Eastman Chemical Company v. AlphaPet Inc. et al

Filing 75

REPORT AND RECOMMENDATIONS regarding D.I. 19 MOTION to Dismiss Based upon for failure to state a claim upon which relief can be granted and for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2) filed by AlphaPet Inc., Indorama Poly mers PCL, Indorama Polymers Workington Ltd., Indorama Polymers Rotterdam BV, Indorama Holdings Rotterdam BV. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 11/21/2011. Signed by Judge Christopher J. Burke on 11/4/2011. (dlk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
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EASTMAN CHEMICAL COMPANY,
Plaintiff,
v.

ALPHAPET INC., INDORAMA HOLDINGS
ROTTERDAM B.V., INDORAMA
POLYMERS ROTTERDAM B.V.,
INDORAMA POLYMERS WORKINGTON
LTD., and INDORAMA POLYMERS PCL,
Defendants.

Civ. Action No. 09-971-LPS-CJB

REPORT AND RECOMMENDATION REGARDING DEFENDANTS' MOTION TO
DISMISS THE AMENDED COMPLAINT PURSUANT TO FED. R. CIV. P. 12(B)(6) 1
In this action, Plaintiff Eastman Chemical Company ("Eastman" or "Plaintiff') has filed
an Amended Complaint alleging patent infringement (Count One) against Defendants AlphaPet,
Inc. ("AlphaPet") and Indorama Polymers PCL ("IRP"). (D.I. 15) The Amended Complaint also
alleges breach of contract (Count Two) against IRP, as well as Defendants Indorama Holdings
Rotterdam B.V. ("IHR"), Indorama Polymers Rotterdam B.V. ("IPR") and Indorama Polymers
W orkington Ltd. ("IPW"), and alleges trade secret misappropriation against all Defendants
(Count Three). Before the Court is Defendants' motion to dismiss the breach of contract and
trade secret misappropriation claims pursuant to Fed. R. Civ. P. 12(b)(6) (D.I. 19).2

With regard to a motion to dismiss filed pursuant to Rule 12(b)(6), absent
unanimous consent of the parties to the jurisdiction of a United States Magistrate Judge, a
Magistrate Judge's authority as to the resolution of the motion is limited to making a Report and
Recommendation to the District Court. 28 U.S.C. § 636(b)(1)(B); D. Del. LR 72.1(a)(3).
2

Defendant IRP has separately moved to dismiss all claims against it for lack of
personal jurisdiction, pursuant to Fed. R. Civ. P. 12(b)(2). That motion is pending, but briefing
1

For the reasons that follow, I recommend that the Court GRANT-IN-PART Defendants'
motion by dismissing without prejudice the breach of contract claim asserted against IRP and the
claim for breach of implied contractual provisions made against all Defendants, but otherwise I
recommend that the Court DENY the motion.

I.

BACKGROUND
Plaintiff is a Delaware corporation engaged principally in the manufacture and

development of chemicals, fibers, and plastics, including polyethylene terephthalate ("PET").
(D.I. 15

at~

2; D.l. 28 at 1) Defendants are all directly or indirectly related corporations whose

business includes, inter alia, the manufacture and development of PET products. (D.I. 15

at~

6;

D.I. 20 at 1-2) In March 2008, Eastman entered into a Master Business Sale Agreement
("MBSA") with certain ofDefendants,3 and into a Technology License Agreement ("TLA") with
Defendants IHR, IPR, and IPW. (D.I. 15

at~

13) Under the TLA, these three Defendants

received a nonexclusive license to certain Eastman trade secrets, which would assist them in
making certain PET polymers and compositions in Europe. (Id. at ~~ 16-18) The TLA is
governed by Delaware law. (Id. at ~ 25)
Pursuant to the TLA and MBSA, Eastman transferred certain of its employees to IHR,
IPR, and IPW. (D.I. 15

at~

15) The TLA prohibits IHR, IPR, and IPW from using, transferring,

making any product with, or using or modifying any process with Eastman non-licensed trade

has been stayed pending resolution of Plaintiffs motion for jurisdictional discovery. (D.I. 27)
The Court addresses Plaintiffs motion for jurisdictional discovery in a separate Memorandum
Opinion and Order, which contain additional background about this case not discussed herein.
3

Neither party has submitted a copy of the MBSA, and it is unclear from the record
who the parties to the MBSA are.
2

secrets, or soliciting such information from the transferred employees. (Id.

at~~

19-24) Some of

those non-licensed trade secrets relate to the manufacture and formulation of PET products using
Eastman's melt-to-resin IntegRexTM technology. (!d. at~ 38) During 2009, Defendant AlphaPet
completed a melt-to-resin manufacturing plant in Decatur, Alabama. Plaintiff alleges that
"former Eastman employees working for one or more [of IHR, IPR, and IPW], at the direction of
one or more of the Defendants, traveled from Europe to Alabama in mid-2009 to assist in starting
up production at the AlphaPet facility." (Id. at ,-r 3 7) These same transferred employees had also
"assisted during the mid-2006 to early-2007 start-up of Eastman's advanced polyester melt phase
processes at its IntegRexTM PET manufacturing plant in Gaston, South Carolina." (Id.)
Plaintiff alleges that "these former Eastman employees or other former Eastman
employees, at the direction of one or more of the Defendants, improperly disclosed Eastman's
confidential, proprietary, and trade secret information relating to the manufacture of PET,
including information related to Eastman's IntegRexTM PET technology, to Defendants AlphaPet
and IRP during the design, start-up or operation of AlphaPet's melt-to-resin PET manufacturing
process, in contravention of the TLA." (!d. at ,-r 39) Plaintiff alleges that these transferred
employees therefore misappropriated non-licensed trade secrets by disclosing them in breach of
the TLA, and alleges that these non-licensed trade secrets, having been obtained by certain
Defendants, were then used to create and/or operate the Decatur facility. (Id.

at~~

39-41) This

misappropriation allegedly injured Eastman "due to Defendants' improper head start in producing
competing products at the AlphaPet facility, unjustified marketplace competition by these
products, and unfair and uncompensated use of Eastman's technology." (!d. at ,-r 67)

II.

