Houston Business Attorneys to Stop Client Poaching & Client Theft

How to Stop Ex-Employees From Stealing Your Clients and Customers

Are you watching in alarm as a departing employee, a contractor, or a competitor raids your client list? Texas law protects valuable trade secrets, including client lists, from misuse and misappropriation. These protections can give you legal grounds to defend your client lists from exploitation by former employees or competitors.

According to the Texas Uniform Trade Secrets Act (TUTSA), a trade secret is information that has economic value because it is not generally known, and which a company has made reasonable efforts to keep secret. If your business has made reasonable efforts to protect your client lists, you can take legal action to stop former employees or competitors from going after your valuable client relationships.

At Hendershot Cowart P.C., we draft the agreements that protect your client relationships, and we enforce them when someone tests those limits. Since 1987, we have helped Texas business owners protect confidential client lists, evaluate existing agreements, and pursue relief when their clients are unfairly poached.

Take quick action to stop former employees from stealing your clients. Contact our Houston attorneys at (713) 783-3110 for a consultation.

On This Page:

• What Is Client Poaching?
• Is Client Poaching Illegal?
• Can I Sue a Competitor for Poaching My Clients?
• How Do I Prevent Competitors from Poaching My Clients?
• How Do I Defend against a Client Poaching Lawsuit?
• Special Considerations for Law Firms and Attorneys
• Entrust Your Client Poaching Case to Experienced Business Attorneys

When an employee leaves the company – either to join a competitor or to start a competing business – they may try to encourage clients to join them at their new company. A former employee may also maliciously share protected client information with a competitor who then directly solicits your customers or clients.

This is called “client poaching” and endangers your proprietary information, profits, and client relationships.

Examples of client poaching can include:

• An employee intercepting calls from potential clients and soliciting them to do business separately.
• A vendor, supplier, or contractor soliciting mutual clients to provide competing products or services.
• An employee who leaves to start a competing operation and asks clients to follow him or her.

What May NOT Be an Example of Client Poaching?

• If the client list is easily ascertained through public sources, such as an internet search.
• If the former employee advertises in the local newspaper or social media and your clients respond.
• If a client follows your employee to a competing operation, but was not directly or actively solicited.

Client poaching is not outright illegal, but it can violate certain business laws, such as the Texas Uniform Trade Secrets Act, and breach the terms of existing agreements, such as a non-compete or non-solicitation provision in the employment contract.

Yes. TUTSA allows businesses to take legal action when misappropriation occurs – or even if it has been threatened – provided that:

• Improper means were used to acquire the trade secret; and
• A trade secret was used or disclosed without consent.

Typically, a trade secret misappropriation case will consist of three general phases:

• Filing of a lawsuit and application for a temporary restraining order;
• Temporary injunction that stops the defendant from a specific act; and
• Litigation for the recovery of damages.

In addition to injunctive relief, businesses are also entitled to the recovery of any financial damages resulting from misappropriation. This includes actual losses and unjust enrichment, or royalties for the unauthorized use or disclosure of a trade secret. In cases where misappropriation was willful and malicious, exemplary damages may also be awarded against the defendant.

The best way to prevent client poaching is to take reasonable measures to protect the secrecy of your client list. This will maintain its protection under Texas law.

What are reasonable measures to maintain the secrecy of your client list?

1. Label client information as “proprietary and confidential.”
2. Limit access to client information on a “need-to-know basis.”
3. Employ physical and digital security, for example, storing information in locked cabinets or password-protected systems.
4. Ask employees, customers, independent contractors, and vendors with access to confidential client lists and information to sign a confidentiality or non-disclosure agreement (NDA).
5. Use non-compete or non-solicitation agreements.

Review more measures to protect trade secrets in our guide to “Protecting Trade Secrets In Texas.”

The best way to defend against claims of client poaching is to demonstrate that you did not solicit clients improperly, or that you obtained the client list through public means.

It gets trickier if you are bound by a non-solicitation, non-compete agreement, or confidentiality agreement. However, these agreements are not always enforceable. If a non-compete or non-solicitation agreement is too broad or does not protect a legitimate business interest, Texas courts may revise the scope of the agreement or decline to enforce it altogether.

Our law firm has been reviewing, drafting, and enforcing non-compete and non-solicitation agreements since 1987. We can review the circumstances of your case and any underlying agreements to determine their enforceability and devise a strategy to achieve the possible outcome for you.

When it comes to client poaching and restrictive covenants for attorneys, there are important ethical considerations that differ from standard business practices. 

The American Bar Association's Model Rule 5.6, which has been adopted in Texas, specifically prohibits lawyers from offering or entering into:

• Partnership, employment, or similar agreements that restrict a lawyer's right to practice after terminating the relationship (with a limited exception for retirement benefits). 
• Agreements that restrict a lawyer's right to practice as part of settling a case.

This rule exists to protect both the public's right to choose their counsel and attorneys' professional autonomy. In Texas, these restrictions are addressed in the Texas Disciplinary Rules of Professional Conduct.

As a result of this rule, attorneys generally cannot be bound by non-compete or non-solicitation agreements, as they are viewed as impermissible restrictions on the practice of law. 

While attorneys cannot be contractually prohibited from accepting employment from a firm's clients, there are still ethical restrictions on how attorneys can solicit clients. Texas Ethics Opinion 422 clarifies that direct solicitation of clients must comply with advertising and solicitation rules under the Texas Disciplinary Rules.

What Law Firms Can Do Instead

Rather than relying on unenforceable restrictive covenants, law firms in Texas should:

1. Focus on client retention through excellent service and responsiveness.
2. Use confidentiality agreements to protect truly confidential firm information (while recognizing client information cannot be restricted).
3. Implement client transition procedures when attorneys depart that address proper file transfers and client communications. 

If you're concerned about client poaching, consult with the attorneys at Hendershot Cowart P.C. We can advise you on the legal ethics in Texas and discuss options for protecting your client relationships and proprietary information.

Client lists are a valuable business asset. If a competitor or former employee is blatantly stealing your clients, rely on the help and counsel of experienced business attorneys at Hendershot Cowart P.C.

Hendershot Cowart P.C. has practiced Texas business law since 1987 – nearly 40 years. In the past five years alone, we have resolved close to 1,000 business disputes and litigation matters. We know how Texas and federal law treat trade secrets, including client lists and pricing information, and we know what a court expects to see before it grants relief. 

We will explain your options in plain English and lay out our fee arrangement before you sign anything. Call (713) 783-3110 or contact us online.