A Former Employee Took Our Customer List. What Can We Actually Sue For?

Short answer: almost never. Federal courts routinely dismiss civil RICO and Lanham Act claims in departing-employee disputes, because the conduct — even when genuinely wrongful — is not what those statutes target. The claims that survive and win are breach of fiduciary duty, trade secret misappropriation, breach of contract, and Wisconsin's civil theft and computer-access statutes.

When a trusted employee leaves and takes customers, confidential information, or both, the instinct is to hit back with everything available. Federal statutes are especially tempting: the Lanham Act and civil RICO both carry powerful remedies, and RICO offers treble damages and attorney's fees.

That instinct is usually a mistake. Federal courts have heard the argument many times, and they are direct about it: a garden-variety business dispute dressed up as racketeering gets dismissed. Meanwhile, the ordinary state-law claims — breach of fiduciary duty, trade secret misappropriation, breach of contract — are the ones that actually survive and do the work.

What happens when an employer over-pleads?

A Wisconsin federal court recently worked through exactly this pattern, in a case where an employer sued departed executives and their new business partners on twenty separate causes of action.

Why do Lanham Act and RICO claims fail here?

Both dismissals turned on the same underlying problem: the conduct alleged was real, but it was not the conduct those statutes target.

The Lanham Act reaches false statements made in "commercial advertising or promotion." Individually contacting a few of a competitor's clients does not qualify, no matter how damaging or how false the statements. The statute requires a systematic campaign aimed at the relevant market — a website, a mailing, a presentation circuit — not a handful of private conversations.

Civil RICO requires an enterprise distinct from the defendants and a pattern of racketeering showing continuity. Alleging in the alternative that three different companies might each be the "enterprise" is not a theory; it signals that no coherent structure exists. And a scheme that began and ended inside a two-year window, harming one victim through two kinds of predicate acts, does not show the long-term criminal activity RICO was written to combat.

What pleading mistakes get claims dismissed?

Two recurring errors did the most damage, and both are avoidable:

• Treating defendants as a monolith. Claims sounding in fraud must be pleaded with particularity — the who, what, when, where, and how, defendant by defendant. Lumping six defendants together under the label "Defendants" is itself grounds for dismissal. In this case, some claims against one entity failed simply because the complaint never alleged anything specific that entity did.

Pleading unjust enrichment alongside a contract. If a valid, enforceable contract governs the relationship, unjust enrichment does not apply. Pleading it by express reference to the contract terms is a common way to get the claim knocked out early — courts routinely treat an unjust enrichment claim as redundant once an express contract covers the same relationship.

The court also flagged something worth internalizing: an eighty-six page, 354-paragraph complaint filled with rhetoric is not a strength. It obscured which facts supported which claims, and it drew a pointed observation that "spray and pray" is not an acceptable pleading strategy.

Which claims actually survive?

The claims that made it through are the unglamorous ones, and they are sufficient. A former employee who takes kickbacks from a vendor he recommends, or who copies customer information before resigning, faces liability for breach of fiduciary duty regardless of whether a federal statute applies. Wisconsin's Uniform Trade Secrets Act protects customer information, pricing, and technical material that the company kept confidential. Wisconsin's computer crime and civil theft statutes create private causes of action with real remedies. And a well-drafted non-compete supplies contract claims and, often, injunctive relief.

Notably, the court also declined to let the economic loss doctrine bar the fraud claims — Wisconsin has not extended that doctrine to employment relationships, and much of the alleged fraud concerned contracts the employee was not even a party to.

Key takeaways for employers

• Investigate before you plead. Heightened pleading exists to force pre-filing work. You know your own customers — identify which ones were contacted, by whom, and what was said, before you file rather than hoping discovery fills the gap.
• Match the claim to the conduct. Ask what each statute actually prohibits, not what remedies it offers. Treble damages are attractive; a dismissed count is worth nothing.
• Plead each defendant separately. Every defendant needs specific conduct attributed to them. Entities added for leverage but never tied to the facts are the first claims dismissed.
• Lead with fiduciary duty and trade secrets. These claims fit the conduct, survive motions, and support the injunctive relief that usually matters most.