STANDARD OF REVIEW
3

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires "a short and plain statement
of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In recent
years, the United States Supreme Court has clarified and refined its jurisprudence concerning the
standard of pleading required under Rule 8. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
555-56 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949-53 (2009).
Prior to 2007, district courts were permitted to dismiss a complaint for failure to state a
claim pursuant to Fed. R. Civ. P. 12(b)(6) only if "it appear[ ed] beyond doubt that the plaintiff
can prove no set of facts in support ofhis claim which would entitle him to relief." Conley v.
Gibson, 355 U.S. 41, 45-46 (1957). The Supreme Court, concerned that this "no set of facts"

language could be read to suggest that "a wholly conclusory statement of claim would survive a
motion to dismiss whenever the pleadings left open the possibility that a plaintiff might later
establish some set of [undisclosed] facts to support recovery," rejected that test in Bell Atlantic
Corp. v. Twombly, 550 U.S. 544 (2007). ld. at 561 (internal quotations and citations omitted)

Instead, Twombly required a plaintiff setting forth an antitrust claim for a violation of Section I of
the Sherman Act to allege sufficient "factual matter (taken as true) to suggest" liability for the
misconduct alleged. Id. at 556. Such a complaint need not contain "detailed factual
allegations," but it must include "more than labels and conclusions" or the "formulaic recitation
of the elements of a cause of action." !d. at 55 5. The Supreme Court did "not require heightened
fact pleading of specifics," but rather held that a well-pleaded complaint should provide "enough
facts to state a claim to relief that is plausible on its face," which "simply calls for enough fact to
raise a reasonable expectation that discovery [would] reveal evidence" for such a claim. I d. at

4

556, 570. In Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009), the Supreme Court
extended these standards to all civil complaints. Id. at 1953.
The Third Circuit has determined that after Twombly and Iqbal, district courts faced with
a motion to dismiss for failure to state a claim should perform a two-part analysis. Fowler v.

UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). First, the district court should separate
the factual and legal elements of a claim, accepting any well-pleaded facts as true, but
disregarding any legal conclusions. Id. Second, the district court must "determine whether the
facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for
relief."' Id. at 211 (quoting Iqbal, 129 S.Ct. at 1950). Determining whether a claim is plausible is
"'a context-specific task that requires the reviewing court to draw on its judicial experience and
common sense."' Id. (quoting Iqbal, 129 S.Ct. at 1949). In so doing, the court must "construe
the complaint in the light most favorable to the plaintiff, and determine whether, under any
reasonable reading of the complaint, the plaintiff may be entitled to relief." Fowler, 578 F .3d at
210 (citing Phillips v. County ofAllegheny, 515 F.3d 224, 233 (3d Cir. 2008) (internal quotations
omitted)).
A well-pleaded complaint may not be dismissed simply because "it strikes a savvy judge
that actual proof of [the alleged] facts is improbable, and that a recovery is very remote and
unlikely." Twombly, 550 U.S. at 556 (internal quotations omitted). While the Supreme Court
has clearly admonished that conclusory allegations are insufficient to satisfy the pleading
standard required by Rule 8, "the Supreme Court did not strike [the phrase 'upon information and
belief] from the lexicon." Smith v. Harvey, No. 08 C 816, 2010 WL 1292473, at *4 (N.D. Ill.
Mar. 29, 2010). As such, the touchstone of a court's inquiry in this regard is plausibility, not
5

probability, and whether a defendant is on notice of a claim for relief, not whether that claim has
been pled with specificity or particularity. See, e.g., Iqbal, 129 S.Ct. at 1949; West Penn

Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 98 (3d Cir. 201 0) (noting that "Twombly's
plausibility standard" does not function as a "probability requirement in complex cases").

III.

DISCUSSION
A.

Trade Secret Misappropriation

Defendants argue that Plaintiffs claim for trade secret misappropriation fails to satisfy the
pleading standard of Rule 8 in three principal respects. First, Defendants assert that the
Amended Complaint fails to identify which of the Defendants allegedly obtained Eastman's trade
secrets, and which individuals were involved in the allegedly illicit disclosure and use of that
information. (D.I. 20 at 5-7) Second, Defendants argue that the description of the trade secrets
that were allegedly used or disclosed is "so broad as to be meaningless." (Id. at 7) Finally,
Defendants contend that "Eastman still fails to adequately plead that any [particular] defendant
actually used or disclosed" any trade secrets. (Id. at 8) Viewing Plaintiffs misappropriation
claim and the associated facts in the light most·favorable to Plaintiff, the Court finds that
Defendants have not shown that this claim should be dismissed pursuant to Rule 8.
The Delaware Uniform Trade Secrets Act ("DUTSA") governs claims for trade secret
misappropriation. 4 A "trade secret" is information that "[d]erives independent economic value ..
. from not being generally known to, and not being readily ascertainable by proper means by,

4

For purposes of this analysis, the Court considers caselaw from other states that
have adopted the Uniform Trade Secrets Act to be persuasive authority. See 6 Del. C. § 2008
("This chapter shall be applied and construed to effectuate its general purpose to make uniform
the law with respect to the subject of this chapter among states enacting it."); Accenture Global
Servs. GmbH v. Guidewire Software Inc., 581 F. Supp. 2d 654, 662 n.6 (D. Del. 2008).
6

other persons who can obtain economic value from its disclosure or use" and "[i]s the subject of
efforts that are reasonable under the circumstances to maintain its secrecy." 6 Del. C.§ 2001(4).
The DUTSA defines trade secret misappropriation as:
a. Acquisition of a trade secret of another by a person who knows or
has reason to know that the trade secret was acquired by improper
means; or
b. Disclosure or use of a trade secret of another without express or
implied consent by a person who:
1. Used improper means to acquire knowledge of the trade secret; or

2. At the time of disclosure or use, knew or had reason to know that
his or her knowledge of the trade [secret] was:
A. Derived from or through a person who had utilized improper
means to acquire it;
B. Acquired under circumstances giving rise to a duty to maintain its
secrecy or limit its use; or
C. Derived from or through a person who owed a duty to the person
seeking relief to maintain its secrecy or limit its use ....
6 Del. C. § 2001(2). In other words, misappropriation can occur in several alternative
ways-namely, via acquisition, disclosure, and/or use. The statute is disjunctive, meaning that a
defendant who engages in only one of these activities will be liable for misappropriation.
As noted above, the first step in analyzing whether Plaintiff has satisfied Rule 8 is to
separate the factual and legal elements of the claim. The Court has highlighted some of
Plaintiffs key factual allegations, which it must accept as true for purposes of this motion: 5

5

See, e.g., Erickson v. Pardus, 551 U.S. 89, 94 (2007) ("[W]hen ruling on a
defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained
in the complaint.")
7

•

In March 2008, Eastman and Defendants IHR, IPR, and IPW entered into the TLA, which
is a license to certain technology and intellectual property relating to the manufacture of
PET products outside of the United States. (D.I. 15 at~~ 13, 17)

•

The TLA did not, however, license all of Eastman's trade secrets. The TLA excluded
certain trade secrets, including Eastman's IntegRexTM PET technology, from the universe
of licensed trade secrets. (ld. at~~ 13, 20)

•

Eastman transferred certain employees to one or more Defendants pursuant to the TLA
and the related MBSA. (ld. at~ 15) Certain of these employees had gained knowledge of
unlicensed trade secrets relating to Eastman's IntegRex™ technology during the start-up
of Eastman's IntegRexTM plant in South Carolina. (!d. at ~ 37)

•

Sometime after the TLA was executed, those former Eastman employees who had
previously worked at Eastman's South Carolina plant and who now worked for "one or
more" of Defendants IHR, IPR, and IPW, "at the direction of one or more of the
Defendants, traveled from Europe to Alabama in mid-2009 to assist in starting up
production at the AlphaPet facility. "6 (Id.)

