Ct. 163, 81 L. Ed. 153 (1936). The moving party has the burden of establishing the “pressing
need for delay” and proving “that neither the other party nor the public will suffer harm from
entry of the order.” Ohio Envtl. Council v. United States District Court, Southern District of
Ohio, Eastern Division, 565 F.2d 393, 396 (6th Cir. 1977).

Allegiance has failed to satisfy its burden. Asserting that a stay is necessary, Allegiance
only argues that “Canadian law and Premier’s Canadian litigation with Tricor will greatly
impact” the current case due to the overlap of the evidence and parties involved in both cases.
Without more, the Court does not find a “pressing need for delay” at this time. Therefore, the
Court DENIES Allegiance’s Motion to Stay the proceedings.

VI. CONCLUSION

The Court GRANTS in PART and DENIES in PART Allegiance’s Motion to Dismiss.
(ECF No. 10). The Court DISMISSES counts Three, Four, and Seven against Allegiance and
GRANTS Premier leave to file its Second Amended Complaint. The Court also DENIES
Allegiance’s Motion to Stay. The Court DIRECTS Premier to file its Second Amended

Complaint, which shall include only the trade secret misappropriation and copyright

infringement claims.
IT IS SO ORDERED.
[-2-2014 / —
DATE EDMUND‘A. SARGUS, JR.

CHIEF UNITED STATES DISTRICT JUDGE

14


Programs to be marketed at attractive pricing while ... accurately addressing costs and risks.”
See Pl.’s Amend. Compl. at 6. In its first count, Premier then maintains that, pursuant to a
confidential agreement, it shared with Tricor “business and technical information, including
without limitation its Rating Process.” Jd. at 19. Finally, Premier states that its “proprietary
and confidential information constitute trade secrets,” under the OUTSA. Id. at J 22.

The Court finds that Premier’s First Amended Complaint sufficiently pleads facts that
establish that its Rating Process is a trade secret. Premier adequately claims that the Rating
Process is a trade secret based on its use, development, secrecy, and security protections. The
Court notes, however, that the Rating Process is the only trade secret that Premier has
sufficiently pleaded in its First Amended Complaint, and so, Premier has failed to show that its
other “numerous proprietary systems and information” are also trade secrets.

In conclusion, the Court DENIES Allegiance’s Motion to Dismiss Premier’s trade
misappropriation claim.

B. Ohio Revised Code § 1333.67 Precludes Premier’s Tortious Interference Claim.

The OUTSA preempts “conflicting tort, restitutionary, and other laws of this state
providing civil remedies for misappropriation of a trade secret.” Ohio Rev. Code § 1333.67(A).
“Other civil remedies that are not based on misappropriation of a trade secret” are not preempted
by the OUTSA. Id. § 1333.67(B)(2).

The Sixth Circuit has explained that “[t]he test to determine whether a state law claim is
displaced by OUTSA is to determine whether the claims are no more than a restatement of the
same operative facts that formed the basis of the plaintiff's statutory claim for trade secret
misappropriation.” Stolle Machinery Co., LLC v. RAM Precision Industries, 605 Fed. Appx. 473,

485 (6th Cir. 2015) (quoting Thermodyn Corp. v. 3M Co., 593 F. Supp. 2d 972, 989 (N.D. Ohio


IV. LEAVE TO AMEND

Rule 15(a)(2) states that a leave to file an amended complaint should be freely allowed
“when justice so requires.” Most courts have interpreted this language to require allowing
amendments unless one of the following justifies denial: (a) undue delay; (b) bad faith or dilatory
motive by the moving party; (c) repeated failure to cure deficiencies by previous amendments;
(d) undue prejudice to the opposing party; or (e) futility. Foman v. Davis, 371 U.S. 178, 182
(1962). The Sixth Circuit has adopted this framework and explained that “a proposed
amendment is futile only if it could not withstand a Rule 12(b)(6) motion to dismiss.” Rose v.
Hartford Underwriters Ins. Co., 203 F.3d 417, 421 (6th Cir. 2000).

