Skyline Zipline Global, LLC v. Domeck et al

Filing 78

ORDER (1) Granting In Part And Denying In Part Maui Land And Pineapple Company, Ltd's Motion To Dismiss, Doc. No. 21; And (2) Granting Baldwin Brothers, LLC DBA Piiholo Ranch Zipline's Partial Substantive Joinder In Maui Land And Pineapple Company, Ltd.'s Motion To Dismiss Doc. No. 31 in re 21 , 31 . Signed by JUDGE J. MICHAEL SEABRIGHT on 2/21/13. (gls, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

SKYLINE ZIPLINE GLOBAL, LLC,

)
)
Plaintiff,
)
)
vs.
)
)
TODD DOMECK; EXPERIENTIAL
)
RESOURCES, INC.; GO ZIP, LLC;
)
MAUI LAND AND PINEAPPLE
)
COMPANY, INC.; KAPALUA LAND )
COMPANY, LTD.; BALDWIN
)
BROTHERS LLC dba PIIHOLO
)
RANCH ZIPLINE; JOHN DOES 1-10; )
JANE DOES 1-10; DOE
)
CORPORATIONS 1-10; and DOE
)
PARTNERSHIPS 1-10,
)
)
Defendants.
)
________________________________ )

CIVIL NO. 12-00450 JMS-BMK
ORDER (1) GRANTING IN PART
AND DENYING IN PART MAUI
LAND AND PINEAPPLE
COMPANY, LTD.’S MOTION TO
DISMISS, DOC. NO. 21; AND
(2) GRANTING BALDWIN
BROTHERS, LLC DBA PIIHOLO
RANCH ZIPLINE’S PARTIAL
SUBSTANTIVE JOINDER IN
MAUI LAND AND PINEAPPLE
COMPANY, LTD.’S MOTION TO
DISMISS, DOC. NO. 31

ORDER (1) GRANTING IN PART AND DENYING IN PART MAUI LAND
AND PINEAPPLE COMPANY, LTD.’S MOTION TO DISMISS, DOC. NO.
21; AND (2) GRANTING BALDWIN BROTHERS, LLC DBA PIIHOLO
RANCH ZIPLINE’S PARTIAL SUBSTANTIVE JOINDER IN MAUI LAND
AND PINEAPPLE COMPANY, LTD.’S MOTION TO DISMISS,
DOC. NO. 31
I. INTRODUCTION
This dispute stems from Cougar Mountain Adventures, Ltd.’s
(“Cougar Mountain”) efforts to enter into agreements to develop, install, and/or
operate zipline adventure courses for Defendants Maui Land and Pineapple

Company, Inc. (“MLPC”) and Kapalua Land Company, Ltd. (collectively,
“Kapalua Defendants”), as well as for Baldwin Brothers, LLC dba Piiholo Ranch
Zipline (“Baldwin Brothers”).1 As alleged in the August 8, 2012 Complaint,
Cougar Mountain disclosed its intellectual property to its proposed subcontractor,
Experimental Resources, Inc. (“ERI”) and its owner Todd Domeck (“Domeck”)
(collectively “ERI Defendants”), who then used this information in developing and
operating zipline operations for Kapalua Defendants and Baldwin Brothers without
Cougar Mountain. Cougar Mountain has since assigned the rights to its intellectual
property to Plaintiff Skyline Zipline Global, LLC (“Skyline” or “Plaintiff”), which
brought this action.
Currently before the court is Kapalua Defendants’ Motion to Dismiss
seeking dismissal of Skyline’s claims for misappropriation of trade secrets and
fraudulent concealment,2 which Baldwin Brothers substantively joins (collectively,
“Moving Defendants”). Based on the following, the court GRANTS in part and
DENIES in part the Motion to Dismiss, and GRANTS the Partial Substantive

1

The Complaint incorrectly identifies Baldwin Brothers as Piiholo Land, LLC and
Piiholo Classic, LLC. The parties have since stipulated and substituted these Defendants for
Baldwin Brothers. Doc. No. 34.
2

Skyline’s claim for patent infringement was the subject of Motions for Summary
Judgment brought by Defendants, which the court granted on February 6, 2013. See Doc. No.
74. Kapalua Defendants’ instant arguments for dismissal of the patent infringement claim are
therefore moot.
2

Joinder.
II. BACKGROUND
A.

