«MEMORANDUM RE: DEFENDANT’S MOTION TO DISMISS Baylson, J. February 29, 2015 I. Introduction In this diversity action, Plaintiff CertainTeed Ceilings ...»
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
CERTAINTEED CEILINGS CORP., CIVIL ACTION
DANIEL F. AIKEN,
MEMORANDUM RE: DEFENDANT’S MOTION TO DISMISS
Baylson, J. February 29, 2015 I. Introduction In this diversity action, Plaintiff CertainTeed Ceilings Corporation (“CertainTeed”) alleges that its former sales representative, Defendant Daniel Aiken (“Aiken”), breached his contractual and fiduciary duties and misappropriated trade secrets when Aiken resigned from CertainTeed to work for a competing company. Presently before the Court is Aiken’s Rule 12(b)(6) motion to dismiss the counts of CertainTeed’s Amended Complaint that allege breach of fiduciary duty and misappropriation of trade secrets. For the reasons set forth in this memorandum, the Court will grant Aiken’s motion with respect to Count Two, alleging breach of fiduciary duty, and deny Aiken’s motion with respect to the counts alleging misappropriation of trade secrets in violation of various state Uniform Trade Secrets Acts.
Factual and Procedural Background1 II.
CertainTeed’s Amended Complaint alleges that Aiken was employed as a CertainTeed Architectural Sales Associate and then Architectural Sales Manager from June 1, 2010 until he 1 For purposes of deciding this motion to dismiss, the Court accepts as true all well-pleaded facts in CertainTeed’s complaint.
1 resigned effective May 1, 2014. Am. Compl. 12-14 (ECF 14). His job was to sell acoustical ceiling systems to distributors and contractors through interactions with architects, contractors, and distributors. Id. 18. Aiken’s sales territory encompassed portions of Virginia, West Virginia, Maryland, Delaware, and the District of Columbia. Id. at 19 & Ex. C.
During the course of his employment, Aiken allegedly had access to CertainTeed’s confidential information and trade secrets, including “customer lists, detailed information about CertainTeed customers’ projects, projects, product development plans, marketing, sales and business methods, systems and strategies, sales, competitor, and market intelligence, product and plant cost structure, pricing models and projects with Ecophon specifications.” Id. 22. He was also responsible for “maintaining a database of architects, contractors and distributors and information about them and existing projects for his Territory.” Id. 21. Aiken “used CertainTeed’s Confidential Information and Trade Secrets in the regular performance of his duties as an Architectural Sales Manager.” Id. 23.
Before taking his job at CertainTeed, Aiken signed a “Noncompete Employee Agreement” that required him to protect CertainTeed’s confidential, trade secret, and proprietary information during and after his term of employment and restricted him from working for a competitor for one year after leaving CertainTeed. Id. 26-33 & Ex. D. CertainTeed regularly uses employment agreements and noncompete covenants to protect its confidential information and trade secrets. Id. 9.
Immediately after resigning from CertainTeed, Aiken started a job with Rockfon, LLC, one of CertainTeed’s direct competitors in the ceiling products market. Id. 24-25, 35, 49, 52.
At Rockfon, Aiken is an “Architectural Sales Manager” with “identical and/or nearly identical job responsibilities” to his role at CertainTeed. Id. 37-39. Aiken was hired by Rockfon to
CertainTeed alleges that (1) “it would be impossible for Aiken to perform his duties with Rockfon without disclosing CertainTeed’s Confidential Information and Trade Secrets and/or there is a substantial threat of such disclosure,” id. 43; (2) “Aiken has and/or inevitably will disclose and/or use CertainTeed’s Confidential Information and Trade Secrets in the performance of his job duties with Rockfon,” id. 47; and (3) “Aiken has and/or inevitably will disclose and/or use CertainTeed’s Confidential Information and Trade Secrets to compete with CertainTeed,” id. 48.