•

Defendant AlphaPet then took the information about Eastman's IntegRexTM PET
technology from these same former Eastman employees discussed in the prior paragraph,
"or [from] other former Eastman employees," and "used [it] during the design, start-up
and/or operation of its melt-to resin manufacturing process without express or implied
consent from Eastman." (ld. at~ 64; see also id. at~~ 39-41)

•

IHR, IPR, and IPW were specifically prohibited under the TLA from using or transferring
any Eastman trade secrets that had not been licensed, such as IntegRexTM technology, and
likewise were prohibited from soliciting any information about unlicensed trade secrets
from any transferred employees, or otherwise disclosing or accessing such information.
(ld. at~~ 19-24)
Plaintiffs factual allegations invoke a familiar tableau that often underlies

misappropriation claims-a former employee improperly discloses trade secret information that
is then used to compete against the former employer. See, e.g., Orthovita, Inc. v. Erbe, Civil
Action No. 07-2395,2008 WL 423446, at *1 (E.D. Pa. Feb. 14, 2008) ("Employee loyalty and
6

See also D.I. 32 at 16 (characterizing the Amended Complaint as alleging that

Defendants "directed transferred employees having direct knowledge of Eastman's IntegRex™
PET technology to travel from Europe to Alabama to assist with starting up a plant using [this
polyester melt phase] technology").
8

post-employment competition against the former employer spawn many disputes."). However,
this case involves a slight twist on the typical misappropriation fact pattern, in which an
employee is fired or resigns and then uses trade secrets from the former employer to start or
engage in a competing venture. See, e.g., Accenture Global Servs. GmbH v. Guidewire Software
Inc., 581 F. Supp. 2d 654, 662 n.8 (D. Del. 2008) ("The typical DUTSA case involves allegations
that [a] former employee of plaintiff had access to trade secrets in the context of his or her
employment ... and later left to compete directly with plaintiff .... "). Instead of terminating
employees who then went to compete against Eastman armed with an arsenal of trade secrets,
Eastman willingly dispatched its former employees to Defendants, but with the caveat that only
certain information, knowledge, and know-how from Eastman could be disclosed to or used by
Defendants.
Having outlined and considered the contours of Plaintiffs factual allegations, the Court
finds that, as discussed in detail below, Defendants have been given sufficient factual
information to provide adequate notice of the plausible grounds for Plaintiffs misappropriation
claim under the Twombly!Iqbal standard.
1.

Plaintifrs Alleged Failure to Sufficiently
Identify the Trade Secret(s) at Issue

Defendants first challenge the Amended Complaint for allegedly failing to identify any of
the trade secrets that Plaintiff contends have been misappropriated. Specifically, Defendants
argue that "Eastman's amended complaint continues to vaguely claim that its trade secret(s) is/are
'information relating to the manufacture of PET,"' and that this description is "so broad as to be
meaningless." (D.I. 20 at 7 (quoting D.I. 15 at ,-r 38)) However, Defendants' quotation from the

9

Amended Complaint omits the remainder of the sentence from paragraph 38, which provides that
the allegedly misappropriated information is "related to Eastman's IntegRexTM PET technology."
(D.I. 15

at~

38) Defendants also ignore the thirteen other references in Plaintiffs Amended

Complaint to Eastman's IntegRexTM technology, which is the specific "information relating to the
manufacture of PET" that is clearly at issue here. It is true that almost every time Plaintiff
references the trade secrets at issue in the Amended Complaint, Plaintiff uses the phrase

"including information related to Eastman's IntegRex™ PET technology," (see e.g., D.l. 15 at~~
62, 64, 65 (emphasis added)), which suggests that there could be some other unidentified trade
secrets also at play in this litigation. But in light of the repeated references to IntegRexTM PET
technology in the Amended Complaint, it is clear that Plaintiff has identified the illicit disclosure
and use of information relating to that particular type of melt-to-resin technology as the
gravamen of its trade secret misappropriation claim. 7
As such, Plaintiffs claim is distinguishable from that found to be inadequate in Medafor,

Inc. v. Starch Med. Inc., No. 09-CV-0441 PJS/FLN, 2009 WL 2163580, at *1 (D. Minn. July 16,
2009), a case cited by Defendants. (D.I. 20 at 7-8). In Medafor, "[t]he complaint describe[d] the
trade secrets at issue as 'business methodologies, formulas, devices, and compilations of
information, including suppliers and customers."' 2009 WL 2163580 at *1. TheMedafor
complaint provided almost no guidance as to the nature of the alleged trade secret, leaving the

7

Defendants have not argued that identifying trade secret information by reference
to a registered trademark, such as IntegRex™, would be insufficient to identify the nature of the
trade secret alleged to have been misappropriated. Indeed, this Court has previously held that
information relating to a generic Efudex® product was the sort of" core information" that should
be found in a claim for trade secret misappropriation. See Spear Pharms. Inc. v. William Blair &
Co., LLC, 610 F. Supp. 2d 278, 283-84 (D. Del. 2009); see also D.l. 40 at 5.
10

defendant to guess at which of the legions of its unidentified "methodologies, formulas, devices,
and compilations of information" was alleged to have been wrongfully misappropriated. !d.
There is no analogously generic description here in Plaintiffs Amended Complaint;
instead, the trade secret clearly at the center of this dispute is specifically identified by name
more than a dozen times. While Defendants protest that "'information relating to the
manufacture of PET' could literally mean anything," Defendants cannot credibly contend that
information relating specifically to IntegRexTM technology could likewise mean "literally
anything." (D .I. 20 at 8) When trade secrets are identified by reference to a trade name, such as
IntegRex™, courts in this circuit have refused to dismiss misappropriation claims. See, e.g.,
Reckitt Benckiser Inc. v. Tris Pharma, Inc., Civil Action No. 09-3125, 2011 WL 773034, at *4
(D.N.J. Feb. 28, 2011) (refusing to dismiss trade secret claim where the confidential information
was identified as "the Delsym® manufacturing process, Delsym® formulations, and other private
information concerning Delsym® and related research and development"). Thus, the Court finds
that Plaintiff has identified the trade secret at issue so as to satisfy the requirements of Rule 8.

2.

