Trade Secrets Claim Against Former Executive Fails

Posted by msch on Dec 14, 2010 11:45:00 AM

Attorneys John Sean Johnson and Ed Kuchinski in Sterling Payment v HudecIn Sterling Payment Technologies v. Hudec, a Tampa credit card merchant services provider accused a former executive and board member of taking confidential information and trade secrets to start a competing business, Platinum Merchant Services.

Shutts & Bowen's John "Sean" Johnson told the jury that Ellen Hudec, Sterling's EVP of Sales and a member of the board of directors, decided near the end of 2007 to leave Sterling in the the following spring. She then set in motion her plans to compete.

Among other things, said Mr. Johnson, Ms. Hudec secretly shipped information offsite to herself, including Sterling's entire merchant database, which included detailed information about 18,000 Sterling customers. Ms. Hudec also allegedly improperly modified the contract of one of Sterling's agents, with whom she was romantically involved and with whom she planned to co-found the competing company, to allow him to compete with Sterling.

Sivyer Barlow & Watson's Ed Kuchinski told the jury that although Ms. Hudec was in possession of Sterling's information, she did not use the information in a competing business. She was sending herself the information, said Mr. Kuchinski, because there were plans for her to continue working with the company in another capacity after she resigned.

The sales agent whose contract she modified never had an exclusive relationship with Sterling, according to Mr. Kuchinski, but only a right of first refusal, which would not have been renewed. And the other changes to the agent's contract reasonably traded a higher commission for a lower bonus.

According to Mr. Kuchinkski, Ms. Hudec left Sterling because she was being scape-goated for recent business difficulties. After two years of discovery, including a review of Ms. Hudec's electronic records, the defense allegedly had found no evidence that Ms. Hudec had shared trade secrets, nor could they name a single merchant who had left Sterling because of Ms. Hudec's efforts.

Ms. Hudec would not have attempted to compete with Sterling, Mr. Kuchinski claimed, because her "golden handcuffs" provided that competitive activity would terminate her right to 500,000 shares of Sterling stock. In fact, Mr. Kuchinski concluded, the jury should award Ms. Hudec damages based on Sterling's mishandling of her stock and non-compete agreement.

The jury found that Ms. Hudec did not breach her duty of loyalty and did not cause damages, and did not breach her contract. Instead, the jury awarded Ms. Hudec $300K in lost wages, plus additional shares of stock, based on Sterling's breach of contract.

Watch CVN's webcast of Sterling v. Hudec.

Topics: Commercial Law