Last week, the Western District of Washington concluded that a multi-level marketing beauty company sufficiently alleged that it exercised reasonable efforts to maintain the secrecy of its training materials, and network salespeople and contact lists, despite the salespeople using their personal Facebook accounts, and despite making the training materials available to a Facebook group comprising thousands of members. Accordingly, the court denied defendants’ motion to dismiss with respect to defendants’ alleged trade secret misappropriation in violation of the Defend Trade Secrets Act.

Plaintiff, Tori Belle Cosmetics LLC (“Belle Cosmetics”), sells its cosmetics and false eyelashes through a network of salespeople, allowing each salesperson to earn a portion of any revenue generated by any salespeople they recruit to join their sales network, i.e., a multi-level marketing business. Defendants are five former network salespeople of Belle Cosmetics, who plaintiff alleges, helped design and launch a competing product line for a company called Juvanae LLC. Belle Cosmetics alleges its trade secrets include, inter alia, lists containing contact information of customers and network salespeople including in the form of social media contacts, and training materials in the form of videos, photos, informational posts, webinars and other instructional materials that it makes available to thousands of its network salespeople through a Facebook group called “Team Lash Out.”

Defendants first argued that the network of salespeople and customer lists on Facebook were owned by them, as they have ownership interests in their Facebook profiles, and that because each defendant’s Facebook friends could see the rest of their friend network, these lists were not confidential. The court disagreed. The court noted that that while the most revealing settings on Facebook may allow Facebook friends to see a friends’ name and profile picture, Belle Cosmetics alleged that it sought to protect the list of its network of salespeople and additional information such as their respective phone numbers and addresses not otherwise available to a user’s Facebook friends. The court therefore concluded that Belle Cosmetics sufficiently alleged that the list of network salespeople and customers was sufficient to constitute confidential information.

Defendants next argued that Belle Cosmetics failed to state a claim for trade secret misappropriation in that Belle Cosmetics failed to allege that it exercised reasonable efforts to protect the secrecy of its training materials. In particular, defendants argued that because Belle Cosmetics made the information available to thousands of network salespeople on Facebook, “the world’s largest social media website,” that information was by definition non-confidential, and could not be a trade secret. The court dismissed this argument, noting that Facebook permits users to control exactly who may view any information they post, and they may choose to post the information to a private group allowing admission to only a select group of individuals. The court also noted that previous courts inquired into the particular privacy selections used, and the types of communications made, before deciding whether a party failed to exercise reasonable measures. The court therefore concluded that taking as true Belle Cosmetics’ allegations that it had corporate representatives serving as Facebook group administrators who only granted access to the training materials to Belle Cosmetics network salespeople, plaintiff sufficiently alleged the exercise of reasonable measures to maintain the secrecy of its asserted trade secrets.

This will be an interesting case to follow, in particular what the court considers “reasonable efforts” with respect to materials posted in a Facebook group. For example, it will be interesting to see how the court assesses the contractual requirements in the contracts between Belle Cosmetics and the salespeople imposing upon them an obligation to keep the training materials secret and not to use or disclose the materials, and the sufficiency of such contractual terms. These are, of course, foundational requirements to qualify as a trade secret. It will also be interesting to see if the court assesses the process by which Belle Cosmetics Facebook group administrators verified any new users requesting access to the alleged confidential training materials were Belle Cosmetics network salespeople. Or if the court has to determine how many users included in the Facebook were not network salespeople before confidentiality of the asserted trade secrets is destroyed. Stay tuned.

The court’s opinion in Tori Belle Cosmetics LLC v. Meet, No. C21-0066RSL (W.D. Wash. Mar. 7, 2022) can be found here.