Ohio’s Supreme Court Ducks the Question of Whether “Mere Confidential Information” Is Protectable
A debate is growing within the trade secret community about the scope of information that should be protected–specifically, confidential information that does not rise to the level of a trade secret. This debate is largely between employers and their counsel who want to have every available tool to protect all of their information, and those who believe existing trade secret law provides adequate protection and therefore, information that doesn’t meet that standard isn’t worthy of protection (hence, the derogatory moniker “mere confidential information”). On October 12, 2023, in Hanneman Family Funeral Home & Crematorium v. Orians, the Ohio Supreme Court addressed this issue as well as another noteworthy issue–whether customer information shared with the government can qualify as a trade secret. But as a concurring opinion by Justice Patrick Fischer persuasively argues, the Supreme Court passed up on an opportunity to squarely decide the issue of whether “mere confidential information” should be preempted (and therefore not protectable), a ruling that would be in line with the majority of other states holding the UTSA prohibits claims seeking protection for information that doesn’t rise to the level of a trade secret.
So what was the case about?
One of the defendants, Patrick Orians, was a former funeral director who was not hired when the plaintiff, Hanneman Family Funeral Home & Crematorium, bought the funeral home he previously worked for. Before he left, Orians copied the funeral home’s customer information–specifically, the identities and addresses of customers who had contracts prearranging their funeral services with Hanneman Family, otherwise known as “preneed funeral contracts.” He then used that preneed funeral information to solicit business from approximately 100 of those customers for his new employer, a competing funeral home called Chiles-Laman.
Hanneman Family sued Orians and his new employer, claiming that they had violated the Ohio UTSA and committed other common law torts including tortious interference with contract and conversion. The defendants, however, argued that the information did not qualify as a trade secret because the identities of the customers had to be shared with the Ohio Board of Embalmers and Funeral Directors and was therefore a public record. The defendants also argued that Hannaman Family’s tortious interference and conversion claims were preempted by the Ohio UTSA. The trial court agreed and granted the defendants’ motion for summary judgment and on appeal, the Third Appellate District affirmed and entered judgment in favor of the defendants.
The Supreme Court’s Holding and Justice Fischer’s Concurring Opinion.
The majority opinion, written by Chief Justice Sharon Kennedy, affirmed the Third District judgment and provided the following reasoning.
On the first issue–whether the preneed customer information could qualify as a trade secret–Justice Kennedy found that the information was readily ascertainable by proper means by other persons and didn’t meet the Ohio UTSA’s definition of a trade secret. The Chief Justice explained that the information lost that status because it was available as a public record, having been disclosed to the Ohio Board of Embalmers and Funeral Directors in an annual report required under Ohio law.
As for the other tort claims, Chief Justice Kennedy found that because the common law tort claims arose from the same factual allegations in the complaint that made up Hanneman Family’s misappropriation-of-trade-secrets claim, they were preempted under Ohio’s UTSA (R.C. 1333.67). In other words, because those other tort claims specifically used or relied upon the words “trade secrets” in their allegations, they were preempted under the Ohio UTSA. As a result, the Chief Justice reasoned there was no need to consider the issue of whether tort claims for information not meeting the definition of a trade secret should be displaced by the Ohio UTSA.
However, as you no doubt gleaned from my introduction, Justice Fischer’s concurring opinion believed the majority opinion should have more broadly addressed the question of whether claims based on other information should have been preempted. Justice Fischer emphasized one of the UTSA’s key goals was “to create a uniform business environment [w]ith more certain standards for protection of commercially valuable information.” That goal would be fulfilled, he wrote, by a more fulsome ruling preempting claims for confidential information by the Ohio Supreme Court because it would be consistent with the majority view that “claims based on the unauthorized use of information, regardless of whether that information meets the definition of ‘trade secret,’ are preempted.” He also noted that this holding would be consistent with other courts that applied the Ohio UTSA in line with the broader, majority view on preemption.
At the end of the day, by not ruling that “mere confidential information” is preempted by the Ohio UTSA, the Ohio Supreme Court missed an opportunity to give effect to the Ohio General Assembly’s language and put to rest claims based on information that cannot meet the Ohio UTSA’s relatively low definitional threshold.
Takeaways.
It’s hard to disagree with the proposition that information shared with and potentially available from a government entity loses its trade secret status. Therefore, trade secret owners sharing trade secret information with a government body should do their best to ensure that they take advantage of any and all protections under their public records and/or FOIA laws to designate that information as a trade secret. If they don’t, they risk losing that trade secret status.
As for the issue of preemption, I agree with Justice Fischer’s concurring opinion advocating a broader ruling that would include information that does not rise to the level of a trade secret. Expressly joining the majority view would further the goal of uniformity and certainty under the UTSA. And as Justice Fischer persuasively reasoned, “this is the only interpretation that gives effect to the legislative intent that the [Ohio UTSA] function uniformly with other states that have adopted the [UTSA], and this interpretation protects only the information that the General Assembly deemed appropriate to protect.”
