Social media is a quickly growing and preferred method for broker-dealers and registered representatives to create and deepen relationships with existing and prospective clients. It alerts representatives and their broker-dealers to a host of client information that previously took years to collect. However, broker-dealers are facing increasing risks that the client information contained within those social media accounts may not be protected as a trade secret. In addition, the use of social media is posing new challenges to the enforcement of non-solicitation agreements and other post-employment restrictions. As these well-connected registered representatives move from one broker-dealer to another, the risks and benefits of employees using social media are becoming clear, and, as with most technology advances, litigants face the challenge of applying established legal concepts to new questions posed by social media.

Ownership Of Social Media Connections

So who owns the social media connections? In 2013, a Pennsylvania court found that in the absence of a social media policy, a LinkedIn profile -- and all of its connections -- belonged to the individual, not the employer. In Eagle v. Morgan, the employer, Edcomm, encouraged its employees to use LinkedIn as a “sales and marketing tool for Edcomm business.” The plaintiff, Linda Eagle, created her own LinkedIn account using her Edcomm e-mail address. After Eagle’s employment ended, Edcomm argued that it owned the profile. The court disagreed, finding that the profile and the information it contained belonged to Eagle because Edcomm did not have policies that stated the account and client information were the employer’s property. According to the LinkedIn user agreement, the account belonged to her.

Social Media Connections As Trade Secrets

Can social media connections be considered a trade secret if dispute arise? Generally, client lists and information are protectable as trade secrets if they are “not generally known” by a competitor and if the company has taken reasonable efforts to maintain the secrecy of the information. On March 25, 2015, an Illinois federal court refused to grant a motion to dismiss a plaintiff’s claim that a customer list constituted a trade secret. The defendant argued that LinkedIn connections could not be protected as secret under the Illinois Uniform Trade Secrets Act because they were not “secret.” In CDM Media USA Inc. v. Simms, the court upheld CDM Media USA’s pursuit of trade secret claims because too little was known about the contents, configuration and function of the LinkedIn group to conclude that its list of members did not constitute a trade secret. It also observed that “privacy setting[s] . . . limited access to the [group’s] online community.” This case bears watching because the court has made clear that the group’s privacy settings could determine whether the LinkedIn group profile constitutes a company trade secret. 

On the other hand, in 2010, a federal court in New York considered whether a recruiting firm’s client list was a trade secret when the information in the list was equally and readily available to any recruiter using publicly available sources. In Sasqua Group Inc. v. Courtney, the court found that the client list was not a trade secret, partly because the information was available on LinkedIn. Importantly, there was no restrictive covenant that governed the dispute. The court noted that the “information in [the recruiting firm’s] database concerning the needs of its clients, their preferences, hiring practices and business strategies … may well have been a protectable trade secret in the early years … when greater time, energy and resources may have been necessary to acquire [the information and] to build and retain the business relationships at issue here.” However, “the exponential proliferation of information made available through full-blown use of the Internet and the powerful tools it provides to access such information in 2010 is a very different story.”

Social Media Posts And Non-Solicitation Clauses

Courts also are considering whether notifications made through social media accounts constitute a solicitation that breaches contracts. Generally, courts are finding that such notifications are not solicitations.

In 2011, an Indiana court found that a job posting on LinkedIn did not constitute an improper solicitation of employees as set forth in an agreement. In Enhanced Network Solutions Group Inc. v. Hypersonic Technologies Corp., the plaintiff sued for breach of a “non-solicitation of employees” provision because Hypersonic posted on its LinkedIn page a notice of an employment opportunity. An Enhanced Network Solutions employee reached out to Hypersonic and, ultimately, accepted employment. The court found that the LinkedIn posting was not a “solicitation” in violation of the agreement because the terms of the agreement only prohibited solicitation and, because the agreement did not define solicitation, the court determined that a solicitation must include a request or induction to take some action.

In 2013, a federal court in Oklahoma considered whether a Facebook post constituted solicitation in violation of a non-solicitation agreement. In Pre-Paid Legal Services Inc. v. Cahill, the term “solicit” was not defined in the agreement governing the dispute. The court noted that the “novel issue, then, is whether Defendant’s Facebook posts on his public, personal account constitute solicitations under the terms of the non-solicitation agreement.” The court found that the posts were not solicitations because there was no evidence that the defendant had made any targeted contacts of employees by posting on their walls or through private messaging. 

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