In an unsigned opinion rendered on December 26, 2023 in Snap! Mobile v. Argyrou, et al., a Washington State appellate court confirmed that both a competitor and an ex-employee can be held liable for the same misappropriation of trade secrets; stated differently, a finding of liability against one does not inherently preclude a finding against the other.
What Happened in Snap! Mobile
After prevailing in their first lawsuit against competitor VR and its chief executive for tortious interference with Snap!'s restrictive covenants with its employees and misappropriation of Snap!'s trade secrets, Snap! separately sued their former employees for breach of those non-solicit and non-compete provisions. More specifically, these clauses included a non-acceptance of business provision, and a non-solicitation of business clause for the specific geographic area where the employee performed services for Snap as well as “any geographic area about which Employee learned Confidential, Proprietary, and Trade Secret Information.” The agreement also prohibited solicitation of other Snap employees. All restrictions had a duration of 18 months after termination of employment.
(In case you were wondering, Snap! sued in two different courts because the case with VR, who was apparently not subject to the Washington courts' jurisdiction, Snap!'s agreements with its employees contained a provision setting the forum as Washington state for any legal disputes arising between them).
The employees moved to dismiss the action against them on the grounds that since the Idaho court had already found VR and its chief executive liable for the same set of acts, that inherently precluded a similar liability finding against them. In legal terms, this is referred to as "collateral estoppel" and "res judicata," also known as "claim preclusion" and "issue preclusion," are, in layperson's terms, loosely translated as the issue has already been litigated and decided, precluding a new court from reaching an inconsistent determination.
What the Appellate Court Held
In reversing the trial court's order that granted the former employees' motion to dismiss, the appellate court stated as follows:
"Without application of claim preclusion, the fact that VR and Landers were held liable for injury to Snap based on Respondents’ actions will not necessarily preclude claims against Respondents for the same conduct. As Restatement (Second) of Judgments § 49 (Am. Law Inst. 1982) states,
“A judgment against one person liable for a loss does not terminate a claim that the injured party may have against another person who may be liable therefor.” Comment a to § 49 explains, When the claimant thus brings consecutive actions against different persons liable for the same harm, the rendition of the judgment in the first action does not terminate the claims against other persons who may be liable for the loss in question. The judgment itself has the effect of officially confirming the defendant’s obligation to make redress, an obligation which under the substantive law co-exists with that of the other obligor. No reason suggests itself why the legal confirmation of one obligation should limit or extinguish the other ...
"Without a commonality of interest, or an employer-employee relationship that would lead to vicarious liability, the Respondents are not in privity with Landers or VR. Therefore, Snap’s current lawsuit against Respondents lacks a “concurrence of identity” of “persons or parties” with Snap’s prior case against Landers and VR. As a result, Respondents cannot establish one of the four elements required for claim preclusion. Claim preclusion does not apply to preclude Snap’s claims against Respondents, and the trial court erred by dismissing the case on this basis."
But Wasn't Snap! Already Awarded Damages for These Acts, Rendering These Breach of Contract Claims Duplicative?
Stated differently, since Snap! had already won damages, why would they be entitled to a second bite at that proverbial apple, which would theoretically give them a double recovery, or at least a signficant windfall?
Granted, this was - and is - an entirely fair question. And the appellate court addressed it as well, stating:
"[T]he parties disagree as to whether the issue of Respondents’ liability for damages for breach of contract is identical in the Idaho case and the present case. In the Idaho case, the jury found VR’s and Landers’s actions constituting tortious interference and unfair competition resulted in damages for unjust enrichment totaling $750,000 and awarded punitive damages against both VR and Landers ... In this case, Snap claims to seek damages for lost profits caused by Respondents’ running additional fundraising campaigns after December 2020, as well as the “cost of assembled workforce ...
"Through these damages, Snap seeks to recoup the costs incurred to recruit and train Respondents, rather than the cost to retrain replacements for which VR and Landers were held liable in the Idaho lawsuit. Thus, the Respondents cannot establish that the issue of their liability for damages caused by their breach of contract in this case is identical to the previously litigated issue of VR’s and Landers’s liability for damages for tortious interference with contract. As a result, issue preclusion does not bar litigation of the issue of damages caused by Respondents’ breach of the agreement."
The Takeaways
One should not assume that just because some damages were awarded for a given set of facts that it will preclude a separate finding that others are also liable for damages under those same set of facts. Moreover, just because you weren't named in the first lawsuit, it doesn't necessarily mean you won't be named in a separate lawsuit that largely arises out of the same underlying acts.
