Trade Secrets, the Competition and What You Need to Know

Executives be careful!  What you know could get you in trouble.  Do know the obligations in your restrictive covenant agreement?   

XPO Logistics Freight Inc., a national truckload logistics company, filed a lawsuit against its rival YRC Inc. this week in Delaware state court accusing two key executives of leaving XPO and improperly taking and using valuable confidential information for their new employer, YRC. 

The lawsuit claims YRC Inc. schemed with executives Paul Lorensen (Vice President of Operations) and Robert Richardson (Vice President of Line-Haul) to misappropriate sensitive proprietary and trade secret information in an effort to unfairly compete. 

Lorensen and Richardson allegedly had access to XPO’s customer and financial information including pricing, costs, profits/loss statements and sensitive plans for acquisitions, and used that information to help YRC better compete with XPO.  XPO asserts that YRC worked with Lorensen and Richardson to raid other XPO employees as well.  XPO asserts claims for misappropriation of trade secrets, unfair competition, tortious interference with contract and aiding and abetting breach of fiduciarReviewing agreementy duty.  

Is this grounds for firing?

Although it appears that XPO has not named Lorensen and Richardson individually in its lawsuit, their alleged actions have created a firestorm of trouble for themselves and their new company, and could result in personal liability if certain claims are asserted. 

Executives like Lorsensen and Richardson often hold confidential and proprietary information about their companies that remains valuable long after their employment ends.  This retention of sensitive information shines a spotlight on departing executives that only gets brighter when they leave to join a competitor (with or without a traditional non-compete agreement).  

How can I avoid getting sued?

Executive employment agreements are often used by new employers to outline an executive’s obligations both during and after employment, but can also be structured to limit an executive’s exposure to overly broad restrictive covenant agreements and personal liability as well if crafted correctly on behalf of the executive.  Properly drafted agreements are critical to helping executives protect themselves during these exceptionally challenging employment situations. 

If you have any questions or need help with an executive employment agreement or related representation during litigation, please contact me at pdolan@msiegellaw.com or visit our website at Siegel & Dolan Ltd and reach out to any of my employment law colleagues who are happy to help you.

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