On August 29, 2023, the First Circuit affirmed a ruling from the United States District Court for the District of Massachusetts that Allstate Insurance agents misappropriated trade secrets when they retained spreadsheets that contained confidential information. Allstate Ins. Co. v. Fougere, 79 F.4th 172 (1st Cir. 2023). Significantly, the First Circuit rejected the argument that the spreadsheets could not be trade secrets because most of the information within them is publicly available.
Allstate brought this action against two former “scratch agents” who were based in Massachusetts. When the two agents joined Allstate, they entered into “exclusive agency” agreements, which prohibited them from soliciting, selling, or servicing insurance from other insurance companies without the company’s approval. However, Allstate received reports that they were sharing confidential information with competing insurance companies. Allstate then terminated both agents.
After their terminations, Allstate demanded that the agents return all confidential information they acquired to the company. However, other insurance agents who worked with the agents after they left Allstate informed Allstate that the former agents were using spreadsheets that included “names, addresses, phone numbers, email addresses, renewal dates, types of insurance policies, and premiums paid by insurance customers” to solicit new customers. Allstate filed suit against the agents alleging breach of contract and trade secret claims, including claims of misappropriation under Massachusetts common law and the Defend Trade Secrets Act (“DTSA”).
The agents argued that: the information contained in the spreadsheets did not constitute trade secrets; even if the spreadsheets did, the company was not the owner of the documents and the information; and summary judgment was inappropriate because there was no evidence that they used improper means to acquire the information.
The First Circuit rejected all these arguments. First, it held that the spreadsheets did constitute trade secrets under Massachusetts common law and the DTSA, because even if they contained publicly available information, the spreadsheets could only be replicated at immense difficulty. The argument that the spreadsheets were the property of the agents also failed, because of the executive agency agreements that the agents signed when they joined the company, which provided that any confidential information acquired by the agents while working with the company – such as the customer and policy information contained in the spreadsheets – is “wholly owned by [Allstate].” This decision is quite favorable to employers faced with situations where misappropriated information consists of some publicly available information that could only be replicated with significant difficulty.