The Letter of the Law: January 2012

IN THIS ISSUE:

BUSINESS: Protecting Customer & Client Lists

PERSONAL INJURY: Admissibility of Traffic Citations, Investigating Officer's Conclusions, and Misdemeanor Traffic Convictions

FAMILY: Division of a Thrift Savings Plan in Divorce

Protecting Customer & Client Lists

By: Allyson K. Thompson

When preparing Employee Handbooks, we frequently are asked by clients, "What can I do to protect my client and customer lists from being taken by departing employees?" Client and customer lists are often a company's most important asset. Legally protecting that asset in California can be difficult.

We advise that the best way to protect your client information is to treat it the same way that you would your proprietary products, designs, and methods: as a trade secret. California courts historically have rarely upheld covenants not to compete and non-solicitation agreements as enforceable, even when negotiated in an employment contract. So, if you make reference to the confidentiality of your client lists in a covenant not to compete or non-solicitation agreement, you run the likelihood of that proprietary information not being protected. Trade secrets however, have been given much more enforcement protection by California courts. It therefore makes better sense to make reference to the confidentiality of your client lists in your trade secret or confidential information provisions.

In California, two conditions must be satisfied for information, including customer and client lists, to enjoy trade secret protection. First, the employer must routinely make efforts to maintain the secrecy of the client/customer information, and second, the information must derive independent economic value from not being generally known to the public. California Uniform Trade Secrets Act and Civil Code §§ 3426.1 through 3426.11.

What must a company do to make efforts to maintain the secrecy of client and customer lists? Make certain that your internal policies make it unequivocally clear that this information is secret and is not to be disseminated, and communicate that policy in writing regularly to your employees.

To satisfy the second requirement, showing that the information has independent economic value from not being publicly known, is inherently easy to demonstrate. Client and customer lists have a natural monetary value, especially if considerable efforts were made by the company to compile the information. Clearly if your client list with contact information was to be leaked to a direct competitor, that competitor now has a ready ability to poach your customers. These customers have a known willingness to purchase a competing product, and the poaching company is spared the time and expense of having to work to generate the list. Mark all of your client and customer lists as "Confidential and Privileged." During exit interviews with key staff that may have access to this information, make sure that they have returned all computers and technology devices that were given to them that may have this information. And immediately terminate access to computer drives that contain this information.

The takeaway: the more a company screams, "this information is confidential and privileged," the more inclined a court will be to agree that this information clearly was not meant to be disseminated, and to protect the information as a trade secret.

Admissibility of Traffic Citations, Investigating Officer's Conclusions, and Misdemeanor Traffic Convictions

By: Robert P. Mougin

What evidence will be admissible in Court is often a central issue in prosecuting or defending motor vehicle accident cases. Lay persons, who are often those who end up on our juries, have a tendency to think that issuance of a traffic citation to one party or the conviction of a misdemeanor traffic offense, is evidence of liability. Additionally, jurors tend to give more weight to the investigating officer's conclusions when determining liability. This article will provide a brief overview on Nevada's laws regarding the admissibility of traffic accident reports, traffic citations, the investigating officer's conclusions contained in those reports, and convictions for misdemeanor traffic offenses.

Traffic Citations are Generally Inadmissible. An Investigating Officer's Testimony Regarding Fault is Generally Inadmissible when based on Hearsay.

It is the function of the trier of fact to decide who and what caused the motor vehicle accident. The case of Frias v. Valle, 101 Nev. 219 (1985) best illustrates the Nevada Court's hesitation to admit Traffic Accident Reports and Traffic Citations, and places limits on an investigating officer's testimony regarding liability.

In the Frias case, a taxicab owned and operated by ABC Union Cab rear-ended a small pick-up truck. The trial court admitted the traffic accident report into evidence, which was prepared by the investigating officer. The jury awarded the truck driver damages and ABC Cab appealed.

