A former employee of a tech company has been found liable for misappropriating trade secrets and breaching his duty of loyalty. Champ Systems, Inc. (CSI) filed the complaint against Stewart Fines in the Court of Appeal of the State of California, Third Appellate District, on June 25, 2024.
The case centers around Fines' actions while employed at CSI, where he used confidential customer information to solicit business for his own new venture. CSI accused Fines of breaching a nondisclosure and confidentiality agreement and misappropriating trade secrets. During his employment from November 2007 to February 2013, Fines was privy to sensitive customer lists and other proprietary information. Despite signing an agreement to refrain from using such information outside his role at CSI, Fines solicited CSI’s clients for his own company, My IT Bud, even before leaving CSI.
In February 2013, while still working at CSI, Fines approached Medical Vision Technology (MVT), one of CSI's customers, with marketing materials for My IT Bud. Shortly after this approach, MVT terminated its contract with CSI and began using services from My IT Bud instead. Further investigations revealed that Fines had plans to solicit other clients from CSI and successfully transitioned four additional customers—Municipal Maintenance Equipment (MME), SGLC Inc., Gateway Pacific Contractors (Gateway), and Corfee Stone & Associates (Corfee)—to his new business shortly after leaving CSI.
CSI's second amended complaint included claims for misappropriation of trade secrets under California’s Uniform Trade Secrets Act (CUTSA), breach of duty of loyalty, breach of contract, intentional interference with contractual relationships, intentional interference with prospective economic advantage, and injunctive relief. The trial court ruled in favor of CSI on most claims but dismissed some based on CUTSA preemption.
The court found that the customer list qualified as a trade secret and that Fines had indeed misappropriated it by using it to market his new business. However, it also ruled that certain claims were preempted by CUTSA because they were based on the same facts as the trade secret misappropriation claim. As a result, the court awarded damages based on unjust enrichment rather than lost profits or exemplary damages.
Fines was ordered to pay $122,683.20 in damages corresponding to one year’s worth of profits earned from the misappropriated clients. The court denied requests for exemplary damages citing insufficient evidence that Fines acted maliciously or with intent to harm CSI.
The attorneys involved in this case include representatives from both parties’ legal teams who presented their arguments before Presiding Justice Earl along with Justices Duarte and Krause under Case ID C096837.