Departing lawyers who copied firm’s databases may be liable for unfair business practices, top state court says
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Departing lawyers who downloaded a “treasure trove” of proprietary materials from their Boston law firm may be liable for unfair or deceptive business practices, the Massachusetts Supreme Judicial Court has ruled.
The court ruled for the Governo Law Firm in its lawsuit against a group of nonequity partners who at first made an offer to buy Governo and then started practice at their new law a day after their offer was rejected. The lawyers had already incorporated the new law firm, CMBG3, and they used the downloaded materials in their practice, according to the court’s April 9 opinion.
Law360 and the Boston Business Journal have coverage, while Holland & Knight published an alert on the case.
According to Holland & Knight, the decision appears to be the first instance in which a court deemed this type of conduct to create possible liability under a state’s deceptive practices laws.
“Taking materials developed by or for the firm at the firm’s expense may create risks to the attorney and the attorney’s new firm under consumer protection laws,” the alert said.
Governo represented insurance companies in asbestos litigation. The lawyers started secretly downloading the research library, databases and administrative files onto high-capacity thumb drives in October 2016. It cost more than $100,000 to build the library and the same amount to build the databases, according to the opinion.
The downloaded research library consisted of more than 100,000 documents relevant to asbestos litigation, including witness interviews, expert reports and investigative reports. The searchable databases included scientific information. The administrative files included marketing materials and client lists.
In June 2019, jurors awarded the Governo Law Firm $900,000 on claims of conversion, conspiracy and breach of the duty of loyalty. But jurors did not find liability on a claim of unfair or deceptive trade practices.
The Massachusetts Supreme Judicial Court said Governo is entitled to a new trial on the trade practices claim because of erroneous jury instructions by the trial judge. The judge wrongly said jurors could not consider copying of documents while they were still employed at Governo.
“Where an employee misappropriates his or her employer’s proprietary materials during the course of employment and then uses the purloined materials in the marketplace, that conduct is not purely an internal matter; rather, it comprises a marketplace transaction that may give rise to a claim” under the trade practices law, the court said.
“Had they not been told to disregard this conversion, the jury could have found that the defendants’ subsequent use of the converted materials was an unfair or deceptive act, rendering the defendants liable.”
The Governo Law Firm’s owner, David Governo, is now a partner with the Boston firm Smith Duggan Buell & Rufo, according to the Boston Business Journal. An online notice on the Governo Law Firm’s website says other Governo attorneys and staff members also moved to Smith Duggan.