1. Trademark Infringement Claim

As discussed supra, the Court denied Allegiance’s Motion to Dismiss Premier’s
trademark infringement claim but limited the scope of that claim to the Rating Process. In its
Proposed Second Amended Complaint, Premier included allegations and information expanding
upon the trade secrets that Allegiance allegedly misappropriated. The Court must now determine
whether Premier may file its Proposed Second Amended Complaint as it relates to the scope of
the trade secret misappropriation claim.

In its Proposed Second Amended Complaint, Premier alleges that Allegiance
misappropriated four types of trade secrets—Reserves, Rates, Rating Process, and Rate Cards.
Ex. A at 46. Premier explains the source and development of the Reserves and Rates by
describing their components. For example, Premier states:

Premier assembled possession of information about the repairs that were made to

the vehicles of customers who bought service contracts in the United States.

Those customers submitted claims; repair bills were generated and covered claims

were paid. That paperwork contained raw, unprocessed data about thousands of
customers (the “Raw Data”). The Raw Data was never in the public domain.

10


same operative facts that formed its trade secret misappropriation claim. See Stolle Machinery
Co., 605 Fed. Appx. at 485 (6th Cir. 2015) (dismissing Plaintiff's tortious interference claim
because it was dependent on proof of the underlying act of misappropriation of trade secrets).

As a result, the OUTSA precludes Premier’s tortious interference claim. For that reason,
the Court GRANTS Allegiance’s Motion to Dismiss Premier’s tortious interference claim.

C. Premier Has Failed to Adequately Plead a Copyright Infringement Claim

Finally, Allegiance argues that Premier’s copyright infringement claim fails to state a
claim for three reasons. First, Allegiance contends that the Court must dismiss Premier’s
copyright infringement claim fails because the copyrighted forms are unoriginal. See Def.’s Mot.
to Dismiss at 13-16. Allegiance also argues that the Court must dismiss this claim since all the
allegedly infringing activity took place in Canada, and because the Copyright Act does not apply
to exclusively extraterritorial conduct. In response, Premier argues that its First Amended
Complaint properly alleges that Allegiance is an Ohio entity that used the forms in Canada, and
that Allegiance replicated Premier’s valid copyrights. Third, Allegiance argues that Premier
failed to satisfy the heightening pleading standard necessary for copyright infringement claims.
Premier contends that no such heightened standard applies.

To establish a claim of copyright infringement, a plaintiff must show: (1) ownership of a
valid copyright; and (2) that the defendant copied it. Kohus v. Mariol, 328 F.3d 848, 854 (6th
Cir. 2003). Here, the fact that Allegiance copied Premier’s copyrighted forms is not disputed.
“Not all ‘copying’ is actionable, however: it is a constitutional requirement that a plaintiff
bringing an infringement claim must prove ‘copying of constituent elements of the work that are
original.” Kohus, 328 F.3d at 853 (emphasis in original) (quoting Feist Publication, Inc. v.

Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991)). Premier has registered the forms with the


2008) (internal quotations omitted)). But “[w]here the state-law claim has a factual basis
independent from the facts establishing the OUTSA claim, the portion of the claim supported by
an independent factual basis survives preemption.” /d. (internal quotations omitted).

To recover on a claim of tortious interference with business relationships, a plaintiff must
show: (1) the existence of a business relationship; (2) the wrongdoer’s knowledge of the
relationship; (3) the wrongdoer’s intentional and material interference with the business
relationship; (4) lack of justification; and (5) damages. Stolle Machinery Co., LLC v. RAM
Precision Indus., 605 Fed. Appx. at 485.

Allegiance argues Premier’s tortious interference claim is based on the same set of
operative facts and states the same claim for relief as Premier’s trade secret claim, Allegiance
also asserts that Premier fails to allege any additional or novel facts to support the tortious
interference claim. In response, Premier contends its tortious interference claim is contained
only in paragraphs 49-55 of its First Amended Complaint. While accurate, paragraph 49
“incorporates the preceding allegations of [the] Complaint as if rewritten verbatim herein.” See
Pl.’s First Am. Compl. at 49. By incorporating the Complaint’s preceding paragraphs, Premier
effectively incorporated the factual allegations contained in all prior paragraphs, but most
importantly paragraphs 1 through 17.

