Bellevue woman must pay for stealing business

A 69-year-old Bellevue businesswoman has to pay her former employer close to $150,000 plus undetermined court costs for using the company's materials and programs to run her own competing firm.

Lorraine Nelson was found liable in King County Superior Court for theft of trade secrets, unjust enrichment, civil conspiracy and breach of fiduciary responsibility.

A judge last week issued a permanent injunction against Nelson and her startup company, Court Services Institute (CSI), from using a modified software program, manuals and other intellectual property belonging to the National Traffic Safety Institute (NTSI). The injunction came two months after a jury concluded Nelson misappropriated trade secrets and engaged in a civil conspiracy to harm the company for which she had worked for a decade.

NTSI, which was founded in California 30 years ago, and Nelson's CSI both provide court-ordered education programs for people who receive traffic citations or are ordered to take anger-management, domestic-violence or shoplifting-diversion classes.

NTSI has eight offices in the U.S. — including one in Issaquah, where Nelson worked between 1992 and 2002 — and offers programs in 26 states as well as in Mexico City and Toronto, said company President Paul Hallums. He estimated 350,000 to 400,000 people attend court programs developed by NTSI each year.

In contrast, Nelson's CSI operates in Washington and Oregon, with maybe 2,100 people attending its classes annually, said Nelson's attorney, David Lawyer.

Nelson began her company within a month of leaving NTSI but she was "not bound by any contract covenant not to compete," and she doesn't believe "the activities she engaged in constitute any unfair competition or misappropriation of trade secrets," Lawyer said.

Though disappointed with the jury verdict, Lawyer said the judge didn't issue a "blanket prohibition that would shut (CSI) down," something he said NTSI's lawyers wanted.

"That was the silver lining to a very dark cloud," he said.

Although two other former NTSI employees — Nelson's daughter, bookkeeper Brenda Sargent, and a computer programming contractor, Brian Heiden — were named as defendants in the lawsuit, both have filed for bankruptcy protection, making Nelson legally responsible for the entire jury award of $146,803 and NTSI's court costs, which a judge has yet to determine.

NTSI first filed for an injunction against CSI in 2002, shortly after Nelson started her company, Hallums said. A judge demanded more evidence, which is why the case was refiled and tried earlier this year, he said.

"CSI took our curriculum and our approach to curriculum development and a lot of information directly from our materials and used them as their own," said Hallums. "They used all our information, all our computer software, customer lists and curriculum to develop their business — all on our dime."

Lawyer, though, said he argued at trial that NTSI's manuals can't be considered "trade secrets" since they are supposed to be disseminated to the public.

While he conceded that Nelson hired Heiden to modify an off-the-shelf computer program for her as Heiden had previously done for NTSI, Lawyer called Heiden "the architect" of the program.

Basically, Heiden "gave her the same product" as NTSI, which apparently included NTSI data, he said. But his client never used that information — most of it was names and addresses of people who'd already attended NTSI classes — because it wasn't useful, Lawyer said.

The judge ordered Nelson to delete NTSI's database and customized software from her computers. She also has to give NTSI attorneys any written reports, manuals or other business records belonging to NTSI, court records say.

Sara Jean Green: 206-515-5654 or sgreen@seattletimes.com