Late last month, Borgata casino in Atlantic City filed a lawsuit in federal court alleging that key rival Ocean Casino Resort poached a half-dozen top executives in order to steal Borgata’s biggest customers.
One of the core complaints was that a former executive, William Callahan, never returned a company-owned cellphone rife with VIP customer secrets.
A flurry of filings in the last two weeks reveal that Callahan promptly returned the cellphone — and that this melodrama may have a long way to go.
As for the phone, Borgata alleges that “Callahan developed close personal relationships with Plaintiff’s highest-level guests and learned their preferences regarding credit, large loss discounts, gaming rule changes, hospitality, and other considerations that provided Plaintiff a competitive advantage in having these players consistently return to its casino.”
That, Borgata asserts, “is the exact type of information that could be used by [Borgata’s] competitors to sway high level players and corporate clientele to patronize their hotels and casinos.”
The burden of gaining an injunction
While Borgata sought a broad preliminary injunction in the case, a judge noted that such an injunction is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.
“A court may grant such relief only upon a petitioner’s showing of (1) likelihood of success on the merits, (2) likelihood of irreparable harm in the absence of preliminary relief, (3) the balance of equities weighs in petitioner’s favor, and (4) an injunction is in the public interest.
“The Court finds that Plaintiff’s allegations support a claim to injunctive relief for trade secret misappropriation against Callahan, only.
“The evidence suggests that even if Callahan could perform his job with Ocean without violating his non-competition agreement, he has likely engaged in behavior that violates both his confidentiality and non-competition agreements.”
The judge took care not to blame Ocean in the ruling, lacking evidence that it was aware of potential violations by Callahan.
The other named employee in the suit is Kelly Ashman Burke, Borgata’s former executive director of marketing.
In the same ruling, the judge laid out Burke’s assertion that “she is exempt from her non-competition agreement because she followed the procedures of the Employee Good Cause Termination provision of her Employment Agreement.”
Second executive also targeted
“The Court finds that Plaintiff has shown a likelihood of success on the merits that Burke violated her non-competition agreement. The emails between Burke and Johnson show that Burke did not attempt to invoke the Good Cause Termination provision; rather, she highlighted her concerns about her new job duties in an attempt to renegotiate her non-compete agreement before concluding her employment term with [Borgata].
“Although the Court finds in the immediately preceding discussion that Plaintiff has not demonstrated a likelihood of success on the merits against Burke for trade secret misappropriation, the Court finds that Burke is in breach of its Employment Agreement with Plaintiff by violating the non-competition provision.”
Both Callahan and Burke are now restrained from communicating with any former Borgata clients, and both were ordered to be deposed by Borgata this month.
But Ocean’s attorneys subsequently argued that the ruling was unfair.
“Defendants agree and fully believe discovery is necessary to get to the merits of the issues being presented to the Court. But discovery cannot be one-way. Defendants firmly believe that [Borgata]’s declarations will not carry any evidentiary weight on a full record before the Court, including that Mr. Callahan did not solicit any of the seven customers Borgata has put at issue in the case.
“Defendants will be able to vindicate themselves — but because Borgata has raised issues with their credibility, Defendants must be permitted discovery of corroborating evidence and, at the very least, the documents they intend to introduce at the Preliminary Injunction Hearing to have a fair chance at defending themselves.
“The Defendants have not created a crisis that has necessitated emergency intervention. Defendants attempted to resolve this issue with plaintiff through stipulation, however, plaintiff was intractable and unwilling to compromise.”
Ocean’s stance is that the seven “whales” — big-spending customers — will confirm that Callahan made no untoward efforts to solicit their business.
Whose phone is it, anyway?
As for the phone, even though it was turned over last week, Ocean’s claim is that Borgata President Melonie Johnson “told several people, including the Chief Operating Officer of Borgata, that Mr. Callahan could keep his phone.”
Johnson, however, has made a formal declaration disputing that claim.
“Borgata has taken a few strands of facts, added a pile of hearsay, and spun it together into very damaging allegations against Mr. Callahan, who has a completely understandable and legal defense, if he could have discovery and a fair hearing at which to present it,” said Ocean’s attorneys.
Ocean’s other claim is that Borgata’s policies gave it access at all times to any employee phone, so that it “could have wiped Mr. Callahan’s phone at any time.”
If that’s the case, Ocean argues, then Borgata’s failure to exercise its own policies is on them.
Ocean’s attorneys also objected to Borgata’s attempt to obtain Callahan and Burke’s employment agreements with Ocean.
Finally, Ocean wants to drastically slow the time frame of the case for discovery reasons, to “at least 60 days” or even more if Borgata required it.
Borgata, meanwhile, asked that the court order Callahan and Burke to be ousted from their roles at Ocean pending resolution of the case.
A well-rounded team of whales
Among the seven named customers, one appears to be a former Pennsylvania lawmaker, another a banker, one an optometrist, and a fourth a semi-pro poker player.
The two parties exchanged conflicting claims on whether the phone in question even has a password — an indication of the extent of the stalemate.
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