Establishing Trade Secret Security Measures in NY

A recent decision by the Commercial Division in New York County requires specific pleading security measures to establish trade secret protection under New York law. Clean Earth Holding, Inc. v. Kopenhaver, et al., Ind. No. 604077/2007, Sup. Ct., NY Co., Commercial Part (Ramos) (April 26, 2010) (Unpublished)

Clean Earth is in the business of treating, recycling, reusing, transporting, and disposing of contaminated soil, dredge sediments, and other non-hazardous and hazardous materials. Clean Earth’s success was alleged to have been due to its unique position in the marketplace, pricing strategies, exclusive arrangements with third-party disposal facilities, and its client base that it had developed over the years.

Clean Earth alleged that defendant Richard Rivkin had breached his fiduciary duty by soliciting certain Clean Earth clients after his employment with Clean Earth was terminated. Clean Earth predicated this cause of action on the theory that its "Client List" was a trade secret and that Rivkin breached his fiduciary duties by providing the Client List to a competitor.

Justice Ramos noted the six factors that are considered in trade secret claims are:

(1) the extent to which the information is known outside of [the] business; (2) the extent to which it is known by employees and others involved in [the] business; (3) the extent of measures taken by [the business] to guard the secrecy of the information; (4) the value of the information to [the business] and [its] competitors; (5) the amount of effort or money expended by [the business] in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.’"

Justice Ramos then indicated that trade secret protection does not apply to names, addresses, and telephone numbers of clients or potential clients, if the information is readily available from public sources, such as a local telephone directory.

In dismissing the fiduciary duty claim on summary judgment, Justice Ramos first ruled that certain representations in a client certification that the Client List "is protected within our company in a number of ways, and access to the information is restricted internally" failed to demonstrate with sufficient detail the measures that were taken to guard the information’s secrecy. Justice Ramos then held that "Clean Earth fails to raise a triable issue that the Client List was not readily ascertainable to those in the industry or that it was compiled through great effort and expense. Therefore, it fails to demonstrate that the Client List qualifies as a trade secret."