N.J. Integrator Earns $837K Judgement vs. 3 Disloyal Employees
Security integrator B&H Security in Union, N.J. has received a judgement totaling $837,087 against 3 former employees who left, set up a competing business and stole accounts.
It turns out non-compete clauses are defensible, in some cases.
A New Jersey security integration company has successfully defended a non-compete agreement it had with three former employees to the tune of $737,087 in compensatory damages, $100,000 in punitive damages, plus attorneys’ fees.
The Superior Court of New Jersey rendered a ruling (Docket No. UNN-L-001292-08) on January 2, 2013 in favor of B&H Security in Union, N.J. The 30-year-old company, owned solely by president Eliot Barry, claimed three of its former employees - a salesman, customer service rep, and IT manager - violated their confidentiality and 48-month non-compete agreements not to disclose or access B&H’s customer information.
According to court documents outlined on security attorney Ken Kirschenbaum’s website, back in 2007 (the wheels of justice grind slow) the three employees set up multiple companies named Advanced Integration Security (AIS) LLC, The Vorst Group (dba as Security Supply Store), Advanced Integration Systems, Pandora Security and Pandora Advanced Integration Security.
According to Barry, all of the information that B&H deals with is sensitive. This includes the identities of clients, their access codes, central station codes, and plans for what is secured. The customized solutions, which involve assembly of equipment from various vendors, are also deemed confidential.
B&H takes precautions to maintain the confidentiality of its information. It applies security to its own offices and computers systems. It also provides employees with a handbook containing a Non-Disclosure/Confidentiality section.
According to court documents, a former employee misappropriated confidential information belonging to B&H, taking with him virtually the entire database, which he then used to solicit B&H customers while still employed at B&H in at least one instance. In the end, four of B&H’s largest clients canceled their agreements or initiated new projects with AIS.
The court ruled that the employees breached their “duty of loyalty” and their “restrictive covenant” (the non-compete) to their employer by setting up the competing company. In the final ruling, the court determined the loss in revenue to B&H was $1,363,059 and a lost profit of $737,087.
Whether B&H will ultimately be able to collect on this judgement is unknown.
Jason has covered low-voltage electronics as an editor since 1990. He joined EH Publishing in 2000, and before that served as publisher and editor of Security Sales, a leading magazine for the security industry. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He is currently a member of the CEDIA Education Action Team for Electronic Systems Business. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at [email protected]
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