Free Trial Brief - District Court of Arizona - Arizona

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GREENBERG TRAURIG, LLP
ATTORNEYS AT LAW SUITE 700 2375 EAST CAMELBACK ROAD PHOENIX, ARIZONA 85016 (602) 445-8000

Steven M. Weinberg, SBN 016817, [email protected] Brian J. Schulman, SBN 015286, [email protected] Kimberly A. Warshawsky, SBN 022083, [email protected] Attorneys for Plaintiff Awareness Corporation and Third Party Defendants Allcock and Schmidt IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Awareness Corporation, Plaintiff, v. Group Vision International, L.L.C., et al., Defendants. Plaintiff Awareness Corporation ("Awareness") hereby submits its bench memorandum on Statutory and Common Law Trade Secrets. I. Introduction. The only remaining trade secret claim that survives is the Distributor Defendants' claim that Awareness violated Arizona trade secret law by contacting individuals identified as Awareness distributors in Awareness' genealogy databases who were in the same Awareness downlines as the Distributor Defendants. The Arizona Trade Secrets Act defines trade secrets as follows: "trade secret" means information, including a formula, pattern, compilation, program, device, method, technique or process, that both: (a) derives independent economic value, actual or potential, from not being generally known to,
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No. CV03-2024-PHX-DGC PLAINTIFF AWARENESS CORPORATION'S BENCH MEMORANDUM NO. 10 RE: TRADE SECRETS

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and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

A.R.S. § 44-401. One who discloses or uses another's trade secret, without privilege to do so, is liable to the other if: (1) (2) he discovered the secret by improper means; or his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him, or he learned the secret from a third person with notice of the facts that it was a secret and that the third person discovered it by improper means or that the third person's disclosure of it was otherwise a breach of his duty to the other, or he learned the secret with notice of the facts that it was a secret and that its disclosure was made to him by mistake.

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(3)

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(4)

RESTATEMENT (SECOND) OF TORTS § 757 (1976) (recognized by Arizona in the absence of controlling authority). II. The Distinction Between Rudimentary Contact Information Available in a Phone Book and Customer Trade Secrets Is Well Established. Under the Arizona Trade Secrets Act, raw public information, which is inherently unprotectable, cannot be a trade secret. Enterprise Leasing Co. of Phoenix v. Ehmke, 3 P.3d 1064 (Ariz. Ct. App. 1999). In Enterprise Leasing Co., the court explained the important distinction between "matters that are public knowledge" and "a grouping in which the components are in the public domain but there has been accomplished an effective, successful and valuable integration of those public elements such that the owner derives a competitive advantage from it." Id. at 1069. The former raw publicly available information does not get trade secret protection, but the latter "end-product" does. Id.
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III.

The Distributor Defendants Have Failed to Identify any Fact or Theory on Which They Can Base a Claim of Ownership of Awareness Distributor Information. There is no legal basis for the Distributor Defendants' trade secret claim. There is

