Confidentiality Provisions: Non-Compliance Has Few Consequences
May 17, 2022
The April 14th decision by the Delaware Court of Chancery sheds new light on the consequences for non-compliance with confidentiality provisions in employment contracts, mainly that there are few if any at all. The case, AlixPartners v. Mori, C.A. No. 2019-0392-KSJM (Del. Ch. April 14, 2022)., involves termination of the employment relationship and the subsequent measures the defendant took to copy thousands of documents belonging to the plaintiff onto his personal devices. The defendant, who lives and worked out of the plaintiff’s Milan office, was entitled to use the documents related to his lawsuit against the former employer, according to Italian Law, deemed applicable after a prior decision involving jurisdictional issues.
Central to the Italian court’s reasoning was Section 178(1) of the Restatement (Second) of Contracts, that a term of agreement is unenforceable in instances where the term conflicts with public policy. Italian law provided because Mori’s employment litigation required use of the AlixPartners documents to move forward, the conflicting confidentiality clause ultimately failed the public policy requirement.
The court found no violation of the contract’s non-solicitation clause and determined Italian law governed issues of trade secrets, which were also unviolated. Permanent injunction and damages were denied except for a nominal $7 compared to the defendant’s $2 million award in connection with his employment claims against the plaintiff. While the court warned its precedent-setting reasoning should be limited to the facts in this case, this will be an important case for corporate and commercial litigators to keep on hand for its persuasive analysis of noncompliance in the handling of confidential documents.
To read the full article from the Delaware Business Court Insider, click here.
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