The Massachusetts Supreme Judicial Court (“SJC”) recently found that the misappropriation of trade secrets by employees who then use the trade secrets to compete is actionable under the Unfair Trade Practices Act and misleading Massachusetts. The SJC’s decision in Governo v. Bergeron law firm means that the Unfair and Deceptive Marketing Practices Act, Massachusetts General Laws Chapter 93A Section 11 (âChapter 93Aâ), now applies to trade secret disputes in the employer-employer context. Previously, such cases were considered an âinternal matterâ and therefore could not give rise to action.
For more than two decades, the plaintiff Governo Law Firm, has built databases and an electronic library containing legal theories, client information and more than 100,000 documents related to their practice of asbestos litigation. In 2016, three non-shareholder partners of Governo Law Firm were considering either acquiring the firm from its sole owner, Governo, or creating their own law firm. As part of their plan, in October 2016, the defendants began exporting documents from the company’s research library, databases and administrative files. They moved these documents from their laptops to USB drives. One of the defendant’s attorneys even told another defendant’s attorney to use a sports bag to remove the materials, so as not to arouse suspicion. Following the transfer of the documents, the defendants downloaded these documents to a laptop computer they had purchased for their new law firm. The defendants then offered to buy the law firm from Governo, providing it until 5:00 p.m. the same day to accept their offer. Governo rejected the offer and within days the defendants began operating their own newly formed law firm using the Governo documents.
Governo Law Firm brought an action against the former employees for, among a number of other complaints, violation of Chapter 93A, which states that anyone who (a) engages in commerce or commerce and (b) loses money ‘money or property as a result of its use by another person who engages in a trade or tradeâ¦ of an unfair or deceptive act or practice âmay sue for damages against that person . However, Massachusetts courts have long held that Chapter 93A did not apply to “internal matters”, which it described as members of the same company, including partners of a company and shareholders of a closely held company, based on the theory that such disputes do not arise in the context of a âcommercial transaction in the marketâ. Likewise, the courts have held that Chapter 93A also does not apply to disputes in the context of the employment relationship between employers and employees.
the Governor The trial court relied on these principles and told the jury that the conduct of the employees while employed by Governo Law Firm could not be considered in assessing liability under Chapter 93A. . As a result, the jury concluded that although the defendants were guilty of various claims, the defendants had not violated Chapter 93A because their conduct was not part of a “commercial transaction in the market”.
Governo Law Firm appealed the trial court’s judgment and the SJC allowed its request for review on a direct appeal. On April 9, 2021, the SJC reversed the lower court’s decision, noting that when an âemployee misappropriated his employer’s proprietary documents during his employmentâ and then used them âin the marketâ, the conduct of the employee âis not a purely internal matter. Rather, this behavior constitutes a âmarket transactionâ. The fact that the defendants were employees of the law firm at the time of the hijacking âdoes not absolve them of their responsibilityâ; they “then used ill-gotten materials to compete with their former employer.” Although the SCJ has also ordered a new trial, the application of Chapter 93A to this law firm as a “business transaction” gives greater potential liability to employees who engage in the theft of trade secrets and simultaneously offers broader protection for employers.