Joining forces with other co-workers to form a new venture that will compete with your former employer can not only create ill will, it can also lead to civil litigation and, in some cases, the exposure of your new company’s confidential financial information. As one South Florida business recently learned following its unsuccessful appeal to the 3d District Court of Appeal, that forced disclosure may sometimes happen without the trial court even holding a hearing or reviewing the documents before ordering the information turned over.
The seeds of this underlying dispute were planted when several former officers, directors and other employees of Navalimpianti USA, Inc., a company that manufactured life safety appliances for ships, left to form a new company, Bianchi & Cecchi Services, Inc. The former Navalimpianti employees allegedly committed numerous varieties of corporate malfeasance in the formation of the new company. Navalimpianti accused the individuals of breaching their fiduciary duties, misappropriating trade secrets and improperly shifting property from Navalimpianti to Bianchi.
After Navalimpianti won the liability phase of the trial, it had to prove how much damage it incurred as a result of lost sales and misappropriated trade secrets. Navalimpianti subpoenaed several of Bianchi’s corporate financial documents from 2008-2012, including income tax returns, balance sheets, income statements and invoices regarding sales made.
Bianchi refused to hand over anything more recent than June 2010. Navalimpianti went to court and the judge ordered Bianchi to disclose the rest of the documents. Although the two companies were competitors, the disclosure wouldn’t harm Bianchi, according to the trial judge, because the documents would only be seen by Navalimpianti’s lawyers and expert witness.
Bianchi appealed, arguing that the trial judge erred by ruling on its request without even holding an evidentiary hearing or conducting an in-person review of the documents at issue. The appeals court disagreed, though. Bianchi was not a party to the case. When a non-party fights the disclosure of documents it claims are confidential, the law requires the trial court to balance the requesting party’s need for the information against the would-be discloser’s privacy interest. In other words, the trial court in this case was tasked with determining if Navalimpianti’s need for Bianchi’s financial documents from 2012, 2011 and the latter half of 2010, in order to prove its damages, was greater than Bianchi’s right to keep that information private.
The appeals court agreed with Bianchi that a firsthand review of the documents or an evidentiary hearing “is generally the appropriate mechanism” for making this determination, but the court nevertheless conclude that no “hard and fast rule” existed requiring such procedures, and the court refused to create such a rule in this case. In a minority of cases, the required analysis can be done based solely on the trial evidence, the parties’ filings and the arguments of counsel. Based upon the order the trial court issued in Bianchi’s case, the appeals court was satisfied that the trial court met its obligations even without the additional review or hearing.
Business litigation can hold many risks. Whether you win or lose, the litigation of the case may force you to disclose information you’d prefer to keep secret in order to best protect your company’s business interests and competitive advantages. If you find yourself faced with possible litigation, talk to the knowledgeable Florida commercial litigation attorneys at Stok Folk + Kon. Our experienced attorneys can help you take the necessary steps to best protect your business interests.
Contact us online or by calling (954) 237-1777 to schedule your consultation.
More blog posts:
Dealing with a Contractor’s Invoice Paid by the Wrong Developer, Florida Business Lawyers Blog, March 13, 2015
LLC Member Unable to Use Garnishment to Recover Judgment from Terminated Member, Florida Business Lawyers Blog, Feb. 26, 2015