In an opinion published late last August, the First Circuit affirmed a district court’s finding, as a matter of law, that spreadsheets containing a compilation of public and non-public information about a company’s customers constitute trade secrets, which the appellant-defendants misappropriated. In Allstate Ins. Co. v. Fougere, 79 F.4th 172 (1st Cir. 2023), the court affirmed the district court’s grant of summary judgment on Allstate Insurance Company’s (“Allstate”) claims for trade secret misappropriation under the Defend Trade Secrets Act and Massachusetts law, reasoning that the spreadsheets in question constituted trade secrets because they were not wholly in the public domain, and it would be “difficult, if not impossible” to recreate that information solely through publicly available information. Further, the court reasoned that the spreadsheets derived independent economic value in light of the advantage they could provide to a competitor, and that Allstate took reasonably appropriate steps to protect the spreadsheets through its agency agreements, passwords, and other precautions.

Case Background

The appellant-defendants were two former Allstate agents (the “Agents”) as well as one of the Agents’ separately owned company, A Better Insurance Agency, Inc. (“ABIA”). The Agents entered into exclusive agency agreements with Allstate. Under the terms of the agency agreements, the Agents promised to work exclusively for Allstate and to maintain and protect Allstate’s confidential information, which they were required to return once their agency relationships ended.

Allstate eventually terminated the Agents’ agreements after certain disagreements developed between the parties. Nine months later, several former employees of the Agents and ABIA informed Allstate that the Agents had retained confidential information relating to thousands of Allstate customers. Allstate filed suit against the Agents and ABIA, alleging breach of contract and trade secret misappropriation against the Agents, tortious interference and trade secret misappropriation against ABIA, and unfair competition against all three appellant-defendants. The appellant-defendants counterclaimed against Allstate for breach of contract and violation of various Massachusetts statutes (which were dismissed on summary judgment).

During the course of discovery, Allstate obtained spreadsheets created by the defendants that largely mirrored the spreadsheets the Agents had retained from Allstate, which contained “thousands” of Allstate customers and included the customers’ renewal dates, premiums, types of insurance, Allstate policy numbers, driver’s license numbers, home addresses, phone numbers, and email addresses.

The district court granted summary judgment in Allstate’s favor as to liability on its breach of contract and trade secret claims after finding that the spreadsheets retained by the Agents constituted Allstate’s confidential and trade secret information, and the defendants appealed.

The First Circuit's Decision

With respect to Allstate’s trade secret claims, appellant-defendants argued that the district court erred because (1) the information contained in the spreadsheets at issue did not constitute trade secrets; (2) even if it did, Allstate did not own the spreadsheets or the information contained in them; and (3) summary judgment was inappropriate in any event because Allstate failed to present evidence that appellant-defendants acquired the information in the spreadsheets through improper means. 

The First Circuit disagreed as to all three arguments and affirmed the district court’s decision in its entirety.

First, the court held, as a matter of law, that the spreadsheets constituted Allstate’s protectable trade secrets. Although some of the information set forth in the spreadsheets was in the public domain, the court explained that there was no genuine issue of fact that other portions were not, and it would have been “difficult, if not impossible” to recreate the spreadsheets solely by using publicly available information. As the court explained, “the inclusion of some information in compilations which could have been obtained from public sources does not mean the compilations were not trade secrets, and that trade secrets may be found, even as to that information, when it would have been immensely difficult to collect and compile it in the form in which it appeared in the compilation.”

Second, the court found, as a matter of law, that the spreadsheets in question derived independent economic value. In so holding, the court relied on evidence that Allstate considered the information valuable, and that the information was of a type that a competitor could use to compete with Allstate. The court did not give any evidentiary weight to defendants’ “declarations, under oath that the spreadsheets were not commonly used by ABIA and that ABIA employees failed to successfully make a sale using them.”

Third, the court held, as a matter of law, that Allstate took reasonable steps to protect the information at issue. According to the court, those steps included Allstate’s use of exclusive agency agreements specifying the confidential nature of the information at issue, as well as Allstate’s practice of restricting access to the information "by only granting access to agents, restricting its availability through the use of passwords and, upon termination, revoking access by former agents.”

Takeaways

The First Circuit’s decision in Allstate Ins. Co. v. Fougere demonstrates that compilations of information – even if comprised of information otherwise available in the public domain – may constitute trade secrets if they would be exceedingly difficult to create solely by using public information. Additionally, Fougere reiterates the importance of taking reasonable precautions to protect trade secrets from disclosure. Although the law does not require such mechanisms to be “perfect,” agreements – such as the exclusive agency agreements in Fougere – form an important part of such efforts because they define what is “confidential,” how such “confidential” information may be used, and who owns any “confidential” information created or compiled during an employee’s tenure with a given company.