Factual Background
As alleged in the Complaint, Skyline provides consultation services to

design, engineer, develop, install, and/or operate zipline adventure features and
canopy tours at various recreational facilities, and also manufactures, markets,
offers for sale, and sells zipline trolleys. Compl. ¶ 18. Skyline was assigned
Cougar Mountain’s rights to its intellectual property, as well as any claims arising
from infringement or misappropriation of those rights. Id. ¶ 17. The present
dispute involves business dealings between Cougar Mountain and Defendants.
1.

Cougar Mountain’s Business Relationship with ERI Defendants
In July 2006, Cougar Mountain and ERI began discussions for ERI to

act as the subcontractor for some of Cougar Mountain’s zipline course installations
and projects. Id. ¶ 30. To that end, on September 13, 2006, Cougar Mountain and
ERI executed a Confidentiality Agreement under which ERI agreed to hold in
confidence all information provided by Cougar Mountain and not use such
information for any other purpose. Id. ¶¶ 32-33.
After signing this Agreement, Cougar Mountain shared with ERI its
confidential and proprietary information including, among other things,
3

confidential business information such as project proposals, pricing, sales,
marketing, forecasts, financial models, business development plans, and financial
and business model information, as well as technical information regarding zipline
course and component design, fabrication, manufacture, assembly, installation,
operation, and maintenance. Id. ¶¶ 33-34. Cougar Mountain also provided ERI
on-site zipline training from September 2006 to January 2007, and taught ERI how
to install, operate, and maintain zipline courses incorporating its proprietary
technology, which allows for longer and faster-braking zipline courses. Id. ¶ 36.
Given that ERI’s experience was limited to existing zipline course technology that
runs at slower speeds and uses gravity braking, Cougar Mountain’s proprietary
information on high-speed zipline courses was new for ERI. Id. ¶ 38.
2.

Cougar Mountain’s Business Dealings with Kapalua Defendants
and Baldwin Brothers
In the meantime, during the summer and fall 2006, Cougar Mountain

met separately with Kapalua Defendants and Baldwin Brothers to discuss
developing and operating zipline courses on each of their properties. Id. ¶¶ 21, 27.
In particular, Cougar Mountain and Kapalua Defendants began exploring the
formation of a jointly-owned operating company to accomplish the zipline project,
id. ¶ 23, while Baldwin Brothers was interested in having a zipline project
developed for it. Id. ¶ 27. As a result of these discussions, Cougar Mountain
4

prepared and delivered course designs for both Kapalua Defendants and Baldwin
Brothers. Id. ¶¶ 25, 29.
In October 2006, Cougar Mountain introduced ERI to Kapalua
Defendants and Baldwin Brothers, and planned to use ERI as the subcontractor for
both zipline courses. Id. ¶¶ 39-42. To that end, Cougar Mountain disclosed to ERI
the full service drawings for the courses, as well as proprietary information for
manufacturing, mapping, and rigging the courses. Id.
Over the next several months, Cougar Mountain continued to move
each project along. As to the Baldwin Brothers project, on October 6, 2006,
Cougar Mountain delivered to Baldwin Brothers a business plan and proposal for
the development of the zipline course, which included a discussion of Cougar
Mountain’s intellectual property and terms for Baldwin Brothers to take a license
to the intellectual property. Id. ¶ 43. It was Cougar Mountain’s understanding that
Baldwin Brothers planned to go forward with the project after finalizing a real
estate deal for some of the land for the zipline course. Id.
As to the Kapalua project, in October 2006, Cougar Mountain and
ERI visited Kapalua Defendants to inspect the site and work on the business
arrangement. Id. ¶ 44. On October 26, 2006, ERI delivered to Cougar Mountain a
build quote for the subcontractor installation work, which was based on the

