Michigan Federal Court OKs Former Employer's Cease and Desist Letter to New Employer

When an individual threatens to disclose a company’s confidential information gained during employment at the company to a new employer, the common first reaction by the company is to send a “cease and desist” letter to the individual, and also a similar letter to the new employer. Yet before sending such a cease and desist letter to the new employer, the company may wonder whether it is opening itself up to potential liability -- on a tortious interference claim by the individual -- if the new employer should turn around and fire the individual on the basis of the allegations in the letter.

Companies with such concerns received a bit of reassurance in a January 21, 2014 opinion and order in Rick Bonds v. Philips Electronic North America, issued by the U.S. District Court for the Eastern District of Michigan, Southern Division. In that case, Rick Bonds had been employed with Philips Electronic North America or its predecessors (“Philips”) since 1996 as a field service engineer who maintained and repaired medical imaging equipment. He was subject to at least two confidentiality agreements concerning Philips’ confidential information. According to the opinion and order, in early 2009, Mr. Bonds surreptitiously began working for Philips’ competitor Barrington Medical Imaging, LLC as a field service engineer -- while still employed by Philips! Mr. Bonds continued his dual employment until July 2009, when Philips discovered what was going on and terminated Mr. Bonds’ employment.

A month after terminating his employment, Philips sent a cease and desist letter to Mr. Bonds, reminding him of his continuing obligations to Philips with respect to its confidential information. Philips sent a copy of this letter via fax to Barrington, and less than a week later, Barrington terminated Mr. Bonds’ employment.

Over two years later, on January 27, 2012, Mr. Bonds sued Philips, asserting a single claim for tortious interference with his business relationship with Barrington. Philips asserted counterclaims for breach of the confidentiality agreements, unfair competition and misappropriation of trade secrets. After discovery, Philips moved for summary judgment dismissing Mr. Bonds’ tortious interference claim.

In granting summary judgment dismissing Mr. Bonds’ claim, the court noted that to meet the elements of a tortious interference with business relationship claim, the plaintiff must demonstrate that the defendant “acted both intentionally and either improperly or without justification.” The court held that Mr. Bonds failed to present any “specific, affirmative acts that corroborate an improper motive of interference,” and that Philips’ actions to protect its confidential information were not improper because they were motivated by legitimate business reasons. Indeed, the court went so far as stating “concern about potential disclosure is exactly the kind of legitimate business reason that insulates [Philips] from liability.”

So companies should rest easy when sending a cease and desist to an individual’s new employer, provided that letter avoids defamatory comments and is sent in furtherance of the company’s legitimate business interests (which might include confidential information and/or customer relationships) and is not a malicious attempt to get the employee fired.