When Collusion Proves Costly: A Cautionary Tale on Potential Penalties for 93A Violations

From JDSupra, Emily Slaman discusses a chase in which names, resumes, and candidate information were shared by a employee of a recruiting company with an employee of a competing recruiting company. This case suggests that candidate information is a protected trade secret. Emily writes:

What happens when an individual, to benefit their own employer, solicits confidential corporate information held by a spouse or partner?

A damages award in the several millions may be the result. In BioPoint, Inc. v. Dickhaut, et al., a recent decision issued by Judge Stearns in the U.S. District Court for the District of Massachusetts, the court ultimately awarded treble damages for “knowing and willful” violations of the Massachusetts consumer protection statute (commonly referred to as “Chapter 93A”) after a jury verdict in favor of the plaintiff.

BioPoint is a Massachusetts-based life sciences consulting company that recruits short term labor for medical device, biotech, and pharmaceutical companies. Defendant Andrew Dickhaut is an employee of the defendant, Catapult. Catapult is a Texas-based consulting company which opened its Boston office in 2017. Dickhaut was the managing director of Catapult’s Boston office. At the time of the Boston office’s opening, Catapult had no intention to recruit staff for positions within the biotech industry. However, that changed around the year 2018. Importantly, Dickhaut’s fiancée at the time (now his wife), Leah Attis, was a business development manager at BioPoint. BioPoint alleged in its lawsuit that Dickhaut and Attis colluded to funnel BioPoint’s trade secrets to Catapult, thereby costing BioPoint hundreds of thousands of dollars in profits. These trade secrets related to recruitment in the life sciences sector.

BioPoint sued Dickhaut and Catapult in federal court, and alleged that the defendants:

  1. misappropriated its trade secrets,
  2. tortiously interfered with its business relationships,
  3. was unjustly enriched, and
  4. engaged in unfair and deceptive trade practices in violation of Chapter 93A.

Specifically, BioPoint alleged that the transmission of trade secrets which caused their damages occurred between Attis and her fiancé Dickhaut. The trial was bifurcated, with a jury hearing the trade secrets and tortious interference claims, and the judge reserving the unjust enrichment and Chapter 93A claims for a bench trial following the jury’s verdict.

According to the judge’s findings, evidence showed that from 2017 through 2019, Attis “repeatedly disclosed BioPoint’s pricing information, candidate information, and internally marked-up client agreements to Dickhaut.” Specifically, upon his inquiries Attis provided Dickhaut with “a few names” and pay rates for consultants in comparable roles, as well as the bill rates charged to the client employers. Though Attis expressed concern to Dickhaut about sharing this information, stating that it was “shady,” and that “people have gone to jail” for sharing names from BioPoint’s confidential internal system, she continued to do so. In one instance, Attis provided information to Dickhaut regarding Vedanta BioSciences, Inc., a BioPoint prospective client, which ultimately caused Vedanta to sign a master services contract with Catapult instead of BioPoint.

Another instance related to the placement of an individual with BioPoint’s client Shire, plc, who was in the process of being acquired by Takeda Pharmaceutical Company. Attis was responsible for BioPoint’s account with Shire, and BioPoint was on the verge of placing a candidate in a medical director role with Shire in October 2019. Dickhaut requested and received information from Attis related to Takeda’s pay structure, and ultimately persuaded the candidate to accept a position offered through Catapult instead. Evidence introduced at trial showed that Dickhaut sent a text to a Catapult recruiter stating “Hahahaha[.] we win!” in response to hearing that the candidate had cancelled her interview with BioPoint’s client–to the detriment of BioPoint. It was after this incident that BioPoint learned Attis had disclosed trade secrets to her fiancé, and she was terminated. She now works for Catapult as Director of Life Sciences.

The jury found that Dickhaut, through his employment with Catapult, misappropriated trade secrets related to Vedanta and Shire, and that he tortiously interfered in BioPoint’s prospective business relationships with three consultant candidates. Significantly, the jury was not asked to specify what trade secrets were violated, over the objection of Catapult’s attorney. The jury awarded damages in the amount of $312,000 for Catapult’s tortious interference with the Shire candidate’s placement contract.

Throughout trial, Catapult’s attorney argued that the information solicited by Dickhaut concerning resumes and names did not constitute a trade secret and was publicly available in the industry via websites such as LinkedIn. After the damages award, Catapult’s attorney cautioned that such a broad view of what constitutes a trade secret “will create turmoil in the staffing industry.”

However, the case was not over. Judge Stearns subsequently held a bench trial to resolve the unjust enrichment claim, and the claim for violation of Chapter 93A. He found that Catapult was unjustly enriched due to its acquisition of the Vedanta contract, by way of the information Dickhaut obtained from Attis. The court determined Catapult’s profit from the Vedanta contract to be $1,375,148, before turning to the unfair and deceptive trade practices claims under Chapter 93A.

Chapter 93A allows for individuals or businesses to recover up to treble damages and reasonable attorneys’ fees for willful or knowing violations which constitute unfair and deceptive trade practices, a fact-based determination made by the judge. This is where the
relatively meager damages award from the jury became inflated due to the specific actions taken by Dickhaut.

Judge Stearns found that Dickhaut’s conduct was unfair and deceptive within the meaning of Chapter 93A, entitling BioPoint to treble damages and attorney’s fees. Further, Judge Stearns found that Dickhaut’s collusion was willful, citing the “we win!” text message, as well as Dickhaut’s awareness “that surreptitiously obtaining BioPoint’s confidential information from Attis was illegal because Attis told him as much.” Thus, Judge Stearns trebled the damages awarded by the jury for the tortious interference claim, and the damages awarded for Catapult’s unjust enrichment claims. Altogether, the damages due to BioPoint ballooned to $5,061,444 due to the knowing and willful conduct by Dickhaut.

Judge Stearns’ holding in the BioPoint case illustrates how a relatively humdrum award of damages can increase exponentially under a Chapter 93A claim if an individual’s conduct is found to be willful and knowing. Additionally, the BioPoint case is significant for the court’s broad instruction to the jury regarding what constitutes a trade secret.

Currently, Catapult has filed several post-trial motions contesting the damages awarded, including a motion for the court to consider reducing the amount of damages (a remittitur). While it may take some time for the dust to settle on this case, in the meantime, certainly this decision reflects the court’s inclination to take broad view of what may constitute a “trade secret,” and the risks of a substantial damages award based on an individual’s willful misconduct.

Case: BioPoint, Inc. v. Dickhaut, et al., (D. Mass., April 25, 2023)

Source: When Collusion Proves Costly: A Cautionary Tale on Potential Penalties for 93A Violations | Conn Kavanaugh – JDSupra

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