CertainTeed alleges six separate counts: (I) breach of contract, based on Aiken’s alleged violation of the noncompete and nondisclosure provisions in his Noncompete Employee Agreement, id. 56-66; (II) breach of fiduciary duty, based on Aiken’s alleged disclosures of CertainTeed’s confidential information and trade secrets, id. 67-75; and (III-VI) violations of the Uniform Trade Secrets Acts of Pennsylvania, Maryland, Virginia, and the District of Columbia, id. 76-107. CertainTeed seeks both damages and injunctive relief. Id. at 18-19.
CertainTeed filed suit on June 25, 2014 and moved for a preliminary injunction that same day (ECF 1, 3). Aiken filed a motion to dismiss on July 16, 2014 (ECF 7) and CertainTeed responded by filing an Amended Complaint on August 4, 2014 (ECF 14). On August 19, 2014, Aiken filed the present Motion to Dismiss Counts II through VI of the Amended Complaint, relating to the claims for breach of fiduciary duty and violations of the four state Uniform Trade Secrets Acts (ECF 22). CertainTeed filed an opposition to Aiken’s motion on September 5, 2014 (ECF 30). Aiken’s motion to dismiss is ripe for resolution.
2 After the Court granted CertainTeed’s motion for a preliminary injunction (ECF 33, 37), Aiken reportedly began working for Rockfon in a different geographic area, in compliance with the Court’s injunction. Status Report at 2 (ECF 36). For purposes of this motion to dismiss, however, the relevant facts are those pleaded in the amended complaint.
oral argument on the motion for preliminary injunction (ECF 32, 33), and the Court granted a preliminary injunction on October 9, 2014 (ECF 33, 37). Aiken’s appeal of the preliminary injunction order is presently pending before the Third Circuit (ECF 38).
The Parties’ Contentions III.
Aiken seeks dismissal of all counts except for CertainTeed’s breach of contract claim.
Mot. to Dismiss (ECF 22). With respect to CertainTeed’s claims for misappropriation of trade secrets under the Pennsylvania, Maryland, Virginia, and District of Columbia Uniform Trade Secrets Acts (Counts III through VI), Aiken makes two arguments. First, he argues that CertainTeed has failed to plead sufficient facts to identify the trade secrets in Aiken’s possession and to show that Aiken has or likely will disclose those trade secrets. Aiken Memo. of Law at 5ECF 22-1). Second, Aiken argues that CertainTeed’s misappropriation claims are based on a theory of inevitable disclosure, which is not recognized in Maryland, Virginia, or the District of Columbia, and that CertainTeed has not pled sufficient facts to make this claim plausible under Pennsylvania law. Id. at 10-12. CertainTeed counters that it has sufficiently identified its trade secrets for the purposes of pleading, has pled the requisite facts to support a claim for inevitable disclosure of trade secrets under Pennsylvania law, and has pled facts that support claims for actual or threatened misappropriation of trade secrets in all four states. CertainTeed Opp. at 6-18 (ECF 30).
As for CertainTeed’s claim for breach of fiduciary duty, Aiken argues that there are no allegations that he breached any duty during his employment and that any allegations that he breached an ongoing duty fail for the same reasons as CertainTeed’s statutory misappropriation of trade secrets claims. Aiken Memo. of Law at 12-13. Aiken also argues that the breach of
or identical to contractual claims. Id. at 13-14. CertainTeed responds that the facts alleged in its complaint show that Aiken violated his fiduciary duty to CertainTeed during his employment, that his fiduciary duty not to disclose confidential information continues after his employment, and that the fiduciary duty claim is broader than the statutory misappropriation claims because it includes disclosure of confidential information in addition to trade secrets. CertainTeed Opp. at 19-22. CertainTeed contends that the gist of the action doctrine does not apply because Aiken’s fiduciary duty arises from the fact of his employment, not from his signing a Noncompete Employee Agreement, and thus CertainTeed’s breach of fiduciary duty claim is independent of its breach of contract claim. Id. at 22-23.
