Interestingly, for purposes of imposing liability under the CFAA, the Court noted that simply hitting the delete button will not suffice; citing a Seventh Circuit case, Int’l Airport Ctrs., L.L.C. v. Citrin, 440 F.3d. 418 (7th Cir. 2006),  “merely pressing the delete key on a computer does not remove data but rather ‘removes the index entry and pointers to the data file so that the file appears no longer to be there.” Id. “Such deleted files,” wrote the Court, “are easily recoverable.” Id.

The Court continued, “Even though pressing the delete key technically ‘transmits a command’ to the computer,” it would render the statute (which, as stated above also carries criminal implications) too broad.  On the other hand, where, as in this case, the defendant allegedly used a secure-erasure program, such actions would fall within the ambit of the CFAA.

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The initial action, which sought monetary damages for these former employees’ alleged breach of fiduciary duty,   embezzlement and fraud was filed by Marciano roughly two years ago. Over the course of the last two years, however, Marciano disregarded numerous court orders directing that he provide certain discovery, such as appearing for his Court-ordered deposition, which ultimately led the presiding judge to “strike his complaint,” which is legalese for dismissing his case. Since he also refused to comply with the Court’s orders directing him to respond to the employees’ discovery demands on their respective counterclaims, the Court also struck his answer to their allegations, which essentially took away his attorneys’  ability to defend against the employees’ claims.

Lest you think that such conduct is regular, standard fare, Marciano apparently went through seventeen (17!!!) attorneys on this case over the past two years. This is simply unheard of.

At the damages portion of the trial (based on Marciano’s misconduct, the judge had already precluded him from contesting liabilty), Marciano made a surprise appearance, and was completely unapologetic: he conceded that he was on a crusade against these former employees.  Given the size of the verdict against him, it certainly seems that his testimony made quite an impression on the jury.

The moral of the story is clear: if you disregard with impunity a court’s orders and carry this arrogance before a jury, you do so at your own peril.

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Consequently, in order to properly evaluate whether you may have a potential breach of contract claim, it is worth investigating the general types of breach of contract claims. While a detailed discussion of these types of claims is well beyond the scope of this (or any) blog post, three (3) of the perhaps less-known, yet commonly litigated categories of breach of contract claims are the following:

• Breach of Express Warranty or Breach of Implied Warranty – these claims are usually raised when a consumer alleges that the product she purchased or used was defective, and suffered personal injuries as a direct result. For a more in depth discussion of this topic, please see our Free eBook, “Why There Are So Few Successful Defective Products Lawsuits“;
• Breach of Contract By an Insurance Company – as a general rule, this type of claim arises when they refuse to pay out on a claim, or to defend or indemnify their insured on a reported claim under the insurance policy (for more on this topic, please see “Why It May Pay to Fight An Insurer’s Disclaimer“; and,
• Anticipatory Repudiation or Breach of Contract – these claims often arise in the real estate context, where one side to the agreement demonstrates that either cannot, or will not, abide by its end of the agreement – before its time to fulfill its obligations under the contract have come due. For additional information on this important type of breach of contract claim, please see our blog article, “When It Becomes Clear That Your Small Business’ Partner Is Going To Breach Your Contract.”

As you can readily discern from this article, there are numerous types of breach of contract claims, and these 3 do not even begin to address what are likely the most common – and most famous (or infamous) breach of contract lawsuits, which involve breach of fiduciary duty or the improper performance (or outright failure to perform) under the terms of a contract.

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I’m sticking to my guns. As I’ve previously opined in “(Another) Report Predicts That Employees’ Breach of Duty and Theft To Rise in Down Economy” and “Study Claims That Employee Theft Rises As Economy Worsens,” it’s not the economy that causes people to steal – it’s a lack of ethics.

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In a story that was published earlier today, a former Goldman Sachs vice president was arrested by the FBI based upon this employee’s alleged trade secret theft, more particularly, claims that he stole Goldman’s proprietary automated trading codes and uploaded them to a remotely located computer server.

According to the FBI, this employee downloaded and then transferred this proprietary information from his work computer after accepting a job offer at a different company, and then tried to conceal his actions by deleting the history of his actions from his desktop computer.

He is currently out on bail.

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First, and as a threshold matter, the article does not even attempt to prove – scientifically or otherwise – a link between the economy and a breach of fiduciary duty.

