Cornucopia Products LLC v. Bed Bath & Beyond Incorporated

Filing 21

ORDER AND OPINION: The motion at docket 10 is GRANTED, and the motion at docket 14 is DENIED. The case is dismissed with prejudice. The Clerk will please close the file. Signed by Judge John W Sedwick on 9/24/2014. (See Order for details)(ALS)

Download PDF
1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF ARIZONA 8 9 Cornucopia Products, LLC, 10 Plaintiff, 11 12 13 14 15 vs. Bed, Bath & Beyond, Inc., Defendant. ) ) ) ) ) ) ) ) ) ) 2:14-cv-1156 JWS ORDER AND OPINION [Re: Motions at dockets 10 and 14] 16 17 18 I. MOTIONS PRESENTED At docket 10 defendant Bed, Bath & Beyond, Inc. (“BBB”) moves to dismiss the 19 original complaint filed by plaintiff Cornucopia Products, LLC (“CP”). CP responds at 20 docket 15, and BBB replies at docket 18. CP m oves at docket 14 to amend the original 21 complaint. BBB’s response is included in its memo at docket 18. CP replies at 22 docket 19. Oral argument was heard on September 24, 2014. 23 24 25 II. BACKGROUND CP alleges that it invents and manufactures various items, including heated 26 towel warming devices for distribution in retail stores. One of its towel warming device 27 customers from time-to-time has been BBB. CP has some items manufactured abroad 28 1 2 3 in China. CP alleges that its trade secrets are incorporated into towel warming devices. CP’s proposed First Amended Complaint (“FAC”) sets out three claims. In Count One, CP alleges that BBB misappropriated its towel warming trade secrets. Count Two 4 5 alleges that BBB tortiously interfered in CP’s business expectancy with a Chinese 6 manufacturer. Count Three alleges that BBB breached a contract to purchase towel 7 warming devices from CP. 8 9 III. STANDARD OF REVIEW Rule 12(b)(6) tests the legal sufficiency of a plaintiff’s claims. In reviewing such 10 a motion, “[a]ll allegations of material fact in the complaint are taken as true and 11 12 construed in the light most favorable to the nonmoving party.”1 To be assumed true, 13 the allegations, “may not simply recite the elements of a cause of action, but must 14 contain sufficient allegations of underlying facts to give fair notice and to enable the 15 opposing party to defend itself effectively.”2 Dismissal for failure to state a claim can be 16 based on either “the lack of a cognizable legal theory or the absence of sufficient facts 17 18 19 20 21 alleged under a cognizable legal theory.”3 “Conclusory allegations of law . . . are insufficient to defeat a motion to dismiss.”4 To avoid dismissal, a plaintiff must plead facts sufficient to “state a claim to relief that is plausible on its face.”5 “A claim has facial plausibility when the plaintiff pleads 22 23 24 25 1 Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997). 2 Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). 3 Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). 26 4 27 5 28 Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001). Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 -2- 1 factual content that allows the court to draw the reasonable inference that the 2 defendant is liable for the misconduct alleged.”6 “In sum, for a complaint to survive a 3 motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from 4 5 that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”7 IV. DISCUSSION 6 7 8 9 A. Motion at Docket 10 BBB’s motion at docket 10 asks the court to dismiss the original complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim. CP’s response 10 11 12 concedes there are shortcomings in the original complaint, but contends that the defects in the original complaint are cured in the FAC. While CP’s response also 13 advances some substantive arguments, in addition to contending that the FAC cures 14 the problems, resolution of the motion to amend at docket 14 will necessarily address 15 them. For these reasons, the motion at docket 10 will be granted. The original 16 complaint will be dismissed, but without prejudice to the motion to amend at docket 14. 17 18 19 B. Motion at Docket 14 The FAC appears at docket 14-1 as an attachm ent to CP’s motion to amend. 