Search Partners Inc v. MyAlerts Inc. et al

Filing 17

ORDER granting 10 Motion to Dismiss (Written Opinion) Signed by Senior Judge David S. Doty on 6/30/2017. (DLO)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 17-1034(DSD/TNL)
Search Partners, Inc.,
Plaintiffs,
v.

ORDER

MyAlerts, Inc.,
f/k/a TrackIF, et al.,
Defendants.
L. Kathleen Harrell-Latham, Esq. and Loop Legal PLLC, 2828
University Ave SE, Suite 150, Minneapolis, MN 55414, counsel
for plaintiffs.
Thomas J. Conley, Esq. and Law Office of Thomas J. Conley,
80 South Eighth Street, Suite 900, Minneapolis, MN 55402,
counsel for defendants.

This matter is before the court upon the motion to dismiss by
defendant MyAlerts, Inc. (formerly known as TrackIF).

Based on a

review of the file, record, and proceedings herein, and for the
following reasons, the motion is granted and the case is dismissed
with leave to file in state court.

BACKGROUND
This
parties’

trade

secret

executive

and

contract

recruiting

dispute

agreement.

arises
In

from

the

approximately

September 2015, defendant and plaintiff Search Partners Inc. (SPI)
executed an agreement whereby SPI agreed to recruit and provide
names of prospective employees to MyAlerts in exchange for a fee.

Compl. ¶¶ 15-18; Conley Aff. Ex. 1.
On October 13, 2015, after detailed negotiations, one of the
candidates

SPI

referred

to

MyAlerts,

MyAlerts’ offer of employment.

Mr.

Babcock,

Compl. ¶¶ 21, 25-28.

declined

SPI alleges

that at some point later, however, MyAlerts contacted Babcock to
again discuss the position.

Id. ¶ 29.

In approximately March

2016, MyAlerts formally offered Babcock the job and he accepted.
Id. ¶¶ 30-31.

When SPI later learned that Babcock worked for

MyAlerts, it demanded payment from MyAlerts under the contract.
MyAlerts refused to pay SPI.

Id. ¶ 33.

On April 3, 2017, plaintiff commenced this suit raising
several claims against defendant.

Count I alleges a violation of

the Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1832; Count II
alleges a violation of the Deceptive Trade Practices Act (DTPA),
Minn. Stat. § 325D.43; Count III alleges breach of contract; Count
IV alleges unjust enrichment; and Count V alleges conversion.
Defendant now moves to dismiss.

DISCUSSION
I.

Standard of Review
To survive a motion to dismiss for failure to state a claim,

“‘a complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.’”
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009)

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(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

“A

claim has facial plausibility when the plaintiff [has pleaded]
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 Bell Atl. Corp. v. Twombly, 550 U.S.
544, 556 (2007)).

Although a complaint need not contain detailed

factual allegations, it must raise a right to relief above the
speculative level.

Twombly, 550 U.S. at 555.

“[L]abels and

conclusions or a formulaic recitation of the elements of a cause of
action” are not sufficient to state a claim.

Iqbal, 556 U.S. at

678 (citation and internal quotation marks omitted).
The court does not consider matters outside the pleadings
under Rule 12(b)(6).

Fed. R. Civ. P. 12(d).

The court may,

however, consider matters of public record and materials that are
“necessarily embraced by the pleadings.”

Porous Media Corp. v.

Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (citation and
internal quotation marks omitted).

Here, the court considers the

parties’ contract.
II.

Defense of Trade Secrets Act
SPI alleges that MyAlerts violated the DTSA by using SPI’s

proprietary candidate information for its economic benefit. Compl.
¶¶ 39-40.

The DTSA creates a private cause of action in favor of

the “owner of a trade secret that is misappropriated ... if the
trade secret is related to a product or service used in, or

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intended for use in, interstate or foreign commerce.”
1836(b)(1).

18 U.S.C. §

Under the DTSA, a trade secret includes:

all forms and types of financial, business, scientific,
technical,
economic,
or
engineering
information,
including patterns, plans, compilations, program devices,
formulas, designs, prototypes, methods, techniques,
processes, procedures, programs, or codes, whether
tangible or intangible, and whether or how stored,
compiled, or memorialized physically, electronically,
graphically, photographically, or in writing if—
(A) the owner thereof has taken reasonable measures
to keep such information secret; and
(B) the information derives independent economic
value, actual or potential, from not being
generally known to, and not being readily
ascertainable through proper means by, another
person who can obtain economic value from the
disclosure or use of the information[.]
18 U.S.C. § 1839(3).
“Misappropriation” is defined as:
an unconsented disclosure or use of a trade secret by one
who (i) used improper means to acquire the secret, or,
(ii) at the time of disclosure, knew or had reason to
know that the trade secret was acquired through improper
means, under circumstances giving rise to a duty to
maintain the secrecy of the trade secret, or derived from
or through a person who owed such a duty.
Mission Measurement Corp. v. Blackbaud, Inc., 216 F. Supp. 3d 915,
920 (N.D. Ill. 2016) (citations and internal quotation marks
omitted).
Here the facts as alleged simply do not support a claim under
the DTSA.

