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Infinity Headwear & Apparel, LLC v. Coughlin

Court of Appeals of Arkansas, Division IV

November 5, 2014

INFINITY HEADWEAR & APPAREL, LLC, APPELLANT
v.
MICHAEL COUGHLIN, APPELLEE

APPEAL FROM THE BENTON COUNTY CIRCUIT COURT. NO. CV2012-1813-5. HONORABLE XOLLIE DUNCAN, JUDGE.

Keith, Miller, Butler, Schneider & Pawlik, PLLC, by: G. Nicholas Arnold and George Rozzell, for appellant.

Taylor Law Partners, LLP, by: William B. Putnam, for appellee.

BRANDON J. HARRISON, Judge. GRUBER and WOOD, JJ., agree.

OPINION

BRANDON J. HARRISON, Judge

This case primarily asks whether, under Arkansas or federal law, Michael Coughlin unlawfully took electronic business data from Infinity Headwear & Apparel, LLC. The circuit court answered " no" and granted summary judgment against Infinity's first amended complaint. Infinity appeals that decision, but we affirm the circuit court.

I. Background

Infinity markets sportswear, apparel, and other products. In May 2008, Coughlin was hired as Infinity's sales manager. Coughlin signed an acknowledgment of company policies informing him that all work product was the sole property of Infinity and was nontransferable. Coughlin did not sign a nondisclosure provision or a non-compete agreement. In August 2012, Coughlin began working for Outdoor Cap Co., Inc., a larger competitor of Infinity. Before leaving Infinity, Coughlin emailed files from Infinity's database to his personal email account. This database contained, among other things, Infinity's sales plans, margins, marketing and operating costs, customer and supplier lists, royalty negotiations, and future project ideas. Only employees could access the database.

In September 2012, Infinity sued Coughlin for breach of contract, violating the Theft of Trade Secrets Act, breaching a duty of loyalty, and conversion. Infinity also sought temporary injunctive relief against Coughlin. Coughlin responded to Infinity's motion for a temporary restraining order.

Page 140

Following an evidentiary hearing, the circuit court denied Infinity's motion for a temporary restraining order because Infinity had not adequately protected its information as the trade-secrets law requires. See Saforo & Assocs., Inc. v. Porocel Corp., 337 Ark. 553, 991 S.W.2d 117 (1999).

After the temporary restraining order was denied, Infinity amended its complaint. The first amended complaint dropped the trade-secrets claim but raised six claims: that Coughlin (1) breached a contract, (2) violated the federal Computer Fraud and Abuse Act (CFAA), (3) committed unlawful acts under an Arkansas statute dealing with computer-related activity (Ark. Code Ann. § 5-41-202 (Repl. 2013)), (4) breached a duty of loyalty, (5) converted tangible and intangible property, and (6) was liable for replevin. Infinity sought, among other things, damages, injunctive relief, and an order directing that Coughlin to return all of Infinity's property. Coughlin answered the complaint.

Later, Coughlin moved for summary judgment against Infinity's first amended complaint. Infinity opposed the motion. Following a hearing, the circuit court granted Coughlin's motion. The court ruled that any contract between the parties was oral and that, in any event, there was no triable issue on whether a breach had occurred. On the breach-of-loyalty claim, the court ruled that there was no such claim because no fiduciary relationship existed between the parties; nor was one ever alleged. The court also found that Coughlin was permitted to copy data to a personal computer so that he could work remotely.

The court also ruled that there was no genuine issue of material fact in dispute on the point that Coughlin deliberately destroyed or misused data and thus rejected the federal CFAA claim. Regarding the state-law computer claim, the court entered judgment for Coughlin because the statute unambiguously stated that there was no civil remedy available for alleged unlawful acts regarding a computer. The court entered summary judgment on the conversion claim because, according to it, our supreme court has not recognized a cause of ...


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