Before 2017

Plaintiffs’ Business Partner Dismissed from Trade Secret Misappropriation Suit Against Former Employee

Hi Technology Corp. et al. v. Roderick J. Kersch et al., Civil Action No. 1:21-cv-03468 (N.D. Ga. May 27, 2022)

Plaintiffs HI Technology Corp. and Interactive Communications International, Inc. filed suit against Defendants Roderick J. Kersch and NationsBenefits, LLC on August 24, 2021 in the Northern District of Georgia (Atlanta Division for breach of contract, trade secret misappropriation under the Defend Trade Secrets Act and Georgia Uniform Trade Secrets Act, breach of duty of loyalty, and tortious interference with contractual relationship. Only one of the claims–tortious interference with a contractual relationship–was asserted against NationsBenefits. The Complaint generally alleged that Defendant Kersch, a former HI Technology executive, conspired with Defendant NationsBenefits, a business partner of HI Technology, to steal Plaintiffs’ high confidential and trade secret information to unfairly compete against it. As alleged in the Complaint, Defendants’ misconduct was discovered when Defendant Kersch synched his personal Gmail account to his work email account, uncovering his communications with Defendant NationsBenefits to misappropriate Plaintiffs’ trade secrets was uncovered. As an employee of Hi Technology, Defendant Kersch was a party to a Business Protection Agreement, which contained a noncompete provision and a non-disclosure provision allegedly breached by Kersch through his misconduct.

Plaintiffs filed a motion for temporary restraining order and preliminary injunction concurrently with the Complaint seeking, inter alia, an order (1) restraining Defendants from using or disclosing Plaintiffs’ trade secrets and restraining Defendant Kersh from violating the non-compete provision in his agreement, (2) compelling Defendants to return all property and records pertaining to Plaintiff HI Technology acquired through improper means, (3) requiring an accounting of all profits acquired by Defendant NationsBenefits through its disclosure or use of Plaintiffs’ trade secrets, and (4) compelling Defendants to produce computers, accounts, and electronic storage devices for inspection by a forensic expert.

On September 7, 2021, the parties filed a consent motion for preliminary injunction as to Defendant NationsBenefits, which the Court entered on September 8th. Under the stipulated injunction, NationsBenefits could not permit Kersch to perform any work for it, agreed to provide Plaintiffs with a hard drive with all emails Kersch sent to anyone at NationsBenefits, which NationsBenefits had to later delete, and agreed not to use and return to Plaintiffs any information it received from Kersch that may be considered confidential, proprietary, or trade secret information of Plaintiffs. A similar stipulated preliminary injunction was entered by the court as against Kersch on September 13, 2021.

Defendant Kersch answered the Complaint on October 18, 2021 and asserting counterclaims for, inter alia, breach of contract, retaliation under the Age Discrination in Employment Act, and retaliation under the False Claims Act. The same day, Defendant NationsBenefits filed a motion to dismiss the Complaint arguing that Plaintiffs failed to allege facts to support Plaintiffs’ claims that NationsBenefits induced or encouraged Kersch to violate the restrictive covenants in his employment agreements with Plaintiff. NationsBenefits further argued that Plaintiffs failed to allege facts showing that (a) NationsBenefits solicited emails from Kersch, (b) Kersch’s emails included information that was confidential or proprietary, (c) NationsBenefits used or benefitted from the information contained in Kersch’s emails, or (d) NationsBenefits induced Kersch to perform any improper acts. Plaintiffs filed a motion to dismiss Defendant Kersch’s counterclaims on November 8, 2021 for failure to state a claim. Two weeks later, Defendant Kersch filed an amended answer and counterclaim.

In an order dated May 27, the Court granted NationsBenefits’ motion to dismiss for failure to state a claim and denied Plaintiffs’ motion to dismiss Kersch’s counterclaims as moot. To state a claim for tortious interference with contractual relations in Georgia, a complainant must establish (1) improper action or wrongful conduct by the defendant without privilege, (2) the defendant acted purposefully with malice with the intent to injure, (3) the defendant induced a breach of contractual obligations, and (4) the defendant’s tortious conduct proximately caused damage to the plaintiff. The Court only reached the first element of tortious interference–wrongful or improper conduct–and found the Plaintiffs’ allegations lacking. While the Complaint alleged that NationsBenefits used Kersch to establish itself as a competitor of Plaintiffs, none of the actions recited by Plaintiffs amounted to the type of fraud or misrepresentation that is generally required for conduct to be considered “improper” or “wrongful.” Nor did Plaintiffs identify any instances where NationsBenefits used their confidential information in a way that was improper or outside “ordinary business behavior.” Instead, “the Plaintiffs’ allegations either concern actions taken solely by Kersch or actions by NationsBenefits that imply mere collaboration with an individual in breach of his contractual obligations.” Plaintiffs’ tortious interference allegations were dismissed without prejudice. The Court denied Plaintiffs’ motion to dismiss Kersch’s counterclaims as moot in view of Kersch’s amended counterclaims. Plaintiffs filed a renewed motion to dismiss Kersch’s counterclaims on May 31, 2022.

Categories: Before 2017

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