The one thing you must remember before starting a new job or company [Fidelity Brokerage Services v. Rocine]

You want to switch jobs. Or you want to start your own company. Either way, you’ve got to remember one thing: your prior employer has trade secrets, and you can’t use them.

You also have to remember your contract with your prior employer. It probably stops you from using that employer’s confidential information.

So now you’re facing two devils. One is trade secret law. The other contract law.

A new decision in California shows just how easy it is for former employees to be burned by contract law.

Fidelity Brokerage Services v. Rocine

The Fidelity ruling involved a Fidelity Financial Consultant who moved to JPMorgan as a VP. While at Fidelity, he used Fidelity’s leads to bring in clients. When he left, he recalled the names of about thirty of his former Fidelity clients. He then found their contact information (through either JPMorgan’s database or public data) and solicited them as clients.

For this, Fidelity sued. Fidelity claimed that the former employee stole its trade secrets. Fidelity also claimed that the employee breached his contract by using confidential information.

The court didn’t even reach the trade secret question. Instead, it gave Fidelity everything it wanted through the contract claim. In its view, the employee used Fidelity’s confirmation “because all he did after his departure was put together a list of customers ‘from memory’ and then look up their contact information in JPMorgan’s account databases or in publicly-available databases. The fact remains that he would not have known whose name to look up had he not first obtained the names during the course of his employment at Fidelity.”

Fidelity’s got problems

Fidelity’s maybe wrong. It never addresses the foundational question — can a former employer even sue for breach of contract for theft of information?

A federal trial court recognized that that former employers can’t sue for this. And a California appellate court “doubt[ed]” that a former employer could sue for this. Yet the court ended up not deciding the question.

Fidelity doesn’t address this at all. So if you’ve got someone quoting Fidelity at you, quote this right back.