Grossman LLP | <strong >Lawsuit By Gallery Against Former Employee </strong ><strong >Raises Questions About Confidential Information In The Art Trade</strong >
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  • Lawsuit By Gallery Against Former Employee Raises Questions About Confidential Information In The Art Trade
    02/15/2019
    A contentious lawsuit is underway between a Manhattan art gallery and its former director over her handling of purportedly-confidential information when she quit her job to accept a position at another gallery.  The case raises potentially important questions about one of the key assets of any art business—information about its customers and contacts. 
     
    The Gallery’s Complaint
     
    The gallery, Lehmann Maupin (the “Gallery”), first filed suit in federal court in New York at the end of November, and amended its complaint in January.  (See S.D.N.Y. Docket No. 18-cv-11126-AJN.)  The amended complaint alleges that the defendant, Bona Yoo, was employed at the Gallery from early 2015 to late 2018, and during that time worked her way up from a sales consultant to a director of the Gallery.  During her employment, the Gallery alleges, she played an important role in managing client relationships and in the Gallery’s “new strategic positioning in Korea,” including overseeing the opening of the Gallery’s Seoul location of the Gallery in 2017. 
     
    The Gallery, which was founded in 1996 and has outposts in Hong Kong and Seoul, says that it caters to an international client base and has represented artists from many countries, including Korea.  It claims that Yoo had access to sensitive client information, particularly with respect to the Gallery’s Korean market.  The Gallery alleges that it kept comprehensive notes about its clients in an internal database called ArtBase; this information included non-public information such as personal contact information and continuous notes on clients’ tastes and preferences.  Employees who have access to the database sign an agreement that they will not disclose the information in it; will not use it for any purpose other than their work for the Gallery; and will not “remove, copy, download or transmit” any of the confidential information in the database during or after employment with the Gallery.  Yoo’s agreement also provided that, to the extent she had any information she had already obtained prior to being employed by the Gallery, that by adding it to the database, she assigned and transferred her rights in that information to the Gallery.  Yoo’s contract also required her to agree not to solicit any clients of the Gallery for a year after departing from the Gallery.
     
    According to the Complaint, Yoo gave her notice in October 2018 in order to accept a position with another gallery, Levy Gorvy, which was also seeking to expand its presence in Asia and specifically in Korea, “essentially becoming a direct competitor” of the plaintiff.  She initially gave only a day’s notice, but agreed to stay on for a few extra days. 
     
    Following Yoo’s departure, the Gallery alleges, other Gallery personnel noticed “substantial alterations to certain client information” in the database.  The Gallery ultimately concluded that Yoo had engaged in systematic changes to more than 100 client records in the database, including deletions and modifications of client notes and contact information.  The Gallery also asserts that she kept for herself copies of the original unaltered records; that she purged hundreds of files from her cloud storage in the week leading up to her departure; that she transferred internal files, including sales data, to herself; and that she seems to have attempted in some cases to hide her actions by, for example, renaming files before deleting them.
     
    The complaint puts forward claims for misappropriation of trade secrets under a federal law, the Defend Trade Secrets Act, 18 U.S.C. § 1836; violation of the Stored Communications Act, 18 U.S.C. § 2701; misappropriation of confidential information under New York state common law; breach of her confidentiality and non-solicitation agreement; conversion; breach of her duty of loyalty as an employee; tortious interference with the Gallery’s business relationships with its clients; and unfair competition.  The Gallery seeks to enjoin Yoo from misappropriating the Gallery’s confidential information and breaching her non-disclosure, non-use, and non-solicitation obligations; the Gallery also seeks compensatory and punitive damages, as well as its costs and attorneys’ fees.
     
    The Former Gallery Director’s Response
     
    This past week, Yoo responded to the Gallery’s complaint, filing an answer and asserting her own counterclaim against the Gallery.  In her filing, she asserts that the Gallery has sued her out of “spite” for choosing to leave “to pursue a promising career opportunity” elsewhere.  Interestingly, she admits that she copied certain personal files onto a flash drive, and deleted certain information belonging to certain clients (many of whom were her personal friends or friends’ family members) because she believed they “would not feel comfortable leaving that information” at the Gallery once she departed.  But she denies that her actions violated any contract or law, and seeks to undermine the complaint by emphasizing that the information at issue consists primarily of clients’ personal contact information, in many cases from clients whom Yoo brought to the Gallery.  She further notes in her answer that the Gallery cannot prove any actual, non-speculative damages arising out of her actions. 
     
    Yoo also asserts a cause of action against the Gallery for its alleged breach of her separation agreement, which included a non-disparagement clause.  She says that, upon learning that the Gallery intended to sue her, she volunteered to give the Gallery a copy of the flash drive on which she had retained the records at issue; volunteered to answer any questions the Gallery might have; and confirmed that neither she or her new employer had any intention of breaching her non-solicitation obligations, but the Gallery sued anyway.  She further asserts that the Gallery’s desire to punish her went so far as to alert art-industry press outlets to the amended complaint, and to amend the complaint so that it was searchable and used not just her legal name (Hyun-Yi Yoo) but also her nickname, so as to ensure that any future Google searches of her would turn up information about this lawsuit.
     
    What Is “Confidential Information” When It Comes To The Art Market?
     
    In her answer, Yoo scornfully notes that the Gallery “is not a software company, biotechnology firm, or any other sort of organization that invents secret technologies that it needs to protect.”  Nevertheless, the case has the potential to raise interesting questions about what actually constitutes legally-protectable “confidential information” in the unique context of the art market. 
     
    New York law does not preclude the idea that customer lists and contact information can be confidential information under the right circumstances.  The parties will likely dispute the nature of the information at stake here, including questions about how it was compiled and how much of the information was otherwise publicly available.  Moreover, there is New York case law supporting the idea that, in certain circumstances, misappropriated information may give rise to an unfair competition or breach-of-trust claim even if the information does not technically qualify as a trade secret. 
     
    And in the art world, few would dispute that a gallery or dealer’s business is certainly shaped by its ability to build relationships with and keep in touch with clients, with many art businesses investing time and effort into keeping tabs on collectors’ contact information, lives, tastes, interests, and buying and selling history.  Add to this the fact that, in the art market, clients often prize confidentiality and discretion, and many art deals proceed with a fair amount of secrecy and anonymity for buyers and sellers.  At the same time, individuals who work in the art world cultivate their own professional and personal networks, and those connections do not disappear when an art professional changes jobs.  All of this adds up to a complex landscape for litigating issues like the ones presented in Lehmann Maupin’s suit so far.  We’ll watch this case with interest, as it has the potential to provide judicial guidance about the protectability of customer information in art businesses.