Local Cases Prove Confidentiality Contracts? Worth

One need look no further than a couple of high-profile lawsuits in Northwest Arkansas to realize the importance of documenting company policies.

In the first case, Tyson Foods Inc. of Springdale filed suit against Nebraska-based ConAgra Inc. The suit claimed three former top Tyson executives now employed by ConAgra had sensitive information regarding Tyson’s pricing, costs, profit margin and marketing strategies for its secret nutrient profile for its efficient and less-costly chicken feed.

An Arkansas State Supreme Court ruling forced then Washington County Chancellor John Lineberger to dismiss a previous $20 million judgment against ConAgra.

Tyson had not required the executives to sign noncompetition or confidentiality agreements, although the company had a Code of Conduct that required all employees to safeguard confidential business and technical information. Tyson felt its confidential business information was protected under the United Trade Secrets Agreement, which prohibits actual or threatened misappropriation of trade secrets. The Arkansas Supreme Court said Tyson should not have relied on the Code of Conduct and “verbal understandings” with its executives to protect its trade secrets but should have required the executives to sign noncompetition or confidentiality agreements.

Without such agreements, the court said, Tyson “had in place no protection against post-employment revelation of confidential information by these executives.”

The court also pointed out that Tyson Foods did not contractually require its customers to maintain the secrecy of their pricing arrangements, despite Tyson’s contention that such contracts were unnecessary because its customers had a natural competitive interest in maintaining the secrecy of their arrangements.

In another Northwest Arkansas case, a former employee of engineering and architectural firm Crafton Tull & Associates charged that the Rogers company fired him for political reasons.

Cyrus Young, a member of the Fayetteville City Council, alleged he was discharged for performing his duties as an alderman. Washington County Chancellor Kim Smith had overruled Crafton Tull’s motion to dismiss, but the two settled the day it was to go to trial. Jurors would have been asked to determine if Crafton Tull had the right to fire Young because his decisions as an alderman were hurting the company.

“This was a really important legal issue that was left undecided,” said Bob Still of Bassett Law Firm. “We would have liked to have seen the outcome. The Arkansas Supreme Court would’ve been the ultimate decision maker on the law. But this was a case that could present problems to employers that are difficult to fathom right now. It would open a Pandora’s box.”

The case was settled with Crafton Tull agreeing to pay Young back wages of $37,500.

With Arkansas being an employment at-will state, Crafton Tull believed its dismissal of Young was within its rights. Young believed his case brought up an issue not covered in the state doctrine.