March 2025
Connecticut declines to restrain departed founder from using client list
A Connecticut federal judge in TJT Capital Group, LLC v. Timothy McFadden denied an investment adviser’s motion for a temporary restraining order that would have prevented its departed founder from using a client list he took shortly after announcing his resignation and from contacting or communicating with TJT’s clients.
In anticipation of his departure from TJT, McFadden sent himself a list, created from information in TJT’s database, that contained the names, personal addresses and/or email addresses and account numbers for 171 client accounts he personally advised. TJT also alleged that McFadden secretly registered with a competitor while still a TJT member, told at least one client that he had joined the competitor and would continue to manage their accounts at the competitor, and instructed the client to “disregard any communications from TJT Capital.” TJT further asserted that McFadden had diverted many client accounts—over 100 as of the date of the parties’ oral argument.
McFadden was not bound by any restrictive covenants, meaning he had no contractual obligations not to compete with TJT or to solicit its clients. TJT’s only argument in support of its motion for injunctive relief was that the client list was a trade secret and that irreparable harm from its disclosure should be automatically presumed.
The court disagreed. It held that while courts in the Second Circuit previously presumed irreparable harm when trade secrets are misappropriated, that is no longer the case: “Where a misappropriator seeks only to use those secrets—without further dissemination or irreparable impairment of value—in pursuit of profit, no such presumption is warranted because an award of damages will often provide a complete remedy for such an injury.” The Court then held that no presumption of irreparable harm was warranted:
Here, TJT has not established a realistic danger of McFadden disseminating the client account list to a wider audience or otherwise irreparably impairing the value of the information on the list. There is no indication that McFadden intends to use this list for any purpose other than pursuing profit at [the competitor]. TJT has not adequately explained why the loss of clients to McFadden at [the competitor] cannot be redressed with money damages.
S&K Take: Though unique to its facts, this case highlights the difficulty of obtaining immediate injunctive relief, even where misappropriation of trade secrets is plausibly alleged. It is notable that the founder in this case had no restrictive covenants, and the court also highlighted that the founder had taken only a list of clients he had personally advised while at TJT. Had he taken “more” information, or been bound by restrictive covenants, the outcome might have been different. For example, we have covered cases holding that client information constituted a trade secret that could support enforcement of restrictive covenants.
ACLU argues AI hiring technology unlawfully discriminated against Deaf and non-white candidate
The American Civil Liberties Union (“ACLU”) filed administrative complaints against Intuit, Inc. (the employer) and HireVue, Inc. (a third-party vendor hired by Intuit to provide artificial intelligence (“AI”) technology and human resources services) for unlawfully failing to promote an Indigenous and Deaf employee based on the results of an AI hiring system. The ACLU alleges that the AI system is biased against qualified disabled or non-white applicants and employees.
The complaint focuses on Intuit’s use of HireVue’s screening tool, a remote video interviewing platform that utilizes AI to evaluate applicants’ interviews to determine whether they are likely to succeed in the role. The ACLU cited research highlighting the inaccuracies prevalent in most AI voice transcription technology, noting that they performed significantly worse in transcribing the speech of deaf, hard of hearing, and non-white speakers. Therefore, asserts the ACLU, HireVue knew or should have known its platform is likely to discriminate on the basis of disability and/or race, and HireVue’s and Intuit’s use of the platform has a disparate impact on the basis of race, among other claims.
S&K Take: This complaint serves as another reminder for employers considering whether to incorporate AI decisionmaking tools in employment. As we previously reported, HireVue’s screening tool also came under scrutiny in Massachusetts federal court for potentially violating the state’s prohibition on lie detector tests in employment. Meanwhile, many states are poised to regulate the development and use of AI technology in decisionmaking more directly: Colorado recently passed the Colorado AI Act, which is scheduled to take effect on February 1, 2026, while Virginia was also considering its own AI bill, which largely mirrored the Colorado law, but was recently vetoed by the Virginia Governor.
FTC asks courts to wait while it reconsiders its non-compete ban
On March 7, 2025, the Federal Trade Commission (“FTC”) filed motions seeking 120-day stays of its appeals pending in the Fifth and Eleventh Circuit courts to afford the agency time to consider whether it would continue to seek enforcement of its non-compete ban (the “Rule”). As previously covered, the Rule, as drafted, would prospectively ban all non-competes with workers and render virtually all existing non-competes with workers unenforceable. The Rule remains blocked nationwide following the Northern District of Texas’s decision setting aside the Rule. The FTC cited the public statements of its new Chair Andrew N. Ferguson, who stated: “the Commission . . . basically needs to decide whether it’s a good idea [and] it’s in the public interest to continue defending this Rule. . . . I’m going to be presenting at some point [to] my colleagues the decision about whether to continue defending this Rule.”
S&K Take: Although the FTC has temporarily halted its appeals, Chair Ferguson recently launched a new “Joint Labor Task Force” to “prioritize rooting out and prosecuting unfair labor-market practices that harm American workers.” Notably, echoing the views of his predecessor Lina Khan, Chair Ferguson specifically called out non-compete agreements as an example of the deceptive, unfair, anticompetitive labor market conduct within the FTC’s jurisdiction because “employers can use [them] to impose unnecessary, onerous, and often lengthy restrictions on former employees’ ability to take new jobs in the same industry after they leave their employment.” We will continue to monitor.
