Car dealers in road rage over sales rep's client files: top BMW seller said to illegally take lists.

Neda Shahrokhi figures she sold about a car a day during her years at Beverly Hills BMW. So when at the end of 2002, she up and left for competitor Century West BMW in Universal City--and took her lengthy client list with her--it set off a legal battle that raises the question of how businesses protect proprietary information when employees leave.

Beverly Hills BMW claims that Shahrokhi illegally took customer data. Alter a Los Angeles Superior Court judge turned down the dealer's request for a court order--later affirmed by a three-judge panel in the 2nd Appellate District--that would have prevented her from selling to customers on the list, the case is now in arbitration.

Car sales are notoriously volatile, with high turnover and frequent jumps to competitors and other dealer. Still, disputes rarely end up in court.

"Sometimes, a manager at a dealership is hiring from another dealership and asks them to bring the customers over there to enhance his business," said Bert Boeckmann, owner of Galpin Ford, one of the largest dealerships in Los Angeles County. "It benefits the sales person to bring the list with him. That's 100 percent dishonest, but those things happen from time to time."

Dealerships are supposed to own the information collected in the course of doing business, and in many cases they seek to bolster that fact by having employees sign confidentiality agreements. "I know there have been lawsuits, but generally the ones I'm familiar with are where the salesman had taken perhaps what may have gone beyond his own customers," said Boeckmann.

For information to be protected under California's Uniform Trade Secrets Act, the company must have made some efforts to protect its secrecy, said David Shukan, an intellectual property partner at Kirkland & Ellis LLP who is not involved in the case.

Having employees sign confidentiality agreements frequently protects customer lists, but courts have interpreted the state's trade secrets laws in various ways. As a result, law-suits over customer lists are not uncommon.

"If the list is valuable enough, the potential damage of someone leaving could cause substantial disruption to the company," he said.

Shahrokhi, who declined to comment, claimed in court papers to have sold as many as 6,000 BMWs in her 17-year career. Martha McKinley, a spokeswoman for BMW of North America LLC, which franchises out the two dealerships, could not verify those figures and declined to comment on the suit.

Shahrokhi also claimed that customers on the list include several of her friends and business associates, such as her physician, lawyer, hairdresser, dermatologist and ex-boyfriend.

"She was able to freely take her list that she created from dealership to dealership and no one ever made an issue of it," said Debra Fischer, a partner at Bingham McCutchen LLP representing Shahrokhi and Century West BMW. "No one told her that list she was creating was inappropriate, that customer information was confidential. No one objected to her taking it."

John Boggs, a partner at Fine Boggs Cope & Perkins LLP representing Beverly Hills BMW, said the list was protected by passwords and other security measures, and that Shahrokhi was the only employee with access to the fist, which included all 3,000 of the dealership's customers, not just hers.

When the dispute between Shahrokhi and her former employer arose, the two sides agreed to seek resolution through arbitration. Before arguing the merits of the case, however, Beverly Hills BMW requested a court order that she return documents. The dealership also sought a preliminary injunction preventing her from selling to customers on the list.

The Superior Court judge denied the request, except as it related to a list of customers with leases due in December 2002 and January 2003. Shahrokhi' s lawyer said that list had been taken inadvertently and was returned. Beverly Hills BMW appealed the decision, and the appellate panel agreed with a lower court's ruling, sending the case back to arbitration for arguments on its merits.

In its ruling, which only pertains to the preliminary injunction, the appellate court noted that other salespeople who had left Beverly Hills BMW with similar lists were not sued. Also, the confidentiality agreement Shahrokhi was to have signed was included in an employee handbook that did not define what was confidential.

The court also found that Shahrokhi was never told the list was confidential and that a sales manager told her that sales vouchers, which include a customer's name, address, telephone and purchase information, were the property of the salesperson.

In fact, the panel ruled, general customer lists are readily available in the industry. It noted that in trying to prove its case, Beverly Hills BMW obtained computer printouts showing that Shahrokhi sold cars to two of its customers after going to Century West BMW.