Source: http://mo.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20190325_0000604.EMO.htm/qx
Timestamp: 2020-04-08 22:57:49
Document Index: 438961182

Matched Legal Cases: ['§ 1836', '§ 417', '§ 1836', '§ 417', '§ 1836', '§ 1839', '§ 1839', '§ 417']

FindACase™ | Design Nine, Inc v. Arch Rail Group, LLC
Design Nine, Inc v. Arch Rail Group, LLC
DESIGN NINE, INC., Plaintiff,
ARCH RAIL GROUP, LLC, et al. Defendants.
Plaintiff, Design Nine, Inc., brings this action against its former employees, defendants John S. Ebersohl, James K. Kendall, and Edward D. Harster, and against Arch Rail Group, LLC, the company they formed to compete with Design Nine. Plaintiff alleges that the individual defendants formed their own company, Arch Rail, and began competing with Design Nine while still employed there. Design Nine alleges that, among other things, defendants misappropriated its trade secrets, including a propriety spreadsheet with formulas and a measuring device used to determine the dimensions for replacing railroad bridge ties. The complaint has fifteen counts - four for statutory violations of misappropriating trade secrets, one claim for violating the Missouri Computer Tampering Act, and ten counts raising various common law claims. Defendants seek to dismiss the case or in the alternative for more definite statement. They argue that the complaint fails to state a claim upon which relief can be granted and that the common law claims are preempted by the trade secret statute.
I will grant the motion in part and deny it in part. First, I conclude that Counts 1 through 4 of the complaint properly allege facts that, if proved, would constitute misappropriation of trade secrets under both the Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836(b)(1), and the Missouri Uniform Trade Secrets Act (MUTSA), Mo. Rev. Stat. § 417.455. Moreover, the complaint (with the exception of Count 6) complies with Rule 8(a), Fed. R. Civ. P., and provides more than adequate notice to defendants of what trade secrets they are alleged to have misappropriated and what conduct they are accused of that is alleged to be wrongful. To the extent that defendants argue that many of the other claims are preempted by MUTSA, that argument is premature. Although some of the other claims certainly may be precluded if plaintiff is able to prove its allegations about the trade secrets, that is not something that can be determined on a motion to dismiss. However, I agree with defendants that three of the counts - Count 6 (tortious interference with business expectancy), Count 12 (for prima facie tort) and Count 13 (for unfair head start) - fail to state claims on which relief may be granted, and those counts will be dismissed. I will otherwise deny the motion to dismiss.
Design Nine is an engineering firm that provides a variety of engineering services to railroads and industries served by railroads. In the mid-1990s, Design Nine created a specialized measuring device that is used to measure “existing bridge structures to determine edges of steel girders relative to the existing center line of track and used to dimension location of holes for hook bolts on new timber bridge ties.” [ECF 1 ¶ 12].[1] Design Nine uses this device “almost exclusively” with work for the Union Pacific Railroad Company (UPPR). Id. at ¶ 11. According to the complaint, the device accurately and efficiently assists with measurements that are used to produce the prefabrication of replacement railroad timbers and ties for UPPR related projects. Id. at ¶ 13-15.
Design Nine alleges that the bridge survey device is a trade secret. Id. at ¶ 30. According to the complaint, Design Nine limited access to the bridge survey device by only maintaining one device and by limiting the number of employees who could use the device. Further, Design Nine alleges it did not advertise, discuss, or disclose the device to outside individuals, except to UPPR personnel at work sites. Id. at ¶ 31 and ¶ 32. In addition to the bridge survey device, Design Nine further alleges a proprietary spreadsheet “with formulas” as a trade secret. Id. at ¶ 30. Design Nine used the spreadsheet to “calculate dimensions, quantities, and other data for new bridge timbers to be utilized to replace existing deteriorated timber tie decks.” Id. at ¶ 45. Design Nine alleges that the spreadsheet was not advertised, disclosed, or shown to outside individuals, except to “select UPPR bridge engineers in Omaha, Nebraska” who asked to view the spreadsheet. Id. at ¶ 34. Further, Design Nine alleges that the spreadsheet was password protected and access to the spreadsheet was limited “to those employees with a need to use” the spreadsheet. Id. at ¶ 33.
Defendants Ebersohl, Harster, and Kendall were employees of Design Nine until they resigned simultaneously in January 2018. Id. at ¶ 28. Ebersohl was an officer of the company with the title of Vice President and Corporate Secretary. Id. at ¶ 21. Kendall and Harster worked as project engineers under the supervision of Ebersohl. Id. at ¶ 24 and ¶ 27. According to the complaint, in October 2017, Ebersohl, Harster, and Kendall formed Arch Rail Group, LLC, while they were still employed by Design Nine. Id. at ¶ 40. Design Nine alleges that before forming Arch Rail, Ebersohl persuaded the corporate officers of Design Nine to build a second bridge survey device to allow additional survey work on UPRR structures. Id. at ¶ 35. Design Nine authorized a purchase request and entered into a contract with Designs for Tomorrow to build the second bridge survey device. Id. at ¶ 37 and ¶ 38. Design Nine alleges that defendants paid for the second device but then took it for their own use at Arch Rail, instead of delivering it to Design Nine. Id. at ¶ 44.
