Marcone Supply has won another court victory in its legal battle against a major competitor that it claims used key customer data stolen by former employees to build its local office.
The Appellate Division of State Supreme Court in Rochester last week unanimously upheld an earlier ruling that barred 1st Source Servall from soliciting business from 640 customers included on a lengthy list of Marcone customers. The original ruling was issued earlier this year by State Supreme Court Justice John A. Michalek in Buffalo.
The case centers on whether former Marcone employees, who had been hired by Servall to establish three new Northeast distribution sites, including one in Buffalo, stole inside information, including a confidential list of 3,300 Marcone customers.
Michalek's ruling said two Servall executives working in the Buffalo area -- Mark J. Creighton and Karl P. Rosenhahn -- tried to cover up the theft of confidential information by destroying evidence.
The appeals court, in a decision Friday, backed Michalek's ruling.
"The record is replete with evidence that the individual defendants stole and/or improperly retained thousands of documents belonging to [Marcone] and thereafter used that information to compete against their former employer," the Appellate Court said.
"In our view, the court struck the appropriate balance between prohibiting [Servall] from exploiting the fruits of the misappropriated information and permitting [Servall] to compete fairly for customers in the northeast market," the Appellate Court said.
The ruling bars Servall from soliciting business from 640 of Marcone's customers in the Northeast. It also bars sales to another group of about 200 customers unless Servall can show that it won those accounts without using Marcone's proprietary information.
The issue arose in January 2010 after Marcone acquired Buffalo-based AP Wagner, a Depew company that had distributed appliance parts since 1928. Marcone, which is based in St. Louis, is the nation's largest wholesaler of appliance parts in the United States. Servall, based in Detroit, is the second-biggest.
Marcone early last year sent a letter to all AP Wagner employees in Western New York, warning that "their positions might be terminated" in April 2010, according to court papers. That prompted several AP Wagner employees to resign from Marcone, and within a week, they had been hired by Servall.
Marcone, which has about 100 employees at its Northeast headquarters in Buffalo, contends that the case cost it at least $12 million in sales last year, according to its local attorney, James D. Donathen of the Phillips Lytle firm.
"We are extremely pleased with the outcome [of the ruling] and what it means to Marcone's employees and customers," Donathen said. The ruling "once again supports Marcone's contention that it was the victim of a classic espionage scheme."
Servall attorneys argued that the customer list contained information that was publicly available or easily obtainable. Marcone said the file included confidential information, such as credit terms and sales data, as well as information on pricing and profit margins.
B. Kevin Burke Jr., Servall's local attorney, could not be reached to comment.