Plaintifr s Alleged Failure to Identify Who Among Which Defendants
Disclosed The Trade Secret

Defendants also argue that Eastman's Amended Complaint fails to comply with Rule 8's
pleading requirements because Eastman "does not identify which former employees it accuses
and which defendant(s) these former employees now work for." (D.I. 20 at 6 (emphasis in
original)) Plaintiff responds that it has identified those individuals, albeit not by name. As
previously noted, Plaintiffs misappropriation claim centers on the actions of a group of
employees who are not named in the Amended Complaint, but who assisted in the mid-2006 to

11

early-2007 start-up of an IntegRexTM PET manufacturing plant in South Carolina. (D.I. 15 at ,-r,-r
15, 37) These employees were later transferred from Eastman to IPW, IPR, and IHR, and then
were allegedly used by IRP and AlphaPet to set up AlphaPet's PET facility in Alabama. (Id.)
Plaintiff contends that these former employees disclosed unlicensed trade secret information
about the IntegRex TM technology during the creation or operation of the Alabama plant, and that
information was thus acquired by one or more of Defendants (none of whom were authorized to
acquire such information). (Jd. at ,-r,-r 37-39) Plaintiff further alleges that one or more of the
Defendants then used this information to make PET products at AlphaPet's Alabama facility. (Id.
at ,-r 41) As such, the allegations in the Amended Complaint focus on a finite universe of (1)
individuals who were transferred from Eastman to Defendants pursuant to the TLA, who also (2)
worked on the IntegRexTM technology in connection with the start-up of Eastman's South
Carolina facility, and who also (3) traveled to Alabama as part of the development of AlphaPet's
Alabama facility. 8
While it is unclear to the Court why the Plaintiff did not identify these individuals by
name in the Amended Complaint, the question before the Court is not why Plaintiff did not, but
rather whether Rule 8 requires Plaintiff to do so. Defendants cite no authority from Delaware or
any other jurisdiction that requires a plaintiff to identify the individual who allegedly

8

It is true that, as it did with respect to the nature of the trade secret at issue,
Plaintiff at times uses language in the Amended Complaint that could be seen as trying to hedge
its bets as to who is in the class of possible trade secret misappropriators. To that end, Plaintiff
identifies potential wrongdoers as not only the former Eastman employees with the shared South
Carolina/Alabama history, but also a group of"other former Eastman employees." (D.I. 15 at ,-r
39) Yet even if one takes into account this somewhat expanded class of individuals, it is a group
that is still significantly limited to only (1) individuals who formerly worked at Eastman and who
now work for one of Defendants and who (2) were involved in the creation or operation of the
Alabama plant.

12

communicated or used a trade secret by name. On the contrary, the Twombly Court specifically
endorsed the use of "'either direct or inferential allegations regarding all the material elements
necessary to sustain recovery."' Haspel v. State Farm Mut. Auto. Ins. Co., 241 Fed. App'x 837,
839 (3d Cir. 2007) (quoting Twombly, 127 S.Ct. at 1969) (emphasis added). Even ifDefendants
have to engage in an inferential step to determine the identities of the former employees in
question, that would not be grounds to dismiss the Amended Complaint according to Twombly.
Defendants rely primarily on Spear Pharmaceuticals, Inc. v. William Blair & Co., LLC,
610 F. Supp. 2d 278, 283 (D. Del. 2009), for the proposition that "'the identity of the individual'
alleged to have disclosed confidential information [is] 'core information' under the Twombly
analysis for a claim of trade secret misappropriation." (D.I. 20 at 7) In Spear, this Court denied
a motion to dismiss a trade secret misappropriation claim, noting that the complaint at issue there
"includes allegations substantial enough to justify opening the door to discovery." 61 0 F. Supp.
2d at 283. Among those allegations was the name of a single individual (Brian Scullion) who
allegedly leaked information in breach of a confidentiality agreement. I d. However, the name of
the individual involved in the "leak" in Spear was just one part of a litany of "core" facts which,
taken together, provided sufficient notice of the contours of a trade secret misappropriation
claim. These categories included: (1) the time frame during which confidential information was
leaked, (2) the content of that information, (3) an opportunity and motive for leaking the
information, (4) the manner in which the leaked information was used to the plaintiffs detriment;
and (5) a sequence of events supporting a connection between the defendants and the alleged
harm. Id. The Spear Court gave no indication that any one of these "core" categories was more
important than any other, and likewise did not suggest that any one piece of information (such as
13

the identity of the individual disclosing the trade secret) was essential to surviving a challenge
under Rule 8. 9
The Court thus declines to read Spear as establishing a brightline rule that a trade secret
misappropriation claim satisfies the Rule 8 requirements if and only if the plaintiff "names
names" of those responsible for misappropriation. As the Third Circuit has noted, even after

Twombly, plaintiffs are not required to present "detailed factual allegations" in a complaint in
order to cross "the line from conceivable to plausible." Phillips, 515 F .3d at 231, 234 (internal
quotations omitted); accord Zep, Inc. v. First Aid Corp., No. 09 CV 1973, 2010 WL 1195094, at
*7 (N.D. Ill. Mar. 19, 2010) (rejecting arguments that a complaint failed to allege "'who, what,
where, when or how [a defendant] breached the contract or used trade secrets,"' where the court
was "satisfied" that defendants could "deduce the grounds upon which [plaintiffs] claims rest").
Under Rule 8, even if a complaint is somewhat "lacking in specificity," that is not a
reason to dismiss the complaint, unless that lack of specificity deprives the defendants of fair
notice of the claim itself. 10 Zep, Inc., 2010 WL 1195094 at *8. In this case, although it has not

9

Indeed, Plaintiffs Amended Complaint provides information falling into each of
the categories identified in Spear. (D.I. 32 at 16) It sets forth: (1) a general description of the
individuals involved in the alleged "leak"; (2) the time-frame of the alleged leak (mid-2009 and
after); (3) the content of that alleged leak (information about IntegRex™ PET technology); (4) an
opportunity and motive for the alleged leak (the transfer of knowledgeable Eastman employees to
competitors of Eastman and their travel to the Alabama facility, giving Defendants an "improper
head start" in producing competing products there); (5) the manner in which the leaked
information was used to Plaintiffs detriment (in the design, start-up, and/or operation of the
Alabama facility); and (6) a sequence of events supporting a connection between Defendants and
the alleged harm (the above-referenced transfer of Eastman employees knowledgeable about
IntegRex™ technology and their work at the Alabama PET plant). (See generally D.l. 15)
10

This notice pleading standard of Rule 8 is distinct from the heightened pleading
standard of Rule 9-which requires the sort of specificity that Defendants at times appear to
demand here. See Fed. R. Civ. P. 9(b) ("In alleging fraud or mistake, a party must state with
14

identified by name the specific individuals who allegedly leaked the prohibited information, the
totality of information Plaintiff provides amounts to much more than just a "formulaic recitation
of the elements" of a trade secret misappropriation claim. Twombly, 550 U.S. at 555.

