Opinion ID: 222717
Heading Depth: 2
Heading Rank: 1

Heading: Denial of Biamp's motion to dismiss

Text: In its first issue on appeal, Biamp contends the district court erred in denying its motion to dismiss ClearOne's misappropriation of trade secrets claim. Generally speaking, we review de novo a district court's ruling on a motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Gee v. Pacheco, 627 F.3d 1178, 1183 (10th Cir.2010). We have not previously addressed whether a defendant may appeal the denial of a motion to dismiss for failure to state a claim after the plaintiff has successfully prevailed at trial on the claim at issue. We have, however, addressed a similar question in the context of the denial of a motion for summary judgment. In Whalen v. Unit Rig, Inc., we held that summary judgment was not intended to be a bomb planted within the litigation at its early stages and exploded on appeal. 974 F.2d 1248, 1251 (10th Cir.1992) (citation omitted). Thus, we held, even if summary judgment [is] erroneously denied, the proper redress [following trial] would not be through appeal of that denial but through subsequent motions for judgment as a matter of law ... and appellate review of those motions if they were denied. Id. We note that the Fifth Circuit has addressed the precise issue we now face and has held that a defendant may not, after the plaintiff has prevailed at trial on a particular claim, appeal the pretrial denial of a Rule 12(b)(6) motion to dismiss that claim. In Bennett v. Pippin, the Fifth Circuit concluded that [w]hen a plaintiff has prevailed after a full trial on the merits, a district court's denial of a [motion to dismiss] becomes moot. 74 F.3d 578, 585 (5th Cir.1996). This is because, the court explained, [a]fter a trial on the merits, the sufficiency of the allegations in the complaint is irrelevant: the plaintiff has proved, not merely alleged, facts sufficient to support relief. Id. The Fifth Circuit further held that [t]he arguments for not considering an appeal from a denial of a Rule 12(b)(6) dismissal after a trial on the merits are stronger than those for not considering a refusal to dismiss under [Federal Rule of Civil Procedure] 56, given the ease with which a plaintiff may amend a complaint after judgment in order to conform to the evidence. Id. (citing Fed. R.Civ.P. 15(b)). We are persuaded by the Fifth Circuit's reasoning and hold that, as a general rule, a defendant may not, after a plaintiff has prevailed at trial, appeal from the pretrial denial of a Rule 12(b)(6) motion to dismiss, but must instead challenge the legal sufficiency of the plaintiff's claim through a motion for judgment as a matter of law. Although in this case Biamp did file a motion for judgment as a matter of law, it did not reassert in that motion the arguments it made in its Rule 12(b)(6) motion  nor does Biamp appeal the district court's denial of its motion for judgment as a matter of law. Consequently, Biamp's appeal of the district court's denial of its motion to dismiss is not properly before us. At oral argument, Biamp asserted that the Fifth Circuit's decision in Bennett was inconsistent with the law in this circuit. In making its argument, Biamp correctly noted that we have created an exception to our holding in Whalen. We have held that while a party may not appeal the denial of a summary judgment motion based on factual disputes ..., when the material facts are not in dispute and the denial of summary judgment is based on the interpretation of a purely legal question, such a decision is appealable after final judgment. Haberman v. Hartford Ins. Grp., 443 F.3d 1257, 1264 (10th Cir.2006). Applying this exception, we have adjudicated post-trial appeals from denials of summary judgment motions in cases where the district court has determined liability under an insurance policy, id., defined the scope of federal safety statutes, Wilson v. Union Pac. R.R. Co., 56 F.3d 1226, 1229 (10th Cir.1995), and decided whether collateral estoppel precludes a plaintiff from filing a breach of contract claim in federal court, Ruyle v. Cont'l Oil Co., 44 F.3d 837, 841-42 (10th Cir.1994). Biamp argues that our rulings in these cases mandate the recognition of a similar exception for post-trial appeals from the denial of Rule 12(b)(6) motions to dismiss. More specifically, Biamp contends that a defendant should be allowed, post-trial, to appeal the pretrial denial of a Rule 12(b)(6) motion if the denial was based on the resolution of a purely legal question. We find it unnecessary to decide whether to recognize such an exception here because, as we will explain, the district court's denial of Biamp's motion to dismiss was based largely on its conclusion that additional factual development was necessary, and Biamp does not seek in this appeal to challenge the sole legal conclusion reached by the district court in denying the motion to dismiss. In its motion to dismiss, Biamp alleged that it possessed only unreadable object code provided to it by WideBand, [3] and that it in turn freely distributed that object code to its own customers. Based upon these allegations, Biamp asserted two distinct arguments in support of its motion to dismiss. First, Biamp argued that it could not have obtained knowledge of ClearOne's trade secrets merely by possessing the [object code] unless ClearOne c[ould] allege facts showing that Biamp could read the [object code].... JA at D810. In other words, Biamp argued that it lacked knowledge of the alleged trade secret because it could not read the object code provided to it by WideBand. Second, Biamp argued that, because of its own public distribution of the object code, the object code could not, as a matter of law, qualify as a trade secret under the UUTSA. In denying Biamp's motion to dismiss, the district court briefly addressed both of Biamp's arguments. With respect to Biamp's argument that it could not read the object code, the district court concluded as a matter of law that Biamp's understanding of the underlying [object] code and algorithm [wa]s unnecessary for misappropriation because [t]here [wa]s no requirement of comprehension of the trade secret to state a claim for misappropriation under the [UUTSA]. Id. at D5657-58. The district court also determined that, because ClearOne's third amended complaint alleged that Biamp knew that WideBand derived the WideBand Code through improper means, it need not consider whether Biamp actually understood the object code. Id. at D5659. Lastly, the district court emphasized that additional factual development was necessary, noting that it was not appropriate for [it] to rule at this early stage that ClearOne ha[d] no viable claim for trade secret misappropriation against Biamp. Id. at D5659-60. As for Biamp's argument that the object code was not entitled to trade secret protection because it had been publicly distributed, the district court again emphasized the necessity of additional factual development, stating simply: At this early phase of litigation, the court will not rule that Biamp's public distribution of the WideBand Code  in object code format  destroys the trade secret protections of the underlying source code. Id. at D5660. On appeal, Biamp now argues that [t]he district court erred when, in denying [the] motion to dismiss, it held that Biamp could be liable for misappropriation of ClearOne's alleged trade secret information (the algorithms in the source code) when it never acquired or possessed knowledge of this information. [4] Aplt. Br. at 20 (internal citation omitted). The problem, however, is that the district court never issued such a holding. Instead, as we have already described, the district court held only that a defendant's comprehension of the trade secret at issue is not a necessary element of a misappropriation claim under the UUTSA. [5] Otherwise, the district court concluded, after reviewing the broad allegations in ClearOne's third amended complaint, that additional factual development was necessary before ClearOne's misappropriation claim against Biamp could be definitively resolved. In other words, unlike the cases cited by Biamp, the district court's denial of Biamp's motion to dismiss was premised largely upon the district court's conclusion that additional factual development was necessary before it could definitively resolve ClearOne's misappropriation claim against Biamp.