5

specifications prepared and designed by Cougar Mountain for the Kapalua course.
Id. ¶ 45. On October 27, 2006, Cougar Mountain sent to Kapalua Defendants a
“Skyline Development Proposal,” which included discussion of Cougar
Mountain’s intellectual property, terms for a joint venture for developing and
operating the Kapalua course, and terms for Kapalua Defendants to take a license
to Cougar Mountain’s intellectual property as a residual model, should Cougar
Mountain not have ownership interest in the Kapalua zipline. Id. ¶ 46.
In November 2006, Cougar Mountain presented its business plan to
the Kapalua Board of Directors. Id. ¶ 47. This plan, which identified ERI as a
subcontractor installer, included course design, cost analysis, a logistics study for
projected volume, cash flow and profit analyses, and management information.
Id. During the meeting, Cougar Mountain again informed Kapalua Defendants that
it owned intellectual property regarding zipline course designs and components,
including its proprietary zipline trolley design. Id. ¶ 48. Cougar Mountain also
displayed a sample trolley and harness to be used in the project. Id.
On December 19, 2006, Cougar Mountain and MLPC entered into a
Letter of Intent and a Confidentiality Agreement regarding the Kapalua zipline
project. Id. ¶ 50. According to the Letter of Intent, the parties planned to execute a
Joint Venture Agreement and an Operating Agreement, which both outlined that

6

Cougar Mountain would prepare the zipline course design, each party would
contribute to a capital project budget, and each party would fund pre-opening
operating expenses. Id. ¶ 51.
After several revisions were circulated, in February 2007 Kapalua
Defendants stopped communicating with Cougar Mountain. Id. ¶ 53. In a
February 28, 2007 letter, MLPC notified Cougar Mountain that it was cancelling
the Letter of Intent due to agreements not being finalized within the due diligence
period. Id. ¶ 57. Around this same time, ERI and Baldwin Brothers also stopped
communicating with Cougar Mountain. Id. ¶¶ 55-56.
3.

Cougar Mountain Learns of Kapalua Defendants’ Zipline Activities
In May 2007, Kevin Smith, principal of Cougar Mountain, read in the

newspaper that Kapalua Defendants were developing a zipline course. Id.
¶ 58. In a May 16, 2007 email, Smith asked ERI whether it was involved in the
Kapalua zipline, and ERI responded that it was not. Id. ¶ 59. As a result, Cougar
Mountain asserts that it had no reason to believe the Kapalua zipline course would
include its confidential information and proprietary technology. Id.
In September 2009, Smith saw photos of the Kapalua zipline course,
which included Cougar Mountain’s tower design and braking system, and
employed Cougar Mountain’s proprietary and patent-pending trolleys. Id. ¶ 60. It

7

is Skyline’s belief that ERI manufactured, distributed, used, sold, and offered for
sale the trolleys used on the Kapalua zipline course. Id. ¶ 72. After conducting
due diligence, however, Cougar Mountain believed that Kapalua Defendants were
closing the zipline course. Id. ¶ 60. In fact, however, Kapalua Defendants
operated the zipline course until mid-December 2009, when MLPC entered into an
arrangement to transfer the operations to ERI and another of Domeck’s companies,
GoZip. Id. ¶ 64. Under this arrangement, MLPC receives lease and license
income from ERI and GoZip, who both operate the zipline course. Id.
4.

Cougar Mountain Learns of Baldwin Brothers’ Zipline Activities
Also around September 2009, Smith learned that Baldwin Brothers

had a zipline course, and website materials mentioned ERI in conjunction with the
course. Id. ¶¶ 61-62. It is Skyline’s belief that ERI manufactured, distributed,
used, sold, and offered for sale the trolleys used on the Baldwin Brothers’ zipline
course. Id. ¶ 72.
In March 2010, Baldwin Brothers was informed it was infringing
Plaintiff’s intellectual property. Id. ¶ 65. Despite this notice, Baldwin Brothers
continued its activities. Id. ¶ 66.
///
///

8

B.

Procedural Background
On August 8, 2012, Skyline filed its Complaint asserting claims for

(1) patent infringement against all Defendants (Count I); (2) breach of contract
against Domeck and ERI (Count II); (3) trade secret misappropriation against all
Defendants (Count III); (4) fraudulent concealment against all Defendants except
GoZip (Count IV); and (5) tortious interference against Domeck and ERI (Count
V).
On October 31, 2012, Kapalua Defendants filed their Motion to
Dismiss, Doc. No. 21, and Baldwin Brothers filed its Partial Substantive Joinder on
November 7, 2012. Doc. No. 31. Skyline filed an Opposition on January 14,
2013, Doc. No. 61, Baldwin Brothers filed a Reply on January 17, 2013, and
Kapalua Defendants filed a Reply on January 18, 2013. Doc. No. 72. A hearing
was held on February 4, 2013.
III. STANDARDS OF REVIEW
A.