3.

Plaintifrs Alleged Failure to Identify How
Trade Secrets Were Used or Disclosed

Finally, Defendants also contend that "Eastman still fails to adequately plead that any
defendant actually used or disclosed" any unlicensed trade secret information. (D.I. 20 at 8
(emphasis added)) However, in the Amended Complaint, Plaintiff specifically alleges that:
•

"Defendants [IHR, IPR, and IPW] disclosed Eastman's confidential and proprietary trade
secret information to AlphaPet or IRP during the design, start-up or operation of
AlphaPet's melt-to-resin manufacturing process, including information related to
Eastman's IntegRexTM PET technology[.]" (D .I. 15 at ~ 62 (emphasis added))

•

"Defendant IRP ... obtained trade secret information and ... used [that information]
without express or implied consent from Eastman." (Id. at ~ 63 (emphasis added))

•

Defendant AlphaPet "improperly used information ... related to Eastman's IntegRexTM
PET technology[] during the design, start-up and/or operation of its melt-to-resin
manufacturing process without express or implied consent from Eastman." (Id. at ~ 64
(emphasis added))

This plain language of the Amended Complaint clearly alleges both use and disclosure of trade
secret information relating to the IntegRexTM technology, and does so with sufficient specificity
in light of the other allegations in the Amended Complaint to meet the Twombly!Iqbal standard.
Defendants rely primarily on Accenture Global Services GmbH v. Guidewire Software
Inc., 581 F. Supp. 2d 654 (D. Del. 2008) in support of their position to the contrary. (D.I. 20 at
8-9) However, Accenture is distinguishable from the present facts. In that case, the plaintiff

particularity the circumstances constituting fraud or mistake."); Osteotech, Inc. v. Biologic, LLC,
No. 07-1296 (JAP), 2008 WL 686318, at *5 (D.N.J. Mar. 7, 2008) (explaining that "there is no
heightened pleading standard for a misappropriation claim").
15

("Accenture") and defendant ("Guidewire") were competitors in the consulting and technology
services industry, and each provided, among other things, software and services to aid insurance
companies in information management and processing. 581 F. Supp. 2d at 657. In 2000,
Accenture provided an assessment to a potential third-party customer, CNA, which included
information about Accenture's proprietary systems and software. ld. at 658. Accenture thereafter
installed certain test software at CNA. Id. CNA ultimately declined to purchase Accenture's
system, and instead informed Accenture that it would purchase and develop a similar system with
Guidewire. Id. Accenture later filed a complaint against Guidewire alleging, inter alia, trade
secret misappropriation. !d. at 657. Guidewire moved to dismiss the trade secret claim pursuant
to Rule 12(b)(6). Id.
This Court dismissed the trade secret claim in the Accenture complaint after finding that
it was based solely on "conclusions" and a "formulaic recitation of the elements of a cause of
action." I d. at 663. This Court further found that Accenture did not allege that any protected
information had been obtained through improper means, because Accenture had alleged only that
it "worked with CNA, during which time it learned about Guidewire; Accenture installed
software on CNA's computers in late-2002; CNA informed Accenture in 2003 that its bid had
lost; and Accenture later learned that Guidewire had the winning bid." !d. The Accenture Court
highlighted Accenture's "assum[ption], based upon what it feels was 'a surprisingly quick
development trajectory,' that Guidewire ha[d] 'somehow' obtained and used Accenture's trade
secrets." !d. at 663 (emphasis added). This use of the term "somehow" in the Accenture
complaint exemplified the lack of any allegations "that Guidewire obtained [any] information by
improper means." I d. Finally, the Accenture Court highlighted that "there [was] no specific
16

allegation that Guidewire gained access to [the alleged trade secrets] through CNA, and that
"there was no allegation that Guidewire either disclosed or used" any trade secret information in
developing its competitive product. I d.
Thus, there were two primary pleading deficiencies that this Court identified in the
Accenture complaint: (1) no description ofhow the defendant improperly obtained the trade
secrets; and (2) no allegation of improper disclosure or use of the allegedly secret information in
developing the competitive product. Neither of these deficiencies are present in Plaintiffs
Amended Complaint. First, Plaintiff provided a description of "how" Defendants allegedly
gained access to Plaintiffs IntegRexTM trade secrets-namely, by sending former Eastman
employees who had worked on an IntegRexTM plant and become knowledgeable about the
IntegRexTM trade secrets to AlphaPet's Alabama facility. II (D .I. 15 at ~ 37) Second, as outlined
above, Plaintiff specifically alleged that the IntegRex™ technology was disclosed and used to
develop and start up Defendants' Alabama facility. (Id. at ~~ 62-64)
When it came to allegations of the illicit disclosure and use of trade secrets, the Accenture
complaint was based strictly on supposition and assumption-it did no more than hint at the
alleged wrongful acts, and invite the reader to fill in the blanks with their own version of how or
when Guidewire and/or CNA may have wrongfully acted. Plaintiffs complaint, in contrast,
alleges a specific illicit pathway (involving its former employees) through which confidential
information flowed, and alleges the time period and a set of relevant events (the mid-2009 start-

The Accenture court noted that the facts in that case did not follow the "typical"
pattern for a trade secret claim, which normally involve "allegations that a former employee of
plaintiff had access to trade secrets in the context of his or her employment ... and later left to
compete directly with plaintiff." 581 F. Supp. 2d at 662 n.8. Here, Plaintiffs former employees
(who now work for Defendants) are at the heart of Plaintiffs misappropriation claim.
II

17

up of the Alabama plant) that was the impetus for the alleged wrongful disclosure and use.
While the Amended Complaint does not allege every act taken in support of the alleged wrongdoing, or every time and date when such acts occurred, that level of comprehensive detail is not
required by Twombly. 550 U.S. at 570 (requiring only "enough facts" to state a plausible claim).
When faced with similar allegations, courts have denied motions to dismiss trade secret
misappropriation claims. See, e.g., Reckitt, 2011 WL 773034 at *5 (refusing to dismiss
complaint alleging that defendants used trade secrets in the development and formulation of a
generic drug).

4.

Plaintifrs Trade Secret Misappropriation Claim Is Legally Sufficient

For the reasons discussed above, the Court finds that Plaintiffs trade secret
misappropriation claim contains more than a mere "threadbare" recital of the elements of
misappropriation, such that a plausible claim has been stated. Iqbal, 129 S.Ct. at 1949.
Therefore, Plaintiffs misappropriation claim is sufficiently pled under the standards of Rule 8.

B.

