Opinion ID: 77150
Heading Depth: 2
Heading Rank: 3

Heading: Convergys's Trade Secrets Counterclaim

Text: 21 On a motion to dismiss, the standard of review is the same for the appellate court as it was for the trial court. Spain v. Brown & Williamson Tobacco Corp., 363 F.3d 1183, 1187 (11th Cir.2004) (internal quotations omitted). Thus, [w]e review de novo the district court's grant of a motion to dismiss under [Rule] 12(b)(6) for failure to state a claim, accepting the allegations in the complaint as true and construing them in the light most favorable to the [nonmoving party]. Hill v. White, 321 F.3d 1334, 1335 (11th Cir.2003). 22 Convergys pleaded its one-count trade secrets counterclaim under both Georgia and Ohio law. The claim alleges that Convergys entrusted Manuel with the following kinds of trade secret and confidential business information: (1) pricing; (2) price lists; (3) programs and processes sold, licensed, or developed by Convergys; (4) technical data, plans, and specifications relating to present and future development projects; (5) financial and marketing data; (6) computer programs, systems, and software; (7) processes; (8) improvements; (9) designs; and (10) redesigns. Convergys further alleges that Manuel will inevitably use this confidential information during his employment with Mellon. Under the liberal pleading standards of Federal Rule of Civil Procedure 8(a), Convergys contends that it satisfied the requirement for a short and plain statement of the claim showing that the pleader is entitled to relief and it argues that the district court therefore erred in dismissing its counterclaim for failure to state a claim. 23 Convergys raises three issues regarding the trial court's dismissal of its counterclaim. First, it argues that district court erred in applying only Georgia law to its counterclaim because Manuel's misappropriation may occur outside of Georgia. Second, it argues that the district court misapplied the Georgia law on misappropriation of trade secrets. Third, it argues that the district court improperly resolved questions of fact regarding whether Manuel retained only personal knowledge of information that Convergys regards as protected. We address each of these issues in turn. 24 As to the first issue, a federal court sitting in diversity will apply the choice of law rules for the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Under Georgia conflicts of law rules, the choice of law provision in the contract will not apply to the tort claim of misappropriation of trade secrets. Rayle Tech, Inc. v. DEKALB Swine Breeders, Inc., 133 F.3d 1405, 1409 (11th Cir.1998). For the trade secrets claim, the traditional Georgia rule of lex loci delicti will apply, which provides that tort cases are governed by the substantive law of the state where the tort was committed. Lloyd v. Prudential Sec., Inc., 211 Ga.App. 247, 438 S.E.2d 703, 704 (1993); see also Salsbury Labs., Inc. v. Merieux Labs., Inc., 735 F.Supp. 1555, 1568 (M.D.Ga.1989) (In a trade secret misappropriation case, the lex loci delicti is not the place where the information was learned, but where the tortious act of misappropriation and use of the trade secret occurred.). We agree that the district court did not need to address Convergys's claim that other states' laws might apply because misappropriations may also occur there. The counterclaim is asserted under only Georgia and Ohio law, and Convergys offers no basis for the application of Ohio law. Thus, Georgia law governs Convergys's counterclaim. 25 As to the second issue, the district court, applying Avnet, Inc. v. Wyle Laboratories, Inc., 263 Ga. 615, 437 S.E.2d 302, 303, 305 (1993), concluded that a list of general customer and business information, which was not protected as trade secret information under Georgia law, was virtually identical to the list of information in this case. In so doing, the district court held that Convergys failed to state a claim on which relief can be granted because an employee's knowledge, training, and experience gained during employment do not constitute trade secrets as a matter of law. 26 In Avnet, the Georgia Supreme Court affirmed a trial court's application of the Georgia Trade Secrets Act, O.C.G.A. § 10-1-760 et seq. Id. The trial court in that case determined that so long as the following customer and other business information was merely within the former employees' minds it did not constitute a protectable trade secret: the identity of . . . suppliers, customers' identities, customer needs, business practices and patterns which include the type products clients purchase, the products sold but not delivered, specific client relations problems, client preferences, cost pricing, sales volume information, the amount clients are willing to pay, cost profit and price computation information as well as employee compensation capabilities and performances. Id. at 303. The plaintiffs appealed the portion of the trial court's order that allowed the former employees to use information in their minds that was gained through their former employment. Id. at 303, 304. In upholding the trial court's determination, the Georgia Supreme Court concluded that the holding in Taylor Freezer Sales Co. v. Sweden Freezer E. Corp., 224 Ga. 160, 160 S.E.2d 356 (1968), [has] not been obviated by the Trade Secrets Act. Avnet, 437 S.E.2d at 305. The allegations in Taylor Freezer Sales Co. encompassed practically every phase of the plaintiff's business, i.e., customers, equipment, prices, price quotations, new machines, method of doing business, and procedures. 160 S.E.2d at 360. Nevertheless, the court in that case found that in none of these does there appear to be any element of secrecy or confidential information that is peculiar to the plaintiff's business and known only to it and its employees. Id. 27 Several recent Georgia cases have applied the same rule. See, e.g., DeGiorgio v. Megabyte Int'l, Inc., 266 Ga. 539, 468 S.E.2d 367, 369 (1996) (citing Avnet and stating that utilization of personal knowledge [of customer and vendor information] may be forbidden through the use of restrictive covenants, but not under the Trade Secrets Act (emphasis added)); Stone v. Williams Gen. Corp., 266 Ga.App. 608, 597 S.E.2d 456, 459 (2004) (citing Avnet and stating that an individual is free to use any information he can remember from his former employment, including trade secrets, in the absence of a valid and enforceable covenant), rev'd on other grounds, 279 Ga. 428, 614 S.E.2d 758 (2005). 28 The Northern District of Georgia case of Servicetrends, Inc. v. Siemens Medical Systems, 870 F.Supp. 1042 (N.D.Ga.1994), is also instructive in this regard. In Servicetrends a company alleged that its former employee misappropriated trade secrets in the form of technical data. Id. at 1074. The evidence showed that the employee allegedly disclosed only the technical information residing in his mind. Id. In finding that the former employee did not misappropriate trade secrets, the court held that the law does not prohibit the exploitation of an employee's accumulated knowledge gained during his employment. Id. 29 Under Avnet, parties may contract above and beyond the protections of Georgia law with a valid nondisclosure agreement. See Avnet, 437 S.E.2d at 305. However, when that agreement, as here, has been found invalid, the base standards of Avnet apply, not the heightened standards of the invalidated agreement. See id. Therefore, we find no error in the district court's interpretation of applicable Georgia law. 30 As to the third issue, Convergys claims that the district court improperly accepted Manuel's representation that he retained only personal knowledge of Convergys's trade secrets. Yet, even under the liberal pleading standards of Rule 8(a), Convergys's counterclaim has failed to state a claim upon which relief can be granted. Convergys only alleges general customer and business information that Avnet held cannot be a trade secret if it is only personal knowledge. The counterclaim refers generally to Manuel's training and experience and does not contain any statement alleging that Manuel physically took protected documents or other tangible, proprietary information when he left his employment with Convergys. 4 As such, we conclude that the district court properly dismissed Convergys's counterclaim under Georgia law.