A booming oil industry is fueling trade secrets litigation within the domestic energy industry, where companies are increasingly suing one another for raiding each other’s work force.
Labor and employment attorneys say that higher gas prices are leading to hotter competition among domestic gas and oil companies, which are aggressively going after each other’s top talent.
Consequently, lawyers say, lawsuits are bubbling up, particularly in Texas, as companies claim their top-notch workers are unlawfully being swiped by rivals, either for their talent, their secrets or both.
“I’ve never been so busy as I am right now with these cases,” said David Countiss of the Houston office of Chicago’s Seyfarth Shaw.
“Whenever you have a high-level employee leaving – one of your best employees who has worked with the company for a long time – when he goes to a competitor, litigation also follows. And that’s what’s happening right now,” said Countiss, who is handling more than half a dozen lawsuits involving departing employees and alleged trade secrets claims.
In Houston, a jury last week rejected a multimillion-dollar trade secrets lawsuit by an oil field supply company that sued a rival company for allegedly hiring four of its employees to obtain confidential information. The jury found that neither the employees nor the new employer did anything wrong. National Oilwell Varco v. A & B Bolt & Supply, 2006-79749 (Harris Co., Texas, Dist. Ct.).
In Iowa, an ethanol producer is suing two former employees for allegedly disclosing trade secrets and breaching confidentiality agreements by taking jobs with a competitor in Colorado. Horizon Ethanol v. Gary T. Hanson, 3:07-cv-03017-MWB (N.D. Iowa).
In Austin, Texas, an oil and gas waste disposal company is suing a former employee for taking a job with a competitor, and allegedly taking confidential data with him in violation of a noncompete agreement. The new employer is also being sued. American Disposal Services v. BLSR Operating, 2007V-0070 (Travis Co., Texas, Dist. Ct.).
Some lawyers say the gas and oil industry has become so competitive that companies are hiring competitors’ employees not for their talent, but for their employer’s secrets.
“We have clients that are very concerned that that is happening,” said Teresa Valderrama, an attorney in the Houston office of Jackson Lewis. Valderrama said that claims alleging unfair competition for labor are a growing problem for the energy industry. “The last two years there’s been a growth in the area, but perhaps the last 12 months has been the most active.”
More suits, she said, are likely to follow. “I do think that litigation is going to continue to grow as long as the economic and marketing pressure continues to grow,” she said. “Right now, there’s a high value being placed on experienced personnel.”
Business litigator John Zavitsanos at Houston’s Ahmad, Zavitsanos & Anaipakos believes that trade secrets claims by gas and oil companies are being overblown. He said litigation about departing employees isn’t about protecting confidential information, but about scaring current employees into keeping their jobs rather than seeking higher pay elsewhere.
“If a message is sent to the existing labor base – if you go work for a competitor we’re going to come after you – there is less economic incentive to raise salaries,” said Zavitsanos, who is handling 15 to 20 trade secrets lawsuits involving energy companies. “Trade secret cases get filed because people don’t want to pay market rate.”
That’s what Zavitsanos argued in his recent case before the Houston jury that cleared four employees of any wrongdoing when they left for higher-paying jobs. Zavitsanos said his clients were underpaid for years, undervalued, and were under no confidentiality or noncompete agreements.
“At the end of the day, there are really very, very few trade secrets,” Zavitsanos said. “Everyone wants to think that these companies are huge repositories of trade secrets, when they’re really carbon copies of one another.”
J.D. Page, a solo practitioner in Houston who represented the plaintiff, was unavailable for comment.
Meanwhile, attorney M. Todd Sullivan, an employee-defection specialist in the Raleigh, N.C., office of Womble Carlyle Sandridge & Rice, foresees more trade secrets litigation on the horizon for the energy industry. “There is naturally going to follow a consistent attempt to search for valued labor, and there’s going to be fights over that because everyone wants to make and capture those profits that are burgeoning in that growing field.”
Tresa Baldas is a reporter for The National Law Journal, a Recorder affiliate based in New York.