20 BBB argues that the proposed amendment is futile because the FAC still does not state 21 a claim upon which relief may be granted. 22 23 24 25 26 27 28 U.S. 544, 570 (2007)). 6 Id. 7 Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009); see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). -3- 1 2 1. Count One of the FAC With respect to Count One alleging misappropriation of trade secrets, BBB 3 argues that “most importantly, there is still no allegation that [BBB] misappropriated the 4 5 information.”8 The Supreme Court has held that it requires “more than labels and 6 conclusions” for a complaint to satisfy Rule 8(a)(2); the “[f]actual allegations must be 7 enough to raise a right to relief above a speculative level.”9 The complaint “must 8 include sufficient ‘factual enhancement’ to cross ‘the line between possibility and 9 plausibility.’”10 “Establishing the plausibility of a complaint’s allegations is a two-step 10 process that is ‘context-specific’ and ‘requires the reviewing court to draw on its judicial 11 12 experience and common sense.’”11 Under step one, courts identify pleadings that 13 “because they are no more than conclusions, are not entitled to the assum ption of 14 truth.”12 Then, under step two, courts assume the veracity of “well pleaded factual 15 allegations” and “determine whether they plausibly give rise to an entitlement to relief.”13 16 “When considering plausibility, courts must also consider an ‘obvious alternative 17 18 explanation’ for defendant’s behavior.”14 “Where a complaint pleads facts that are 19 20 8 21 9 22 10 23 24 25 Doc. 18 at 5. Twombly, 550 U.S. at 555. Eclectic Properties E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 995 (9th Cir. 2014) (quoting Twombly, 550 U.S. at 557)). 11 Id. (quoting Iqbal, 556 U.S. at 679). 12 Iqbal, 556 U.S. at 679. 26 13 27 14 28 Id. Eclectic Properties, 751 F.3d at 996 (quoting Iqbal, 556 U.S. at 682). -4- 1 ‘merely consistent’ with a defendant’s liability, it ‘stops short of the line between 2 possibility and plausibility of entitlement to relief.’”15 3 Turning to the Count One of the FAC, CP has not made the kind of factual 4 5 allegations that nudge its “claims across the line from conceivable to plausible.” 16 6 The Arizona Uniform Trade Secrets Act (“AUTSA”) defines “misappropriation” as either 7 “[a]cquisition of a trade secret of another by a person who knows or has reason to know 8 that the trade secret was acquired by improper means” or “[d]isclosure or use of a trade 9 secret of another without express or implied consent by a person who either:” 10 16 (I) Used improper means to acquire knowledge of the trade secret[;] (ii) At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was derived from or through a person who had utilized improper means to acquire it, was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use or was derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use[; or] (iii) Before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.17 17 Paragraph 39 of the FAC alleges misappropriation by BBB as follows: 11 12 13 14 15 18 “Defendant acquired the designs . . . by strong-arming Plaintiff into selling the design to 19 another company . . . .”18 Although the first clause of this sentence asserts that BBB 20 acquired CP’s designs, the second clause of the sentence contradicts this assertion. 21 22 Coercing CP to reveal its trade secrets to a third party is not the same thing as 23 24 25 15 Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). 16 Twombly, 550 U.S. at 570. 26 17 27 18 28 A.R.S. § 44-401(2). Doc. 14-1 at ¶ 39. -5- 1 2 3 acquiring, disclosing or using CP’s trade secrets. This is confirmed in paragraph 40 of the FAC, where CP alleges that BBB knew that its actions merely facilitated that other company’s acquisition of CP’s trade secrets and that BBB profited thereby. Count One 4 5 6 of the FAC fails to state a plausible claim, and therefore CP’s motion for leave to amend Count One is denied. 