Court: Old leads can be followed
Published 09/03/04

An employee's non-disclosure agreement does not equate to a non-solicitation agreement. This point was illustrated in the Massachusetts state court decision of Merrill Lynch v. Dewey, decided on June 30, 2004 in the Worcester County Superior Court. In that case, Merrill Lynch requested the Court prohibit its former employee, Morgan Dewey, from using Merrill Lynch's customer list and soliciting his former clients. Dewey had serviced hundreds of Merrill Lynch accounts while at Merrill Lynch.

According to Merrill Lynch, upon leaving its employ, Dewey directly commenced work at Morgan Stanley making an announcement to his Merrill Lynch clients notifying them of his departure and future employment at Morgan Stanley. Merrill Lynch stated that Dewey had taken his laptop with him when he left which contained a database of names, addresses, and telephone numbers of Merrill Lynch clients.

According to the Privacy Policy that Dewey signed, Merrill Lynch guarantees to its customers that their names, addresses, and other information will remain confidential and not be disclosed to others outside Merrill Lynch. Third parties service providers obtaining access of client information are also subject to Merrill Lynch's Privacy Policy. Furthermore, a Conflict of Interest Agreement Dewey signed stated that he is not to use or disclose any confidential information or business secrets relating to Merrill Lynch before or after his employment. Furthermore, Dewey signed Merrill Lynch's "Guide to Business Conduct" which provides that Merrill Lynch's assets include client lists and such assets can be used only for the purposes intended and not for an employee's personal benefit. Dewey did not sign a non-compete or a non-solicitation agreement.

The Court noted that Dewey should be prohibited from using a confidential client database that he took and that he should return it. However, he has the right to use his general knowledge, experience, memory, and skill after leaving his employment. Solicitation of Dewey's former clients, whose information he has in his memory, does not necessarily disclose confidential information especially since a significant amount of Dewey's clients at Merrill Lynch came with him from his previous firm and are personally known to him as a result of the familial or other personal relationships.

The Court further noted that Merrill Lynch, in asking for an order prohibiting Dewey from soliciting his former clients, equates non-disclosure agreements with non-solicitation agreements which would render the latter obsolete. Non-disclosure and non-solicitation agreements are distinct and the Court found that to equate the two would be fundamentally unfair to an employee who is not put on notice of what obligations may apply upon termination of his employment.

If an employer wants a former employee to be prevented from soliciting his former customers, the employer should seek a non-solicitation agreement from that employee and not rely merely upon a non-disclosure agreement.

However, employees should also read carefully non-disclosure agreements to determine whether they are so broadly written so as to be, in effect, a non-solicitation agreement.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and business persons on a variety of legal issues, including employment, and advocating on their behalf. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

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