Louisiana Appellate Court Addresses Customer Lists and Irreparable Harm In Trade Secret Case
A recent Louisiana court of appeal decision provides guidance on two issues that frequently arise in trade secret cases. Southern Marsh Collection, LLC v. State Traditions, LLC, 2017 WL 4985217 (La. App. 1st Cir. 2017) addresses the recurring question of when customer lists qualify as trade secrets and—somewhat surprisingly—holds the Louisiana Uniform Trade Secrets Act does not require a showing of irreparable harm for injunctive relief.
Factual Background. In Southern Marsh Collection, a Louisiana company sold casual clothing to retail outlets. The Louisiana company maintained electronically-stored contact information, including email addresses for individual decision makers, for over 500 different customers in 15 states. In violation of a confidentiality agreement, an employee of the Louisiana company supplied this information via email to a competing Alabama company. The Louisiana company sued for and obtained a preliminary injunction that prohibited the Alabama company from using the customer list or contacting any of the customers on the list with whom the Alabama company did not have a preexisting relationship.
On Appeal. The Alabama company in Southern Marsh Collection argued that the customer list did not qualify as a trade secret because most of the information was publicly available. In fact, a competitor could obtain most of the information by using the “store locator” feature on the Louisiana company’s own website. In many cases, courts have refused to treat customer lists as trade secrets when the information can be obtained through proper channels.
The appellate court acknowledged all this, but nevertheless affirmed the injunction. The court held that the Louisiana company had proved that the customer list qualified as a trade secret even though much of the information was readily ascertainable. The real value in the list lay in the email addresses. Many buyers or store owners have multiple email addresses, with one being a “public facing” address, while the other is a “private” address where people expect to get “real” information that is not unsolicited mail (i.e. “spam” email). The Louisiana company had accumulated valuable private addresses for its customer contacts that the Alabama company could not readily obtain through proper means.
The Alabama company also argued that the trial court had improperly granted the injunction because the Louisiana company failed to prove that use of the list would cause it irreparable harm; the harm to the Louisiana company, supposedly, could be measured in the form of lost profits. Louisiana’s Code of Civil Procedure, in its article 3601, says that an injunction “shall be issued in cases where irreparable injury, loss, or damage may otherwise result to the applicant.” “Irreparable” harm is that which may not be remedied with a damage award.
Some Louisiana cases before Southern Marsh Collection have suggested that a plaintiff in a trade secret case must prove irreparable harm to obtain an injunction. However, article 3601 also says that a court may issue an injunction “in other cases specifically provided by law.” The court of appeal in Southern Marsh Collection pointed out that the Louisiana Uniform Trade Secrets Act specifically provides for injunctions against “actual or threatened misappropriations,” without saying anything about irreparable harm. In fact, the Trade Secrets Act says that plaintiff may recover damage awards “in addition to or in lieu of injunctive relief.” Thus, according to the court in Southern Marsh Collections, “the possible existence of a damage claim does not preclude the granting of injunctive relief as to a trade secret.”
Take Away. The appellate court’s decision in Southern Marsh Collection diverges from other Louisiana jurisprudence and could provide a useful weapon in the arsenal of businesses who need to protect protect trade secrets. Customer lists represent one of the most frequently litigated types of business information, and this case offers new avenues to demonstrate the independent economic value of these lists—without the need to demonstrate irreparable harm.