Facts

American Career College (ACC) and West Coast University (WCU) filed suit against three former executives and their subsequent employers. The former executives were ACC's Chief Operating Officer (Christa Jones), its Controller (Will Tu), and WCU's Executive Director of Online (Colton Alton). Jones had become employed by Hamilton White Group IIA, LLP (formerly known as International Institute of the Americas, now doing business as Brookline College) and Alton had become employed by Potomac College, LLC. In February 2009, after the filing of this suit, Tu was also hired to work at Brookline College.

ACC and WCU filed suit against Jones, Tu, Alton, Hamilton White, and Potomac College, asserting claims including trade secrets misappropriation, violation of statutes governing misuse of computer data, breach of contract, conversion, interference with employment relationship, breach of the duty of loyalty, breach of fiduciary duty, fraud and deceit, and unfair competition under Business & Professions Code Sections 17200 et seq.

PLAINTIFF'S CONTENTIONS:
Plaintiffs alleged that the former executives had conspired to steal company information and engaged in other misconduct, including working for their new employers while still employed by plaintiffs. Having conducted a forensic examination of plaintiffs' computers used by the executives, plaintiffs alleged that the executives had copied thousands of files from plaintiffs' computer system (including through one notable off-hours visit to company offices over Memorial Day weekend 2008), using external hard drives and private email accounts, and then destroying evidence after one of the executives was arrested and informed the other executives that their activities had been discovered.

Plaintiffs further contended that the new employers of the executives knew of their clandestine activities and actively participated in the scheme to have the executives breach their duties to plaintiffs. Plaintiffs alleged that the new employers, each of which had the same Chairman of the Board and other common links, arranged for Alton to be hired by Potomac College rather than Brookline (Jones' new employer) in an effort to evade a non-solicitation clause that Jones had in her ACC employment contract, even though Alton was actively rendering services to Brookline. Plaintiffs uncovered evidence that Potomac (which had all of its other operations in the Washington, D.C. area) even subleased space for Alton's use from Brookline in the same Scottsdale, AZ, office suite where Brookline had its executive offices. The executives also denied and attempted to conceal the plan to have Tu follow Jones to work at Brookline notwithstanding Jones' non-solicitation agreement, only to have the plan confirmed by ex-Brookline employees who were aware of it. Even the Chairman of the Board contradicted Jones, the new CEO of Brookline, and Tu, its new CFO, in confirming in her deposition the intent to have Tu join Jones as Brookline.

DEFENDANTS' CONTENTIONS:
Defendants denied all plaintiffs' contentions, any claims of liability, or that plaintiffs suffered any damages. Defendants contended that the action was a thinly veiled attempt to enforce an unenforceable post-termination non-competition agreement between ACC and Jones. Defendants contended that they were independently introduced to Jones and Alton through a third party executive recruiting firm and did not hire Tu until February 2009, long after the complaint was filed and after the case had already been litigated for six month. Defendants contended that, despite, voluminous discovery, including extensive forensic computer analysis, plaintiffs were unable to identify a single piece of ACC or WCU material or information the individual defendants had allegedly taken that would have qualified as an actual trade secret of ACC or WCU. Defendants further contended that plaintiffs had no evidence to show that any ACC trade secret information was actually used by any of the entity defendants. The entity defendants further denied having any knowledge of the individual defendants' alleged activities while still serving as ACC/WCU employees or orchestrating in any way their departure from plaintiffs' employ.

Damages

Plaintiffs' alleged damages between $16 million and $25 million.

Result

The case settled for $5,000,000, the full amount of plaintiffs' demand. The agreement contained mutual releases of all claims by all parties and included an express denial of liability by defendants and required all parties to bear their own costs and attorney fees. Defendants made no offer prior to agreeing to pay the full settlement demand. Plaintiffs refused defendants' request for a confidentiality clause in the settlement agreement. Plaintiffs also obtained injunctive relief against defendants, designed to protect plaintiffs' trade secret information. Plaintiffs further obtained another injunction requiring the return or destruction of all files copied by defendants, verified by defendants. The Court has retained jurisdiction over the parties for the purpose of enforcing the two injunctions

Other Information

The former executives had arbitration agreements and, after suit was filed, demanded to arbitrate the claims against them. The claims against the three individuals proceeded through discovery in an arbitration before Hon. John Leo Wagner (Ret.) at Judicate West, while the claims against the new employers were stayed. Although an arbitration date had been set, settlement was reached in August 2009 before the arbitration commenced. Once the settlement was reached, all parties returned to the Superior Court for the settlement to be entered there. FILED: August 8, 2008.