Employer Granted Injunctive Relief After Accessing Former Employee's Facebook

At issue here is whether a former employer that suspects trade secrets theft has taken place can log in to the former employee’s personal social media account to search for the potentially incriminating evidence. While the initial reaction for many would be a resounding “no”, in Scherer Design Group v. Ahead Engineering LLC, the Third Circuit held that the unclean hands doctrine did not bar an employer’s claims against its former employee for trade secret misappropriation even though the employer had previously installed and used software that allowed for the monitoring prior to the termination of employment.
It must be decided how far an employer can go to protect their potentially misappropriated trade secret and where the line may be drawn. Here, Chad Schwartz, a senior direction of engineering at Scherer Design Group, left the company following a failed plan to obtain partial ownership. Schwartz made it clear that if he was not made an owner, he would start his own competing company. Scherer requested that Schwartz sign a noncompete agreement to which Schwartz declined and left to begin his own companies – Ahead Engineering LLC and Far Field Telecom LLC – and hired others from Scherer to join him.
After his, and his co-workers including David Hernandez, departure from Scherer, a network administrator from his former employer inspected Hernandez’s company laptop where he was able to gain access to Hernandez’s Facebook account that had allegedly been left signed-in. While this allegation is debated, it is undisputed that Scherer installed a monitoring device on Hernandez’s company-issued laptop and was able to uncover alleged plans to steal client information and intellectual property to bring to their next company.
Scherer brought suit against the former employees claiming trade secret misappropriation under state and federal law. Defendants argued that injunctive relief was inappropriate because of the doctrine of unclean hands and was a violation of Hernandez’s privacy.
The U.S. District Court for the District of New Jersey granted the preliminary injunction against the defendants which prevented them from contacting Scherer’s clients and the Third Circuit agreed. In order to invoke the unclean hands doctrine, the party must establish that the opposing party committed an “unconscionable act”, and the act is related to the claim in which equitable relief is sought. The unclean hands doctrine was one of many factors that the court must consider when deciding on injunctive relief. The Third Circuit decided “on balance” that they would not be allowing for the continued misappropriation.
In Judge Ambro’s dissent, he wrote that this was a clear violation of New Jersey’s privacy law, arguing that the company “went on an external fishing expedition rather than merely conducting a review of activity on its own physical assets.” This strong dissent further called into question the completeness of the analysis by the majority of the unclean hands doctrine.