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Judge dismisses most claims in Smyth Jewelers’ trade secrets suit

The Smyth Jewelers store in Timonium (Maximilian Franz/The Daily Record).

The Smyth Jewelers store in Timonium (Maximilian Franz/The Daily Record).

Allegations of trade-secret misappropriation by a former Smyth Jewelers employee remain pending in federal court after a federal judge dismissed claims against the company’s former chief operating officer and the competing business he opened.

Albert S. Smyth Co. alleged former COO Mark A. Motes violated the terms of his employment agreement when he left Smyth in late 2016 and started Meritage Fine Jewelers LLC, which opened a retail store near Smyth’s Timonium location.

The lawsuit included state and federal trade secret claims and civil racketeering in addition to breach of contract. More defendants were added, including former Smyth employee John Jackson III, who the plaintiffs accused of changing access information for a Dropbox account containing customer data and refused to return control.

U.S. District Judge Catherine C. Blake dismissed all claims against Motes and Meritage but maintained claims against Jackson. Motes’ counterclaims for breach of contract and accounting also remain pending.

Smyth’s attorney, Steven K. Fedder, of Fedder & Janofsky LLC in Baltimore, said Monday he is studying the opinion and determining the next steps in the litigation.

The lawsuit alleges Jackson, who maintained the Dropbox account, changed the access information from his Smyth email to his personal one, allowing him to maintain access to the files, which had customer records including buying habits, pricing information and business strategies. The company “took reasonable steps to protect the confidentiality” of the records, including prohibiting disclosure and storing them on encrypted servers.

Blake ruled Jackson’s alleged repeated access to the trade secrets after leaving the company and after filing documents with the state to open a competing business is sufficient to show misappropriation.

“It is reasonable to infer that if Jackson accessed and modified folders containing trade secrets, he also viewed the files within those folders,” she wrote. “Considering that evidence within the larger constellation of facts alleged in the complaint, most importantly the allegation that the folders were accessed after Jackson filed Articles of Organization for a competing jewelry business, makes it plausible that Jackson in fact used Smyth’s business records and therefore misappropriated them.”

Jackson’s attorney, Patrick Buckler of Womble Bond Dickinson LLP in Baltimore, said Monday he and his client are disappointed all claims were not dismissed but “are prepared to move forward with discovery on an expedited basis and are confident that the balance of the case will not survive summary judgment.”

Employment agreement

Motes was promoted to COO in 2007 and signed an agreement which the complaint alleged was orally amended in 2009, according to Blake’s opinion. After Motes took nearly $3 million in profits between 2013 and 2015 — which the plaintiffs said should have been only $336,648 after the oral amendment — Motes supposedly made another agreement to transfer some of his interest and forgive a loan but refused to sign a written version of that agreement.

Motes resigned in November 2016 and allegedly took more than 13 employees with him, including Jackson, as well as company records with customer information.

Blake ruled the plaintiffs failed to show Motes and Meritage misappropriated trade secrets. She also determined the plaintiffs failed to prove the existence of an oral modification to the parties’ written agreement and Motes and Jackson never violated their duty of loyalty during employment.

Michelle J. Dickerson, a Columbia solo practitioner who represents Motes, said Monday she and her client are pleased with the court’s dismissal and “intend to vigorously prosecute Mr. Motes’ counterclaims” against the plaintiffs.

Motes alleges Smyth failed to pay him the value of his membership interest in installments after termination of his employment and provide him with a complete accounting.

The case is Albert S. Smyth Co., Inc. et al. v. Mark A. Motes et al., 1:17-cv-00677-CCB.

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