Judge Smacks AA, Shows What Not To Do When Your Competitor Hires You

In denying a motion by American Airlines for an injunction against former New York sales head Chuck Imhof, which would have prevented him from working the same job for Delta Air Lines, U.S. District Court judge Lewis Kaplan last week offered some entertaining commentary. The decision is part of the ongoing suit by American against Imhof and Delta, which former AA employees said was unusual considering the frequency with which airline sales execs change flags.

Among other gems (all emphasis below is added by me), Kaplan wrote that "If American were as deeply concerned about the risk of Mr. Imhof going to work for a competitor as it now professes, it had the means to prevent it. It could have offered Mr. Imhof an employment contract containing a reasonable covenant against post-employment competition." Or, said one source, AA could have made a better offer. [more]

More from Kaplan's June 3 opinion: "By April 2008, Mr. Imhof had begun to feel frustrated with his prospects at American. So when the prospect of a job at Delta arose in mid-March 2009, he was interested. No doubt he would have benefitted from legal advice on how to pass through the difficult period during which he spoke with Delta while still employed by American, as he did not do very well on his own.

"Mr. Imhof resigned from American on April 28, 2009. He joined Delta on May 1, 2009. But there is more to the story than the fact that Mr. Imhof negotiated to join Delta while continuing to do his job at American. As the chances of his departure from American rose in mid-April, Mr. Imhof began to send e-mails to himself at his family e-mail address that attached documents relating to American’s business and/or his work at American. These included an April 2, 2008 presentation entitled New York Passenger Sales. On April 23, 2009, moreover, Mr. Imhof bought an external hard drive to which he copied both personal and American documents that were stored in the “My Documents” folder on his American laptop computer. A few days later, he purchased a BlackBerry for the purpose, he says, of transferring the contacts on his American-issued BlackBerry to his own.

"Delta, faced with the imminent prospect of litigation, immediately conducted an internal investigation concerning whether Mr. Imhof had conveyed any American confidential and proprietary information to it. The investigation concluded that he had not done so, and American does not contend otherwise. Mr. Imhof, for his part, now confesses that the transmission of American documents to his family e-mail address and his downloading of other American documents to his personal hard drive were errors. He has undertaken to destroy or return these materials to American, at American’s option.

"In these circumstances, I find that there is no material risk that Mr. Imhof will retain copies of the documents, much less that he would disclose them to Delta. American therefore has failed to establish the requisite threat of irreparable injury in respect of the copied documents. Regardless of whether Mr. Imhof’s copying of American materials in preparation for his departure was ill-intended or simply ill-informed, the ensuing events--which have threatened his reputation and his livelihood--quite likely have taught him a lesson that he will not soon forget. I am not convinced that American is in any realistic danger of irreparable injury as a result of deliberate misuse by Mr. Imhof of whatever competitively sensitive information he learned in American’s employ.

"As an initial matter, it is well to bear in mind that we are dealing with an individual responsible for sales of a widely used service as distinct, for example, from a food chemist privy to the secret formula for Coca-Cola or even a salesman for a highly specialized, technical product used only by small numbers of obscure manufacturers. Anyone knowledgeable about the New York business scene, or with access to publications such as Crain’s New York Business, readily could come to a reasonably accurate judgment as to the types of businesses that are the largest purchasers of air travel originating from the New York airports, such as the major financial services and communications companies, law firms, and so on. Nor would it take a genius to figure out that large travel agencies are important. The marketplace, moreover, is a competitive one. One seeking to sell air travel to major business entities and large travel agencies would be bound to learn from the customers a great deal about the competitors and the prices and incentives they offer. That is not to say, of course, that airlines have no valuable confidential information relating to sales. But it is to say that such claims must be examined carefully so as to avoid placing undue restrictions upon the ability of sales people in the airline industry to change jobs within the industry. With the context thus in focus, I turn to American’s specific claims, beginning with those based upon documents that Mr. Imhof copied before he left and that he has undertaken to destroy or return.

"American vastly overstates its case as to this document. As an initial matter, only six of the 115 pages purport to state American’s strategy, and the objectives there stated are so obvious and so general as to be virtually meaningless.

"American does not rest alone on the premise that Mr. Imhof is bound to remember and use against it the content of the handful of documents referred to above. It claims also that he was exposed to an abundance of other confidential information that he inevitably will use to Delta’s advantage, by virtue of the close correspondence of his jobs at Delta and American, even assuming his good faith. This includes American’s strategies for contracts with certain major financial institutions including information regarding its program for tiering and tying with J.P. Morgan and perhaps others, American’s practice of so-called “stealth pricing,” the expiration dates of key corporate contracts, specific overseas markets targeted by American, and the details of American’s relationship with Credit Suisse.

"But these claims are generalities, easily voiced and, to a great degree, devoid of real content. For example, the claim that Mr. Imhof has been exposed to American’s strategies for contacts with financial institutions may mean nothing more than that he knows that American’s strategy for financial institutions is to offer a price lower than the competition whenever doing so would be to American’s advantage. But American has been quite reticent concerning the details to which Mr. Imhof allegedly has been exposed."