A Different Kind of Embezzlement — DSO Executive Accused of Stealing Trade Secrets

Nathan Cox

Earlier this month, a Nashville, Tennessee company filed a federal lawsuit against its former employee alleging trade secrets misappropriation under the Defend Trade Secrets Act, among other claims.  The plaintiff, Marquee Dental Partners, LLC, operates dental offices in Tennessee, Alabama, and Kentucky.  Marquee purchases existing dental practices and provides administrative services to those practices allowing the doctors and support staff to focus on clinic services and patient care.  In a particularly strongly-worded introductory sentence, the complaint reads: “This case shows what it means to be a faithless corporate executive.” 

According to Marquee, that corporate executive, defendant Nathan Cox, was hired in early January 2016 as the Vice President of Business Development.  Mr. Cox was tasked with helping Marquee grow its network.  Specifically, Mr. Cox’s duties included developing contacts with practices that met certain financial, geographic, and practice-type criteria, cultivating relationships with potential future network members, and gauging their interest in joining Marquee’s network.  Instead of fulfilling his duties, Marquee alleges that Mr. Cox “concealed the confidential and proprietary information Marquee paid him to collect, develop, and maintain for its exclusive use; provided information instead to multiple Marquee competitors—while still employed by Marquee—in an effort to land a higher paying job; and deleted nearly all of his [8,200 emails] on his way out the door.”  Marquee claims Mr. Cox abruptly left the country shortly thereafter.

Marquee recovered Mr. Cox’s deleted emails and allegedly found that, despite his obligations, he withheld acquisition pipeline information from Marquee.  For example, Marquee alleges that one list of potential leads that Mr. Cox sent Marquee included twelve fewer leads than he alluded to in emails to Marquee’s competitors.

Marquee brought its claims under the DTSA which was signed into law effective May 11, 2016.  In order to prevail in their DTSA claim, Marquee will first need to establish that the information Mr. Cox collected were Marquee’s trade secrets.  Then, Marquee will need to establish that Mr. Cox’s activities amounted to the unauthorized disclosure of Marquee’s trade secrets.  Though these elements are familiar under state laws, with less than two years on the books, how the DTSA will be used by Plaintiffs and applied by courts is still to be determined.  If you’re a regular reader, you know we have been keeping our eye out for developments with respect to the DTSA and will continue to do so.

In the meantime, a key lesson can already be gleaned from this case: Trade secret owners must be vigilant.  Even trusted executives can misappropriate.

Content retrieved from: https://blogs.orrick.com/trade-secrets-watch/2017/12/29/worse-than-a-toothache-dental-executive-alleged-to-have-misappropriated-proprietary-business-leads/