Source: https://law.justia.com/cases/california/court-of-appeal/3d/179/124.html
Timestamp: 2019-04-25 01:54:29+00:00

Document:
MOSS, ADAMS & COMPANY, Plaintiff and Appellant, v. JOHN D. SHILLING et al., Defendants and Respondents.
Jeffrey J. Parish, Glenn E. Westreich, Wayne L. Bender and Rosenblum, Parish & Bacigalupi for Plaintiff and Appellant.
James H. A. Pooley, Hans R. Troesch, Mosher, Pooley & Sullivan and Mosher, Pooley, Sullivan & Hultquist for Defendants and Respondents.
[1a] In this case we hold that professional employees of an accounting firm, as a matter of law, did not engage in unfair competition when they used a company rolodex to obtain the addresses of clients of the firm for whom they had provided professional services, in order to mail those clients an announcement of their formation of a new accounting partnership. The mailing of such an announcement does not constitute solicitation and therefore is not unfair competition.
On appeal from a final judgment Moss, Adams & Company (hereafter Moss Adams) challenges a summary adjudication order in favor of John D. Shilling, Cynthia L. Kenyon, and Shilling, Kenyon & Company (hereafter Shilling and Kenyon). We affirm the judgment.
In 1982, Shilling and Kenyon decided to form their own accounting firm. Two weeks before they submitted resignation letters to Moss Adams, Kenyon removed a rolodex from the desk of a Moss Adams' receptionist and took it home. There she and Shilling used the rolodex, as well as Kenyon's personal collection of business cards, to address envelopes to Moss Adams' clients with whom they had had personal contact and to whom they had charged time during the previous year. In these envelopes they mailed the following announcement: "John D. Shilling and Cynthia L. Kenyon, formerly with Moss Adams, are pleased to announce the formation of a new partnership: Shilling, Kenyon & Co.[,] Certified Public Accountants[,] Lloyds Bank Building[,] One Almaden Blvd., Suite 1110[,] San Jose, CA 95113[,] (408) 295-3822[.]"
Moss Adams sued Shilling and Kenyon for misappropriation of trade secrets, interference with prospective economic advantage, interference with contractual relations, breach of contract, breach of fiduciary duty, and unfair competition. Shilling and Kenyon cross-complained for declaratory relief and unfair competition.
The court granted a motion by Shilling and Kenyon for summary adjudication (Code Civ. Proc., § 437c) and rendered an order determining (1) the mailing of the announcements and use of the rolodex did not constitute solicitation and was not unlawful, and (2) the employment agreements could not be enforced to prohibit such conduct. The court expressly withheld determination whether the information from the rolodex was a trade secret, stating in open court that while this was a question of fact, it need not be decided because there was no solicitation.
The case proceeded to a nonjury trial on the issues other than the mailing of the announcements and this resulted in a judgment for Shilling and Kenyon. Only the grant of summary adjudication is challenged on appeal.
In granting summary adjudication for Shilling and Kenyon, the court relied on the rule that "[m]erely informing customers of one's former employer of a change of employment, without more, is not solicitation." (Aetna Bldg. Maintenance Co. v. West (1952) 39 Cal. 2d 198, 204 [246 P.2d 11]; accord; Continental Car-Na-Var Corp v. Moseley (1944) 24 Cal. 2d 104, 113 [148 P.2d 9].) In both decisions, our Supreme Court also held that information used in those cases to announce a change of employment did not constitute trade secrets. (Aetna Bldg. Maintenance Co. v. West, supra, 39 Cal.2d at pp. 204-205; Continental Car-Na Var Corp. v. Moseley, supra, 24 Cal.2d at pp. 111-112.) Moss Adams contends the use of a trade secret to announce a change of employment (rather than to solicit) is still unfair competition, and there was a triable fact issue whether the information in [179 Cal. App. 3d 128] its rolodex was a trade secret, thus the court erred in granting summary adjudication.
An answer, however, is suggested in Aetna Bldg. Maintenance Co. v. West, supra, 39 Cal.2d at page 204, in which the court said that "even in the absence of solicitation, Aetna is entitled to protection against West's use, or disclosure in competition with it, of trade secrets given to him only for the purpose of carrying on his employer's business." (Italics added.) This implies that solicitation is not the only possible misuse of a customer list, and that other uses of secret customer lists may constitute unfair competition.
Accordingly, in the present case the trial court's determination that there was no solicitation did not end the unfair competition inquiry; it was also necessary to determine whether Shilling and Kenyon made some other unlawful use of a trade secret to facilitate announcing their changes of employment.
 Ordinarily whether information is a trade secret constitutes a question of fact; however, this is not so under the peculiar facts presented here. It is undisputed that Shilling and Kenyon simply used the rolodex to obtain some of the addresses of clients whose names they already knew from having personally provided accounting services during the previous year. Thus, two sub-issues are presented: (1) whether these clients' names were trade secrets even though they were already known to Shilling and Kenyon, and (2) whether the clients' addresses were trade secrets.
Under the rule of Avocado Sales Co. and Theodore, the names of Moss Adams' clients serviced by Shilling and Kenyon during the year preceding their resignations were not trade secrets, because the clients became known through personal contact and provision of accounting services. Shilling and Kenyon could not be compelled to "wipe clean the slate of their memories." The names of other Moss Adams' clients may have remained trade secrets, but Shilling and Kenyon did not record the names or addresses of those clients or mail announcements to them.
[4a] On the second sub-issue, whether the clients' addresses were trade secrets even though their names were not, the answer must be no. All of the clients were local, and their addresses were easily obtainable through normal resources (e.g., telephone directories).
The record is unclear as to precisely how many addresses were recorded from the rolodex. The rolodex contained almost 600 client names. In a declaration the managing partner of Moss Adams' San Jose office stated the firm contacted approximately 40 clients who received the announcement from Shilling and Kenyon. Shilling and Kenyon submitted declarations by 29 clients who switched firms, and Kenyon said in a subsequent declaration that these were "most" of the clients who switched. Shilling was quoted in [179 Cal. App. 3d 130] a local newspaper article as stating about 35 percent of the clients they supervised for Moss Adams switched to the new firm. Thus, the record suggests no more than 100 or so announcements were sent to Moss Adams' clients, with an unknown number of the addresses obtained from Kenyon's personal collection of business cards rather than from the rolodex. At most, the use of the rolodex merely saved Shilling and Kenyon from the minor inconvenience of obtaining the desired addresses through generally available resources.
[5, 3b, 4b] In short, we conclude that (1) former employees cannot use trade secrets to announce a change of employment to the former employer's customers, (2) the names of clients to whom Shilling and Kenyon mailed announcements were known to them from personally providing accounting services and therefore were not trade secrets, and (3) these clients' addresses could have been easily determined without use of the rolodex and thus were also not trade secrets. [1b] As a matter of law the use of the rolodex did not violate the common law of unfair competition.
Low, P. J., and Haning, J., concurred.
FN 1. Shilling's employment agreement provided in pertinent part that (1) the names and addresses of Moss Adams' clients "are 'trade secrets' and proprietary to Moss-Adams, and are not to be disclosed or to be used by Employee either during the term of this Agreement or at any time thereafter," and (2) for a period of one year following termination of employment the employee could not use or make known to any other person the names or addresses of clients or "[call]on, solicit, divert, take away or attempt to call on, solicit, divert or take away any of the clients of Moss Adams ...." Kenyon's employment agreement contained similar provisions.

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