If Im a 1099 (independent contractor) at a cash advance firm and I left (quit). Can I take the leads I sorted through and became "my list" and take those leads and start my own merchant cash advance business? Or, am I legally not allowed to take them. Or if I am able to take them, how can I?

  • What does it say on your contract – Shazamo Morebucks Jun 20 '19 at 19:42
  • Don't have one. They just told me I'm a 1099. @ShazamoMorebucks – Moshe Jun 20 '19 at 19:44
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    @Moshe because the company paid you to build up that relationship, you weren't the one funding your effort. You were doing the work for your employer, not off your own back - they footed the bill, not you. – user4210 Jun 21 '19 at 0:31
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    @ShazamoMorebucks someone hasn't been reading my comments fully, and has been rushing to comment that I'm wrong on a basis I never used... I never said anything about legality, I'm saying it's wrong from a moral or ethical stance. And I'm sure a US company can find ample reason to sue if needed - it will still take a ruling to find there's no case to answer, and that means time and effort for the defendant. – user4210 Jun 21 '19 at 8:42
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    @ShazamoMorebucks also, a brief look around Google makes it look likely that several law firms consider that a client list can be protected under several states trade secrets laws, regardless of whether there's an NDA or confidentiality clause in play - so again, plenty of potential ammunition for a case to potentially be brought. – user4210 Jun 21 '19 at 8:51

Breach of confidence

In the absence of a non-disclosure or confidentiality agreement you can still be liable for breach of confidence. To succeed, your ex-principal must prove:

  1. the information was confidential
  2. it was given to you in such a manner that a reasonable person would know it was confidential
  3. they suffered damage as a result of their use.

Whether a client list is confidential or not depends on the circumstances of the case, but they usually are. Possible exceptions are where a business uses their client list as a marketing tool - "Look at who our clients are, aren't we great!". Your use of it would normally be considered a confidential transfer. Your using it in the way described would harm your ex-principals interest.

On balance, you probably can't do this legally.

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  • Does breach of confidence exist in the US? Breach of confidence has rarely been successfully plead in the UK, due to courts generally favouring free speech in the absence of a contractual agreement to non-disclosure. This, i suspect, would also be the case in the US. Otherwise a good answer. – Shazamo Morebucks Jun 21 '19 at 7:41

In US law, a client list is often considered to be a Trade Secret under the various state versions of the Uniform Trade Secrets Act (UTSA). See also the US Federal "Defend Trade Secrets Act" (DTSA)

A trade secret is information: * from which a business derives commercial advantage, * that is not public or generally known, * that the business makes reasonable efforts to keep confidential, and * that some or all of the commercial advantage to the business comes from the information not being known.

Client lists will often fit these conditions, and be treated as trade secrets.

Under the UTSA, a business may be able to obtain an injunction against improper use or disclosure of a trade secret, may be able to obtain damages for such improper use or disclosure, and may have other remedies. I believe that all or all but one US state has enacted a version of the UTSA.

Under the federal DTSA similar cases may be brought in federal court, and in some cases improper disclosure of a trade secret may be criminal.

In addition, if there is a contract requiring the employee in general terms to protect confidential information (as there often is) any client lists or information might well fall under such a provision. Any remedy under a contract is in addition remedies under the UTSA or DTSA.

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  • Is there a way around that? Let's say by "starting the relationship over again". By using a different company name for myself and starting from the beginning with them as if I found their number on google??? @davidsiegel – Moshe Jul 11 '19 at 14:02
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    @Moshe That is something you should consult with an actual individual lawyer on, but probably not. You can't really "start the relationship over" if the client will remember you. If you do searches to get names of new clients and firms you worked with before come up, you aren't required to skip them, but if it appears that you are in fact using your knowledge of the prior contacts to create your own client list, and searches are a sham to cover that, this is no defense. – David Siegel Jul 11 '19 at 14:08
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    @moshe Your former employer can't forbid you to make a living in the same general industry as a rule, but they can prevent you from gaining an advantage over them, or over someone who never worked for them, by using your knowledge of their confidential information for your own benefit. Again, you will want to consult an actual lawyer to be sure of your rights and duties. – David Siegel Jul 11 '19 at 14:11
  • What if I don't remember if it was on the contract? Like I'm in doubt? Do we say be strict and it probably was? Or do we say if you don't remember then your "innocent until proven guilty"? – Moshe Jul 11 '19 at 14:12
  • @Moshe If you know, or have good reason to know, that information is confidential to your former employers, and qualifies as a trade secret, you are subject to suit under the UTSA and DTSA if you improperly use or disclose it, even in the absence of any contract. As for contract provisions, you should have a copy of any contract you signed. It need not list "client names' specifically: a requirement to "protect confidential information" or "protect trade secrets" or the like is enough. If a reasonable person would know that something is probably a trade secret, you would be liable. – David Siegel Jul 11 '19 at 14:20

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