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Calisi v. Unified Financial Services, LLC - 4/11/2013

Arizona Court of Appeals Division One Holds that a Business’s Customer List Is Not a Trade Secret Where the Business Has Not Shown that the List Contains Unique and Original Information, that the Business Invested Substantial Time and Effort to Acquire the Information, or that the Business Treated the List as Secret.


Michael Calisi was hired as a Certified Public Accountant at Unified Financial Services (“UFS”) in January 2006, and was promoted to vice president of operations in January 2007.  In August 2008 UFS demoted Calisi to a non-salaried, commission-only financial advisor position, but also assigned him to serve as the tax season coordinator and agreed to pay him $15,000 for serving in that role.  Calisi’s employment with UFS ended on January 28, 2009.  Calisi then became the in-house CPA to a mortgage company owned by Daryle Messina.  The mortgage company sent out an email to its clients offering a discount on Calisi’s tax preparation services.  From 2004 to 2008, UFS and Messina’s company referred customers to each other and Messina’s client list included clients of UFS. Calisi subsequently sued UFS for $1,581.84 in unpaid commissions and $11,814.85 in unpaid compensation for his work as the tax season coordinator.  He sought treble damages under A.R.S. § 23-355(A).  UFS filed a counterclaim, alleging that Calisi had misappropriated UFS’s trade secrets by using its customer lists.  The trial court ruled in favor of Calisi on his claims for unpaid commissions and wages, and awarded $43,760.40 in treble damages.  The court rule in favor of UFS on its trade secrets claim and awarded $51,566.54 to UFS, resulting in a net judgment of $7,806.14 to UFS.  Calisi appealed and UFS cross-appealed.

The court of appeals affirmed the treble damages award and vacated the trial court’s judgment on trade secrets.  The court held that UFS’s customer lists were not trade secrets.  The court explained that there is a two-part inquiry to determine whether something is a trade secret: “first, whether the subject matter of the information is secret; and second, whether reasonable efforts have been taken to keep the information secret.”  The court listed four factors relevant to determining whether a customer list is a trade secret: first, “[a] customer list may be entitled to trade secret protection when it represents a selective accumulation of detailed, valuable information about customers -- such as their particular needs, preferences, or characteristics –- that naturally ‘would not occur to persons in the trade or business’”; second, “[a] customer list may also be entitled to trade secret protection if the claimant demonstrates it compiled the list by expending substantial efforts to identify and cultivate its customer base such that it would be difficult for a competitor to acquire or duplicate the same information”; third, “whether the information contained in the customer list derives independent economic value from its secrecy, and gives the holder of the list a demonstrable competitive advantage over others in the industry”; and fourth “the extent to which the claimant divulged its customer list externally and

internally, i.e., to people outside of its business as well as to its own employees.”  The court of appeals held that UFS had failed to present evidence showing that the four factors applied.  In its cross-appeal, UFS challenged the trial court’s award of treble damages, arguing that there was a good faith dispute as to the amount due to Calisi. The court rejected this argument, holding that reasonable evidence supported the trial court’s judgment. The court of appeals thus affirmed the trial court’s award of treble damages and vacated the trial court’s judgment in favor of UFS on its trade secret claim and ordered that it enter judgment in favor of Calisi on that claim.

Judge Norris authored the opinion.  Judges Gould and Howe concurred.

Posted by: James Rogers

Posted On: 5/16/2013