Read as a whole, Premier’s tortious interference claim alleges that Allegiance persuaded
Tricor to breach the Agreement with the “objective of hijacking” Premier’s proprietary
information as a means to “step into Premier’s shoes and profit from the relationship Premier
cultivated over nearly two decades.” Id, at | 12. In other words, Premier claims that Allegiance
stole Premier’s trade secrets, and by doing so, interfered with Premier’s business relationship.

Therefore, the Court concludes that Premier’s tortious interference claim essentially restates the


Amended Complaint, which include the forms used by Premier and Allegiance, respectively. By
comparing the two forms, Allegiance does not offer proof of industry standard forms since
Allegiance cannot reasonably rely solely on its own form as the industry standard. Therefore, at
this stage, the Court concludes that Allegiance has failed to rebut the presumption that Premier’s
copyrighted forms are valid.

Although Premier has established the first element of its copyright claim, the Court must
still determine whether the Copyright Act’s scope covers the alleged infringing activity. On this
issue, both parties correctly explain the Copyright Act’s limited jurisdiction. That is, “if all the
copying or infringement occurred outside the United States, the Copyright Act would not apply.”
Liberty Toy Co. v. Fred Silber Co., 149 F.3d 1183, 1998 WL 385469, at *3 (6th Cir. 1998); see
Subafilms, Ltd. V. MGM-Pathe Communs. Co., 24 F.3d 1088 (9th Cir. 1994) (holding that
allegations within the U.S. for alleged activities entirely abroad cannot state a claim for copyright
infringement under the Copyright Act). Premier does not allege that Allegiance has engaged in
any directly infringing activity. Instead, Premier alleges the infringing activity took place in
Canada, and that Allegiance is headquartered in Ohio. Notably, Premier never claims that
Allegiance engaged in any infringing activity in the United States. Therefore, in its First
Amended Complaint, Premier failed to establish any nexus between the allegedly infringing
activity in Canada and the United States.!

For those reasons, the Court DISMISSES Premier’s copyright infringement claim. In its
Response to Allegiance’s Motion to Dismiss, Premier moved the Court for leave to amend, if the

Court preliminarily dismissed Premier’s claims. The Court now addresses that motion.

"In its Memorandum in Response, Allegiance states that “Defendants plausibly reproduced and prepared derivative
works at their Ohio offices...” Pl.’s Resp. at 12. Had Premier included this allegation in its Complaint, Premier
would have adequately plead a copyright infringement claim. But because Premier first mentioned this claim in its
Response to Allegiance’s Motion to Dismiss, the Court cannot consider the allegation as part of the pleadings.

9


UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
PREMIER DEALER SERVICES, INC.,
Plaintiff,
Case No. 2:18-cv-735

ve Chief Judge Edmund A. Sargus, Jr.
Magistrate Judge Chelsey M. Vascura

ALLEGIANCE ADMINISTRATORS,
LLC, et al.,

Defendants.
OPINION AND ORDER

This matter is before the Court for consideration of the Motion to Dismiss (ECF No. 10)
filed by Defendants Dimension Service Corporation and Allegiance Administrators, LLC
(collectively “Allegiance”), the Memorandum in Opposition and Motion for Leave to Amend
(ECF No, 16) filed by Plaintiff Premier Dealer Services, Inc. (“Premier”), Allegiance’s Reply
Brief (ECF No. 37), Premier’s Surreply (ECF No. 43), and Allegiance’s Response to Premier’s
Surreply and Motion to Stay. (ECF No. 44.) For the reasons set forth below, the Court
GRANTS in PART and DENIES in PART Ailegiance’s Motion to Dismiss, GRANTS
Premier’s Leave to Amend, and DENIES Allegiance’s Motion to Stay.

I. BACKGROUND

The facts relied upon in this decision were taken from the pleadings or documents that
are properly considered part of the pleadings. See Weiner v. Klais and Co., Inc., 108 F.3d 86, 89
(6th Cir. 1997) (documents are considered part of the pleadings if they are referenced in the
complaint and are central to the plaintiff's claim).

In its First Amended Complaint (ECF No. 3), Premier alleges eight counts: (1)

misappropriation of trade secrets, (2) copyright infringement, (3) conversion, (4) replevin, (5)


litigation, the Court understands that the materials facts have been hashed out over time. With
that in mind, the Court concludes that “justice so requires” Premier leave to amend its complaint.

