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Intellectual Property Law

: Womble Trade Secrets Blog

Connecticut Mortgage Broker Loses Staff in 2004 and Lawsuit in 2009

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CNNMoney.com has an interesting piece about a small mortgage brokerage company that claims to have had 33% of its employees "raided" by another company. Those employees then allegedly worked within 2 miles of their former employer and ate its proverbial lunch.

"It was a complete shock," says Charter Oak Lending Group Co-Founder Debra Killian. "We lost everything that took 10 years to build in one month, because one company stole it. How is that not illegal?"

It's an important question. Are there some things that companies "build" that they're not legally entitled to retain? This court seemed to think so.

Certainly the piece's identification that Ms. Killian and Charter Oak did not use any type of employment agreements that restricted certain post-departure competition was instructive. That definitely hurt them. But one wonders what Connecticut law says about raiding - where the number of employees hired by the competitor is so substantial that it renders the former employer hobbled competitively. Isn't that illegal as unfair competition?

We'll see how the appeal of this matter turns out. I am not persuaded by Ms. Killian's claim that Charter Oak "lost everything" when they lost a third of their employees to a competitor - but I buy the argument that she lost something and that the law distinguishes between losses to pure competition and unfair competition. The former is what we want. The latter is not.

Full post as published by Womble Trade Secrets Blog on October 28, 2009 (boomark / email).