Breach of Contract

Plaintiff has asserted a breach of contract claim against only four of the defendants
(Plaintiffs three co-parties to the TLA, and IRP). To survive a Rule 12(b)(6) motion to dismiss a
breach of contract claim, the plaintiff must have pled: "( 1) the existence of a contract, whether
express or implied; (2) a breach of an obligation imposed by that contract; and (3) damage
suffered by the plaintiff as a result." Narrowstep, Inc. v. Onstream Media Corp., Civil Action
No. 5114-VCP, 2010 WL 5422405, at *7 (Del. Ch. Dec. 22, 2010). Defendants make three
separate arguments in support of their motion for dismissal: (1) IRP is not a party to the TLA,
and thus no contract exists between IRP and Plaintiff; (2) Plaintiff has failed to plead breach of

18

contract against its co-parties to the TLA with sufficient specificity; and (3) Plaintiff has failed to
identify any implied contractual provision in the TLA that might support an implied breach of
contract claim. The first argument goes to whether a contract with IRP even exists, while the
remaining arguments address whether the alleged facts sufficiently support Plaintiffs claims for
breach of the TLA.
1.

Breach of Contract Against IRP

As previously noted, the TLA was executed by and between Plaintiff and three of the
defendants-IHR, IPR, and IPW. (D .I. 15 at ~ 13) There is no dispute that IRP was not a party to
the TLA. (Id.) Defendants argue that Eastman has therefore "failed to 'show the existence of a
contract' between Eastman and [IRP]." (D.I. 20 at 10) Plaintiff argues that although IRP is not a
signatory to the TLA, "it is reasonable to infer that IRP, through its ownership and control of
[IHR, IPR, and IPW] has breached (and/or induced breach of) the TLA." 12 (D.I. 32 at 8)
Plaintiff cites no authority to support the notion that a parent company can be held liable for an
alleged breach of contract by its subsidiaries, simply by virtue of its "ownership and control" of
those entities.
Under Delaware contract law, "only a party to a contract may be sued for breach of that
contract." Wallace ex ref. Cencom Cable Income Partners IL Inc. v. Wood, 752 A.2d 1175, 1180
(Del. Ch. 1999) (citation omitted). A parent corporation can only be held liable for the
performance of a contract by a wholly-owned subsidiary under extremely limited circumstances.

12

Although Plaintiffs brief makes this passing mention of the possibility that IRP
could be liable for inducing a breach of the TLA, that tort has not been pled in the Amended
Complaint, and therefore will not be addressed by the Court. See, e.g., UpJohn Co. v. Riahom
Corp., 650 F. Supp. 485, 487 (D. Del. 1986) (noting that Delaware law recognizes an
independent tort "known as an 'inducement of breach of contract"').
19

!d. "Delaware law respects corporate formalities, absent a basis for veil-piercing, recognizing
that the wealth-generating potential of corporate and other limited liability entities would be
stymied if it did otherwise." Alliance Data Sys. Corp. v. Blackstone Capital Partners V L.P., 963
A.2d 746, 769 (Del. Ch. 2009). Essentially, a parent will be liable for breach of a contract only
in the case of fraud or where the subsidiary is a mere instrumentality or alter ego of a contracting
party. O'Leary v. Telecom Res. Serv., LLC, Civil Action No. 10C-03-108-JOH, 2011 WL
379300, at *7 (Del. Super. Jan. 14, 2011) (citing Geyer v. Ingersoll Publ'ns Co., 621 A.2d 784,
793 (Del. Ch. 1992)).
Even viewing the Amended Complaint in the light most favorable to Plaintiff, it provides
no basis for concluding that any of these narrow exceptions apply to IRP, which is indisputably a
non-party to the agreement. Therefore, the Court recommends that the claim for breach of
contract against IRP be dismissed for failure to state a claim.

2.

Breach of Express Confidentiality and Non-Use Obligations
By IHR, IPR, and IPW

In the Second Count of the Amended Complaint, Plaintiff alleges various breaches of the
express terms of the TLA relating to confidentiality, non-disclosure, and non-use obligations.
(D.I. 15

at~~

22-24, 55) Defendants' motion to dismiss these claims is based principally on two

arguments: (1) Plaintiffs allegations are too vague to offer Defendants fair notice of the alleged
breach; and (2) Plaintiff does not specifically identify what role each accused defendant played in
the alleged breach. (D.I. 20 at 11-12) As with Defendants' motion to dismiss the trade secret
misappropriation claims, Defendants again seek to impose a heightened pleading burden on
Plaintiff, which is at odds with the less stringent requirements of Rule 8.

20

Although Defendants argue that because of the vagueness in Eastman's Amended
Complaint, they are unable to discern the nature of Eastman's breach of contract claims, in their
briefing Defendants manage to identify three different categories of contractual duties that
Eastman alleges are breached: "informing employees about the status of Eastman's alleged trade
secrets ([D.I. 15 at] ,-r 22), not soliciting trade secrets from former Eastman employees (id. [at] ,-r
24), and not using unlicensed Eastman trade secrets (id. [at] ,-r 23)." (D.I. 20 at 11) While
Defendants are apparently on notice of the multidimensional nature of the alleged breaches of the
TLA, they nevertheless argue that there is insufficient underlying factual support in the Amended
Complaint for "the first two categories. " 13 (D.I. 20 at 11)
The TLA includes, inter alia, two different restrictions on the manner in which Eastman
trade secrets can be used-one substantive (whereby only the enumerated set of licensed trade
secrets could be used), and one geographic (whereby no licensed trade secrets were to be used
under any circumstances in the U.S.). (D .I. 71 at 91) Again, Plaintiff alleges that both of those
restrictions were violated when the former Eastman employees, who had been transferred to IHR,
IPR, and IPW under the terms of the TLA and the MBSA, were sent by Defendants to the U.S. to
aid AlphaPet in designing and starting up the competing PET plant in Alabama. (D.I. 15 at ,-r 37)
These employees allegedly brought with them the protected information about IntegRex™
technology (the alleged trade secrets), and by disclosing/using this information, Defendants
breached the TLA. (ld. at ,-r 39)

13

Because "the first two categories" relate to purported breaches of confidentiality
provisions of the TLA, Defendants presumably do not dispute that Plaintiff has at least alleged a
claim for breach of the non-use/non-transfer obligations of the TLA. Defendants' apparent
concession that Plaintiff has sufficiently alleged such a claim would, in and of itself, allow a
large portion of Plaintiffs breach of contract claim to survive Defendants' motion to dismiss.
21

It is reasonable to infer, accepting these allegations as true, that Defendants failed to
inform the employees transferred from Eastman of the obligations of the TLA, and solicited their
assistance on behalf of or in connection with AlphaPet and IRP. That inference is bolstered by
Defendants IHR and IPR's apparent failure to confirm, after a May 2009 request in a letter from
Eastman, (1) that they were in compliance with the terms of the TLA, and (2) that none of the
individuals with knowledge of Eastman's IntegRexTM technology would work on the AlphaPet
plant in Alabama. (!d. at 'if 34) The Court finds that this level of detail is sufficient to assert
plausible claims for breach of contract and to enable Defendants to formulate their defense.
Defendants' arguments are similar to those that were recently rejected by this Court in