IV. Legal Standard When deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court may look only to the facts alleged in the complaint and its attachments. Jordan v. Fox, Rothschild, O’Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). The court must accept as true all well-pleaded allegations in the complaint and view them in the light most favorable to the plaintiff. Angelastro v. Prudential–Bache Sec., Inc., 764 F.2d 939, 944 (3d Cir. 1985). The wellpleaded allegations accepted as true for purposes of a Rule 12(b)(6) motion to dismiss include “facts alleged on information and belief.” Melo-Sonics Corp. v. Cropp, 342 F.2d 856, 859 (3d Cir. 1965).
A valid complaint requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Iqbal clarified that the
pleading standard for ‘all civil actions.’” 556 U.S. at 684.
The Court in Iqbal explained that, although a court must accept as true all of the factual allegations contained in a complaint, that requirement does not apply to legal conclusions;
therefore, pleadings must include factual allegations to support the legal claims asserted. Id. at 678, 684. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678 (citing Twombly, 550 U.S. at 555); see also Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (“We caution that without some factual allegation in the complaint, a claimant cannot satisfy the requirement that he or she provide not only ‘fair notice,’ but also the ‘grounds’ on which the claim rests.” (citing Twombly, 550 U.S. at 556 n. 3)). Accordingly, to survive a motion to dismiss, a plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556).
V. Discussion A. CertainTeed has Stated Claims for Violations of the Uniform Trade Secrets Acts of Pennsylvania, Maryland, Virginia, and the District of Columbia Pennsylvania, Maryland, Virginia, and the District of Columbia have all adopted the Uniform Trade Secrets Act (UTSA), with only minor variations. Under these laws, a “trade
secret” is defined to include:
Information, including a formula, drawing, pattern, compilation including a
customer list, program, device, method, technique or process that:
(1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
§§ 11-1201(e); Va. Code Ann. §§ 59.1-336.3 “Misappropriation” is defined to include:
disclosure or use of a trade secret of another without express or implied consent by a person who... at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was... acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.4 12 Pa. Cons. Stat. Ann. § 5302; see D.C. Code §§ 36-401(2)(B)(ii)(II); Md. Code Ann., Com.
Law §§ 11-1201(c)(2)(ii)(2); Va. Code Ann. §§ 59.1-336. Each jurisdiction provides injunctive relief for “[a]ctual or threatened misappropriation.” 12 Pa. Cons. Stat. Ann. § 5303(a); D.C.
Code §§ 36-402(a); Md. Code Ann., Com. Law §§ 11-1202(a); Va. Code Ann. §§ 59.1-337(A).
And each jurisdiction provides for damages for misappropriation, including exemplary damages for willful or malicious misappropriation.5 12 Pa. Cons. Stat. Ann. § 5304(a)-(b); D.C. Code §§ 36-403(a)-(b); Md. Code Ann., Com. Law §§ 11-1203(a), (d); Va. Code Ann. §§ 59.1-338(A)B). Because the relevant portions of the statutes are nearly identical, for purposes of this memorandum the Court will focus on the Pennsylvania UTSA and discuss differences among the jurisdictions only when necessary.
In assessing whether particular information is a protected trade secret, Pennsylvania
courts consider six factors:
3 The District of Columbia, Maryland, and Virginia definitions omit the phrase “including a customer list” but are otherwise identical to the Pennsylvania provision.
4 The Pennsylvania UTSA was enacted in 2004. The parties both cite to pre-UTSA cases for the elements of misappropriation of trade secrets. See ECF 23 at 48; ECF 24 at 29. The Third Circuit has recognized that “[t]he PUTSA displaced Pennsylvania’s common law tort for misappropriation of trade secrets, but there is no indication that the statute effected a substantive shift in the definition of trade secret.” Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102, 109 n.7 (3d Cir. 2010) (internal quotation marks omitted); see 12 Pa. Cons. Stat. Ann. § 5308 (providing that the PUTSA “displaces conflicting tort, restitutionary and other law of this Commonwealth providing civil remedies for misappropriation of a trade secret” but does not affect certain remedies including contractual remedies based upon misappropriation of a trade secret). In accordance with Bimbo Bakeries, the elements of misappropriation of trade secrets laid out in this memorandum are based on the statutory cause of action not the historical tort, while the definition of “trade secret” may reference decisions from both pre- and post-UTSA.