Legal Situation Assessment
Cease & Desist — Breach of Contract & Trade Secret Allegations
About this sample. This is one example of what a Resolvix Legal Situation Assessment looks like. Your deliverable will reflect your specific facts, jurisdiction, contract terms, and the nature of the dispute — the structure and emphasis will vary accordingly. What stays consistent: a clear map of what happened, an honest assessment of every legal theory in play, your realistic options ranked by risk, and an action plan you can act on immediately. All company names, facts, and figures in this sample are illustrative.
Executive Summary
Situation Rating
The five things you need to know right now:
- A C&D is not a lawsuit. It is a demand letter. You have options that stop well short of litigation.
- Non-response is dangerous. Ignoring the letter can be used to argue willful conduct if they later file suit.
- The legal threshold to prove trade secret misappropriation is high. They must prove the data qualifies as a trade secret AND that you used it. Allegations are not proof.
- Your contract defines the battlefield. The confidentiality clause scope — what it covers, what it excludes, what counts as a breach — is your most important document right now.
- You have 9 days before the 21-day response window closes. That is enough time to engage counsel and send a professional denial letter.
1. Situation Map
What Happened
Meridian Creative Group (your agency) completed a 6-month digital marketing engagement for Atlas Home Services (Client A), ending approximately 4 months ago. The engagement involved access to Atlas's customer database, historical campaign performance data, and segment-level audience definitions as part of executing paid search and email campaigns on their behalf.
Approximately 2 months after the engagement ended, Meridian took on a new client, Cornerstone Home Solutions (Client B), a regional HVAC and plumbing company operating in several of the same Texas metros as Atlas. Atlas became aware of this relationship and, 12 days ago, delivered a cease-and-desist letter through outside counsel alleging: (1) breach of the confidentiality clause in your services agreement, (2) misappropriation of trade secrets under the federal Defend Trade Secrets Act (DTSA), and (3) breach of contract.
Meridian's position: the agency performed entirely separate work for Cornerstone, developed new creative and strategy from scratch, and did not use or reference any materials from the Atlas engagement in doing so.
Parties
3-person marketing agency, Texas. Completed engagement for Atlas, subsequently took on Cornerstone. Denies using Atlas data. Has signed contract with Atlas including confidentiality clause. Strong contract position if scope of confidentiality is defined and your work product is separable.
Former client. Alleges you used their customer list and campaign data to benefit Cornerstone, a competitor. Bears the burden of proof: must show (a) the data qualifies as a trade secret, (b) you had access, and (c) you actually used it. Has retained outside counsel — this is a funded legal effort, not a bluff letter.
Jurisdiction & Governing Law
| Item | Detail |
|---|---|
| State | Texas — both parties operate here; most likely governing law |
| Federal claim | DTSA (Defend Trade Secrets Act) — federal statute, filed in federal court if pursued |
| Contract governing law | Review your agreement: likely Texas law; controls breach of contract and confidentiality claims |
| Venue | Likely Texas federal or state court depending on which claims they pursue |
2. Legal Issue Analysis
| Legal Theory | What They Must Prove | Claimant Strength | Notes |
|---|---|---|---|
| Breach of Confidentiality Clause | That the information disclosed to you was covered by the clause AND that you disclosed or used it outside permitted purposes | Medium | Depends entirely on clause scope. If the contract only restricts "disclosure to third parties" and you didn't share data externally, this may not apply. Review the exact clause language with counsel. |
| Trade Secret Misappropriation (DTSA) | (1) Data qualifies as a trade secret — not generally known, subject to reasonable security measures. (2) You misappropriated it — used or disclosed it without consent. | Low–Medium | Customer lists can qualify as trade secrets if properly protected, but Atlas must prove active protection measures (password controls, restricted access, NDAs with their own staff). Generic industry data does not qualify. No lawsuit filed yet suggests they may be testing your response before investing in litigation. |
| Breach of Contract (General) | A valid contract existed, you had obligations under it, and you breached those obligations in a way that caused them damages | Medium | The contract scope matters. If the agreement had no non-compete or non-solicitation clause, serving a competitor is not automatically a breach. The breach theory likely hinges entirely on the confidentiality clause. Check whether the contract had any explicit restrictions on serving competing clients. |
Atlas's strongest claim is breach of the confidentiality clause — not because it's easily provable, but because it's the one claim where the obligation is clearly documented. The trade secret claim is harder for them: they need to prove both that their customer data met the legal definition of a trade secret AND that you used it. If your team kept the Cornerstone engagement work strictly separate and can document that, the DTSA claim is weak.
