Memorandum Greenes Jewelry Wholesale

Running Head: MEMORANDUM

MEMORANDUM

Final Project Part 1

I. Memo Introduction

Legal situations are largely impossible to avoid in the course of conducting business. For this reason, the relevance of awareness and proper assessment of such scenarios when, and if, they arise cannot be overstated. In this memorandum, I come up with a formal brief of the lawsuits. In so doing, I will be seeking to provide an informed assessment to the corporate stakeholders of Greene’s Jewelry Wholesale with regard to the legal concerns brought up. From the onset, it would be prudent to note that as an intern at the legal department of Greene’s Jewelry Wholesale, I am convinced that the company does indeed have significant strengths in as far as its legal claim is concerned.

Jennifer Lawson, a former employee at Greene’s Jewelry, did indeed sign a confidentiality agreement whereby she made a commitment to keep any information gathered relating to the creation of Ever-Gold secret. The process involved in the creation of this particular synthetic material is essentially a trade secret of Greene’s Jewelry. Being a trade secret, the process was not publicly known. Further, thanks to its unique properties, the company markets the material as everlasting gold – effectively meaning that it has an intrinsic economic value to the company. It is important to note that Jennifer never signed a ‘not to compete’ agreement. This, however, has no connection to the issue at hand because Jennifer has not necessarily established an enterprise competing with Greene’s Jewelry. On the other hand, when it comes to the legal defense of the company, it would be prudent to note that Greene’s Jewelry position would be weak. The subsequent sections of this memorandum not only analyze the facts and laws relevant to the scenario presented, but also evaluate the various facts to be determined. Cases that support the position of Greene’s Jewelry will also be highlighted.

II. Client’s Case

A. Facts and Laws

Jennifer has been sued by Greene’s Jewelry for breach of the confidentiality agreement she signed. In the said confidentiality agreement, Jennifer made a commitment not to share any information gathered in the course of her employment, relating to the processes that Greene’s Jewelry uses to create and develop Ever-Gold, with a third party. Following her dismissal from the company, Jennifer unintentionally left with a letter detailing Ever-Gold’s secret creation process. She should have returned the said letter the moment she noticed she had it. Further, in search of new employment, she proceeded to place a call to Howell Jewelry World - one of Greene’s Jewelry main competitors - and proclaim she had confidential information in relation to the creation of Ever-Gold. Following her signing of the formal employment contract at Howell, Jennifer handed over the letter detailing Ever-Gold’s secret creation process to Howell’s hiring manager.

In basic terms, it should be noted that from a legal perspective, breach of a confidentiality agreement is deemed to have occurred in those instances whereby an employee discloses material information, such as a trade secret, that they had committed not to disclose. More specifically, in the words of Bagley (2012), “an individual misappropriates a trade secret when he or she (1) uses or discloses the trade secret of another or (2) learns of a trade secret through improper means” (333). In basic terms, a trade secret is an undertaking, procedure, or even operation that is largely kept secret by an enterprise for business, economical, operational, or other similar reasons. In most instances, trade secrets often give their bearers a competitive advantage over peers in an industry or marketplace. For these, and other reasons such as the resources deployed in their development, trade secrets have legal protection. It is therefore clear that in the presented scenario, Jennifer did indeed disclose the trade secret of Greene’s Jewelry. This is more so the case given that the process involved in the creation of “Ever-Gold” remains the company’s primary asset in as far as the making of bracelets, earrings, rings, and necklaces is concerned.

Some of the key properties of this particular synthetic gold-colored material include, but they are not limited to, ability to hold out against oxidation as well as withstand scratches. It is on the basis of the disclosure of this particular trade secret to a third party that Greene’s Jewelry proceeds to sue its former employee for breach of the confidentiality agreement. Following the enactment of the Defend Trade Secrets Act of 2016, Greene’s Jewelry is in a strong position to pursue a civil suit under federal law. According to Chociey (2018), this particular law “grants a trade secret’s owner the right to sue in federal court for “trade secret” “misappropriation” if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce…”

Jennifer has also countersued Greene’s Jewelry for wrongful termination. As it has already been pointed out in the introductory section of this memorandum, we might not be in a strong position to defend ourselves against this particular countersuit. This is more so the case given the specific provisions of the Worker Adjustment and Retraining Notification Act of 1988, i.e. the so called WARN Act. Although the case study does not specifically state the number of employees to be affected by the downsizing, we could make the comfortable assumption that given the number of persons presently under the employ of Greene’s Jewelry (i.e. a total of 502 individuals), the downsizing would affect at least 50 persons. This is an important consideration given that for the WARN Act to be applicable, the planned layoffs ought to affect a minimum of 50 employees at a specific employment site. In basic terms, the WARN Act requires that employers with more than 100 employees give an advance notification of not less than 60 days to employees in relation to closure of operations or layoffs (U.S. Department of Labor, 2020). More specifically, according to the U.S. Department of Labor (2020), “advance notice gives workers and their families some transition time to adjust to the prospective loss of employment, to seek and obtain other jobs, and if necessary, to enter skill training or retraining…” In the presented scenario, Jennifer was instructed to clear out her desk immediately. There was no 60-day notice advanced. The WARN Act would, however, not be applicable if the number of persons affected by the downsizing (i.e. junior executive secretaries) happens to be below 50 employees.