JJCK, LLC v. Project Lifesaver Int'l, Civ. No. 10-930-LPS, 2011 WL 2610371 (D. Del. July 1,
2011). In JJCK, the "central dispute [was] whether [the plaintiff] ha[d] alleged enough facts to
establish that [defendant's] conduct rises to the level of a breach of the [agreement-at-issue]." !d.
at *7. The JJCK plaintiff alleged that the defendant violated several sections of the agreementat-issue "by publicly disparaging the [plaintiff and its products] in blog posts, press releases, and
statements issued to its member [public service agencies]." !d. The defendant challenged the
sufficiency of these allegations, arguing that the plaintiff "must describe the 'specific statements
alleged to be false or disparaging' or otherwise provide the necessary factual basis for this
conclusion." !d. After drawing all inferences in favor of the plaintiff, this Court refused to
dismiss the breach of contract claim, noting that it provided "fair notice of the nature of the
claims against it." Id. at *9. This was so, even though the JJCK plaintiff did not identify the
specific text of the disparaging statements at issue, because the plaintiff did allege a number of
other facts about the statements, such as where and when they were made, and which person or
22

company made them. I d. at *8-9.
So too is the case here. While Plaintiff has not, for example, cited specific statements in
which Defendants' management solicited information about IntegRex™, Plaintiff does allege that
Defendants "direct[ ed]" the transferred employees to improperly disclose information "related to
Eastman's IntegRexTM PET technology to Defendants AlphaPet and IRP during the design, startup or operation of AlphaPet's melt-to-resin PET manufacturing process." (D.I. 15 at ,-r 39) Thus,
although there are undoubtedly additional facts relevant to Plaintiffs claim that have not been
pled, Defendants cannot credibly argue that they are not on notice as to the basic grounds of
Plaintiffs breach of contract claim.
As such, Defendants' reliance upon iCard Stored Value Solutions, L.L.C. v. West
Suburban Bank, No. 4:07-CV-1539 CAS, 2008 WL 619236 (E.D. Mo. Mar. 3, 2008), is
misplaced. (D.I. 20 at 11) The iCard plaintiff filed a six-count petition alleging various state
law claims, including breach of contract. I d. at * 1. For its breach of contract claim, the iCard
plaintiff pled only that under the contract at issue, it was "to provide certain confidential and
proprietary information" to the defendant and that the defendant was "to perform certain
services." Id. at *2. With regard to the alleged breach, the plaintiff alleged only that the
defendant "refused to perform under the agreed terms," which were not stated in the iCard
complaint. Id. The iCard court determined that the plaintiffs "vague references to 'certain
services' and 'certain information"' were not sufficient "to meet the Twombly standard." I d.
These vague references bear no resemblance to the detail contained in Plaintiffs
Amended Complaint. Similar to the facts encountered in Accenture, discussed in detail above,
the iCard defendant was left to guess what might constitute the "information" and "services" that
23

were the subject of the breach of contract claim or what terms of the contract were allegedly
violated. In contrast, Plaintiff here has specifically identified the information (i.e., information
relating to its unlicensed IntegRexTM technology) and individuals (i.e., the transferred employees)
and circumstances (i.e., the creation and start-up of AlphaPet's plant in Decatur, Alabama) that
give rise to its breach of contract claim and the terms of the TLA it alleges have been breached.
Thus, iCard does not compel dismissal.
Defendants also argue that because Plaintiff failed to "differentiate among [IHR, IPR, and
IPW] or identify what role any defendant played in the alleged breach," it has failed to adequately
plead its claim. (D.I. 20 at 12) For its part, Plaintiff contends that most of the detailed
information that Defendants seek is "solely in the[ir] possession," and that it has alleged a breach
by (at least) each of its co-parties to the TLA. (D.I. 32 at 9-1 0)
As an initial matter, the Amended Complaint specifically alleges breach by each of IHR,
IPR, and IPW. (See D.l. 15

at~

55 ("The actions of Defendants [IHR, IPR,] and [IPW] described

above constitute breach of the terms of the TLA .... ")(emphasis added)) Moreover, there is
only one identified contract at issue that is alleged to have been breached-the TLA. In the TLA,
IHR, IPR, and IPW are collectively defined as the "Purchasers," and are referred to collectively
throughout the document. (D.I. 8, ex. B at 1) 14 Only a single party (IHR) appears to have signed
the TLA on behalf of the Purchasers, and any notices pursuant to the agreement were to be sent

14

The Court has considered the content of the TLA as part of its inquiry into the
legal sufficiency of the Amended Complaint. See, e.g., Pension Ben. Guar. Corp. v. White
Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (noting that "a court may consider an
undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if
the plaintiffs claims are based on [that] document"). Neither party has questioned the
authenticity of the TLA, which was submitted as an exhibit by Defendants. (See D.l. 8, ex. B)
24

to the same person at the same address in order to reach all the Purchasers. (!d. at 22, 26) Thus,
at this stage, addressing allegations collectively to these three parties is at least consistent with
the manner in which they appear to have been characterized in the TLA. Considering this factual
context, along with Plaintiffs allegations regarding the "integration" of the Defendants following
the execution of the TLA, (D.I. 15

at~

27), and the other specific facts pled in the Amended

Complaint, the failure to identify which specific defendant each breaching employee worked for
is not fatal at this stage. This is particularly true because Plaintiff cannot currently be expected to
know all of the details as to which particular Defendant company each of the transferred
employees was ultimately assigned to, given that discovery has not yet commenced. See, e.g.,
Accenture, 581 F. Supp. 2d at 662 ("It is not common for a trade secret misappropriation plaintiff

to know, prior to discovery, the details surrounding the purported theft.").
Moreover, the Amended Complaint and the TLA are distinguishable from the complaint
and contract at issue in Rodriguez v. One West Bank, No. CV09-2361-PHX-NVW, 2010 WL
550760 (D. Ariz. Feb. 16, 2010), relied upon by Defendants. Specifically, Defendants note that
the Rodriguez court dismissed a complaint because it described actions by "'[the defendants]
without identifying whether OneWest or IndyMac [the two named defendants] allegedly
performed the specific acts' alleged to constitute a breach." (D.I. 20 at 11-12 (quoting
Rodriguez, 2010 WL 550760 at *2)) However, the Rodriguez complaint did "not identify what

contract [d]efendants allegedly breached and whether the claim [was] for breach of a written or
oral contract or breach of the covenant of good faith and fair dealing implied in one of the
contracts, or some or all of these." !d. As such, it was impossible for the two defendants in
Rodriguez to sort out what each was actually accused of doing. Id. Here, there is one multi-party

25

contract (the TLA) at issue, in which IHR, IPR, and IPW appear to have been closely linked
together. As to those defendants, the nature of the alleged breach has been sufficiently described
to allow each of them to respond. Thus, the Rodriguez decision, which does not apply or cite
Delaware law, does not clearly support dismissal of Plaintiffs claims for breach of the TLA.

