Network Systems Architects Corp. v. Dimitruk

23 Mass. L. Rptr. 339
CourtMassachusetts Superior Court
DecidedDecember 6, 2007
DocketNo. 064717BLS2
StatusPublished
Cited by1 cases

This text of 23 Mass. L. Rptr. 339 (Network Systems Architects Corp. v. Dimitruk) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Network Systems Architects Corp. v. Dimitruk, 23 Mass. L. Rptr. 339 (Mass. Ct. App. 2007).

Opinion

Fabricant, Judith, J.

INTRODUCTION

This action presents the plaintiff, Network Systems Architects Corporation’s, claim that its former employee, defendant Michael Dimitruk, has misappropriated its trade secrets, and used them for the benefit of his new employer, defendant Accunet Solutions, Inc. Before the Court are cross motions for summary judgment, as well as the plaintiffs motion for sanctions for spoliation and to compel discovery. For the reasons that will be explained, the defendants’ motion for summary judgment will be allowed in part and denied in part; the plaintiffs motion for summary judgment will be denied; and the plaintiffs motions for sanctions for spoliation of evidence and to compel discovery will be allowed.

BACKGROUND

The materials before the Court provide the following factual background. The plaintiff, Network System Architects Corporation (“NSA”), provides computer network communications and security hardware and software to businesses and government agencies. According to its complaint, verified by its president, Steven Ferrari, in the course of providing those services NSA collects sensitive information about its clients, including the vulnerabilities in the security of its clients’ networks, and the details of the security systems it creates for its clients. Its handling of such confidential client information, the verified complaint alleges, is essential to its relationships with customers and suppliers, which in turn form the basis of its competitive advantage.

In October of 2001, NSA hired Defendant Michael Dimitruk as Director of Sales. According to the verified complaint, his role included sales, contract negotiation, customer service, and “coordinating activities with [NSA]’s suppliers to obtain referrals to new customers.” In 2005 Dimitruk earned a total of $101,397 in salary and commissions; as of September 2006, according to the verified complaint, he “was on track to earn over $115,000.” In the course of performing his duties, Dimitruk, like other salespersons, formed personal relationships with clients. Dimitruk testified at his deposition that he also had pre-existing relationships with individuals at certain NSA clients, particularly Bain and General Dynamics, although he had never made any sale to Bain before joining NSA, and he had had no contact with the individual at General Dynamics while that person worked at that company prior to Dimitruk’s employment with NSA.

The extent of Dimitruk’s access to confidential information during his employment at NSA, and NSA’s efforts to protect such information, are subjects of much disagreement between the parties. The verified complaint asserts that NSA provided Dimitruk with access to its “current and prospective customer and supplier information databases, customer and supplier contacts, pricing strategies, and customer payment and creditworthiness histories.” More specifically, the verified complaint asserts that Dimitruk had access to “information relating to network and security of NSA’s customers, their annual support contract terms,” as well as pricing and customer contact information, and information about “creditworthiness, sales history and preferences.” In addition, according to the verified complaint, Dimitruk had access to information regarding vendors, including contact information, pricing, product details, and “prospective customer lists, contact names, quotations, and proposals.” Further, the verified complaint alleges, Dimitruk had access to information regarding NSA’s processes and methods for evaluation, specification, and design of its products; pricing strategy; finances; marketing, bidding and sales strategies; and overall business strategies.

The steps NSA took to protect the confidentiality of such information during Dimitruk’s employment, according to its verified complaint, included informing employees annually “that information concerning its suppliers and customers must be maintained confidential”; distributing information only on a “need-to-know” basis; requiring the use of passwords; and “storing data in alternate storage systems, and storing paper documents in locked areas.” In addition, according to the verified complaint, NSA requires suppliers to sign confidentiality agreements. At his deposition, Ferrari added that the company places copyright marks on its proposals to customers.

In March of2006, NSA distributed to its employees, including Dimitruk, a document entitled “Sales Compensation Plan.” The document sets out commission rates and terms, and then recites the company’s policy regarding confidential information, defined to include virtually all information about the company and its customers, and the employee’s duty to maintain confidentiality of all company information. There follows a provision restricting the employee from competition during employment and for one year thereafter. Dimitruk refused to sign the document, and denies that he ever read it.

When asked at his deposition to identify NSA’s confidential information, Ferrari responded “customer lists, contacts.” He explained that the information Dimitruk had access to was that kept on the NSA laptop computer issued to him, not other information kept on NSA’s server, and that Dimitruk did not have access to the company’s accounting information, or to “other people’s quotes or proposals, any of the financial information, any of the historical information about purchases and so on and so forth.”1 Ferrari acknowledged also that some NSA employees are allowed to keep confidential information of NSA on personal laptop computers.

[341]*341On September 21, 2006, Dimitruk informed Ferrari that he intended to resign effective September 29, 2006.2 Before Dimitruk’s departure, Ferrari told Dimitruk, both in person and by e-mail, that he was obligated to refrain from any use or dissemination of NSA’s confidential information. As far as the evidence discloses, at the time of Dimitruk’s departure from NSA he had no active uncompleted projects in progress at NSA, although he had submitted quotations to potential customers, including Xerox and Kodak, that were outstanding as of that date.

On September 29, 2006, Dimitruk’s last day at NSA, Ferrari sent him an e-mail asking that he “please return the laptop today.” Dimitruk did not do so at that time. On October 1, 2006, Dimitruk became employed with Accunet. On October 12, 2006, Ferrari followed up his request for the laptop with a letter directing that Dimitruk “[r]eturn the laptop immediately and any printed documents or materials or other property taken from NSA.” The letter went on to advise Dimitruk that “you have an obligation to protect the company assets and property. Things like company information, customers and contracts, its relationships, computers, data files and information, contracts, etc. or even the knowledge about the business is your responsibility to keep confidential.” Dimitruk responded, in an e-mail dated October 16, 2006, that “If Steve doesn’t want to sell the unit to me for $500, as he agreed to then I will return the unit to the office.” He did so sometime thereafter.3 Before returning the laptop, however, as Dimitruk acknowledged in his deposition testimony, he used a “scrubbing” program to delete its contents.4

During his employment at Accunet, Dimitruk has made sales to four businesses that were his customers at NSA: Bain, Raytheon, General Dynamics, and EnvoyWorldWide.5

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Related

Network Systems Architects Corp. v. Dimitruk
27 Mass. L. Rptr. 431 (Massachusetts Superior Court, 2010)

Cite This Page — Counsel Stack

Bluebook (online)
23 Mass. L. Rptr. 339, Counsel Stack Legal Research, https://law.counselstack.com/opinion/network-systems-architects-corp-v-dimitruk-masssuperct-2007.