Federal Rule of Civil Procedure 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss

a claim for “failure to state a claim upon which relief can be granted[.]”
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

9

face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)); see also Weber v. Dep’t of Veterans Affairs,
521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court must accept as
true all of the allegations contained in the complaint -- “is inapplicable to legal
conclusions.” Iqbal, 556 U.S. at 678. Accordingly, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 555); see also Starr v. Baca, 652 F.3d
1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not
simply recite the elements of a cause of action, but must contain sufficient
allegations of underlying facts to give fair notice and to enable the opposing party
to defend itself effectively.”).
Rather, “[a] claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of discovery and
continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit
the court to infer “the mere possibility of misconduct” do not show that the pleader

10

is entitled to relief as required by Rule 8. Iqbal, 556 U.S. at 679.
B.

Federal Rule of Civil Procedure 9(b)
Federal Rule of Civil Procedure 9(b) requires that “[i]n all averments

of fraud or mistake, the circumstances constituting fraud or mistake shall be stated
with particularity.” “Rule 9(b) requires particularized allegations of the
circumstances constituting fraud.” In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541,
1547-48 (9th Cir. 1994) (en banc), superseded on other grounds by 15 U.S.C.
§ 78u-4.
In its pleadings, the plaintiff must include the time, place, and nature
of the alleged fraud; “mere conclusory allegations of fraud are insufficient” to
satisfy this requirement. Id. (citation and quotation signals omitted). However,
“[m]alice, intent, knowledge, and other condition of mind of a person may be
averred generally.” Fed. R. Civ. P. 9(b); see also In re GlenFed, Inc. Sec. Litig, 42
F.3d at 1547 (“We conclude that plaintiffs may aver scienter . . . simply by saying
that scienter existed.”); Walling v. Beverly Enter., 476 F.2d 393, 397 (9th Cir.
1973) (Rule 9(b) “only requires the identification of the circumstances constituting
fraud so that the defendant can prepare an adequate answer from the allegations.”
(citations omitted)).
A motion to dismiss for failure to plead with particularity is the
11

functional equivalent of a motion to dismiss under Fed. R. Civ. P. 12(b)(6). Vess v.
Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). In considering a
motion to dismiss, the court is not deciding the issue of “whether a plaintiff will
ultimately prevail but whether the claimant is entitled to offer evidence to support
claims.” Hydrick v. Hunter, 449 F.3d 978, 988 (9th Cir. 2006) (quoting Scheuer v.
Rhodes, 416 U.S. 232, 236 (1974)).
IV. ANALYSIS
Moving Defendants argue that the Complaint fails to state plausible
claims for either trade secret misappropriation or fraud/fraudulent concealment.
The court addresses each claim in turn.
A.

Trade Secret Misappropriation (Count III)
In support of its trade secret misappropriation claim, Skyline asserts

that its trade secrets include, among other things, its confidential and proprietary
information concerning its design, fabrication, manufacture, assembly, installation,
operation, and maintenance of zipline courses, as well as its confidential financial
and business model information concerning project proposals, pricing, sales,
marketing, forecasts, financial models, and business development plans. Compl.
¶¶ 98-99. Skyline further asserts that pursuant to the Confidentiality Agreement,
Cougar Mountain disclosed to ERI Defendants its trade secrets and introduced ERI
12

as its subcontractor to Kapalua Defendants and Baldwin Brothers. Id.
¶¶ 101-102. Finally, Skyline asserts that instead of proceeding with Cougar
Mountain, MPLC and Baldwin Brothers went forward building the zipline courses
with ERI Defendants even though they knew that ERI used Cougar Mountain’s
technology without its authorization. Id. ¶¶ 104, 106.
Moving Defendants argue that these allegations fail to state a
plausible claim for trade secret misappropriation against them because (1) Cougar
Mountain did not take reasonable efforts to keep its proprietary information secret;
and (2) the claim is time-barred where Cougar Mountain should have discovered
the alleged misappropriation in 2007. Based on the following, the court rejects
both these arguments.
1.