B. Precedent

In Hallmark Cards, Inc. v. Janet L. Murley (2013), the defendant (Murley) parted ways with the plaintiff (Hallmark Cards) and was paid a total of $735,000 as the severance package. It is important to note that as Hallmark’s marketing vice-president, Murley had come across and was indeed in possession of some confidential information regarding the operations of the company. The said information was inclusive of, but was not limited to, market research and business plans. Upon the payment of the severance highlighted above, Murley amongst other things agreed to dispose-off any confidential documents and ensure that the company’s confidential information was not disclosed to any third party. Years later, the defendant got hired by a company by the name RPG as a consultant. For the said consulting work, she was offered a total of $125,000. Following her employ, she passed-on key Hallmark documents (and information) to RPG. Hallmark initiated a lawsuit upon its learning of the said developments. According to Peacock (2013), “the jury returned a verdict in Hallmark's favor for $860,000 - equal to her severance pay plus her consulting fee with RPG.”

In Chestnut v. Stone Forest Indus. Inc. (1993), the defendant initiated a mass layoff as a consequence of its assessment of the prevailing business conditions. In this case, changes in market dynamics dictated that for Stone Forest Industries Inc. to remain in business, it had to lay-off a total of 81 employees. The affected employees brought a class action suit pursuant to the WARN Act. They indicated that the company did not afford them the mandated 60-day notice. On its part, Stone Forest Industries Inc. pointed out that the said layoffs were necessitated by unforeseeable business conditions. It thus sought to escape liability under the said Act. In the final analysis, the court made a finding to the effect “that the defendant qualifies for the exception set forth in section 2102(b) (2) (A)” (Justia, 2020).

C. Facts to be Determined

For Greene’s Jewelry claim under the Defend Trade Secrets Act of 2016 to be successful, the company must be able to demonstrate that Jennifer did indeed engage in what could be deemed ‘misappropriation.’ Towards this end, there are a few considerations that would be of great relevance in as far as the said misappropriation is concerned. To begin with, Greene’s Jewelry ought to be in a position to indicate that indeed Jennifer disclosed a trade secret which was by its nature confidential. Further, Greene’s Jewelry should also demonstrate that the former employee did have an obligation of confidence in relation to the said trade secret. Greene’s Jewelry could also show that Jennifer did not have authorization to either disclose or share the trade secret. Our pursuit of a claim for breach would further be buttressed by proof that Greene’s Jewelry has indeed suffered some business damage or loss as a consequence of the said disclosure.

In as far as Jennifer’s countersuit is concerned, it would be prudent to note that there are several exceptions that we could invoke in our defense. As the U.S. Department of Labor (2020) indicates, exceptions to WARN Act do indeed exist “when layoffs occur due to unforeseeable business circumstances, faltering companies, and natural disasters.” These are some of the facts that ought to be established on this front. Was the downsizing a consequence of unforeseeable business circumstances? In the present case study, the reason for the said downsizing has not been indicated.

D. Application of the Law to the Facts

Was Jennifer in breach of the confidentiality agreement that she signed committing never to disclose confidential/proprietary information she encounters in the course of her employ at Greene’s’s?

Case in Brief: In Hallmark Cards, Inc. v. Janet L. Murley (2013), the defendant (Murley) parted ways with the plaintiff (Hallmark Cards) and was paid a total of $735,000 as the severance package. As Hallmark’s marketing vice-president, Murley had come across and was indeed in possession of some confidential information regarding the operations of the company. The said information was inclusive of, but was not limited to, market research and business plans. Upon the payment of the severance highlighted above, Murley amongst other things agreed to dispose-off any confidential documents and ensure that the company’s confidential information was not disclosed to any third party. Years later, the defendant got hired by a company by the name RPG as a consultant. For the said consulting work, she was offered a total of $125,000. Following her employ, she passed-on key Hallmark documents (and information) to RPG. Hallmark initiated a lawsuit upon its learning of the said developments. According to Peacock (2013), “the jury returned a verdict in Hallmark's favor for $860,000 - equal to her severance pay plus her consulting fee with RPG.”

