Puerto Rican Tax Firm Loses Trade Secrets Case at First Cir.

Written July 30, 2020

The First Circuit on July 22, 2020, held that a San Juan, Puerto Rico-based tax planning and consulting firm can’t hold a former employee liable for misappropriating trade secrets or breaching a nondisclosure agreement. TLS Mgmt. & Mktg. Servs. v. Rodríguez-Toledo, 2020 BL 270796, 1st Cir., No. 19-1104, 7/21/20.

TLS Management and Marketing Services LLC didn’t sufficiently establish that it had trade secrets in its client reports and arbitrage strategy for limiting US and Puerto Rico tax liabilities, the Court said Tuesday.

TLS initially subcontracted with Rodríguez-Toledo in 2012 and later hired him to work as its managing director.

After Rodríguez-Toledo left TLS in 2015 and began providing competing tax services, TLS sued him for improperly using the firm’s US-Puerto Rico tax arbitrage strategy and downloading certain client-recommendation reports without authorization before he left.

However, the First Circuit found that TLS failed to prove that the materials contained information that wasn’t public or specific to an individual client.