Non-compete unenforceable
Trade secrets undefined · Dismissed with partial fees
After Leaving to Open Her Own Tax Practice, She Was Sued Over Stolen Client Lists. The Plaintiff Couldn't Define Its Trade Secrets, Dismissed the Case, and Paid Part of Her Attorney's Fees
Background
W worked for six years at a tax and bookkeeping firm. After leaving, she rented a small office nearby and began preparing taxes for individuals and small businesses. She announced her opening on social media, and several longtime clients reached out to her. Three months later, her former employer sued her. It alleged she violated a non-compete clause and stole client lists. The employer sought an injunction barring her from serving any former client, plus damages for "lost client income."
Challenges
- She had signed an agreement at hiring that barred her from serving the company's clients for two years after leaving.
- The employer applied for an injunction. If granted, her newly launched business would have to stop.
Strategy
- Non-compete: in California, employee non-compete clauses are generally unenforceable, so an employer using one to pursue an employee was itself unlawful. We made this clear in our answer. Before the injunction hearing, the employer withdrew its non-compete claim, and the court did not grant an injunction.
- Trade secrets: the employer said its client list and pricing were secret, and that she had exported large amounts of data before leaving. We required the employer to specify which items it claimed were secrets. Its first list read only "client information, business materials," which the court found insufficient.
- We had a third party examine her computer. The report showed she did not export, copy or upload company files before or after leaving. The clients had found her themselves after seeing the opening announcement.
- The employer's second description was still vague. We sent a letter pointing out that a party who sues without a valid basis can be ordered to pay the defendant's attorney's fees.
Case Timeline
| Date | Milestone |
|---|---|
| September 2025 | Former employer filed suit and sought a preliminary injunction |
| October 2025 | Answer filed, requiring the plaintiff to specify its trade secrets; before the injunction hearing the plaintiff withdrew the non-compete claim, and the court did not grant an injunction |
| January 2026 | Plaintiff's first disclosure found insufficient |
| April 2026 | Computer forensic report completed |
| June 2026 | Plaintiff's second disclosure remained vague; our letter noted that a trade secret claim brought in bad faith can carry an award of the defendant's attorney's fees |
| Late September 2026 | Plaintiff dismissed the case and may not refile |
Outcome
The former employer dismissed the case, may not refile it, and bore part of Ms. W's attorney's fees.