Littler and Polsinelli’s trade secrets fight is new kind of war for talent

The company logo of the law firm Polsinelli is seen in their legal offices in Manhattan, New York City, New York, U.S., April 27, 2021. REUTERS/Andrew Kelly

(Reuters) – When a group of three partners and a client relations manager left Littler Mendelson last year to join Polsinelli, it seemed like a typical lateral move.

Home health care industry specialist Angelo Spinola and his team told Reuters at the time that they were drawn to 900-lawyer Polsinelli’s broad practice. While Littler with 1,500 lawyers is larger, the firm focuses more narrowly on labor and employment matters.

What sounded like legal business as usual has instead given rise to a riveting court battle — one that could be a harbinger of others to come as firms increasingly use technology to shape their client offerings.

Central to the dispute are two competing online subscription products, both providing templates, guidance documents and other resources for clients in the home health care and hospice industry, a burgeoning field as Baby Boomers age.

Littler in court papers alleges that Polsinelli through hiring Spinola and his team wrongly obtained its “confidential, proprietary and trade secret documents and information to develop and launch a product that directly competes” with Littler’s “Home Care Toolkit” offering.

The firm also admits that it’s not faring well against the competition, dubbed Polsinelli Online Solution for Homecare, or POSH. Littler’s Toolkit “may reach obsolescence if permitted to continue at the current rate” of decline, the firm said in a filing that redacts specific subscriber and revenue losses.

Littler managing director Erin Webber did not respond to a request for comment nor did the firm’s outside counsel at Squire Patton Boggs.

Polsinelli, which is represented by BakerHostetler, denies any wrongdoing, arguing in court papers that the “harm complained of – loss of subscribers – is merely the natural result of permitted attorney competition, not anything Polsinelli did improperly.”

In an email, a firm spokeswoman said Polsinelli looks “forward to defending ourselves against any of Littler’s claims, once they decide what those are, as they are now amending their complaint for a third time.”

I asked legal recruiters for their take on the fight, which is pending in Atlanta federal court.

“I think this case is unusual because it doesn’t seem to be about the departing partners and their clients but rather the trade secrets that relate to the subscription service,” said Jeffrey Lowe, who leads the law firm practice group at Major, Lindsey & Africa.

In a typical dispute, he continued, “the new firm and the old firm are fighting over the clients the departing partner is trying to take to the new firm and whether he or she inappropriately solicited those clients before they departed.”

But such fights are almost never actually litigated, said legal recruiter Dan Binstock, a partner at Garrison & Sisson. In part, that’s because bar ethics rules don’t allow attorneys to be restrained by non-compete agreements. “Generally speaking, lawyers are free to work wherever they want to without restrictions,” he said.

Moreover, Binstock said, firms tend to be concerned about opening themselves up to discovery, as well as accusations of “unclean hands” — that is, “of employing similar tactics to those that they’re complaining about.”

So while firms might feel “betrayed and bitter” about a partner defection, he said, they rarely air their grievances in court.

Littler in its initial complaint filed 11 months ago only named client relations manager Melissa Mann, alleging that she improperly downloaded confidential or proprietary documents before she left the firm on February 19, 2021, to join Polsinelli along with the trio of partners.

Littler subsequently settled with Mann, who did not respond to a request for comment via her attorney at Buckley Beal.

In a second amended complaint filed on March 31, 2022, Littler broadened its case, accusing Polsinelli of enticing Mann and Spinola, who was co-chair of Littler’s home health and home care industry group to “secretly and without authorization” share Littler’s proprietary information with their new employer.

Spinola, who did not respond to a request for comment, is not named in the suit, but Littler alleges that he took confidential information including a spreadsheet containing information on its Toolkit subscribers and pricing.

Polsinelli in court papers responded that it “has never seen or used any documents improperly downloaded by Mann or anyone,” and that it created POSH on its own. The firm also downplays POSH as “simply an online platform for users to log in and view or obtain examples of standard legal forms and documents.”

In late July, Littler belatedly asked U.S. District Judge Michael Brown to issue a temporary restraining order directing Polsinelli to stop marketing and selling “all Littler Information” in its POSH platform.

Polsinelli protested that Littler had now expanded its definition of such information to include 30,000 client files that Littler itself sent to Polsinelli more than a year ago. Littler fails to show how Polsinelli’s “receipt and use of those documents equates to misappropriation,” the firm said.

According to an entry in the court’s docket, Littler in a hearing on Thursday withdrew its TRO request. The judge gave the firm permission to file a third amended complaint.

All I can say is, pass the popcorn. This fight is still heating up.

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