979 N.W.2d 304
S.D.2022Background:
- DT-Trak, a South Dakota medical consulting firm, employed Kolda as a medical coder and paid for ICD-10 training; she signed an employment agreement with non-compete and confidentiality provisions when rehired in 2016.
- The Agreement defined the employer’s "Business" as professional medical coding and related services for healthcare service providers and defined "Competing Business" as entities that engage or propose to engage in that Business; the geographic scope covered the entire United States and non-compete lasted two years post-employment.
- Kolda resigned in February 2019 and began working remotely from South Dakota as an in-house medical coder for San Carlos Apache Healthcare Corporation (an Arizona healthcare provider) — San Carlos had no active contract with DT-Trak.
- DT-Trak sued alleging breach of the non-compete (Count 2), misuse/disclosure of Confidential Information (Count 1), solicitation (Count 3, later abandoned), and trade-secret misappropriation (Count 4); both parties filed cross-motions for summary judgment, which the circuit court denied.
- The Supreme Court granted intermediate appeal; the parties agreed material facts were undisputed and asked the Court to decide legal issues on summary judgment.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Kolda breached the Agreement’s non-compete by working for San Carlos (Count 2) | San Carlos competes because Kolda’s coding work falls within DT‑Trak’s Business and thus makes San Carlos a Competing Business | San Carlos is a healthcare provider with in-house coding for its own services, not a vendor providing coding to other healthcare providers, so it is not a Competing Business | San Carlos is not a Competing Business under the Agreement; Kolda did not breach the non-compete; SJ for Kolda on Count 2 |
| Whether DT‑Trak’s protocol notes and Kolda’s DT‑Trak experience are trade secrets or Confidential Information and whether they were misused (Counts 1 & 4) | Protocol notes and DT‑Trak–specific know‑how are proprietary/trade secrets and Kolda is using/disclosing them at San Carlos | The notes and experience are either not secret (industry‑level knowledge) or readily duplicated; and there is no concrete evidence Kolda used or disclosed them | Protocol notes/experience do not meet trade‑secret criteria and DT‑Trak offered only suspicion of misuse; SJ for Kolda on Counts 1 and 4 |
| Whether DT‑Trak’s speculative suspicions create a factual dispute to avoid summary judgment | Suspicion plus Kolda’s access and training creates an issue of fact | Suspicion without concrete evidence is insufficient to defeat summary judgment | Suspicion alone is inadequate; summary judgment for Kolda was required |
Key Cases Cited
- Owners Ins. Co. v. Tibke Constr., Inc., 901 N.W.2d 80 (S.D. 2017) (standard of review for denial of summary judgment).
- North Star Mut. Ins. Co. v. Korzan, 873 N.W.2d 57 (S.D. 2015) (summary judgment requires more than speculation to create a genuine issue of material fact).
- Daktronics, Inc. v. McAfee, 599 N.W.2d 358 (S.D. 1999) (trade secret legal/factual framework under state law).
- Franklin v. Forever Venture, Inc., 696 N.W.2d 545 (S.D. 2005) (contract interpretation reviewed de novo).
- Weins v. Sporleder, 569 N.W.2d 16 (S.D. 1997) (compilations within general industry skill are not trade secrets).