First, SPI has not properly alleged that Babcock’s

identity qualifies as a “trade secret” as defined by the act or
that his identity is “a product or service used in, or intended for
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use in, interstate or foreign commerce.”1

18 U.S.C. § 1836(b)(1).

Second, SPI has not alleged “misappropriation” within the
meaning of the act.

The gravamen of the complaint is that SPI

should be compensated for introducing Babcock to MyAlerts; SPI does
not contend that MyAlerts improperly disclosed or misused Babcock’s
identity. Nor does SPI allege that MyAlerts used improper means to
acquire Babcock’s name.
to MyAlerts.

Indeed, SPI willingly introduced Babcock

The fact that MyAlerts may have circumvented SPI by

directly hiring Babcock may give rise to a contract or quasicontractual claim, but it does not violate the DTSA.
Further, a plaintiff states a plausible claim for relief under
the DTSA only if it “sufficiently alleges a prohibited ‘act’
occurring after May 11, 2016” - the date the DTSA was enacted.
Hydrogen Master Rights, Ltd. v. Weston, No. 16-474, 2017 WL 78582,
at *10 (D. Del. Jan. 9, 2017) (citation omitted).

The complaint

does not allege any acts on or after May 11, 2016. The alleged
misappropriation occurred when MyAlerts hired Babcock in March 2016
and is not continuing in nature.

For all of these reasons, the

DTSA claim is dismissed with prejudice for failure to state a
claim.

1

The complaint references a “proprietary database of
candidates,” which could qualify as a trade secret, but the case
does not involve the database or its misappropriation. Compl. ¶ 9.
5

III. State-Law Claims
Because the court has dismissed SPI’s federal claim, the only
claim for which original jurisdiction existed, the court must
consider whether to exercise supplemental jurisdiction over the
remaining state-law claims. See 28 U.S.C. § 1367(c)(3); Johnson v.
City of Shorewood, Minn., 360 F.3d 810, 819 (8th Cir. 2004). “[I]n
the usual case in which all federal-law claims are eliminated
before trial, the balance of factors to be considered under the
pendent jurisdiction doctrine - judicial economy, convenience,
fairness, and comity - will point toward declining to exercise
jurisdiction over the remaining state-law claims.” Dodson v. Univ.
of Ark. for Med. Scis., 601 F.3d 750, 756 (8th Cir. 2010) (per
curiam) (quoting Carnegie-Mellon Univ. v. Cahill, 484 U.S. 343, 350
n.7 (1988)); see also Kapaun v. Dziedzic, 674 F.2d 737, 739 (8th
Cir. 1982) (“The normal practice where federal claims are dismissed
prior to trial is to dismiss pendent claims without prejudice, thus
leaving plaintiffs free to pursue their state-law claims in the
state courts.”).
Based on consideration of the pendent jurisdiction factors,
the court will not exercise supplemental jurisdiction over the
state-law

claims.

The

remaining

determinations of state law.

claims

depend

solely

on

See Farris v. Exotic Rubber and

Plastics of Minn., Inc., 165 F. Supp. 2d 916, 919 (D. Minn. 2001)
(“State courts, not federal courts, should be the final arbiters of

6

state law.”) (quoting Baggett v. First Nat’l Bank of Gainesville,
117 F.3d 1342, 1353 (11th Cir. 1997)).
yet

to

engage

substantial

in

discovery,

resources

and

tending

the

to

Further, the parties have
court

this

has

not

matter.

expended

Under

the

circumstances, these court is satisfied that declining to exercise
supplemental jurisdiction will not harm the parties.

The court

dismisses the state-law claims without prejudice.

CONCLUSION
Accordingly, based on above, IT IS HEREBY ORDERED that:
1.

The motion to dismiss [ECF No. 10] is granted;

2.

The DTSA claim is dismissed with prejudice; and

3.

The state-law claims are dismissed without prejudice.

LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: June 30, 2017
s/David S. Doty
David S. Doty, Judge
United States District Court

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