A temporary restraining order against Rockhill Insurance, granted on behalf of Everest National Insurance, has been allowed to lapse by a federal judge after new findings changed the judge’s view on whether trade secrets had been stolen.
A restraining order was granted in October after Everest accused Rockhill, a subsidiary of State Auto Insurance Group, of stealing trade secrets and employees.
Everest filed the suit in September after Tracy Upton, then vice president of its property facility division, left the company to join Rockhill as head of a new excess and surplus property unit.
Everest alleged that Upton conspired with Rockhill to steal confidential proprietary information and solicit several of its employees to follow his move.
US District Judge Mary Scriven ordered Rockhill and co-defendant Tracy Upton to return confidential information belonging to Everest, as well as prohibiting the defendants from using the information or contacting Everest policyholders.
However, on Thursday, Judge Scriven said that while Rockhill must still return all confidential materials in its possession that belong to Everest, she would not convert Everest’s existing restraining order into a preliminary injunction, a Law360 report said.
Judge Scriven said she no longer found that some of the materials necessarily qualified as trade secrets or that Everest faced imminent irreparable harm.
She added that Everest's prior statements had led her to believe that Rockhill was trying to enter the property insurance market, when the firm has been providing property insurance for over a decade.
“The evidence presented by defendants through their responses and at the preliminary injunction hearing, however, presents a very different picture of the particular property insurance market in which both Everest and Rockhill compete than was conveyed by Everest through its [temporary restraining order] motion,” she said.
Everest is also not at risk of losing revenue from its existing policies until their terms end, the judge said.
“Once the termination date nears, normal competition for the renewal business on such policies will ensue in the marketplace,” she stated.
Everest had also claimed that it faced imminent harm from the threat of Rockhill using its confidential information, including detailed information on Everest policyholders, to “dislodge” business.
But Judge Scriven reversed her acceptance of this after learning that direct solicitation of insureds is prohibited in the excess and surplus lines market – in which the two companies conduct most of their business.
She also noted that all bids and policies must go through wholesale brokers, who typically share much of the information that Everest claimed as trade secrets when they send out requests to various insurance companies.
Judge Scriven also found that Everest lacked grounds to prevent former employees from using their prior business relationships and contacts, as it did not have non-compete or non-solicitation agreements with them.
On Monday, Everest responded to the latest development, pointing to evidence it had already provided which shows that at least 50 days before his resignation, Upton began reviewing and transferring highly confidential data from Everest’s secure computer systems to unsecured email addresses.
The company claim that Upton had been soliciting and recruiting his colleagues in Everest’s property insurance business for weeks before his resignation, and it provided evidence that immediately after Upton left the company, the human resources department at Rockhill contacted several Everest employees to encourage a “mass departure”, according to case records.
Everest also claimed that it has provided evidence which suggests that Upton attempted to clear history of searches from his laptop after the company asked him and other former employees to return the devices.
