,000.” 

Unfortunately, Sam’s and Betty’s final offer to settle was $2,000, so we’re going to trial. But there’s one last chance to avoid a trial. This process, called summary judgment, sometimes resolves cases where there is really no genuine dispute as to the important facts. The judge simply applies the law. If the judge can determine there are enough facts not in dispute from the information we each received in discovery, we may avoid a trial.

If not, we go to trial and experience two directors (the lawyers) trying to direct separate plays on the same stage, and act in it, at the same time using amateurs who have never acted before (witnesses) to act out unscripted parts. The audience is a group of drama critics who have probably never done it before (jury). Meanwhile, a wild-card (the judge), sits and interjects stage directions.

Alan F. Blakley is a lawyer with CR MILES PC in Fort Collins. He may be reached at afblakley@crmiles.com. The information included in this column is general information. You should contact your own lawyer before making any legal decisions.