Therefore, the Court GRANTS Premier’s Leave to Amend.

2. Tortious Interference Claim

The Court must determine whether the tortious interference claim in Premier’s Proposed
Second Amended Complaint is futile.

In its Proposed Second Amended Complaint, Premier largely repeats the same language
regarding the tortious interference that it did in its First Amended Complaint. For example,
Premier’s Proposed Second Amended Complaint again states that Allegiance persuaded Tricor to
breach its Agreement with Premier with the “objective of hijacking” Premier’s proprietary
information “to step into Premier’s shoes and profit from the relationship Premier cultivated over
nearly two decades.” P1.’s Proposed Second Amend. Compl. at 35. This repetition further
illustrates the congruity between Premier’s tortious interference and trade secret
misappropriation claims—which, as discussed supra, was the basis for the Court dismissing
Premier’s tortious interference claim.

Premier adds in its Proposed Second Amended Complaint that “Defendants improperly
and intentionally interfered with Premier’s business relationships by various means, including
inducing Tricor to breach the 12-month notice obligation in the 2014 Agreement.” Id. at q91.
The Court notes the conflict, however, between Premier’s allegation that Allegiance “induced
Tricor to breach the 12-month notice obligation” and Premier’s admission that Premier
ultimately terminated the 2014 Agreement with Tricor, thereby precluding any notice obligation

on Tricor. Id. at J 29.

12


Ex. A at §f] 4-5 of Pl.’s Surreply (ECF No. 43-1).

Premier then alleges that Allegiance misappropriated the “Rating Process,” about which
Premier writes:

In 2006, Premier undertook a major effort to analyze historical loss data for its

Vehicle Service Contracts in U.S, markets. Premier developed a methodology that

analyzed many years of repair costs experienced relative to a host of variables,

including without limitation make of vehicle, year of manufacture, odometer,

nature, scope and duration of any manufacturer’s warranty, the customer’s chosen

coverage level, and the customer’s chosen coverage duration (the “Rating

Process”).
id. at 6. Premier then claims that “[u]sing the Rating Process, Premier was able to make
reliable predictions about how much money needed to be set aside for future repairs in any of the
thousands of possible permutations of the variables (the “Reserves” or “Rates”). Id. at [ 7.
“Reserves,” Premier alleges, “are the proprietary component of the retail costs of a Service
Contract, i.e., the portion of the amount paid by the customer that is set aside to be used to pay
losses under the agreements.” Jd. at | 7. Premier explains that the “Rate Chart” is Premier’s “set
of Reserves ... for every possible permutation” which can be presented on “a paper rate card”
and which “was programmed in Premier’s system.” Id.2

Turning to whether the Court should grant Premier leave to amend, thereby expanding
the scope of its trade secret misappropriation claim, the Court notes the complex nature and
procedural posture of this case. At oral argument for Premier’s Motion for Preliminary
Injunction (which the Court later denied), the parties advanced sharply opposing positions. This

case deals with international companies competing for complex contracts, which involve

confidential algorithms and disputed terms. For that reason, and due to the nature of discovery in

? In its Proposed Second Amended Complaint, Premier states that “[t]his Rate Chart is the fruit of Premier’s labor,
its analysis, and shall be referred to collectively as ‘Premier’s Trade Secrets.” Ex. A at 7 of P1.’s Surreply. While
the Court appreciates the classification for ease of reference, at this time the Court refuses to determine whether the
information and analyses Premier references constitute trade secrets.

11


Copyright Office, which is an infringement suit prerequisite, see 17 U.S.C. § 411(a), and which
constitutes prima facie evidence of the copyright’s validity. See id. § 410(c); see also Lexmark
Intern., Inc. v. Static Control Components, Inc., 387 F.3d 522, 534 (6th Cir. 2004) (“The first
prong tests the originality and non-functionality of the work, ... both of which are presumptively
established by the copyright registration.”). Therefore, by attaching its copyright registration for
the forms, Premier shifted the burden to Allegiance to rebut the presumptive validity of
Premier’s copyright. Hi-Tech Video Prods., Inc. v. Capital Cities/ABC, Inc., 58 F.3d 1093, 1095
(6th Cir. 1995).