Ironically, the prime example cited by this article - a crackdown on wealthy companies who engaged in unfair competition by paying out hundreds of millions of dollars in fines for illicitly attempting to secure lucrative oil contracts through bribes – does not support its theory that theft and dishonesty are being perpetrated by the desperate.

In short, as noted in my earlier blog post “Study Claims That Employee Theft Rises as Economy Worsens,”  it seems that people are looking for a convenient scapegoat for unethical behavior when they should be looking in the mirror.

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The answer is relatively straightforward: since we believed that our position was especially strong under New York law, particularly given the language in the parties’ contract which gave sole and exclusive ownership of all intellectual property to the LLC, we simply showed the other side a draft of the papers we intended to file with the Court, and gave them a day to mull it over. In response, the other side’s attorney contacted me, and began open and frank discussions about how we could resolve our clients’ differences.

Consider two alternative scenarios:

Scenario #1: we could have merely threatened suit, but as you probably know, most threats of lawsuits are not taken very seriously, and therefore, I’ve found, usually is just a waste of time.

Scenario #2: : we could have immediately filed suit and sought injunctive relief from the Court, and thereby not only incurred thousands of dollars in Court filing and attorneys’ fees for both sides, but this would have almost certainly poisoned the atmosphere between the parties, and made the resolution of this particular issue far more costly and difficult than necessary.

The moral of the story is obvious: if you have a strong and well-reasoned position, it is definitely worthwhile to spend the time and money to prepare legal papers that reflect this, and to let the other side know it. Everyone knows that’s the heavy lifting, and that it takes virtually no effort to walk (or electronically file) those papers over to the court. Taking this important first step may just save you loads of time, aggravation and money.

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I don’t think there is any one factor or cause for this phenomenon, and I doubt that it’s because some sort of mystical or mythical pendulum has swung in a different direction, and people have suddenly decided to stick to their principles. Rather, I suspect that the economic downturn we are in has made people more protective of their hard-earned money, and less likely to pay out a settlement because unlike days and years past, there is a likelihood that these people will not recoup (or at least not easily recoup) that settlement from their ongoing business.

But when a client takes an intractable stance, it can put the attorney in a difficult position, and for one simple reason: virtually no case is a “slam dunk.” Every case has difficulties, and the small business lawyer’s job is to balance the zealous advocacy of his client’s position with the need to view the case objectively. Otherwise, the lawyer is doing his client a great disservice; he is reduced to being a mercenary, and is no longer a valued counselor.

The cold, hard truth is this: in a court of law the most important issue is what you can reasonably prove – it is not whether you subjectively believe you are right or wrong.  Once you accept that fact, the next steps flow logically: the smart business owner will not want a mere “hired gun”; rather, he will want someone who will be straightforward and tell him what the problems are with his case based upon an objective evaluation of the evidence. In this manner, the small business owner can make an intelligent assessment whether the case should be tried, or to assess what a fair and just settlement should be.

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In its initial suit papers, Price Chopper claims that competitor Giant Market would have someone consistently and surreptitiously obtain copies of Price Choppers’ fliers that would announce their special sale items, and then undercut those specific sales items in their own advertisements, thereby depriving Price Choppers’ sales of any measurable impact, and giving Giant Market an unfair competitive advantage.

If true, the details set forth in Price Choppers’ complaint are indeed tantalizing, and if this case were ever to go to trial, would certainly have a great deal of jury appeal. For example, Price Chopper apparently has videotape of someone sneaking into the warehouse where their pre-publication fliers were stored, and then handing them to a Giant Market employee. And it appears that they have videotape of this occurring on several occasions.

One important tidbit to glean from this story is this: trade secret protection is not limited to proprietary technology and formulae; if your product marketing and pricing took time, effort, research and expense to develop, and is not readily available to the general public, it can be applied to that as well.

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Not suprisingly, MGA announced its intention to appeal this verdict “immediately.” However, as any veteran litigation attorney will tell you, appellate courts tend to give great deference to jury determinations, and prefer not to disturb jury verdicts unless they are not supported by the evidence, because otherwise, the courts would effectively usurp the jury’s role and function . Thus, putting it mildly, MGA faces an uphill battle in its efforts to either reverse, or substantially reduce, the jury’s 9-figure verdict. In short: infringers beware.

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