A recent New York case, Edelman v. Starwood Capital Group, LLC, 2009 NY Slip Op. 09309 (1st Dep’t December 15, 2009), relates to the issue of maintaining the confidentiality of proprietary materials. The case involved an unsuccessful attempt by an investor, Asher B. Edelman, to acquire a French company Société du Louvre (SDL) in 1999. Edelman claimed that pursuant to his attempt to acquire SDL in 1999, he conducted and compiled significant research to identify SDL as a valuable acquisition. Among other things, Edelman claimed that he researched and analyzed the finances, ownership structure and business operations of SDL. In conjunction with his desire to acquire SDL, Edelman retained a French company to arrange for the financing and to help him obtain a business partner which could help run the hotel operations of SDL that Edelman wanted to continue. This company solicited Starwood Capital Group, LLC ("Starwood") as a potential business partner. Starwood was provided with Edelman's business plans and information, which were all marked confidential, pursuant to the oral agreement between Edelman and the third party company to maintain confidentiality. Starwood declined the deal.

In 2005, pursuant to an auction, Starwood acquired SDL. Its post-acquisition plan allegedly matched the business plans which Edelman had put together and had shown to Starwood years earlier. Edelman claimed that Starwood improperly took and profited from the information he compiled. Edelman alleged claims of unfair competition, improper use of proprietary information and unjust enrichment.

The First Department found that Edelman's claim for the misappropriation of proprietary information failed because the allegations did not sufficiently allege that he took "sufficient precautionary measures to insure that the information remained secret..." Among other things, the Court pointed out that Edelman had failed to obtain a confidentiality agreement with Starwood, as the Court noted would have normally been expected. The Court also stated that the fact that the documents had a "confidential" stamp was, on its own, inadequate to protect them, especially for six years.

The case is another reminder that companies should take appropriate precautionary steps when dealing with confidential information.

Back to Trade Secrets & Employee Mobility Blog

Search This Blog

Blog Editors

Authors

Related Services

Topics

Archives

Jump to Page

Subscribe

Sign up to receive an email notification when new Trade Secrets & Employee Mobility posts are published:

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.