Allegiance argues that the copyrighted forms are unoriginal because they “are standard
through the industry, contain information that is almost identical to contracts used by other
companies throughout the industry, and lack the required originality.” Def.’s Resp. to Pl.’s Mot.
to Dismiss at 16. Additionally, Allegiance asserts that “[w]ithout specifically pleading what
Premier claims to be copyrighted, and what specific parts of the form Allegiance allegedly
copied without authorization, Premier cannot plead a copyright claim under the heightened
standard required by law.” Jd. The Court disagrees.

As a preliminary matter, there is no heightened pleading standard for copyright claims.
See Productivity-Quality Sys., Inc. v. CyberMetrics Corp., No. 3:17-CV-369, 2018 WL 2009673,
at *3—4 (S.D. Ohio Apr. 30, 2018) (“The reference in National Business [(which Allegiance
cites)] to ‘greater particularity in pleading’ merely describes the plausibility standards rather than
some higher pleading standard ....”). Further, whether Premier’s copyrighted forms are standard
through the industry is a factual claim, not resolvable on a 12(b)(6) motion. Instead, Allegiance
directs the Court to Exhibit 1 of its Memorandum in Opposition, which compares the forms used

by Allegiance and Premier section by section, and to Exhibits B and C of Premier’s First


(2) It is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.

Ohio Rev. Code § 1333.61(D). The Ohio Supreme Court has adopted the following six factors
for consideration in determining whether a plaintiff has shown the existence of a trade secret:

(1) The extent to which the information is known outside the business; (2) the

extent to which it is known to those inside the business, i.e., by the employees; (3)

the precautions taken by the holder of the trade secret to guard the secrecy of

information; (4) the savings effected and the value to the holder in having the

information as against competitors; (5) the amount of effort or money expended in
obtaining and developing the information; and (6) the amount of time and expense

it would take for others to acquires and duplicate the information.

State ex rel. The Plain Dealer v. Ohio Dept. of Ins., 687 N.E.2d 661, 672 (1997).

Determining “whether information constitutes a trade secret is a highly fact-specific
inquiry.” Wellington Res. Grp. LLC v. Beck Energy Corp., No. 2:12-cv-104, 2013 WL 5325911,
at *5 (S.D. Ohio Sept. 20, 2013). Still, “[c]onclusory statements as to trade secret factors
without supporting factual evidence are insufficient to meet the burden of establishing trade
secret status.” Murray Energy Holdings Co. v. Bloomberg, L.P., 2016 WL 3355456, at *7 (S.D.
Ohio June 17, 2016) (quoting Arnos v. MedCorp., Inc., 2010 WL 1730139, at *3 (Ohio Ct. App.
Apr. 30, 2010).

Allegiance maintains that Premier has failed to plead that the alleged trade secrets: (i)
derive economic value, (ii) are distinguishable from publicly available industry practices, (iii) are
reasonably protected from disclosure, and (iv) satisfy the test Ohio courts use to determine trade
secret status. See Def.’s Mot. to Dismiss at 9-11.

The alleged trade secret information, as identified by Premier in its First Amended

Complaint, includes: “numerous proprietary systems and information. One such system is ... a

confidential and proprietary rating process for Programs.... Premier’s rating process enabled


III. MOTION TO DISMISS

Allegiance offers three reasons the Court should dismiss Premier’s claims. First,
Allegiance contends that Premier’s Amended Complaint lacks the requisite factual support to
establish that Premier’s Rating Process is a trade secret. See Ohio Rev. Code § 1333.61. Second,
Allegiance argues Ohio’s Uniform Trade Secret Act (“OUTSA”) preempts Premier’s claims for
tortious interference. See Ohio Rev. Code § 1333.67. Premier refutes this, however, and argues
that section 1333.67 does not preempt the tortious interference claim since that claim is wholly
separate from its trade secrets claim. Jd. at 4. Third, Allegiance asserts that Premier’s copyright
infringement claims fail due to: (i) the absence of infringing activity in the United States; (ii)
Premier’s lack of any legal right to copyright protection for unoriginal boilerplate forms; and (iii)
Premier’s failure to satisfy the heightened pleading standard that applies to copyright
infringement claims.

