Legal Question in Business Law in California

Threat of Unfair Trade / Defamation suit

3 of us left our employer & formed an LLC.

We gathered customer lists from the internet (publicly

available) and have some customers in common with

our former employer. 1 of them asked how the former

employer was doing and 1 of our members replied that

he thought they might go under. We received a letter

from the former employers attorney ordering us to

cease defaming them. Should we respond? How

should we respond?

Asked on 10/03/02, 8:35 pm

5 Answers from Attorneys

Amy Ghosh Law Offices of Amy Ghosh

Re: Threat of Unfair Trade / Defamation suit

You should respond them back with a nice courteous letter to keep the record straight..and always make sure you mention that you are not appropriating their customer list

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Answered on 10/04/02, 12:21 am
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Threat of Unfair Trade / Defamation suit

Truth is always a defense to a defamation charge. In a sense, 'they might go under' is true of any business, and the shakier they are, the better the defense. However, disparagement of a competitor could be actionable on other, stronger grounds. The best advice is to avoid comment at all except perhaps as to matters which are indisputable facts.

Also remember that key employees who leave to start competing businesses are walking a tightrope. The law encourages competition and job mobility. It comes down hard on misappropriation of trade secrets including customer lists. If you receive any further threats, or maybe even as a preventive measure, you might consider having a conference with an attorney on what is, and is not, trade secret misappropriation. It's a rather fine line.

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Answered on 10/04/02, 1:22 pm
Karla Shippey Law Offices of Karla Shippey

Re: Threat of Unfair Trade / Defamation suit

It might be advisable to set a written "company policy" among all of you (include any of your own employees that you think might need to be added) that you will not make comments about your former associate, or for that matter about ANY competitor. Simply state the facts related to YOUR company--don't surmise what ANY other competitor might be doing. The client can certainly get the information elsewhere--no need to come from you. As far as responding to the letter, no response is probably required unless they insist on it. If they insist on a reply, then you might respond with a nice letter that you would be happy to comply if they could provide you with precise evidence of the problem, but otherwise that you have strict company policies against any defamatory remarks by your employees regardless of the competitor. Remember, it is important that all of you in the new LLC agree to the company policy and be careful to stick to it because comments by just one of you could be trouble for all of you.

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Answered on 10/04/02, 3:34 pm
Chris Johnson Christopher B. Johnson, Attorney at Law

Re: Threat of Unfair Trade / Defamation suit

The "cease and desist" letter simply asks you to stop any defamatory statements. Your partner's statements may qualify, and they may also make you liable under interference with business statutes. Thus, stop making the disparaging statements and this will likely solve the problem.

Regarding customer lists, that may be a problem if if the list was stolen or taken from the former employer.

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Answered on 10/05/02, 10:52 pm

Re: Threat of Unfair Trade / Defamation suit

Why don't you simply stop commenting about the former employer? If you hear any more from them, consult an attorney.

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Answered on 10/03/02, 9:59 pm

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