3. Your Options
| Option | Description | Risk Level | Our View |
|---|---|---|---|
| Do nothing / ignore the C&D | Take no action, hope they do not follow through with a lawsuit | HIGH RISK | Do not do this. Non-response can be introduced as evidence of consciousness of guilt in subsequent litigation. It also forfeits your ability to shape the narrative before a suit is filed. |
| Respond with a formal denial letter | Through counsel, send a professional response denying the allegations, asserting your position, and requesting that they provide specific factual support for their claims | LOW–MEDIUM | Recommended first step — This is the standard response to a C&D. It does not admit anything, preserves all your options, and signals that you are represented and taking this seriously. Often resolves matters without further escalation. |
| Negotiate a settlement or confidential NDA | Engage in discussions to resolve the matter commercially — could include a confidentiality agreement, minor payment, or acknowledgment — without admitting liability | LOW (if structured correctly) | Viable — If Atlas is primarily concerned about Cornerstone having their data (rather than seeking money), a well-structured mutual confidentiality agreement may satisfy them. Do not negotiate directly — only through counsel, and never admit wrongdoing as part of any settlement. |
| Litigate | Contest the claims in court if Atlas files suit | HIGH | Nuclear option — For a 3-person agency, business litigation is existential. Even a strong defense costs $50K–$150K+ in legal fees. This option is a last resort if negotiations fail and they file suit. Your goal should be to resolve this before it reaches that point. |
Engage Texas business litigation counsel this week. Have them send a professional denial letter within 9 days. In parallel, preserve all work product and communications from both engagements. If Atlas has a factual basis for their claim, it will surface in that exchange — and you will be in a much stronger position having responded promptly and professionally.
4. Risks & Timeline
Statutes of Limitations
| Claim | Statute of Limitations | Clock Start |
|---|---|---|
| Breach of Contract (Texas) | 4 years | Date of alleged breach (end of engagement or when they discovered the Cornerstone relationship) |
| Trade Secret Misappropriation — DTSA | 3 years | Date they discovered or reasonably should have discovered the misappropriation |
| Texas Uniform Trade Secrets Act | 3 years | Same discovery rule as DTSA |
Escalation Risk
| Scenario | Likelihood | Impact |
|---|---|---|
| No response → Atlas files suit within 30–60 days | High if ignored | Severe — you enter litigation without having shaped the record; non-response is documented |
| Professional denial → Atlas accepts and drops the matter | Moderate | Best case — many C&D letters are resolved at this stage when the respondent demonstrates they are represented and prepared |
| Professional denial → Atlas requests more information / enters negotiations | Moderate | Manageable — shifts to a commercial negotiation; your leverage is stronger before suit is filed |
| Atlas seeks a temporary restraining order (TRO) to prevent continued work with Cornerstone | Low without more evidence | Significant — a TRO would require you to pause or terminate the Cornerstone engagement pending a hearing |
5. Next Steps
Immediate Actions — Do These Today
| # | Action | Why It Matters |
|---|---|---|
| 1 | Do NOT delete any communications, files, or work product related to either engagement | Deleting evidence after receiving a legal demand is spoliation — it creates a separate legal problem and can be used against you in court. Preserve everything: emails, Slack, project files, ad account access logs, CRM exports, everything. |
| 2 | Do NOT contact Atlas, their principals, or their attorney directly | Anything you say — even an apology or clarification — can be used against you. All communication must go through your attorney once you have one. |
| 3 | Locate and read your signed contract with Atlas, specifically the confidentiality clause | The exact language of that clause defines the scope of your obligation. Your attorney will need it immediately. Note: what data was covered, what uses were restricted, what exclusions exist (e.g., publicly available information), and whether there was any non-compete language. |
| 4 | Document the Cornerstone engagement — what you did, what materials you used, what you did not use | A clear internal record of how the Cornerstone work was performed independently — with no reference to Atlas materials — is your defense. Create this now while memories are fresh. |
Within 7 Days — Engage Counsel
This situation is past the point of DIY response. A Texas business litigation attorney needs to review your contract, assess the specific allegations, and draft a formal denial letter. Look for attorneys who specialize in commercial disputes or business litigation — not general practice. Initial consultations are typically $200–$400; a denial letter engagement is typically $1,500–$3,500.
- Do not send an apology or acknowledgment of any kind — even "we take this seriously" can be read as an admission
- Do not admit that the Cornerstone engagement involved any similar work, tactics, or audiences — even if it did, let counsel handle how that is characterized
- Do not contact the claimant's attorney without your own counsel present or reviewing the communication
- Do not post about this situation on social media or discuss it with people outside your immediate team
- Do not suspend or terminate the Cornerstone engagement unilaterally — that could be read as an admission and creates a separate breach of contract exposure with Cornerstone
You are in a manageable situation that can become unmanageable if you ignore it or respond carelessly. The allegations are serious but the legal bar to prove them is high. A professional denial letter, delivered within the response window through Texas counsel, is your immediate goal. Everything else flows from that.