A. Premier Has Sufficiently Established Its Trade Secret Misappropriation Claim
Regarding the Rating Process.

To prevail on an OUTSA claim, a plaintiff must show “by a preponderance of the
evidence: (1) the existence of a trade secret; (2) the acquisition of a trade secret as a result of a
confidential relationship; and (3) the unauthorized use of a trade secret.” Heartland Home Fin.,
Inc. v. Allied Home Mortgage Capital Corp., 258 Fed. Appx. 860, 861 (6th Cir. 2008). The
OUTSA defines “trade secret” as:

[I}nformation, including the whole or any portion or phase of any scientific or

technical information, design, process, procedure, formula, pattern, compilation,

program, device, method, technique, or improvement, or any business information

or plans, financial information, or listing of names, addresses, or telephone

numbers, that satisfies both of the following:

(1) It 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.


injunctive relief based on misappropriation of trade secrets, (6) injunctive relief based on
copyright infringement, (7) tortious interference with contract and business relations, and (8)
punitive damages. See Pl.’s First Amend. Compl. Counts four, five, six, and eight are remedies
and so the Court need not address them. Additionally, Premier concedes that its claims for
conversion and replevin are precluded by Ohio law, and so the Court dismisses those. See Pl.’s
Memo. in Opp. to Mot. to Dismiss at 3. Premier’s only remaining claims tipe for review are:
count one (misappropriation of trade secrets), count two (copyright infringement), and count
seven (tortious interference). For the reasons below, the Court DISMISSES Premier’s tortious
interference claim, and GRANTS Premier leave to amend its complaint as it relates to the trade

secret misappropriation and copyright infringement claims.

II. STANDARD OF REVIEW

In evaluating a complaint to determine whether it states a claim upon which relief can be
granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a court must construe it in
the light most favorable to the plaintiff and determine whether the factual allegations present any
plausible claim. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). See also Ashcroft v.
Iqbal, 556 U.S. 662 (2009) (clarifying the plausibility standard articulated in Twombly). “A
claim has facial plausibility when the plaintiff pleads 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. Although a plaintiff's complaint need not contain “detailed” factual allegations,
its “[f]actual allegations must be enough to raise a right to relief above the speculative level on
the assumption that all the allegations in the complaint are true.” Twombly, 550 U.S. at 555.
Plausibility requires showing more than the “sheer possibility of relief but less than a probab[le]

entitlement to relief.” Igbal, 556 U.S. at 678.


Without more, Premier’s tortious interference claim still arises out of the same operative
facts as its misappropriation of trade secrets claim. Therefore, the Court concludes that
Premier’s tortious interference claim in its Proposed Second Amended Complaint is futile.

3. Copyright Infringement Claim

The Court must determine whether the copyright infringement claim in Premier’s
Proposed Second Amended Complaint is futile.

In the preceding section, the Court concluded that Premier’s First Amended Complaint
did not adequately state a copyright infringement claim upon which relief could be granted
because Premier failed to plausibly allege any infringing activity in the United States. In its
Proposed Second Amended Complaint, however, Premier claims that “Allegiance has no
physical presence in Tricor’s market in Canada. All acts take by Allegiance were carried out by
its employees in and about Dublin, Ohio.” Pl.’s Surreply at ] 36. By adding those factual
allegations to its proposed pleadings, Premier adequately established a nexus between
Allegiance’s business activities in the United States and the alleged infringing activity in Canada.
As a result, Premier cured its previously insufficient copyright infringement claim with its
Proposed Second Amended Complaint. Therefore, the Court GRANTS Premier’s Motion for
Leave to Amend.

V. MOTION TO STAY

Allegiance moves to stay this case, pending the outcome of the Canadian litigation
between Premier and Tricor. Def.’s Resp. at 8-9 (ECF No. 44).

A district court’s discretion to stay proceedings is “incidental to the power inherent in
every court to control the disposition of the causes on its docket with economy of time and effort

for itself, for counsel and for litigants.” Landis v. North American Co., 299 U.S. 248, 254, 57S.

13