In August, the North Carolina Business Court, in Edgewater Services, Inc. v. EPIC Logistics, Inc., 2009 NCBC 20 (August 11, 2009), granted summary judgment in part for Defendants on the plaintiffs’ trade secret claim related to its rates and customer files. In that case, plainitff Edgewater Services, Inc. (”ESI”) alleged that the defendants misappropriated its carrier files, rates and customer files and that this information constituted trade secrets under North Carolina law. In discovery, the plaintiff made significant admissions, in effect conceding that only the rates were trade secrets and then admitting that those rates change as variables such as fuel costs change. The plaintiff also conceded that the alleged trade secret information was kept in an unlocked file room “accessible to anyone.” These admissions were probably too great to overcome. The evidence also showed that the customer files were kept by salespersons in their respective offices.

In granting the defendants’ motion for summary judgment on this part of the plaintiffs’ case, the court found that the plaintiffs’ carrier files, rates and customer files were not trade secrets. In support of this conclusion, the court noted that the information could be “learned directly from carriers and customers of ESI.” The court also noted that ESI did not take sufficient steps to safeguard the information.

While the opinion does elsewhere mention the fact that the defendant had entered into an employment agreement and non-compete (and indeed the court denied summary judgment to the defendants with respect to a non-disclosure covenant in that agreement), the court apparently gave this little or no weight in finding that inadequate steps were taken to protect the alleged confidential information. Interestingly, the court, in finding that the customer information was not a trade secret because it could be learned from the customers themselves, did not refer to the portion of the statutory definition that states that a trade secret includes a compilation of information. Of course, an argument could be made that customer files are a compilation of information that are worthy of protection. It is worth noting that the Business Court previously in the Sunbelt case, found that a compilation of information, including customer information, should be afforded trade secret protection. See Sunbelt Rentals, Inc. v. Head & Engquist Equipment LLC, 2003 NCBC 4 (May 2, 2003). Although the court did not mention the Sunbelt case or the compilation point specifically, the court did note that the alleged trade secrets were “compiled in the course of doing business” and there was no evidence that the plaintiffs expended “any significant amount of effort or money in developing the information, outside of the cost of doing business.” While this statement appears to be directed at the value of the alleged trade secret, case law does exist to support the proposition that trade secret status can be afforded to information that is developed in the ordinary course of a company’s business. See e.g. Sunbelt, supra, and Byrd’s Lawn & Landscaping, Inc. v. Smith, 142 N.C. App. 371 (2001).

Post script: This author was on the Sunbelt trial team.