December 10, 2024
Diversified Sues Former Employee, Competing Agent
Electrical contractor’s email error leads to challenges for Moxie Lighting and a former employee
Diversified, a major lighting agency operating in the Eastern Pennsylvania, Northern New Jersey, and New York City markets, has filed a lawsuit against a former employee, alleging breaches of contract, misuse of confidential information and interference with exclusive manufacturer agreements. The lawsuit, filed on December 5 in the U.S. District Court for the Eastern District of Pennsylvania, also implicates Moxie Lighting, a competing agency, in benefiting from these alleged violations.
At the heart of the lawsuit are claims that the former employee, who joined Diversified as part of its acquisition of Liberty Lighting Group in 2021, violated a restrictive covenant agreement signed in December 2022. The agreement prohibited him from competing with Diversified and soliciting its clients for one year following his departure, while also barring him from using its trade secrets indefinitely.
Earlier this year, the Federal Trade Commission (FTC) issued a ban on most noncompete agreements, set to take effect on September 4, 2024. However, on August 20, 2024, a federal judge in Texas struck down the rule, ruling that the FTC had exceeded its authority in issuing the ban.
Specific Allegations of Misconduct
Diversified's complaint details several incidents involving its former employee and key clients. A significant focus is the Regus Marlboro project in Monmouth County, NJ, where Diversified alleges that Moxie submitted a proposal using products from manufacturers abbreviated "LMC" and "BL," which Diversified claims to represent exclusively in the region.
Above: A redacted email from electrical contractor, Sodon's Electric, to Moxie Lighting mistakenly included the salesman's old email address at Diversified and not his new Moxie email address
This alleged violation surfaced when Sodon’s Electric, an electrical contractor in Atlantic Highlands, New Jersey (Exit 117), sent an email to a Moxie quotations employee regarding the Regus project. The email was inadvertently carbon-copied to the former employee’s old Diversified email account instead of his Moxie email address. Diversified alleges that the former employee was involved in facilitating this submission while still employed at Diversified, which the company views as a breach of loyalty and contract.
"We had a great relationship with [ex-employee] and we wished him all the best. However, he signed an agreement and assured senior leadership before his departure that he would not compete in the marketplace. It’s evident he is not honoring those commitments."
– Diversified spokesperson
Another alleged incident involves a customer abbreviated “CE”, likely Cooper Electric Supply – a major electrical distributor with operations across New Jersey, New York, and Pennsylvania. Diversified alleges that the former employee leveraged his prior relationship with CE’s sales staff, specifically an individual identified as "KM," to organize a golf outing sponsored by Moxie. Diversified contends that such activities are indicative of broader efforts to exploit proprietary client relationships for the benefit of Moxie.
Laying Low?
The former Diversified employee is not currently listed on Moxie Lighting’s website, and his LinkedIn profile identifies Albany, NY, as his location — a region outside Diversified’s established territory, and part of Moxie Lighting's Upstate territory. Yet the ex-employee is believed to reside in Monmouth County, New Jersey – a location 180 miles from Albany. These details raise questions about whether he legitimately works in the Upstate territory exclusively or if such measures were taken to obscure his activities and avoid potential violations of Diversified’s agreement.
Above: Excerpts from Diversified employment agreement allegedly signed by ex-employee in 2022
In September, Diversified sent the former employee a formal letter reminding him of his contractual obligations, including restrictions on competition, solicitation, and the use of trade secrets. Despite this reminder, Diversified alleges that the former employee has continued engaging in activities that breach these obligations.
Diversified’s Legal Claims Against the Defendants
Diversified’s lawsuit highlights several legal allegations:
- Breach of Contract: The former employee allegedly violated his restrictive covenant by competing with Diversified, soliciting its customers, and disclosing confidential information.
- Tortious Interference: Moxie Lighting is accused of knowingly benefiting from and encouraging the former employee’s breaches to disrupt Diversified’s business relationships.
- Misuse of Trade Secrets: The lawsuit claims the former employee used proprietary customer lists and business strategies to compete with Diversified.
- Violation of Exclusive Manufacturer Contracts: Diversified asserts that Moxie’s proposals violated agreements with manufacturers exclusively represented by Diversified in the region.
- Unjust Enrichment: Moxie is accused of profiting from the unauthorized use of Diversified’s confidential information and business relationships.
Moving forward
Diversified is seeking a temporary restraining order to prevent further breaches, along with compensatory and punitive damages. According to court records, Moxie Lighting and the former employee have yet to be served with the lawsuit. Once served, they will have 21 days to respond.
On Monday morning, we contacted Moxie Lighting and the former employee for comment, but no reply was received prior to the publication of this article.
