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Supreme Court examines Indiana's blacklisting statute

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In declaring precedent from 1904 bad law, the Indiana Supreme Court has determined that individuals who’ve voluntarily left employment can pursue a claim against their former employers under the state’s blacklisting statute.

But the justices also determined that attorney fees are not an element of compensatory damages under that same statute and that an employer’s suit against a former employee to protect trade secrets isn’t a basis for recovery under that law.

Justices addressed in Loparex, LLC v. MPI Release Technologies, LLC, Gerald Kerber, and Stephen Odders, No. 94S00-1109-CQ-546, three certified questions from U.S. Judge Jane Magnus-Stinson in the Southern District of Indiana involving a federal case filed by Illinois-based Loparex LLC that makes products such as nametags, window films and roofing underlayment.

The case involves two employees who were fired or resigned in 2008 and 2009 and had non-competition agreements to not take any of their knowledge of “trade secrets” for one year. The company accused them of taking materials and knowledge and tried to stop other companies from hiring them, while the two employees filed answers and counterclaims accusing Loparex of blacklisting them in violation of Indiana law. In September 2011, Magnus-Stinson certified a trio of issues to the state justices after she denied Loparex’s motions to dismiss the counterclaims and granted summary judgment to the two employees.

Recapping the history of the Indiana Blacklisting Statute that was enacted near the start of the 20th century, Chief Justice Randall Shepard recounted statutory and constitutional changes as well as evolving caselaw on the blacklisting statute and also the Indiana Constitution’s requirement that laws be confined to a single subject.

When the Indiana Supreme Court decided Wabash Railroad Co. v. Young, 162 Ind. 102, 69 N.E. 1003 (1904), it held that a portion of the blacklisting statute extending to employees not discharged ran afoul of the Indiana Constitution. But Shepard wrote that Young is no longer good law because of rulings and constitutional changes to the single subject requirement through the years.

The justices also determined that nothing in the language, history or nature of the blacklisting statute points to anything but the American rule that attorney fees may not be recovered as an element of compensatory damages for a plaintiff in a blacklisting claim. On the third question, the justices determined the blacklisting statute can’t be used as a basis for recovery in an unsuccessful suit aimed at protecting alleged trade secrets relating to a non-compete agreement.

 

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