No Non-Competes for Lawyers? Trade Secret Misappropriation Lawsuits against Big Law Lawyers and Firm Management on the Rise

15 May 2023 Labor & Employment Law Perspectives Blog
Author(s): Rachel Powitzky Steely

The legal profession reigns as the primary protector of client choice. No other profession — including doctors and accountants — protect the client’s choice of advisor as rigorously as legal governing bodies, with restrictive covenants generally unenforceable against members of the bar. Nonetheless, law firms have taken a page out of their own clients’ playbooks by litigating claims of trade secret theft against former attorneys and legal management in an effort they claim is necessary to preserve fair competition. The lawyers and legal management who are sued cry foul, claiming the lawsuits are anti-competitive and circumvent legal ethics rules. The result typically allows firms to sideline lawyers and legal management, at least temporarily, until the dust settles.

Big Law Sues after Lawyers and Management Resign

Two cases concerning law firms and trade secret theft have recently grabbed headlines. One of these cases was brought by a national labor and employment boutique firm, and it alleges that a former attorney wrongfully downloaded a large amount of client information to an external Drop Box after resigning. The attorney, who resides in California and was expected to move to Texas in 2024, claims the firm lacks personal jurisdiction and merely filed suit in Texas to make it difficult and expensive for her to defend herself.    

A second high-profile case was filed in New York by a large international law firm against its former Chief Operating Officer (COO). The COO gave one month’s resignation notice and then left on vacation for two  weeks. Prior to leaving on vacation, the COO allegedly circumvented IT protocols by downloading information on an external device and copying a “black bookbinder” with sensitive attorney compensation information. The COO claims he downloaded the information so he could work while on vacation overseas, but the firm did not buy that excuse. In fact, the COO had accepted a lucrative offer with a competing law firm, but the offer was allegedly revoked after the lawsuit was filed. The COO claims that the firm is using the media — rather than the court system — as the primary vehicle against him.

In addition to these matters, a Houston firm recently sued a former associate for trade secret theft, following a not-so-unique trend of filing claims against former attorneys after they leave to work for larger firms.

Notably, most trade secret cases against attorneys do not seek injunctive relief precluding the attorneys from working or soliciting prior clients. But, can trade secret misappropriation cases ultimately serve as a basis for injunctive relief, precluding attorneys from competing for a limited time period? Or, do state and American Bar Association ethical rules preclude this prohibition? Stay tuned to find out.

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