On appeal, the ABC Cab argued that the trial court erred in admitting the officer's traffic accident report into evidence. The Nevada Supreme Court ultimately agreed with ABC Cab and ruled that "the conclusions of [the] Officer, based upon statements of third parties and a cursory inspection of the scene, did not qualify him to testify as to who was at fault." Frias, at 221. Further, the Court went on to rule that "evidence of the traffic citation was also inadmissible." Id. To be clear, an investigating officer's statements are still admissible as percipient witness testimony. However, Frias places limits on an officer's testimony as to who was at fault when the officer's conclusions are reliant on hearsay statements and not based on first-hand knowledge.

Conviction of a Misdemeanor Traffic Offense is Insufficient to Trigger Imposed Liability under NRS §41.133

The case of Langon v. Matamoros, 121 Nev. 142 (2005) also demonstrates the Nevada Court's reluctance to admit evidence of traffic citations and convictions of misdemeanor traffic offenses. In this case, Plaintiff Langon sued Defendant Matamoros for personal injuries stemming from a motor vehicle accident. The police issued Matamoros a citation for failure to yield the right of way. Matamoros pleaded no contest, forfeited bail and paid a fine in connection with the citation. Id. at 142. The jury returned a defense verdict in favor of Matamoros and Langon appealed.

On appeal, Langon argued that under NRS §41.133, Matamoros' no contest plea and forfeiture of bail is conclusive evidence that she is liable for Langon's alleged injuries. NRS §41.133 states, "If an offender has been convicted of a crime which resulted in the injury to the victim, the judgment of conviction is conclusive evidence of all facts necessary to impose civil liability for the injury." The Court did not agree with Langon, finding that Langon's interpretation was not consistent with the legislative intent of NRS §41.133, which was intended to protect victims of violent crimes, and directly conflicted with NRS §41.141, Nevada's modified comparative negligence statute that insulates a defendant from liability when the plaintiff's comparative negligence is ruled more than 50%. Id. at 145. In conclusion, the Court held that because NRS §41.133 does not apply to misdemeanor traffic offenses, convictions entered upon traffic citations may not be used to conclusively establish civil liability.

Although NRS 41.133 cannot be used to establish civil liability as a matter of law for misdemeanor traffic convictions, opposing counsel may still comment on the misdemeanor at the time of trial. Defense counsel should therefore file all appropriate pre-trial motions to prevent the inclusion of such evidence as being prejudicial to the defendant.

Division of a Thrift Savings Plan in Divorce

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A Thrift Savings Plan ("TSP") is capable of division in a divorce, annulment or legal separation. It can also be garnished to satisfy a participant's past-due alimony or child support obligations.

A TSP is a retirement savings plan for federal civilian employees and some uniformed services. It is a defined contribution plan similar to a 401(k) plan. Whenever there is a TSP, there is usually another retirement system such as a FERS annuity or military retirement.

TSP will provide some basic information to a spouse or spouse's attorney upon written request. The information that they can provide is limited to the account balance, any loan balances, and statements. TSP cannot provide personal identification information for the member such as date of birth or social security number.

A TSP can be divided by presenting TSP with a court order that complies with 5 U.S.C. §§ 8435(c), 8467 and 5 C.F.R. part 1653 subp. A. TSP can provide a "model order" to assist the preparer in complying with the necessary language. From a valid order, TSP will pay out the payee's present designated entitlement, but will not honor an order for a future payment.

It is recommended that once a TSP is identified as part of community property, that a court order be issued to freeze the TSP account. That will prevent or limit post-separation loans or withdrawals.

In the event of a divorce, a member should take steps to file a new designation of beneficiary with TSP to ensure that the beneficiary they want to receive benefits is the person currently named. Otherwise, TSP has no option but to pay out to the beneficiary listed, even if that is a former spouse! That is true even if the former spouse waived any interest in the TSP account.

To garnish a TSP for unpaid support, TSP must be presented with a writ, order, or similar legal device that properly instructs them as to the amount to be paid and to whom. TSP can usually provide payment within 60 days of receiving a final order, but additional time will be needed to prepare for that final order.

If you are contemplating divorce, or have additional questions about a TSP Plan incidental to a divorce or legal separation, please contact Kring & Chung, LLP's Family Law Department. Kring & Chung has family law practitioners in its Irvine, Sacramento and Las Vegas offices.

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