Advantages of incorporating a business

 

Procedural Posture

Defendants appealed from decision of Superior Court of Los Angeles County (California), which found defendants had misappropriated plaintiff's trade secrets and which awarded attorney's fees to plaintiffs. There are lot of advantages of incorporating a business.

Overview

Defendants appealed trial court's decision in favor of plaintiffs in plaintiffs' action for misappropriation of trade secrets. Defendants competed against plaintiff after employee defendant was terminated from employment. Defendant, before he left employment, took crucial information belonging to plaintiff employer. The court held that the noncompetition agreement between plaintiff and defendant was enforceable because defendant sold all stock in consideration of the agreement. The agreement was enforceable despite plaintiff's wrongful termination of defendant because the obligations in the agreement and the employment contract were not dependent. For the same reasons, defendant was not authorized to take plaintiff's legitimate trade secrets. The unclean hands doctrine was inapplicable to bar plaintiff's claims because plaintiff's wrongful termination did not implicate equities between the parties arising out of defendant's malicious misconduct. The award of attorney's fees against defendant employee based on third-party tortfeasor doctrine was improper because this was essentially a two-party case.

Outcome

The court affirmed the trial court's decision, finding defendants misappropriated plaintiff's trade secrets and plaintiff's wrongful termination of defendant did not excuse defendant employee from the noncompetition agreement and did not authorize him to appropriate plaintiff's trade secrets.

Procedural Posture

Appellant attorney challenged an order of the trial court, California, requiring appellant to disclose the name of persons who paid up to a certain amount to his private entity, pursuant to the disclosure requirements of Cal. Gov't Code § 87207.

Overview

Respondent city official and other officers commenced this action to compel appellant attorney to file a disclosure of income statement, as required by Cal. Gov't Code § 87207. Appellant, who was also a city councilman, alleged that the information sought was privileged. By way of a cross-complaint for declaratory relief, appellant sought to establish the unconstitutionality of the statute. The trial court declared the disclosure provisions valid and ordered appellant to comply. On appeal, the court determined that the provisions requiring appellant, as an attorney, to list the names of each person who paid fees of certain amount to his private entity was unconstitutional. The provisions amounted to an impermissible distinction between public officials who were attorneys or brokers and those engaged in other business activities or profession. The court reversed the judgment. To preserve the disclosure ends of the statute, it subjected appellant as an attorney to the general disclosure of other professionals.

Outcome

The court reversed the order requiring appellant attorney to comply with the disclosure requirements of the statute, because it was unconstitutional. The provisions created an impermissible distinction between public officials who were attorneys or brokers and those who engaged in other professions.