In a tale of alleged betrayal and misappropriation of trade secrets in a courtroom (not) far, far away, a pioneering company in the area of special effects has sued its former employees and a vendor, claiming that they conspired to recreate the company’s primary business under a new name, erasing the evidence on the way out. The alleged tale is an illustration of how vulnerable a company and its trade secrets can be in times of ownership and business transition, especially when the company relies mostly on a single customer.
Plaintiff McCune & Company was started by special effects pioneer Grant McCune. While readers might not recognize his name, they’re likely familiar with his work. Having started as an uncredited model maker on Steven Spielberg’s film Jaws, he later earned an Academy Award for Best Visual Effects for his work on another iconic film, Star Wars. McCune later founded McCune Design, a model-making and special effects company, hiring Monty Shook and Jack Edjourian to work with him on such projects as the film series for Batman and Spiderman.
At the time of McCune’s death in 2010, the special effects industry was increasingly relying on computer-generated imagery and moving away from the kinds of special effects modeling that had brought McCune to fame and sustained McCune Design. Consequently, McCune’s widow, Katherine McCune, transitioned the business to the sale of custom-designed products to high-end customers, under the name McCune Masterworks, a division of McCune & Company. Shook and Edjourian, who had been with McCune for more than twenty years, stayed on for the new iteration of the business.
The core of McCune Masterworks’ business was automata music boxes, essentially very intricate automated music boxes featuring a number of moving parts that unveil themselves in a sequence as the device plays. By 2012, nearly all of McCune & Company’s revenue came from McCune Masterworks, and nearly all of that revenue stemmed from a single, annual contract with SBIZ/Equity Group to make 500 custom creations. The contract was allegedly valued at some $3 million.
Allegedly, as Katherine McCune continued to invest in the business in the years following her husband’s death, Shook and Edjourian were unhappy with the business and their compensation. McCune & Company alleges that as early as 2012, their largest customer, SBIZ/Equity Group, hired Edjourian for a side project without disclosing this to McCune & Company. Then in 2015, as McCune & Company was preparing to discuss renewing their contract with SBIZ/Equity Group, Shook and Edjourian allegedly began making plans to leave the company, encouraged by an outside vendor (defendant John Ferrari) and by an employee of SBIZ/Equity Group.
As with so many other trade secrets cases, the employees allegedly gathered up proprietary information on the way out, including client project information, employee lists, and vendor lists. And similar to many other such cases, the employees allegedly transferred this information to an external drive. Apparently, The Force was not with them, as subsequent forensic analysis allegedly showed—as it often does—that the employees tried to cover their trail by erasing a hard drive and deleting emails. Perhaps they should have used a hammer to destroy the evidence, as one defendant did in a case we reported on last year. Or better yet, a lightsaber.
Within days of leaving McCune & Company, Shook, Edjourian, and Ferrari set up a new company, Synergy Design Concepts, and allegedly immediately began contacting their former employer’s clients. In fact, as McCune & Company alleges, there was no need to go through the sham of contacting these clients, as the defendants had already arranged with SBIZ/Equity Group to cut McCune & Company out and take over the multi-million dollar contract. As a result, McCune & Company alleges that it had to close McCune Masterworks and lay off all of its employees.
While McCune & Company alleges defendants Shook and Edjourian signed “non-disclosure agreements regarding the confidential nature of the job and design process,” it is not clear what other agreements, if any, the company had in place to protect its trade secrets and competitive advantage. This is particularly important in a situation such as this, where the company was relying on one contract for nearly all of its revenue, the work was highly specialized, the work was being done by a small group of individuals, and where the company’s founder was no longer around. If fear is the path to the Dark Side, then misappropriation of trade secrets is surely the path to protracted litigation.