7 2. Count Two of the FAC 8 To establish liability for the tort of intentional interference with a business 9 expectancy, a plaintiff must prove: (1) the existence of a business expectancy; (2) the 10 interferer’s knowledge of the expectancy; (3) “intentional interference inducing or 11 12 causing a . . . termination of the . . . expectancy;” (4) resultant damages; and (5) that 13 the interference was “improper as to motive or means.”19 BBB argues that granting CP 14 leave to amend Count Two, which alleges that BBB intentionally interfered with its 15 business expectancy with an unspecified Chinese manufacturer, would be futile 16 because that claim is preempted by the AUTSA. The AUTSA explicitly states that it 17 18 19 “displaces conflicting tort, restitutionary and other laws of this state providing civil remedies for misappropriation of a trade secret.”20 Decisions in this district have 20 explained that the AUTSA does preempt any tort claim based on the alleged 21 misappropriation of trade secret or any other confidential information.21 Preemption 22 19 23 Wallace v. Casa Grande Union High Sch. Dist. No. 82 Bd. of Governors, 909 P.2d 486, 494 (Ariz. Ct. App. 1995) (citations omitted). 24 20 25 21 26 27 28 A.R.S. § 44-407(A). See Universal Engraving, Inc. v. Metal Magic, Inc., No. CV–08–1944–PHX–GMS, 2012 WL 4358942, at *2 (D. Ariz. Sept. 21, 2012); Firetrace USA, LLC v. Jesclard, 800 F. Supp. 2d 1042, 1048 (D. Ariz. July 30, 2010) (Arizona Supreme Court would construe trade secret statute to preempt “all common law claims based on the misappropriation of secret -6- 1 2 3 does not apply here, however, because CP has not alleged a valid claim that BBB misappropriated any of its trade secrets for the reasons discussed above. BBB also argues that granting leave would be futile because Count Two fails to 4 5 allege facts to support the third, fourth, and fifth elements of the tort—namely, that 6 BBB’s interference was intentional, improper, and caused CP’s damages. BBB is 7 wrong as to causation, 22 but right as to intent and impropriety. The “intentional” element 8 of the tort “focuses on the mental state of the actor,” whereas the “improper” element 9 10 “generally is determined by weighing the social importance of the interest the defendant seeks to advance against the interest invaded.”23 The FAC fails to allege that BBB 11 12 subjectively intended to interfere with CP’s business relations; it merely alleges that 13 BBB “knew about” its relationship with the Chinese manufacturer. This is insufficient to 14 state a claim. Further, the FAC alleges that BBB’s actions were improper because the 15 “delays and confusion” caused by BBB “frustrated relations between the factory and 16 [CP].”24 This statement neither asserts, nor plausibly implies, that BBB caused the 17 18 19 20 delays and confusion for some improper purpose or through improper means. The mere fact that delays and confusion resulted from BBB’s actions is not enough to state a claim. CP’s motion for leave to amend Count Two is denied. 21 22 23 24 25 26 27 28 information.”). 22 Doc. 14-1 at 7 ¶ 52 (“But for the problems that resulted from Defendant’s conduct the factory would still do business with plaintiff.”). 23 Neonatology Associates, Ltd. v. Phoenix Perinatal Associates Inc., 164 P.3d 691, 694 (Ariz. Ct. App. 2007). 24 Doc. 14-1 at 7 ¶ 53. -7- 1 2 3. Count Three of the FAC BBB advances three arguments why CP’s third claim should be dismissed. The 3 court need address only one, for it correctly establishes that the breach-of-contract 4 5 claim fails. The alleged contract between CP and BBB is based on a telephone 6 conversation with a representative of BBB. There is no written contract. In Arizona, as 7 in most states, a contract for the sale of goods worth more than a minimal amount 8 ($500 in Arizona) is unenforceable unless it is in writing and signed by the party against 9 whom it is to be enforced.25 CP does not even address this Statue of Frauds argument 10 in its reply. CP’s motion for leave to add Count Three is denied. 11 V. CONCLUSION 12 13 For the reasons above, the motion at docket 10 is GRANTED, and the motion at 14 docket 14 is DENIED. The case is dismissed with prejudice. The Clerk will please 15 close the file. 16 DATED this 24th day of September 2014. 17 18 /s/ JOHN W. SEDWICK SENIOR UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28 25 A.R.S. § 44-101. -8-

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?