Court Looks Closely, but Sees no Whistleblower Story to Support Fired Employee’s Download of Key Documents | Fox Rothschild LLP
More than 500 sequentially accessed files downloaded to a personal thumb drive, and a description in a verified complaint of the purported confidential information and trade secrets implicated, were the key components of the Business Court granting a preliminary injunction in a case involving a terminated employee who transitioned to a competing pharmaceutical company.
In Merz Pharm., LLC v. Thomas, 2024 NCBC 32, Merz had fired Andrew Thomas as its director of government and federal accounts, a role in which it alleged he had key responsibility for the company’s government sector sales of one of its “flagship products,” Xeomin. Merz alleged that on the day Thomas was fired, and again a few days before he returned his company technology items, he accessed and downloaded confidential information that centered on Xeomin and Merz’s federal accounts. Id. ¶¶ 8, 16-18.
The Court noted that Thomas did not dispute the downloads, but testified that he “permanently deleted all the contents of the [t]humb drive” five days before he applied for a job at Revance, a Merz competitor that had a drug which competed in some of the same market spaces as Xeomin. Thomas said he reformatted the drive “to re-use it for storing [his] family’s archival home videos, which he was in the process of converting to digital format.” Id. ¶¶ 19, 21, 55.
Judge Davis examined the “likelihood of success” prong of the preliminary injunction analysis from the context of a confidentiality agreement between Merz and Thomas and the extent to which the information identified in the complaint qualified for protection under the North Carolina Trade Secrets Protection Act (“NCTSPA”), N.C.G.S. § 66-152(3). The Court found considerable similarity between how the parties’ confidentiality agreement defined protected information and the contours of the NCTSPA.
The Court recounted that the parties’ agreement defined protected information closely allied to a “secret sauce” approach – noting the importance to Merz of planning data; selling and marketing strategies; process designs and specifications; formulas; R&D information; and industrial and intellectual property rights. Merz v. Thomas,¶ 42. Merz framed its implicated trade secrets as including Xeomin-specific strategies, customer purchase volumes, performance data and analytics, and market share information that the Court found was “protected by the explicit terms” of the parties’ confidentiality agreement. “[A]t least some of this information,” the Court concluded, “constitute[d] protectable trade secrets under the NCTSPA. Id. ¶¶ 48-50.
Thomas argued that he was immune from liability because his agreement with Merz contained a “safe harbor” for whistleblower activity that applied to his actions. He alleged that he “reasonably believed [the downloaded documents] constituted evidence of unlawful conduct by Merz that could form the basis for a whistleblower lawsuit to be discussed with an attorney – and for no other purpose.” Id. ¶ 57.
In rejecting the immunity claim, Judge Davis noted there was no evidence of record that Thomas took the downloaded information to an attorney before the date he claimed to have deleted it from the thumb drive. Nor, the Court found, did Thomas explain why “a great number” of the downloaded documents had “no relation” to alleged wrongdoing by Merz that he later alleged in a counterclaim. Based on the case’s early record, the Court did not accept the proposed narrative thread that the downloads were motivated by whistleblower intentions (Id. ¶ 58):
“[T]he Court does not find it credible that [Thomas] downloaded the documents to preserve evidence of wrongful conduct by Merz Pharmaceuticals and then simply proceeded to delete them.”
Takeaways
- While the Court was skeptical of defendant’s take on the underlying events of his departure, it did also discern that Thomas had “superior – and far more detailed – knowledge” than Merz about how drugs can be included in the Veterans Health Administration’s formulary list from which prescriptions to patients can be sourced. Id. ¶ 73. That was a key factor in the Court rejecting Merz’s request for a preliminary injunction regarding a purported breach by Thomas of a nonsolicitation provision in their agreement.
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