ADVISORY+MEMO+2

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San Diego State University *

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671

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Business

Date

Apr 3, 2024

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pdf

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Uploaded by JudgeSandpiperMaster1063

ADVISORY MEMO 2 Fact Pattern and Prompts BA 671 Alice is a software engineer who works for Bob, the owner of a startup company called Techy. Techy develops and sells a mobile app that helps users find and book local services such as plumbers, electricians, and cleaners. Alice signed an employment contract with Techy that includes a non-compete/non-disclose clause, which provides that while working for Techy, Alice would be exposed to Techy’s “ confidential information ” , defined as including, but not limited to, product design and development methods, coding, marketing strategies and other trade information, and therefore and for during the term of employment and for a period of three-years thereafter, “ Alice may not work for any other company in the same trade as Techy nor disclose any confidential information to any third party without consent .” In addition to being part of the design team for the app, Alice is also a customer, having used the app on many occasions to facilitate the renovation of her home. While working for Techy, Alice discovered that Bob has failed to disclose to regulators and customer ’s key facts about the app, such as newly discovered security risks, and that the company secretly sells the app users ’ usage data (including personal identification and location) to other companies. This week, Alice received an employment offer from Charlie, the founder of a new company called Handy. Handy is also developing a mobile app that helps users find and book local services, but with some additional features such as ratings, reviews, and discounts. Charlie offers Alice a higher salary and more benefits than Techy. Alice decides to accept the offer and quits her job at Techy. As one of her final acts as an employee at Techy, Alice sent an anonymous email to a journalist at “ City Times ” , a well-known newspaper, detailing her concerns about Bob failing to disclose the security risks with the app and that Techy was selling user information without consent. The journalist exposed the information that evening, causing an uproar on social media as well as the attention of the FTC. Bob is furious when he learns that Alice has joined Handy. He believes that Alice has violated the non-compete/non-disclose clause in her employment contract and that she will use the trade secrets and confidential information she learned at Techy to help Handy gain an unfair advantage in the market. He also suspects that she had something to do with the City Times article. Bob sues Alice for breach of contract (as to the employment agreement and the non- compete/disclose clause), unfair competition, and seeks an injunction to prevent her from working for Handy. He named Handy as a co-defendant, alleging that they induced Alice to breach her agreement with Techy.

You are the COO of Handy and are tasked with assessing (using your layperson understanding of the law) the best path forward for the company and to prepare a memo to the Board of Directors analyzing the following: Questions: ● Is the non-compete/non-disclosure clause in Alice ’ s employment contract enforceable under California law? Why or why not? ● What defenses and counter claims, if any, will Alice raise in her response to Bob/Techy’s lawsuit? Discuss. ● What defenses, if any, may Bob/Techy assert; and what is the likely outcome and remedies for all three parties? Discuss.

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