no term or provision in any of the agreements between the Distributor Defendants and Awareness that provides that distributors own any of the genealogy or distributor information they use in their Awareness distributorships, nor have the Distributor Defendants articulated any legal theory for their claim. If their claim is that each distributor owns the name and contact information of each new distributor or customer that he or she recruits into his or her downline, then no distributor is entitled to claim ownership of any other distributor's similarly collected information. Each distributor would personally own to the exclusion of every other distributor the information of each specific recruited immediate downline distributor and their customers. Under this theory, no distributor could lay claim to all of the distributor, customer and genealogy information in their downline. On the other hand, if their claim is that an upline distributor owns all of such information in his or her entire downline, as Paige Mattice appears to be claiming, Gord Allcock, as the senior most distributor in all Awareness downlines would own all of the downline information, and not any other distributor. Further, if new distributors or entire downlines are transferred by Awareness to a distributor, such as was the case with Paige Mattice to whom over 70% of her downline, including the Remelskis and the MacGregors, was transferred by Awareness, she would and could have no claim to the distributor and customer information of all of these transferred distributors and their customers since she played no role in recruiting these customers and acquiring this information. Since Awareness had dominion and control over all of the information for these transferred distributors and their customers, as between Awareness and the transferee distributor, Awareness would be the "owner" of that information.
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Thus, under no scenario could any of the Distributor Defendants claim ownership of any downline information other than that of distributors they personally recruited into their downline. However, as explained below, they have in any event waived their right to prevent Awareness from contacting these distributors. IV. The Distributor Defendants Failed to Maintain the Purported Trade Secrets as Secrets, and Therefore Have No Basis for Their Claim Against Awareness. The parties agree that one must maintain a trade secret as a secret in order to claim it as a secret. The Distributor Defendants took no precautions to preserve the secrecy of the information they claim to be secret. There is no agreement between them and Awareness that identifies this information as a trade secret of the Distributor Defendants that must be kept secret, there is no agreement between themselves that this information must be kept secret, and in fact they treated this information as anything but private. As they have admitted, as they were leaving Awareness and in their crusade to recruit Awareness distributors that had been in their downlines, they sent blast emails to all of these downline distributors that openly displayed the recipient's name and email address, without any hint that the recipient needed to keep the information secret. Indeed, as Lynn Remelski readily admitted, it was part of their announced plan to have recipients of these emails forward them on to others. This is hardly an example of maintaining secrecy over purported "secret' information. The only obligation regarding maintaining the secrecy of distributor information, i.e. genealogy information, is Section III of the July 2003 P&P which places the obligation to maintain secrecy of this information on the distributor and not vice-versa as the Distributor Defendants argue. This Section provides that "[g]enealogy reports ... are released to the Team Member/Distributor only for supporting their downline Team Members/Distributors. All information provided by the Company is given in confidence, and the Team Member/Distributor hereby agrees to protect that secrecy and refrain from
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making use thereof for any purpose other than supporting their own organization...," the violation of which could result in an "action for injunctive relief and/or damages including, but not limited to punitive damages." The Distributor Defendants have failed to identify any corresponding obligation placed by them on Awareness. V. The Distributor Defendants Have Waived Any Trade Secret Claim Against Awareness. The Distributor Defendants have waived their right to claim that Awareness' use of distributor information could be a trade secret violation. The July 2003 P&Ps and all predecessors, as well as the AwarenessLife Electronic Agreement, provide that Awareness has the right to contact all distributors via email or otherwise in connection with Company matters. See, e.g. Section VII.F. of the July 2003 P&Ps. It is this permitted act that the Distributor Defendants now try to claim as a trade secret violation. Having expressly agreed that Awareness can communicate with these distributors, they cannot now be heard to complain. Finally, the Distributor Defendants suffered no damages as a result of any purported trade secret violations and can point to none. V. Conclusion. Defendants' trade secret claim has no merit. RESPECTFULLY SUBMITTED this 8th day of August, 2005. GREENBERG TRAURIG, LLP By: /s/ Kimberly A. Warshawsky Steven M. Weinberg Brian J. Schulman Kimberly A. Warshawsky Attorneys for Awareness Corporation and Third Party Defendants Allcock and Schmidt

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CERTIFICATE OF SERVICE I hereby certify that on August 8, 2005, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and transmittal s of a Notice of Electronic Filing to the following CM/ECF registrants: Curtis D. Drew, Esq. 2342 North Pima Road Scottsdale, Arizona 85257-2405 [email protected] Attorney for Defendant Group Vision International, L.L.C. G. Gregory Eagleburger, Esq. The Eagleburger Law Group 2999 North 44th Street, Suite 303 Phoenix, Arizona 85018 [email protected] Attorneys for Distributor Defendants I hereby certify that on August 8, 2005, I served the attached document by facsimile and United States mail on the following, who are not registered participants of the CM/ECF System:

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/s/ J. David Smith

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