Whether Plaintiff’s Zipline Technology Constitutes “Trade Secrets”
Hawaii has adopted the Uniform Trade Secrets Act (“UTSA”), see

Hawaii Revised Statutes (“HRS”) Ch. 482B, which defines a “trade secret” as:
information, including a formula, pattern, compilation,
program device, method, technique, or process that:
(1) 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
(2) Is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.
13

HRS § 482B-2. As this definition makes plain, “[o]nce the data that constitute a
trade secret are disclosed to others, or others are allowed to use those data, the
holder of the trade secret has lost his property interest in the data.” Ruckelshaus v.
Monsanto Co., 467 U.S. 986, 1011 (1984). Thus, the holder of the trade secret
must take efforts “reasonable under the circumstances to prevent disclosure of the
alleged trade secret to those who may exploit it to the detriment of the owner,”
Uhlig LLC v. Shirley, 2012 WL 2923242, at *16 (D. S.C. July 17, 2012), and may
disclose it only to others who “are obligated to keep that information secret.”
Weco Supply Co. v. Sherwin-Williams Co., 2012 WL 1910078, at *7 (E.D. Cal.
May 25, 2012).
Moving Defendants argue that Cougar Mountain’s zipline technology
does not constitute “trade secret” information because as alleged in the Complaint,
Cougar Mountain disclosed such information to Moving Defendants without
obligating them to keep such information confidential. In support of this
argument, Moving Defendants point to the allegations in the Complaint that
Cougar Mountain provided to them development proposals, which included
“discussions of Plaintiff’s intellectual property.” Compl. ¶¶ 43, 46. The
Complaint further asserts that during a Kapalua Board of Directors meeting,
Cougar Mountain (1) presented a business plan that included course design, cost
14

analysis, a logistics study for projected volume, cash flow and profit analyses, and
management information, id. ¶ 47; (2) informed Kapalua Defendants that it owned
intellectual property regarding zipline course designs and components, including
its proprietary zipline trolley design; id. ¶ 48; and (3) displayed a sample trolley
and harness to be used in the project. Id. Given these allegations in the Complaint,
Moving Defendants’ interpretation of Skyline’s misappropriation claim is not
unfounded.
But in its opposition, Skyline disavows that its misappropriation claim
is based on the theory that Cougar Mountain disclosed trade secret information
directly to Moving Defendants prior to having them sign a confidentiality
agreement.3 Rather, according to Skyline, it provided only general information to
Moving Defendants and the basis of its trade secret misappropriation claim is that
Moving Defendants knew of Cougar Mountain’s confidential relationship with ERI
Defendants and used ERI Defendants as their vendor knowing that ERI Defendants
were using Cougar Mountain’s trade secret information.4 Doc. No. 61, Pl.’s Opp’n

3

As alleged in the Complaint, on December 19, 2006, MPLC executed a confidentiality
agreement at the same time that it entered into a letter of intent regarding the Kapalua zipline
course. See Compl. ¶ 50. The parties do not dispute that information disclosed to Kapalua
Defendants after this confidentiality agreement was signed constitutes trade secret information.
4

Skyline further suggests that even if it had disclosed any trade secret information to
Moving Defendants, the need for confidentiality might be inferred from the particular
(continued...)
15

at 21.
Skyline’s proffered theory of liability finds support in the Complaint’s
allegations. For example, the Complaint identifies that Cougar Mountain’s trade
secrets include:
•

Plaintiff’s confidential and proprietary information concerning
zipline course and component design, fabrication, manufacture,
assembly, installation, operation and maintenance, including
proprietary zipline course and component designs, drawing,
photographs, specification, engineering drawings, and
manufacturing specifications and tolerances, plans and knowhow for designing, manufacturing, fabricating, constructing,
assembling, installing, operating and maintaining zipline
courses, zipline towers, trolleys, anchor systems, braking
systems, electromagnet braking systems, wheels, dies, casts,
axles, wheel housings, among other course components, and
how to assemble course and system components, Compl. ¶ 98;

•

Plaintiff’s confidential business contacts and other confidential
business information, including confidential project proposals,
pricing, sales, marketing, forecasts, financial models, business
development plans and other confidential financial and business
model information, id. ¶ 99.