Plaintiff alleges that while defendants were still employed at Design Nine, they accessed and copied confidential information such as financial statements, customer and vendor contracts, invoices, hourly pay rates, personnel documents, payroll and tax information, client lists, internal training resources, company procedures, and other private Design Nine documents. Id. at ¶ 55. It alleges that Ebersohl deleted his Google Chrome browser history to hide his transfer of confidential information to Arch Rail. Id. at ¶ 57. Design Nine also alleges that after the defendants resigned from Design Nine, they used Design Nine's software license to access a vendor's software program to draft and design work for a customer. Id. at ¶ 58.
Design Nine alleges the defendants marketed to Design Nine's customers and met with UPPR to discuss business opportunities. Id. at ¶ 60-61. Further, Design Nine alleges that the defendants represented to UPPR that Design Nine could no longer work on UPPR's projects and UPPR should no longer contract with Design Nine to perform railroad services. Id. ¶ 62-63.
Defendants argue that the complaint is deficient under Rule 8(a), Fed. R. Civ. P., because of the collective grouping of defendants and because the general accusations do not give them fair notice of the allegations of each claim. They also move to dismiss all counts under Rule 12(b)(6), Fed. R. Civ. P., for failure to state claims upon which relief may be granted. Further, defendants argue that if the trade secret counts are properly pled (Counts 1-4), then MUTSA preempts all of the remaining Counts (5-15) because all counts share a common basis of fact.
Design Nine responds that the complaint satisfies the pleading requirements of Rules 8(a) and 12(b)(6) because it provides a sufficient factual basis to establish that each claim is plausible on its face and to inform the defendants of what they must defend against. Design Nine states that the complaint identifies each trade secret and the complaint gives fair notice to the defendants of the accusations against them. Further, Design Nine argues that it is entitled to allege claims in the alternative and that MUTSA does not preempt Counts 5 through 15.
Rule 8(a)(2), Fed. R. Civ. P., provides that a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” In Bell Atlantic Corp. v. Twombly, the Supreme Court clarified that Rule 8(a)(2) requires complaints to contain “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” 550 U.S. 544, 555 (2007); accord Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Specifically, to survive a motion to dismiss, a complaint must contain enough factual allegations, accepted as true, to state a claim for relief “that is plausible on its face.” Twombly, 550 U.S. at 570.
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint. When considering a 12(b)(6) motion, the court assumes the factual allegations of a complaint are true and construes them in favor of the plaintiff. Neitzke v. Williams, 490 U.S. 319, 326-27 (1989). I am not, however, required to accept the legal conclusions the plaintiffs draw from the facts alleged. Id. at 555; Retro Television Network, Inc. v. Luken Commc'ns, LLC, 696 F.3d 766, 768-69 (8th Cir. 2012). Drawing on my “judicial experience and common sense, ” I must consider the plausibility of each claim as a whole, not the plausibility of each individual allegation. Zoltek Corp. v. Structural Polymer Grp., 592 F.3d 893, 896 n. 4 (8th Cir. 2010).
Applying these standards, I conclude that Counts 1 through 4 sufficiently allege the misappropriation of trade secrets under both the both the DTSA and the MUTSA. Of the remaining counts, only Counts 6, 12 and 13 (tortious interference with business expectancy) fail to state claims upon which relief may be granted. While some (but not necessarily all) of the other counts may indeed be preempted if it is proven that the bridge survey device, spreadsheet, and other items are in fact trade secrets, I cannot make that determination at this stage of the case. If, on the other hand, the items are not proven to be trade secrets, then Design Nine may still have the opportunity to attempt to prove any common law claims that would otherwise be preempted by MUTSA.
Trade Secret Misappropriation Claims - Counts 1 - 4
In four separate counts, Design Nine alleges that the defendants misappropriated Design Nine's trade secrets with respect to the bridge survey device and the propriety spreadsheet in violation of the Defend Trade Secrets Act, (DTSA) 18 U.S.C. § 1836(b)(1), and the Missouri Uniform Trade Secrets Act (MUTSA), Mo. Rev. Stat. § 417.455.
To state a claim for misappropriation of a trade secret under the DTSA, a plaintiff must show that “the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1).
The DSTA defines a trade secret broadly as:
all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if - (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information[.]
18 U.S.C. § 1839(3). Under the DTSA, a misappropriation occurs when: (1) a person acquires the trade secret while knowing or having reason to know that he or she is doing so by improper means; (2) a person who has acquired or derived knowledge of the trade secret discloses it without the owner's consent; or (3) when a person who has acquired or derived knowledge of the trade secret uses it without the owner's consent. 18 U.S.C. § 1839 (5).
To state a claim under MUTSA, a plaintiff must demonstrate (1) the existence of protectable trade secrets, (2) misappropriation of those trade secrets by the defendant, and (3) damages. Mo. Rev. Stat. § 417.453(2). MUTSA defines a “trade secret” as:
information, including but not limited to, technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, or process, that: (a) 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; and (b) Is ...