Ruesch v. Ruesch Intern. Monetary Services

• Decision Date: 18 May 1984
• Docket Number: No. 82-764.,No. 83-742.,82-764.,83-742.
• Citation: 479 A.2d 295
• Parties: Verena RUESCH, Appellant, v. RUESCH INTERNATIONAL MONETARY SERVICES, INC., Appellee.
• Court: D.C. Court of Appeals

Page 295

479 A.2d 295

Verena RUESCH, Appellant, v.RUESCH INTERNATIONAL MONETARY SERVICES, INC., Appellee.

No. 82-764.

No. 83-742.

District of Columbia Court of Appeals.

Argued September 7, 1983.

Decided May 18, 1984.

Carlos M. Recio, Washington, D.C., with whom Patrick J. Moran and Karl W. Pilger, Washington, D.C., were on the brief, for appellant.

Collister Johnson, Jr., Washington, D.C., for appellee.

Before FERREN and TERRY, Associate Judges, and PAIR, Associate Judge, Retired.

TERRY, Associate Judge:

In this casewe are confronted with a question of first impression in the District of Columbia: whether a list containing the names of potential customers is a trade secret entitled to equitable protection.We hold that the customer list here at issue was not a trade secret and that the trial court erred in granting appellee's motion for a preliminary injunction.

I

In 1980appellant went to work for appellee Ruesch International, a newly formed corporation providing financial services in the field of foreign exchange and dealing in precious metals.Appellant became a member of the board of directors and as senior vice president was responsible for servicing and developing existing and prospective clients for the corporation.Before joining Ruesch International, appellant had worked for Deak-Perera, another company providing similar services.Because of a restrictive covenant in her employment contract with Deak, appellant was not permitted to compete with it for two years after her departure.When she left Deak, however, appellant took with her a list of some of the clients with whom she had done business there (the "Deak list") and contacted them during her two-year hiatus, reassuring them that she would soon be back in business.Appellant brought the Deak list with her when she went to work for Ruesch International, where it became the nucleus of Ruesch International's initial client list.

After working for Ruesch International for two years, appellant resigned.She took with her a Rolodex card file which she kept on her desk containing the names of Ruesch International's travel agent clients.This file contained between 800 and 1000 names, including all the names on the Deak list.¹

In the meantime, appellant's father founded Euro-Transfer, Inc., another new company providing foreign exchange services.Appellant became its president and sole employee.She solicited three of Ruesch International's clients, at least two of whom were also on the Deak list, and received $5,500 for her services.Five days later Ruesch International obtained a temporary restraining order which directed appellant to return the Rolodex file along with all other materials and documents taken by her, as well as restraining her from soliciting Ruesch International's clients or disclosing any information contained in those materials and documents.Ruesch International's motion for a preliminary injunction was subsequently granted.

II

A trade secret has been authoritatively defined as "any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.It may be a formula for a chemical compound . . . or a list of customers."4 RESTATEMENTOF TORTS§ 757, comment b, at 5(1939).²In determining whether given information should be afforded trade secret protection, many courts have considered the six factors listed in the Restatement:

(1)[T]he extent to which the information is known outside of [the] business; (2) the extent to which it is known by employees and others involved in [the] business; (3) the extent of measures taken by [the employer] to guard the secrecy of the information; (4) the value of the information to [the employer] and to his competitors; (5) the amount of effort or money expended by [the employer] in developing the information; [and](6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Id. at 6.

The cases are legion in which customer lists have "been held to be property in the nature of a `trade secret' for which an employer is entitled to protection, independent of a non-disclosure contract, either under the law of agency or under the law of unfair trade practices."Morgan's Home Equipment Corp. v. Martucci,390 Pa. 618, 623, 136 A.2d 838, 842(1957)(footnote omitted);seeAnnot., 28 A.L.R.3d 7(1969).³Equally true, however, is that the results vary from jurisdiction to jurisdiction, so that abundant authority may be found on either side of the issue.See1 R. MILGRIM, TRADE SECRETS § 2.09[7], at 2-120 through 2-140(1982).Nevertheless, as Milgrim points out:

Although the results in different jurisdictions may be contrary to one another, some basic distinctions are usually considered.In the case of retail or route-customer lists, emphasis can be placed upon the nonavailability of an informative source which tends to divulge likely prospects.Thus, although almost every potential milk or laundry customer might be listed in the telephone book, all persons listed in the telephone book are not necessarily good customer prospects.With reference to lists of wholesale customers, however, a trade publication or a certain section(s) of the classified telephone directory may list a relatively limited number of potential purchasers, all of whom might be considered likely prospects.Thus, protection of customer lists might be more readily granted on a trade secret or analogous theory to certain types of retail customer lists than wholesale ones.