The Complaint further asserts that Cougar Mountain shared this vast trade secret
information with ERI Defendants under the Confidentiality Agreement, id.
¶¶ 33-34, 101-02, and that Moving Defendants took advantage of ERI Defendants’

4

(...continued)
circumstances and “[d]iscovery in this action may support such a contention.” Doc. No. 61, Pl.’s
Opp’n at 22-23. The Complaint makes no such allegations supporting this theory and the court
therefore need not address it.
16

knowledge of Cougar Mountain’s trade secrets when ERI developed and operated
Moving Defendants’ zipline courses. Id. ¶¶ 103-06. In other words, a fair reading
of the Complaint is that Moving Defendants obtained this trade secret information
through their relationships with ERI Defendants.
In light of Skyline’s abandonment of a trade secret claim based on
Cougar Mountain’s direct disclosures to Moving Defendants, the court DENIES
the Motion to Dismiss the trade secret misappropriation claim. The trade secret
misappropriation claim is limited to the allegation that Moving Defendants
obtained trade secret information through ERI Defendants and/or that Kapalua
Defendants obtained trade secret information after MPLC signed the
Confidentiality Agreement. If Skyline wishes to allege any additional theories of
trade secret misappropriation, it must attempt to do so by filing an appropriate
motion to amend the Complaint pursuant to Rule 15.
2.

Statute of Limitations
The statute of limitations for a Hawaii UTSA claim is governed by

HRS § 482B-7, which provides:
An action for misappropriation must be brought within
three years after the misappropriation is discovered or by
the exercise of reasonable diligence should have been
discovered. For the purposes of this section, a continuing
misappropriation constitutes a single claim.

17

Although the Hawaii Supreme Court has not interpreted this provision
specifically, the contours of the “discovery rule” articulated in § 482B-7 are well
understood in this jurisdiction and comport with other jurisdictions that have
adopted the UTSA. In particular, the discovery rule does not place the burden on a
plaintiff to learn every discoverable fact; rather, the relevant question is whether
the plaintiff knew of facts that would cause a reasonable individual to perform a
further inquiry. For example, Vidinha v. Miyaki, 112 Haw. 336, 341, 145 P.3d
879, 884 (Haw. App. 2006), explains:
As the discovery rule has developed, the salient point
giving rise to its application is the inability of the injured,
despite the exercise of reasonable diligence, to know that
he is injured and by what cause. We have clarified that
in this context, reasonable diligence is not an absolute
standard, but is what is expected from a party who has
been given reason to inform himself of the fact upon
which his right to recovery is premised. As we have
stated: “[T]here are [very] few facts which diligence
cannot discover, but there must be some reason to
awaken inquiry and direct diligence in the channel in
which it would be successful. This is what is meant by
reasonable diligence.” Put another way, “[t]he question
in any given case is not, what did the plaintiff know of
the injury done him? [B]ut, what might he have known,
by the use of the means of information within his reach,
with the vigilance the law requires of him?” While
reasonable diligence is an objective test, “[i]t is
sufficiently flexible . . . to take into account the
difference[s] between persons and their capacity to meet
certain situations and the circumstances confronting them
at the time in question.” Under this test, a party’s actions
18

are evaluated to determine whether he exhibited “those
qualities of attention, knowledge, intelligence and
judgment which society requires of its members for the
protection of their own interest and the interest of
others.”
(quoting Fine v. Checcio, 870 A.2d 850, 858 (Pa. 2005)); see Ass’n of Apartment
Owners of Newtown Meadows ex. rel. its Bd. of Dirs. v. Venture 15, Inc., 115 Haw.
232, 271, 167 P.3d 225, 278 (2007); see also, e.g., Gabriel Techs. Corp. v.
Qualcomm Inc., 857 F. Supp. 2d 997, 1003 (S.D. Cal. 2012) (“[W]hen there is
reason to suspect that a trade secret has been misappropriated, and a reasonable
investigation would produce facts sufficient to confirm this suspicion (and justify
bringing suit), the limitations period begins, even though the plaintiff has not
conducted such an investigation.” (quotations omitted)). Reasonable diligence
“means simply that an injured party must act with some promptness where the facts
and circumstances of an injury would put a person of common knowledge and
experience on notice that some right of his has been invaded or that some claim
against another party might exist.” Venture 15, Inc., 115 Haw. at 270, 167 P.3d at
277 (citation, quotation signals, and brackets omitted). Determining the date that a
plaintiff knew or should have known of her claims is generally a question for the
jury. Blair v. Ing, 95 Haw. 247, 267, 21 P.3d 452, 472 (2001).
The alleged misappropriations began sometime in 2007 when

