Inevitable Disclosure Doctrine Fails Again (This Time In New York)

by Lee Gesmer on November 5, 2013

I’ve written about the “inevitable disclosure doctrine” many times over the years, most recently in a blog post focusing on Massachusetts case law.  This line of cases arises when an employee does not have a noncompete agreement, but does have a non-disclosure/trade secret agreements.  The employer then argues, based on the NDA/trade secret agreement, that the employee will  ”inevitably” disclose the former employer’s trade secrets or confidential information in the course of working for a competitor, and therefore should be enjoined from working for the competitor. Disclosure of the employer’s trade secrets is, the employer argues, “inevitable” without an injunction.

Lawyers have been bringing cases under this theory for years, with lottery-like success. As I stated in a July 2012 post, “cases where the courts have accepted this theory without evidence of actual misappropriation are almost as rare as hens teeth.” Nevertheless, lawyers are a persistent bunch, and they Just. Keep. Trying.

In September a New York federal court, applying New York law, proved the near-futility of this legal  theory once again. In Janus et Cie v. Andrew Kahnke (S.D.N.Y. Aug. 29, 2013), the district court judge dismissed an employer’s complaint against a former employee, where the case was based entirely on the alleged inevitable disclosure of trade secrets.

As is typical in these cases, the former employee had not signed a non-compete agreement with Janus (the former employer), but had signed a non-disclosure agreement that prohibited him from sharing Janus’s “confidential information.”  Janus’ suit sought a permanent injunction against the employee working for a Janus competitor (a classic case of overreaching that likely disposed the court against Janus from the outset).

Dismissing the case, the court stated that Janus had made “the extraordinary request that the Court be the first to recognize the inevitable disclosure of trade secrets as a stand-alone claim in a complaint bereft of any allegations that [the employee] misappropriated trade secrets or breached a non-compete agreement.”  The court stated that the inevitable disclosure doctrine should be applied “only in the rarest of cases,” and not where (as in this case) the employer is unable to show that the former employee misappropriated its trade secrets. The court stressed that the doctrine was “fraught with hazard” and that the facts alleged had failed to persuade the court that Janus had successfully “threaded the ‘exceedingly narrow path through judicially disfavored territory.”

In other words, as I stated in the post linked above, in the absence of a valid non-compete agreement, to have a chance of succeeding under “inevitable disclosure,” a plaintiff must have proof that trade secrets have been  disclosed, not that they might be disclosed in the future. As the law goes in Massachusetts, so it goes in New York and most other states.

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