Isco Industries, Inc. v. Thomas W. O'Neill, 2024-CA-1122

O’Neill worked at ISCO Industries for 22 years, becoming Chief Sales Officer and signing agreements regarding confidentiality (RCA) and stock appreciation rights (SAR).
Upon departure in March 2020, O’Neill downloaded 900+ ISCO documents to his Dropbox and subsequently resigned, returning some—but not all—ISCO property.
O’Neill later provided confidential ISCO documents to his attorneys, which were allegedly used in lawsuits (Swain in Delaware; Best in Kentucky) against ISCO or its interests.
ISCO sued O’Neill for breach of contract, breach of fiduciary duty, unjust enrichment, conversion, and breach of the implied covenant of good faith, centering on wrongful disclosure and retention of confidential information.
The trial court dismissed ISCO’s claims regarding disclosure of information (finding them barred by the judicial statements privilege), sending only retention-related claims to the jury, which found for O’Neill.
ISCO appealed, challenging the application of the judicial statements privilege and other trial rulings.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does the judicial statements privilege bar breach of contract claims based on disclosure of confidential information in litigation?	Privilege doesn’t apply to intentional breach of contract/conduct, only to statements; confidentiality agreement should be enforced.	Disclosure was communicative, related to judicial proceedings, and thus privileged.	Privilege does not protect conduct (e.g., wrongful disclosure/retention); it applies narrowly.
Did O'Neill’s actions constitute conduct or privileged statements?	ISCO: O’Neill’s taking and sharing documents was conduct, not only making statements.	O’Neill: Disclosures were communicative, made in litigation context.	Court: O’Neill’s actions were conduct, not just statements; not privileged.
Can the breach of confidentiality (RCA) support a claim for recovery of already-paid SAR compensation?	Yes, contract language allows for recoupment if terms breached.	No, disclosures protected; no material breach as a matter of law.	Jury could consider whether breach was material; trial error warrants retrial.
Was the jury verdict on retention of documents and related claims tainted by exclusion of the disclosure claim?	Yes, claims are intertwined; exclusion prejudiced ISCO.	No, separate matters; verdict unaffected.	Record unclear; exclusion prejudiced ISCO; verdict set aside and remanded.

New Albany Main St. Props., LLC v. Stratton, 677 S.W.3d 345 (Ky. 2023) (explaining scope and review of judicial statements privilege)
Maggard v. Kinney, 576 S.W.3d 559 (Ky. 2019) (addressing privilege and witness immunity in judicial proceedings)
Halle v. Banner Indus. of N.E., Inc., 453 S.W.3d 179 (Ky. App. 2014) (judicial statement privilege does not generally apply beyond defamation; limited in other civil claims)
Ballard v. 1400 Willow Council of Co-Owners, Inc., 430 S.W.3d 229 (Ky. 2013) (qualified privilege for certain litigation filings, not absolute)
Superior Steel, Inc. v. Ascent at Roebling’s Bridge, LLC, 540 S.W.3d 770 (Ky. 2017) (parties’ freedom of contract is a strong public policy)