What damages must be proven in Utah trade secrets cases? Freedom Counseling v. Feller Behavioral Explained

The Utah Supreme Court’s recent decision in Freedom Counseling v. Feller Behavioral clarifies the causation requirement for damages in trade secrets litigation, providing important guidance for practitioners handling claims under Utah’s Uniform Trade Secrets Act.

Background and Facts

Freedom Counseling employed four therapists who began exploring job opportunities with Feller Behavioral Health (FBH). Dr. Kelly Feller, FBH’s executive director, asked the therapists to share client information, employment agreements, and credentialing details. The therapists had signed non-compete agreements with Freedom Counseling that protected confidential information. Despite these agreements, the therapists provided client names, insurance information, member ID numbers, and other personal details to Dr. Feller. FBH subsequently hired all four therapists, and forty-nine clients followed them from Freedom Counseling, which later closed its business.

Key Legal Issues

The central issue was whether Freedom Counseling could establish that FBH’s misappropriation of trade secrets caused its alleged damages. Under Utah Code § 13-24-4(1), damages must be “caused by” the defendant’s misappropriation. Freedom Counseling initially sought damages based on FBH’s competitive advantage but later shifted to claiming actual losses from client departures.

Court’s Analysis and Holding

The Supreme Court reversed the district court’s denial of summary judgment, finding no causal link between FBH’s receipt of client information and Freedom Counseling’s losses. The Court emphasized that while clients did leave Freedom Counseling, they left because their trusted therapists moved to FBH—not because FBH used their personal information to solicit them. The evidence showed FBH would have hired the therapists based solely on general client numbers and credentialing information, without needing personal client details. The Court noted that “temporal correlation” between receiving information and hiring decisions does not establish causation.

Practice Implications

This decision underscores the importance of establishing clear causation evidence in trade secrets cases. Practitioners must demonstrate that the defendant’s specific use of trade secrets—not merely their receipt—directly caused the plaintiff’s damages. Expert reports should analyze the causal relationship between misappropriation and losses, rather than simply calculating damages that occurred during the relevant timeframe. The ruling also highlights that defendants can defeat trade secrets claims by showing they would have taken the same actions without access to the allegedly misappropriated information.