Id. at 2-121(emphasis in original; footnote omitted).Keeping this distinction in mind, together with the factors listed in the Restatement, we examine the list at issue in this case.

III

Otto J. Ruesch, president and chairman of the board of Ruesch International,⁴ testified that out of the approximately 115,000 travel agents and tour operators solicited through mailing lists, trade shows, and other promotional activities by the company since its inception, the company has acquired 800 to 900 clients.In the process the company expended a minimum of $100,000.The Rolodex card file containing the names and addresses of these clients was kept by appellant, who was responsible for maintaining present clients and developing prospective ones, but it was also available to other employees.Besides the Rolodex file, the company maintained a "transaction book" which recorded the type of transaction performed for each client, together with the client's name, address, and telephone number.

Turning to the factors outlined in the Restatement, we first consider the extent to which the names and addresses of travel agents found in the Rolodex file were known outside of Ruesch International's offices.See, e.g., American Institute of Chemical Engineers v. Reber-Friel Co.,682 F.2d 382, 387-388(2d Cir.1982).The record demonstrates that they came primarily from mailing lists and other publicly available sources.⁵With regard to the second and third factors, the availability of the file to other employees and the measures undertaken to guard the secrecy of its contents, the record shows that some of the cards contained in the Rolodex were prepared by employees of Ruesch International other than appellant as new customers were acquired.Otto Ruesch testified that "[i]f a new customer came in, a Rolodex card had to be made immediately and put into [appellant's] Rolodex, because that was the central focus point of the whole address keeping."Thus other employees had access to the names in the Rolodex, and it does not appear from the evidence that any measures were taken to ensure that the list was kept secret.

The fourth factor to consider is the value of the Rolodex customer list to Ruesch International.Mr. Ruesch testified that after two years of being in business, he expected that the company would break even or perhaps earn a slight profit in the near future.The revenue generated by doing business with the clients on the list was undoubtedly of some value to the company.However, the Rolodex file itself contained only a "bare bones listing of customers . . . [with] no complicated marketing data which attempted to project the marketing needs of a customer or the customer's marketing habits."Gary Van Zeeland Talent, Inc. v. Sandas,84 Wis.2d 202, 211, 267 N.W.2d 242, 247(1978);seeBurroughs Corp. v. Cimakasky,346 F.Supp. 1398, 1400(E.D.Pa.1972).Indeed, as Mr. Ruesch recognized, "the only way you get business [is] if you are more competitive with your rates, if you are better with the service."Even if the Rolodex list was of substantial value to Ruesch International (as it may well have been), that fact would not entitle it to trade secret protection because, with a little time and effort, anyone knowledgeable in the business could compile such a list from commonly available sources.

This leads directly to our examination of the fifth Restatement factor, which is the amount of money and effort expended by Ruesch International in creating the Rolodex file.Ruesch International asserts that it spent a great deal of money to develop the lsit of names in the Rolodex file and places great reliance on this fact in arguing that appellant should not now have access to that list.Appellant responds by arguing in her brief that Ruesch International should not be permitted to "use its advertising budget to justify classifying the Rolodex file as a trade secret."We agree with appellant on this point.

The time and money which a business spends in building up a customer list is an important consideration in determining whether the list is entitled to trade secret protection.See, e.g., American Loan Corp. v. California Commercial Corp.,211 Cal.App.2d 515, 27 Cal.Rptr. 243(1963).However, when the prospective clients are commercially conspicuous, seeAnnot., supra,28 A.L.R.3d at 42-44, courts...