19

Defendants ceased communicating with Cougar Mountain and they decided to
develop zipline courses using Cougar Mountain’s trade secret information.
Because this action was brought over five years after these events, Skyline must
plead facts plausibly suggesting that it did not learn of the misappropriation -- and
should not have discovered such misappropriation through the use of reasonable
diligence -- until August 8, 2009, three years before this action was filed. To that
end, the Complaint asserts that although Cougar Mountain learned that Kapalua
Defendants went forward with a zipline in May 2007, Cougar Mountain contacted
ERI Defendants, who denied any involvement with the project. Compl. ¶¶ 58-59.
The Complaint therefore asserts that Cougar Mountain had no reason to know that
the zipline used Cougar Mountain’s confidential information until it saw
photographs of the ziplines in September 2009. Id. As to Baldwin Brothers, the
Complaint asserts that Cougar Mountain had no reason to know of Baldwin
Brothers’ use of Cougar Mountain’s trade secret information until September 2009
when Cougar Mountain discovered through the Internet that Baldwin Brothers had
a zipline course involving ERI Defendants. Id. ¶¶ 61-62.
Moving Defendants argue that these allegations fail to plausibly allege
that Cougar Mountain conducted a reasonable investigation. According to Moving
Defendants, Cougar Mountain should have performed a more in-depth

20

investigation beyond simply taking ERI Defendants’ denials at face value. Doc.
No. 21-1, Kapalua Defs.’ Mot. at 21-22. Instead, Moving Defendants assert that
Cougar Mountain should have communicated directly with Moving Defendants to
ensure that neither was using Cougar Mountain’s trade secrets. The court rejects
this argument at this pleadings stage.
As made clear from the allegations of the Complaint, Cougar
Mountain performed some due diligence after learning that Kapalua Defendants
were proceeding with a zipline course -- it contacted ERI Defendants, who denied
any involvement with the project. Contacting only ERI Defendants is not on its
face unreasonable -- as explained above, the basis of Skyline’s misappropriation
claim is that Cougar Mountain disclosed its trade secrets to ERI Defendants, who
then used that information in developing and operating zipline courses for Moving
Defendants. It is therefore plausible (at least at this pleadings stage) that ERI
Defendants’ assurances that they were not involved with Kapalua Defendants
would end a reasonable investigation -- without ERI Defendants’ involvement,
Kapalua Defendants would have no access to Cougar Mountain’s trade secret
information.5
5

Baldwin Brothers argues that Cougar Mountain had a duty to inquire as to Baldwin
Brothers’ activities once it learned of the Kapalua zipline. This argument is even weaker than
that of Kapalua Defendants -- based on the allegations in the Complaint, the court rejects that
(continued...)
21

The court therefore DENIES Moving Defendants’ Motion to Dismiss
Count III of the Complaint.
B.

Fraud/Fraudulent Concealment (Count IV)
Count IV asserts that all Defendants except for GoZip are liable for

fraud and/or fraudulent concealment.
Under Hawaii law, the elements of a fraud claim are that: “(1) false
representations were made by defendants, (2) with knowledge of their falsity (or
without knowledge of their truth or falsity), (3) in contemplation of plaintiff’s
reliance upon these false representations, and (4) plaintiff did rely upon them.”
Shoppe v. Gucci Am., Inc., 94 Haw. 368, 386, 14 P.3d 1049, 1067 (2000) (internal
quotation marks and citations omitted).
A claim for “fraudulent concealment” is simply a type of fraud based
on “fraud by omission and concealment, and not just affirmative conduct.”
Tachibana v. Colo. Mountain Dev., Inc., 2011 WL 1327113, at *3 n.7 (D. Haw.
Apr. 5, 2011). The Restatement (Second) of Torts, which Hawaii follows, explains
the tort of fraudulent concealment as follows:
One who fails to disclose to another a fact that he knows
may justifiably induce the other to act or refrain from
5

