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Funeral Director Did Not Steal Trade Secrets From Former Employer

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Court findS funeral home director who sought business from customers of his prior employer did not violate state trade secrets law.

Image of an old school rolodex.

Court findS funeral home director who sought business from customers of his prior employer did not violate state trade secrets law.

An Allen County funeral home director who solicited business from customers of his prior employer did not violate the state’s trade secrets law because the information he took was readily available to the public, the Supreme Court of Ohio ruled today.

In a unanimous decision, the Supreme Court held that Patrick Orians did not violate the Ohio Uniform Trade Secrets Act when he contacted customers he signed up for “preneed funeral contracts” when he worked at what is now the Hanneman Family Funeral Home and Crematorium.

In the Court’s majority opinion, Chief Justice Sharon L. Kennedy explained that the Uniform Trade Secrets Act protects information that has independent value because it is not generally known to and readily ascertainable by others if the owner has taken reasonable efforts to maintain its secrecy. That was not the case with Hanneman Family, she wrote.

“The customer information at issue in this case was available outside of the funeral home,” Chief Justice Kennedy explained, because information contained in preneed funeral contracts was a public record before a 2021 change in state law.

Justices R. Patrick DeWine, Jennifer Brunner, and Joseph T. Deters joined the chief justice’s opinion.

In a concurring opinion, Justice Patrick F. Fischer agreed that Orians did not violate the trade secrets law, but noted the Supreme Court declined to address the issue of whether the law bars related civil lawsuits premised on the unauthorized use of information that is found not to be a trade secret. Because Ohio law is based on a uniform law adopted by several states, he maintained the Court should clarify that the Ohio law does prevent other claims such as interference with a contract, if the claims are based on the same facts that formed the basis of a misappropriation-of-trade-secrets claim.

Justices Michael P. Donnelly and Melody Stewart joined Justice Fischer’s opinion.

Funeral Director Solicits Business From Prior Home
In 2019, Hanneman Family purchased several funeral homes from Service Corporation International, including Siferd-Orians Funeral Home in Lima. Orians was the funeral director at Siferd-Orians at the time of the sale. He learned Hanneman Family would not be retaining him after the takeover.

Before leaving to accept a position with Chiles-Laman Funeral & Cremation Services, Orians copied files with the names and addresses of Siferd-Orians customers who had prearranged their funeral services with the funeral home through what are known as preneed funeral contracts.

After Orians started working at Chiles-Laman, he contacted about 100 customers who had preneed funeral contracts with Siferd-Orians. He asked the customers to bring their business to his new employer. A large number of customers transferred their contracts to Chiles-Laman.

New Owner Sues Former Director
Hanneman Family sued Orians and Chiles-Laman for misappropriation of trade secrets as well as other tort claims, such as interfering with business contracts and interfering with business relationships. The trial court granted summary judgment to Orians and his new employer, finding the preneed funeral contracts were not trade secrets. The trial court noted that the preneed funeral contract information Orians obtained had been released by the Ohio Board of Embalmers and Funeral Directors as a public record.

Hanneman Family appealed to the Third District Court of Appeals, which affirmed the trial court’s decision.

Hanneman Family appealed to the Supreme Court, which agreed to hear the case. Orians also filed a cross appeal that the Court accepted.

Supreme Court Analyzed Trade Secret Law
Chief Justice Kennedy explained the General Assembly adopted the Uniform Trade Secrets Act in 1994. The law was based on legislation recommended by the National Conference of Commissioners on Uniform State Laws, and the Ohio law was intended to mirror the laws regarding trade secrets adopted by other states.

Under the Uniform Trades Secrets Act, which is R.C. 1333.61 through R.C. 1333.69, a trade secret includes any business information, including the listing of names and addresses, that derives economic value from not being generally known or readily ascertainable by other people, if reasonable efforts are taken to maintain the secrecy of the information.

The opinion noted that in a 1997 decision (Al Minor & Assocs., Inc. v. Martin), the Court established a six-part test for determining whether information constitutes a trade secret. Among the factors in the test is the extent to which the information is known outside the business, the precautions taken by the holder to guard the secrecy of the information, and the value to the secret holder in having the information.

The Court noted that under state rules, the seller of a preneed funeral contract must file an annual  report with the Board of Embalmers and Directors of existing funded preneed funeral contracts. When Orians worked at Siferd-Orians before Hanneman Family took over, Orians prepared the annual report by contacting the insurance company that insured the preneed funeral contracts and compiled all the customer information.

The opinion stated that as part of the application to transfer ownership of Siferd-Orians to  Hanneman Family, the new owners reported to the board all the names of customers who purchased preneed funeral contacts from Siferd-Orians. The Court noted that only in September 2021, two years after the sale of Siferd-Orians, did lawmakers amend state public records law to no longer make information about a funeral home’s preneed funeral contracts public records.

“Much of the information in the preneed funeral contracts was therefore readily ascertainable by the public prior to Orians’s taking it,” the Court explained, so it was not a trade secret.

Supreme Court Addressed Other Claims by Funeral Home
Hanneman Family argued that even if Orians did not violate the Trade Secrets Act, the home could still sue him for tortious interference with a contract, tortious interference with a business relationship, and conversion. The Court noted that R.C. 1333.67 states that the Trade Secrets Act preempts tort claims “providing civil remedies for misappropriation of a trade secret.”

The majority opinion pointed out that in some states, trade secrets laws similar to Ohio’s prevent the filing of other civil lawsuits based on the unauthorized use of information, even if the information does not meet the definition of a trade secret. The Court’s majority stated that it did not need to address the question of whether Orians can be sued for unauthorized use of information that is not a trade secret.

The opinion explained that trade secrets laws “prevent a plaintiff from merely restating their trade secret claims as separate tort claims.” The Court found that is what Hanneman attempted, and all its allegations against Orians stem from his use of “trade secret information.” Because Hanneman’s tort claims against Orians were premised on the existence of a trade secret, the Court ruled that the Trade Secrets Act barred them.

Concurring Opinion Sought to Answer Broader Trade Secrets Act Question
In his concurring opinion, Justice Fischer wrote that the Court should address the broader question of whether the Trades Secret Act also blocks claims of the unauthorized use of information even if the information is deemed not to be a trade secret.

The opinion noted the Court agreed to consider Orians’ and Chiles-Laman’s cross appeal, which argued that lawsuits arising from the theft, misuse, and misappropriation of confidential information must be filed under the requirements of the Trade Secrets Act. Other claims that are based on allegations of stealing trade secrets, such as tortious interference with a business contract, are not allowed in most states, Justice Fischer noted.

The concurring opinion noted that state lawmakers stated in R.C. 1333.68 that the general purpose of the state trade secrets law was to make it uniform with other states adopting the model Uniform Trade Secrets Act. Most states have adopted the position that any lawsuit based on unauthorized use of information, regardless of whether it meets the definition of “trade secret,” must be filed as a violation of the Trade Secrets Act. Justice Fischer suggested that state lawmakers could revise the Ohio law to clarify their position, but until then the Supreme Court should join the majority of states in holding that all unauthorized use of information lawsuits must be filed as a violation of the Ohio Uniform Trade Secrets Act.

2022-0573. Hanneman Family Funeral Home & Crematorium v. Orians, Slip Opinion No. 2023-Ohio-3687.

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