On the strength of the jury verdict above, Greene’s appears to be in a strong position to pursue a breach of contract claim against Jennifer. All of Greene’s executives, including Jennifer, signed a confidentiality agreement. In the said agreement, Jennifer made a commitment to ensure that all confidential information or data she had acquired in the course of her employ at Greene’s was never disclosed to a third party. The process that Greene’s used in the creation of Ever-Gold was confidential. There is sufficient evidence that Jennifer retained a letter with information detailing Ever-Gold’s creation secret process. In addition to retaining the said information, she went ahead and disclosed the same to a competitor. There is no doubt whatsoever that Jennifer’s actions were in violation of the confidentiality agreement she had signed while in the employ of Greene’s. Indeed, in Hallmark Cards, Inc. v. Janet L. Murley, the Eighth Circuit was categorical that “under her agreement with Hallmark, Janet Murley was required to maintain the confidentiality of certain company information and was prohibited from using or disclosing Hallmark’s documents and other records after leaving the company, but failed to meet her obligations” (Frey, 2015, p. 118).

Greene’s would. therefore, be seeking in damages an amount that is equivalent to the business loss and damage it would suffer as a consequence of Jennifer’s disclosure of the proprietary process it uses to make Ever-Gold. Towards this end we would base our entitlement to the fact that Jennifer’s engagement to Howell was primarily anchored on her disclosure of the confidential information relating to Ever-Gold’s production process. There is evidence indicating that the contract she signed with our competitor had a specific provision addressing the handover of the said proprietary information. Indeed, as Frey (2015) points out, in Hallmark Cards, Inc. v. Janet L. Murley, “Hallmark based its entitlement to the fact that Murley’s value to RPG rested, in large part, on her disclosure of materials and information that belonged to Hallmark… the jury returned a verdict in favor of Hallmark, awarding it $860,000 in damages…” (117). On the strength of the information provided above, there is a high probability that Greene’s will win this particular legal dispute.

Did Greene’s violate the WARN Act in its firing of Jennifer?

Case in Brief: In Chestnut v. Stone Forest Indus. Inc. (1993), the defendant initiated a mass layoff as a consequence of its assessment of the prevailing business conditions. In this case, changes in market dynamics dictated that for Stone Forest Industries Inc. to remain in business, it had to lay-off a total of 81 employees. The affected employees brought a class action suit pursuant to the WARN Act. They indicated that the company did not afford them the mandated 60-day notice. On its part, Stone Forest Industries Inc. pointed out that the said layoffs were necessitated by unforeseeable business conditions. It thus sought to escape liability under the said Act. In the final analysis, the court made a finding to the effect “that the defendant qualifies for the exception set forth in section 2102(b) (2) (A)” (Justia, 2020).

In as far as Jennifer’s countersuit alleging wrongful termination, Greene’s probability of winning the lawsuit by invoking exceptions to the WARN Act are rather low. This is more so the case given that Greene’s will only win this particular lawsuit if it is able to demonstrate that its actions fall within the three exceptions of the WARN Act – and also prove that this could be considered a mass layoff. In the words of Gross and Compa (2009), “for compliance purposes, a mass layoff refers to downsizing that will affect 500 or more total employees, or between 50 and 499 employees if they represent 33% or more of the company's workforce” (39). The first exception relates to a faltering enterprise. On this front, which largely relates to plant closings, an enterprise ought to be experiencing difficulties with regard to remaining a going concern and has as a consequence sought additional capital. The WARN Act would not apply in those instances whereby giving a 60-day notice is likely to get in the way of gaining access to the said capital. Secondly, there is also what Gross and Compa (2009) refers to as “unforeseeable business circumstances” (37). In as far as this particular exception is concerned, a 60-day notice may not be necessary if the business circumstances triggering the layoffs were not anticipated. Third, the WARN Act may also not apply in the case of natural disasters that affect the business’ ability to continue in operation. The said disasters could be inclusive of, but they are not limited to, storms occasioning severe damage to company infrastructure, earthquakes, and floods. In Chestnut v. Stone Forest Indus. Inc., the defendant was able to successfully invoke the ‘unforeseeable business circumstances’ exception. Greene’s does not share the same circumstances as there is nothing to demonstrate that the company initiated layoffs as a consequence of circumstances that were largely unanticipated. Further, there is nothing to indicate that the enterprise’s operation had been impacted upon by a natural disaster or that the company was faltering. Most importantly, however, this cannot be describes as a mass layoff – especially given that it appears to target junior executive secretaries only.