(...continued)
Cougar Mountain would have a duty to investigate Baldwin Brothers simply because it knew of
Kapalua Defendants’ zipline course.
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acting in a business transaction is subject to the same
liability to the other as though he had represented the
nonexistence of the matter that he has failed to disclose,
if, but only if, he is under a duty to the other to exercise
reasonable care to disclose the matter in question.
Sung v. Hamilton, 710 F. Supp. 2d 1036, 1047 (D. Haw. 2010) (quoting
Restatement (Second) of Torts § 551)). As a result, a defendant may be liable for a
“fraudulent concealment” where it (1) fails to disclose a fact that it knows may
cause the plaintiff to act; and (2) the defendant had a duty to the plaintiff to
exercise reasonable care to disclose that fact. See Television Events & Mktg., Inc.
v. Amcon Distrib. Co., 488 F. Supp. 2d 1071, 1081 (D. Haw. 2006). Whether a
claim is based on a misrepresentation or an omission, it must be pled with
particularity. See Smallwood v. NCsoft Corp., 730 F. Supp. 2d 1213, 1232-33 (D.
Haw. 2010).
The Complaint fails to assert a plausible fraud claim against Kapalua
Defendants based on either a misrepresentation or an omission.6 Although the
Complaint asserts generally that Defendants made “false statements,” see Compl.
¶ 123, such a generalized allegation is insufficient to meet Skyline’s burden under
Rule 8, much less the more rigorous requirements of Rule 9 that apply to these

6

Baldwin Brothers also seeks dismissal of the fraud claim, and in response, Skyline
agreed to dismiss this claim without prejudice. Doc. No. 61, Pl.’s Opp’n at 23. The court
therefore GRANTS the Motion as to Baldwin Brothers.
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claims. Indeed, the only misrepresentation alleged in the Complaint is ERI
Defendants’ statement to Cougar Mountain that they were not working on the
Kapalua zipline project. Id. ¶ 121. Needless to say, this alleged misrepresentation
is by ERI Defendants -- not Kapalua Defendants -- and the Complaint asserts no
basis to impute this misrepresentation to Kapalua Defendants. And to the extent
Skyline bases this claim on Kapalua Defendants’ failure to disclose its relationship
with ERI Defendants, the Complaint fails to assert any basis to find that Kapalua
Defendants had such a duty.
In opposition, Skyline asserts that its claim against Kapalua
Defendants is for constructive fraud, which exists “where the parties to a
transaction have a special confidential or fiduciary relation which affords the
power and means to one to take undue advantage of, or exercise undue influence
over, the other.” See Doc. No. 61, Pl.’s Opp’n at 25 (quoting Combs v. Case
Bigelow & Lombardi, 122 Haw. 58, 222 P.3d 465 (Haw. App. 2010)
(unpublished)). Whatever Skyline’s theory of fraud may be, it does not obviate
Skyline’s obligation to plead the elements of a fraud claim, and plead them with
particularity. And in any event, the Complaint does not assert any facts suggesting
that Cougar Mountain and Kapalua Defendants had a fiduciary relationship, or
even a confidential relationship, at the time of the alleged fraud. The court
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therefore GRANTS Kapalua Defendants’ Motion to Dismiss Count IV, with leave
to amend.
V. CONCLUSION
Based on the above, the court GRANTS in part and DENIES in part
Kapalua Defendants’ Motion to Dismiss, and GRANTS Baldwin Brothers’ Partial
Substantive Joinder. Skyline’s fraud/fraudulent concealment claim is dismissed as
to Baldwin Brothers, and is dismissed as to Kapalua Defendants with leave to
amend. Remaining in this action are Skyline’s claim for misappropriation of trade
secrets as to Moving Defendants, as well as Skyline’s claims against non-moving
Defendants.
Skyline is granted leave until March 15, 2013 to file a First Amended
Complaint asserting a fraud claim against Kapalua Defendants. No other new or
different claims may be pled. Skyline is further notified that a First Amended
Complaint supersedes the Complaint. Ferdik v. Bonzelet, 963 F.2d 1258 (9th Cir.
1992); Hal Roach Studios v. Richard Feiner & Co., 896 F.2d 1542, 1546 (9th Cir.
1990). After amendment, the court will treat the Complaint as nonexistent, Ferdik,
963 F.2d at 1262, and therefore Skyline should re-allege all claims it
///
///
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wishes to pursue in this action, except for the already-dismissed patent
infringement claim.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, February 21, 2013.

/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge

Skyline Zipline Global, LLC v. Domeck et al., Civ. No. 12-00450 JMS-BMK, Order (1) Granting
in Part and Denying in Part Maui Land and Pineapple Company, Ltd.’s Motion to Dismiss, Doc.
No. 21; and (2) Granting Baldwin Brothers, LLC dba Piiholo Ranch Zipline’s Partial Substantive
Joinder in Maui Land and Pineapple Company, Ltd.’s Motion to Dismiss, Doc. No. 31

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