## Facts

- A company in a specialized industrial by-products market developed, over decades, detailed internal records on customers’ specific requirements, supplier by-product characteristics, and effective customer–supplier matching.
- The company’s principal business asset consisted of this accumulated, nonpublic commercial information rather than physical property.
- The company hired Kleeman as general manager and Schneider as a salesman; both lacked prior experience in the niche and were given access to the company’s confidential records to perform their jobs.
- While still employed, Kleeman and Schneider, with their wives, agreed to form a competing corporation (Carchem Products Corporation) to operate in the same line of business.
- The defendants used the company’s confidential information and allegedly its facilities to solicit the company’s customers and divert business to Carchem.
- The employer sued for an accounting of profits and a permanent injunction against further use of the confidential information and further diversion of business.
- The trial court found injury to the employer but declined to grant the requested injunctive relief; the employer appealed, and some defendants cross-appealed.

## Issues

1. Whether the employer’s customer-related and supplier-related records and know-how constituted protectable confidential information or trade secrets.
2. Whether the former employees and their co-defendants conspired to misappropriate and use that information to divert the employer’s business, supporting an accounting of profits.
3. Whether the employer was entitled to permanent injunctive relief to prevent continued misuse of the confidential information and related unfair competition.

## Decision

- The Appellate Division modified the judgment to grant the employer permanent injunctive relief.
- The court held the information at issue was confidential and proprietary, and the employer had protectable rights in it.
- The court found defendants acted in concert to exploit the employer’s confidential information through the competing corporation to divert business.
- The court rejected the trial court’s denial of an injunction, concluding equitable relief was appropriate in addition to monetary remedies.

## Legal Principles

- Confidential commercial information, including customer requirements and related nonpublic business records developed through extended experience, may constitute protectable trade secrets.
- Employees may compete after leaving employment using general skill and knowledge, but may not appropriate and use an employer’s trade secrets or confidential information obtained through the employment relationship.
- A non-employee who knowingly participates with former employees in misappropriation and diversion of business may be liable as a co-conspirator and may be bound by injunctive relief.
- Injunctive relief is appropriate where continued misuse of confidential information threatens ongoing loss of customer relationships and goodwill not readily remedied by damages alone.

## Conclusion

The court held that the employer’s specialized customer and supplier information was protectable confidential property and that defendants’ concerted use of it to establish and operate a competing business constituted actionable misappropriation and unfair competition, warranting an accounting and a permanent injunction to prevent further exploitation.


Harry R. Defler Corp. v. Kleeman, 19 A.D.2d 396 (N.Y. App. Div. 4th Dep’t 1963)