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Lighting Agent Accuses Ex-Employees of Stealing Trade Secrets

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Mlazgar Associates sues competing agent and 6 ex-employees

 

In recent months, the Upper Midwest has seen some scrambling of a few major agent-manufacturer partnerships in Wisconsin and Minnesota. First, (Hubbell-agent) Mlazgar Associates merged with (Cooper-agent) Elan Lighting in October to form a multi-state Cooper Lighting agency. Then, Hubbell Lighting parted ways with Mlazgar to join forces with JTH Lighting.

Amidst all of those agent and manufacturer realignments, a number of Mlazgar employees resigned from the agency to join JTH Lighting's Wisconsin sales team. Mlazgar is accusing six ex-employees of unlawfully accessing and saving confidential, proprietary, and trade secret information after their employment with the agency was terminated.

In the Minnesota Fourth Judicial District Court, Mlazgar has filed a civil lawsuit against JTH Lighting and six ex-employees: Justin Hendrickson, Nicholas Pucci, Jamie Napolitano, Christopher Klein, David Mantey and Michael Simonson.

All six individuals allegedly resigned Mlazgar in late December. Mlazgar accuses the ex-employees of using personal electronic devices in the days after their respective terminations "to access, copy, duplicate, and/or reproduce Plaintiff Mlazgar Associates' confidential, proprietary, and trade secret information." The agency claims that the confidential information included price lists, account lists, order information and emails – as well as something called the "Master Notebook File."

Furthermore, the agency claims that the six ex-employees collaborated to delete emails from their respective Mlazgar email accounts "in an attempt to destroy evidence."

Statement from the Attorney representing JTH Lighting and the Six Ex-Employees:

"JTH Lighting and our employees were disappointed and surprised to learn of the unequivocally false and unfounded allegations contained in the recent legal action. At no point have any of our staff engaged in illicit or unethical behavior. As such we look forward to the opportunity to defend our right to compete in a manner commensurate with our longstanding history of clean and fair business practices."
Heather Marx, Cozen O’Connor, Attorney for the Defendants

Seeking Injunctions:
According to the complaint, four of the six ex-employees had previously agreed to a written Confidentiality Agreement that, in part, stated, “Violation of this agreement by the Employee will entitle the Employer to an injunction to prevent such competition or disclosure, and will entitle the Employer to other legal remedies, including attorney's fees and costs.”  The agreement was signed between the employee and Elan Lighting, so it is unclear if Minnesota law would consider those documents enforceable for Mlazgar employees.

In a move that could limit manufacturer movement from Mlazgar representation to JTH representation, the lawsuit also requests the court to prohibit JTH Lighting from "further interfering with Mlazgar's commercial agreements and current and prospective business relationships."  Mlazgar is also seeking injunctions that prohibit the defendants from using Mlazgar trade secrets against them.

Lighting Lines in the Spotlight: "Hubbell" mentioned 115 times
The 193-page lawsuit alleges that interference from the ex-employees caused multiple lighting manufacturers to terminate their relationship with Mlazgar and partner with JTH Lighting in Wisconsin. The lines cited are: Hubbell Lighting, Lightglass, BEGA, Kenall, Kelvix, Neri and Meteor Lighting.

We believe that even more lines have terminated business with Mlazgar to join JTH since the February lawsuit was filed, but JTH Lighting's web-based Linecard hasn’t yet reflected the additions we anticipated.

We speculated in our October article that JTH may partner with Hubbell Lighting and wondered how many of Mlazgar’s 230+ lines would stay with the newly-merged agency. The latter comment was stated with Wisconsin, not Minnesota in mind. Nonetheless, it will be interesting to see if the discovery process reveals any manufacturer solicitation by JTH employees that would justify damages or injunctions under Minnesota law.

Impact on Lighting Manufacturers:
We spoke with at least one individual who works for a Mlazgar-represented manufacturer. She was concerned that a data breach could cause unathorized individuals to leverage pricing and other confidential manufacturer information into competitive advantages.

Furthermore, with Mlazgar seeking an injunction against JTH from "interfering with Mlazgar's commercial agreements," will risk-adverse Mlazgar manufacturers eliminate JTH as a possible landing spot until this lawsuit concludes?

Jurisdiction
The six ex-employees are based in Wisconsin, which is also where the confidentiality agreements were signed. Both companies conduct business in both Minnesota and Wisconsin among other states.  We imagine that Mlazgar filed the lawsuit in a Minnesota District Court due to JTH Lighting's headquarters being there.  It will be interesting to see if the Defendants argue improper venue -- which would test the courts to determine whether Minnesota, Wisconson or Federal Court is the proper venue for the case. 

Next step:
The first hearing on the matter is scheduled for March 30 and it is expected to be a remote hearing.  The Plaintiff is expected to move the court to implement temporary injunctions against JTH Lighting and the six ex-employees.

The Minnesota Fourth Judicial District Court happens to be the same court location as the upcoming, high-profile criminal case involving the three police officers charged with George Floyd’s 2020 death.

 

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Above: An excerpt from a 2015 Elan Lighting Confidentiality Agreement

 

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March 16, 2021

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