3.

Breach of Implied Confidentiality Provisions

Defendants correctly note that Plaintiffs only allegation related to its implied breach of
contract theory is that "[t]he actions of Defendants [IRP, IHR, IPR, and IPW] described above
constitute breach of implied confidentiality provisions of the TLA under Delaware law." (D .I. 20
at 12 (citing D.I. 15

at~

56)) Plaintiff responds that "[t]o the extent that the Court may find that

the pled facts do not establish an express duty that has been breached, Eastman alleges in the
alternative that those same activities establish an implied duty of confidentiality that was
breached when the parties sought, obtained, and used Eastman's intellectual property in view of a
TLA that was evidently written to protect the confidentiality of that intellectual property." (D.I.
32 at 11-12) The Court concludes that such "alternative" pleading is insufficient under Delaware
law to state a claim for breach of an implied contract provision.
Although the Delaware Supreme Court "has recognized the occasional necessity of
implying contract terms," such action should be taken only "rare[ly]" and cautiously. Dunlap v.
State Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005) (internal quotations and citations
omitted). As Plaintiff acknowledges, "to allege a breach of an implied contractual provision, a
plaintiff must allege 'a specific implied contractual obligation, a breach of that obligation by the
defendant, and resulting damage to the plaintiff."' (D.I. 32 at 11 (citing Zwanenberg Food Group
(USA) Inc. v. Tyson Refrig. Proc'd Meats, Inc., Civ. No. 08-329-LPS, 2009 WL 528700, at *4
26

(D. Del. Feb. 27, 2009) (emphasis added)).
Plaintiff never identifies the specific implied contractual obligation it contends should be
read into the TLA-all that Plaintiff appears to allege in its response brief is that a blanket
provision of implied confidentiality should apply generally to the TLA, and that it is broad
enough (whatever its terms may be) to cover Defendants' alleged acts recited in the Amended
Complaint. That is insufficient to state a claim for breach of an implied provision. See, e.g.,
NK.S. Distribs., Inc. v. Tigani, C.A. No. 4640-VCP, 2010 WL 2178520, at *7-9 (Del. Ch. May
28, 201 0) (dismissing a claim for breach of the implied covenant where the plaintiff did "not
allege the existence of any specific, implied contractual obligations"); Wal-Mart Stores, Inc. v.
AIG Life Ins. Co., 901 A.2d 106, 116 (Del. 2006) (holding that the plaintiff failed to state a claim
upon which relief could be granted where it failed to "identifly] any implied contract term that it
would have the trial court read into the contract").
Moreover, even if Plaintiff had sufficiently identified the scope and content of an implied
contractual provision, it would be inappropriate to read an implied duty of confidentiality into the
TLA, given that the TLA expressly addresses the issue of confidentiality. See, e.g., Dave
Greytak Enters., Inc. v. Mazda Motors ofAm., Inc., 622 A.2d 14, 23 (Del. Ch. 1992) ("[W]here
the subject at issue is expressly covered by the contract, or where the contract is intentionally
silent as to that subject, the implied duty to perform in good faith does not come into play.");
accord Dow Chem. Canada Inc. v. HRD Corp., 656 F. Supp. 2d 427,446-47 (D. Del. 2009). An
example of how this principle is applied in Delaware law is found in Kuroda v. SPJS Holdings,
L.L.C., Civil Action No. 4030-CC, 2010 WL 925853 (Del. Ch. Mar. 16, 2010). Kuroda was a
complex contractual dispute among several parties, where the defendants asserted a number of
27

counterclaims against the plaintiff. !d. at *1. Among those counterclaims was a breach of the
implied covenant of good faith and fair dealing, which the Kuroda defendants alleged that the
plaintiff violated when he used and disclosed certain of defendants' confidential information to
solicit investors and disparage the defendants. ld. at *6. The Kuroda defendants argued that the
plaintiff made several implied promises when entering the relevant LLC agreement, including
not to misappropriate trade secrets, not to breach the express confidentiality terms in other related
agreements, and not to encourage others to breach those confidentiality provisions. 15 !d. at *10.
The plaintiff moved to dismiss this claim under 12(b)(6). Id. at *6.
In granting the plaintiffs motion, the Delaware Chancery Court refused to "apply the
implied covenant of good faith and fair dealing to impose upon [plaintiff] a duty of
confidentiality under the LLC Agreement," because it determined that "any use of the implied
covenant to insert a contractual duty of confidentiality into the LLC Agreement would be an
override of the express terms of that agreement." I d. at *10-11. The Kuroda Court highlighted
that "the LLC Agreement specifically excluded any duties relating to confidentiality, while at the
same time intimately related agreements ... included such duties." !d. at *11. Similarly, the
TLA includes a number of express confidentiality provisions that impose duties of
confidentiality; under Delaware law, it is those express duties that must form the basis for any
claim for breach of the confidentiality provisions of the TLA. I d.
Thus, I find that Plaintiff has failed to sufficiently identify any implied contractual term
that should be read into the TLA, and has likewise failed to state a claim under the law for breach

15

As noted above, Plaintiff has not outlined any implied promises that Defendants
allegedly made pursuant to the TLA, in contrast to the allegations in Kuroda.
28

of any such implied provision.

IV.

CONCLUSION
For the foregoing reasons, I recommend that the Court GRANT Defendants' motion to

dismiss the breach of contract claim against IRP and to dismiss the claim for breach of an
implied contractual term of confidentiality without prejudice, but otherwise DENY the motion.
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(1)(B), Fed. R.
Civ. P. 72(b)(l), and D. Del. LR 72.1. The parties may serve and file specific written objections
within fourteen (14) days after being served with a copy of this Report and Recommendation.
Fed. R. Civ. P. 72(b). The failure of a party to object to legal conclusions may result in the loss
of the right to de novo review in the district court. See Henderson v. Carlson, 812 F.2d 874,
878-79 (3d Cir. 1987); Sincavage v. Barnhart, 171 Fed. App'x 924, 925 n.l (3d Cir. 2006).
The parties are directed to the Court's Standing Order In Non-Pro Se Matters For
Objections Filed Under Fed. R. Civ. P. 72, dated November 16, 2009, a copy of which is
available on the Court's website, http://www.ded.uscourts.gov/StandingOrdersMain.htm.

Christopher J. Bur.Ke
UNITED STATES MAGISTRATE JUDGE

29