Georgia continues to be a hot-bed for franchising. Of the more than 75,000 prospective franchise owners that submitted their information to the Franchise Opportunities Network in 2009 the number submitting from Georgia ranked 5th nationally. Thus the laws related to transacting business in Georgia should be of an elevated interest to both current franchisors/franchisees and prospective franchisors/franchisees. Toward that end, one case in particular caught my attention last year.

In the case of Wachovia Ins. Servs. v. Fallon, 299 Ga. App. 440 (2009) the Georgia Court of Appeals took up the issue of whether a customer/client list was protected under the Georgia Trade Secrets Act, OCGA § 10-1-760. The facts presented at trial showed that Fallon left his job with Wachovia and went into business for himself in the same line of work. Wachovia alleged that Fallon misappropriated Wachovia’s client list and thereafter profited from the list to the Fallon’s benefit and Wachovia’s detriment.

The Court pointed out that in order for a client/customer list to be given protection as a trade secret under OCGA § 10-1-761 the information must

(A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Wachovia sought to obtain relief inter alia under Georgia’s trade Secret Act.

The interesting part of the opinion was the Court’s ultimate determination that because the client list was obtainable from sources other than Wachovia, Fallon could not be said to have missappropriated the information under Georgia law. Specifically, the Court held:

“In order to prevail on its claim regarding misappropriation of this client contact information under the Georgia Trade Secrets Act, Wachovia Insurance must show that the client contact information in its former employees’ Blackberries was a “list of actual or potential customers or suppliers which is not commonly known by or available to the public.” OCGA § 10-1-761 (4). The record shows without dispute that a public website titled “freeERISA.com” contains all of the information about the customers of an employee benefit broker such as Wachovia Insurance, including the name and contact information of the customer’s decision-maker. Indeed, a Wachovia Insurance representative (Benjamin) testified that “all of the employee benefits work that Wachovia Insurance Services does in Atlanta” could be obtained from this website. He described it as “a great prospecting tool to go out and find out who might be writing an account.”

Going forward franchisors and franchisees need to be aware that clients lists that they assume to be protectable under Georgia law might well not be. For if the party who “misappopriates” the client list can demonstrate that the list was readily obtainable from some other source, then the company may not have a colorable claim in Georgia under Georgia Trade Secret Act.