In Tanium v. Yago et al., the U.S. District Court for the Northern District of Georgia recently reminded us of a few things: (1) customer contact information can constitute a trade secret; (2) the Georgia Restrictive Covenant Act ("RCA") provides a court greater freedom to modify an otherwise overbroad restriction; (3) a non-solicit of employees provision may be liberally enforced; and (4) bad acts performed by an employee prior to his departure from a company influence how a court rules.
Tanium is a cybersecurity management company. Tanium employed Yago as a salesperson, ultimately responsible for servicing Tanium’s largest customers. Tanium had Yago execute an Employee Invention Assignment and Confidentiality Agreement (“Agreement”) that restrained him from soliciting Tanium customers and employees and from using or disclosing Tanium’s confidential information.
In January 2021, Yago accepted an offer of employment with Wiz, a competitor of Tanium. At or about the same time, Wiz hired four other high-level Tanium employees. Tanium discovered that, while employed, Yago accessed and ran a report that aggregated some 60,000 customer contacts and sent the report to at least one of the other employees who Wiz also hired. Yago also had text contact with at least one of the other employees, in which they discussed whether they could “get . . . over” the other employees who Wiz hired.
Based on these and other facts, Tanium sought a preliminary injunction against the individual defendants and Wiz under, among other theories, a violation of the Agreement and violation of the Georgia Trade Secrets Act. The court first addressed whether the list of customer contacts was a trade secret. Recognizing that, “although customer lists which are simply compilations of public information and which could be as easily compiled by third parties are not deemed to constitute trade secrets,” the court held that such a list may still be entitled to trade secret protection where the entity compiling such a list expends a great deal of time, effort and expense in developing the list and treats the list as confidential in its business. Here, the court believed the company adequately protected the list as confidential, and it demonstrated that the list of 60,000 customers and contact information could not have been gathered without substantial effort and time. Accordingly, the court found that the customer contact reports constituted trade secrets and that there was a substantial likelihood of success on Tanium’s claim that Yago misappropriated the report. The court also ruled that Tanium had demonstrated a substantial likelihood of success on its claim that Yago had violated the nondisclosure provision of the Agreement engaging in the same behavior.
The court also addressed the non-solicit of employees provision in the Agreement. That provision prohibited Yago, for a 12-month period, from “soliciting, encouraging or causing others to solicit or encourage” any employee of Tanium to terminate their employment with Tanium. Like a few other recent cases, it determined that the RCA governs a non-solicit of employees provision and, unlike a few recent cases, it held that restrictive covenants “addressing solicitation of employees are enforceable when they are reasonably limited in time and not fatally vague or ambiguous.” Relying on cases decided prior to the enactment of the RCA, the court held the non-solicit of employees provision to be enforceable.
Finally, the court addressed the non-solicit of customers provision, which prohibited Yago, for a 12-month period, from “directly or indirectly, soliciting, encouraging or causing any current customer” of Tanium to terminate or modify its relationship with Tanium. The defendants argued that the provision was unenforceable because it was not limited to those customers with which Yago had material contact. Recognizing that OCGA §13-8-53(b) expressly contemplates that an overbroad non-solicit of customers may be narrowed “pursuant to the parameters set forth in OCGA §13-8-53(b),” the court narrowed the restriction to only those customers with which Yago had material contact.
Jeff Mokotoff is Co-Chair of FordHarrison’s Non-Compete, Trade Secrets and Business Litigation practice group. If you have any questions regarding this decision, please feel free to contact Jeff at jmokotoff@fordharrison.com or the FordHarrison attorney with whom you usually work.