An Offer They Can't Refuse

When EnvTech’s employees walked out the door to join USAD, a rival company, its trade secrets went with them. They were not the only ones affected. In EnvTech, Inc. v. DeBusk, the Fifth Circuit found that allegations of repeated, executive-directed trade secret theft can plausibly satisfy the pattern requirement of the Racketeer Influenced and Corrupt Organizations Act. 

The Decision

EnvTech alleged that the CEO of USAD orchestrated a scheme to hire away key employees and use their knowledge of EnvTech’s proprietary refinery cleaning process to capture EnvTech’s clients. The district court concluded that the complaint failed to allege the CEO’s personal knowledge or a sufficient pattern of criminal conduct.

The Fifth Circuit disagreed on both points, finding that the CEO’s personal attendance at a significant client meeting, his documented encouragement of the new business line, his admitted awareness that USAD used the same technology as EnvTech, and USAD’s decision to skip any independent testing of its ‘new’ process, collectively supported a plausible inference of knowing and directed trade secret theft. The court also found that allegations drawn from four separate lawsuits against USAD by three other competitors, each following the same playbook of targeted hiring and trade secret capture, adequately pleaded the RICO pattern requirement, including open-ended continuity based on the threat that the conduct would repeat.

Practical Considerations:

• Multiple victims can help establish a civil RICO pattern. Civil RICO requires a pattern of related, continuous conduct. As EnvTech illustrates, one way to satisfy this requirement is to show that the same scheme targeted multiple competitors. Trade secret owners who suspect they are not the only target should investigate whether other companies in their space have faced similar conduct.

• RICO allegations expand the discovery battlefield. Pattern-based claims open discovery well beyond the specific trade secret at issue, reaching other transactions, other alleged victims, and broader business practices. Plaintiffs should factor that expanded scope and the settlement pressure it can generate into their litigation strategy early.

• RICO’s damages multiplier raises the stakes. Trade secret remedies include actual damages and unjust enrichment, as well as exemplary damages for willful and malicious misappropriation. A viable RICO claim layers treble damages and attorney’s fees automatically, without requiring an additional showing. This gap in potential exposure gives trade secret plaintiffs meaningful leverage throughout litigation that a standalone misappropriation claim does not.

• Strong onboarding protocols are a frontline protection. Companies that hire from competitors should have structured intake procedures to prevent new employees from importing confidential information from prior employers. Pairing those protocols with documented independent development of any competing capability protects the business, preserves credibility, and reduces friction if a dispute arises.

• Executive awareness is as important as company policy. Leadership decisions about pursuing new business lines built on recently hired talent should include deliberate inquiry into how that capability was developed. Building trade secret awareness into executive decision-making ensures that company policies translate into sound business judgment.