Unreported / Non-Citable
Background
Mercer alleged that former personnel used confidential client contact information to solicit business for a competing advisory firm. The Central District of California granted summary judgment against Mercer and excluded its damages expert.
The appeal concerned California’s Uniform Trade Secrets Act, contractual restrictive covenants protecting secrets, employee loyalty, causation, and the reliability of the damages analysis.
The Court’s Holding
The Ninth Circuit revived the trade-secret and contract claims. California authority does not require proof of causation or damages as an element of every CUTSA claim, and in any event the record could support an inference that use of Mercer’s contacts caused clients to move. CUTSA also expressly preserves contractual remedies, allowing a trade-secret-protection covenant to proceed alongside the statutory claim.
The panel affirmed dismissal of the loyalty claim because CUTSA preempted the overlapping theory and merely preparing to compete is not disloyal. It also upheld exclusion of the expert based on methodological flaws.
Key Takeaways
- CUTSA remedies may be available without proving damages as an element of liability.
- Contract claims protecting trade secrets are not displaced by CUTSA.
- Evidence that contacted clients switched firms can create a causation dispute.
- Trade-secret plaintiffs still need a reliable, admissible method to quantify damages.
Why It Matters
California employers should draft confidentiality and restrictive provisions specifically around protectable trade secrets, rather than broad restraints on competition. Departing employees and new firms should segregate client data and document independent development of contact information.