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South Carolina’s highest court has considered whether a real estate brokerage could claim that its lists of vacation homeowners and renters were trade secrets entitled to protection.
The Atwood Agency (“Brokerage”) engages in a vacation rental business on Edisto Island, SC. The Brokerage matches property owners with those seeking vacation rental properties. Elaine Shaw (“Shaw”) worked with Brokerage for approximately 15 years as a property manager, but left the Brokerage in 2005 to join another vacation rental agency, Edisto Sales and Rental Realty, Inc. (“Competitor”), also working as a property manager. Her job as a property manager involved overseeing the rental of vacation homes on Edisto Island, and this included having contact with both the owners and the renters.
The Brokerage brought a lawsuit against the Competitor and Shaw, claiming that Shaw had misappropriated its homeowner and renter lists, causing it to lose 50 rental homes and certain revenue. The Brokerage sought an injunction prohibiting the Competitor from contracting with any vacation homeowner or renter client of the Brokerage. The trial court determined that both the homeowners’ and renters’ lists were trade secrets, and so the court entered an injunction prohibiting the Competitor from contacting those on the list, setting bond at $250. The Competitor and Shaw appealed.
The Supreme Court of South Carolina reversed the lower court, finding that information about homeowners and renters was available from other sources and so not entitled to injunctive relief. The “South Carolina Trade Secrets Act” (“Act”) authorizes injunctive relief to protect against another misappropriating a trade secret. The Act defines a “trade secret” as information that “(1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by the public or any other person who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
The court found that both lists contained information that was available from other sources. The identity of property owners is a public record available at the Edisto Island town hall. There was also evidence that information about the Brokerage’s renters was also available through sources other than a customer list. For instance, Shaw testified that a number of renters contacted her directly following her departure from the Brokerage. Also, some homeowners did have contact with their renters through such things as guest sign-in books and other ways, even though the Brokerage tried to restrict such direct contact. Since the information that the Brokerage sought to protect was available through other means, the court ruled that the lower court had improperly entered an injunction.
Next, the court considered whether the trial court had entered a proper bond amount. The bond requirement exists to protect a party from losses it may suffer if improperly enjoined by a court. The court found that the nominal $250 bond entered in this case failed to adequately protect the Competitor and Shaw from the harms they may have suffered in this case, and so the court sent the case back to the lower court for a determination on the amount of damages suffered by them while they were improperly enjoined by the trial court.
Two judges entered a concurring opinion, stating that they believed a broker could plausibly claim a protectible interest in its renters list and so those allegations should proceed to trial.
The Atwood Agency v. Black, 646 S.E.2d 882 (S.C. 2007).