New South Equipment Mats, LLC v. Keener

Filing 43

Memorandum Opinion and Order: Defendant's 21 MOTION to Dismiss for lack of personal jurisdiction is denied; the motion to dismiss for failure to state a claim is granted except as to New South's claim for bad faith and injunctive relief. Signed by District Judge Tom S. Lee on 11/5/13 (LWE)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
NEW SOUTH EQUIPMENT MATS, LLC
VS.

PLAINTIFF
CIVIL ACTION NO. 3:13CV162TSL-JMR

JON M. KEENER

DEFENDANT
MEMORANDUM OPINION AND ORDER

This cause is before the court on the motion of defendant Jon
M. Keener to dismiss pursuant to Rules 12(b)(2) and 12(b)(6) of
the Federal Rules of Civil Procedure.

Plaintiff New South

Equipment Mats, LLC (New South) has responded to the motion and
the court, having considered the memoranda of authorities
submitted by the parties, concludes, first, that Keener’s
objection to personal jurisdiction is without merit, and second,
that his motion to dismiss certain counts of the complaint for
failure to state a claim should be granted in part and denied in
part.
Keener, a resident of Wisconsin, was employed with New South
from 2010 until March 2013, when he accepted a position with
Sterling Lumber Company, Inc.

Upon becoming employed by New

South, Keener executed a Confidentiality and Non-Solicitation
Agreement which provided that during his employment and for a
period of twenty-four months thereafter, Keener “[would] not
directly or indirectly solicit or otherwise induce any employees
of [New South] to leave their employment with [New South], nor
[would] [Keener] directly or indirectly solicit or otherwise

induce any of [New South’s] customers, accounts, suppliers or
contacts to reduce or cease doing business with [New South].”

The

Agreement further reflected Keener’s acknowledgment that during
his employment, he would necessarily be entrusted with
confidential business information and trade secrets, “including
but not limited to the identity of accounts, suppliers, customers
and others having business dealings with the Company, pricing
information pertaining to the Company’s business, and other
information,” and he agreed that such information was the
exclusive property of New South.

The Agreement recited that

Keener would never disclose or use any of New South’s confidential
information and trade secrets “in any manner which is adverse to
the interests of the company, and that he shall return any and all
originals and copies ... in any format whatsoever, containing or
pertaining to said information to the Company immediately upon the
termination of his employment for any reason.”
Following Keener’s departure from New South, New South filed
the present action, alleging that Keener breached the
confidentiality provision of the Agreement by “copying and
misappropriating data relating to New South’s confidential
business information and trade secrets,” and specifically by
“transferr[ing] all of his Outlook Contacts and New South-related
clients and vendors to [an] external hard drive and ... send[ing]
information and New South’s customer list to his personal email
2

account.”

It further alleged that Keener had “been in contact

with New South’s competitors regarding some of New South’s
customers, the availability of New South’s product, and disclosed
and delivered highly confidential communications between New South
and New South’s clients to New South’s competitor, Sterling
Lumber, which now possesses New South’s proprietary, confidential
and trade secret information.”
Keener has moved for dismissal of New South’s complaint
pursuant to Rule 12(b)(1), arguing that Mississippi lacks personal
jurisdiction over Keener because Keener does not have sufficient
minimum contacts with Mississippi to comport with due process
under the Fourteenth Amendment.

The basic principles on which his

motion are based are well-settled.
Personal jurisdiction comports with due process when
first, the defendant has the requisite minimum contacts
with the forum state and second, requiring the defendant
to submit to jurisdiction in the forum state would not
infringe on “traditional notions of fair play and
substantial justice.” Asahi Metal Indus. Co. v.
Superior Court, 480 U.S. 102, 105, 107 S. Ct. 1026, 94
L. Ed. 2d 92 (1987); Internat'l Shoe Co. v. Washington,
326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945).
A non-resident defendant establishes such minimum
contacts by purposefully availing himself of the
benefits of the forum state, so that he “should
reasonably anticipate being haled into court” there.
[Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105
S. Ct. 2174, 2182 (1985)]; World–Wide Volkswagen Corp.
v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 62 L. Ed.
2d 490 (1980).
Personal jurisdiction may be “specific” or
“general”. For specific personal jurisdiction, a
plaintiff makes a prima facie showing of minimum
3

contacts when his claim arises from the defendant's
contact with the forum. Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80
L. Ed. 2d 404 (1984). For general personal
jurisdiction, a plaintiff makes the requisite showing
when that defendant's contacts are “continuous and
systematic,” so that the exercise of jurisdiction is
proper irrespective of the claim's relationship to the
defendant's contact with the forum. Perkins v. Benguet
Consol. Mining Co., 342 U.S. 437, 72 S. Ct. 413, 96 L.
Ed. 485 (1952).
Companion Property and Cas. Ins. Co. v. Palermo, 723 F.3d 557, 559
-60 (5th Cir. 2013).

Keener contends, and New South does not

dispute, that he has not had sufficient contacts with Mississippi
to be subject to general jurisdiction in Mississippi.

Beyond

that, while Keener implicitly acknowledges he had significant
contacts with Mississippi in connection with his employment with
New South, he argues that the present cause of action does not
arise out of those contacts; and he maintains that he has had no
contacts with Mississippi related to the alleged breach of the
Agreement, upon which all of New South’s claims are based.

In the

court’s opinion, however, it is immaterial whether Keener had
sufficient contacts with Mississippi to support an exercise of
specific jurisdiction, as he has consented to personal
jurisdiction in this forum.
The parties’ Confidentiality and Non-Solicitation Agreement
includes a forum selection clause, which states:
(a) Governing Law. The employment relationship between
the parties, including but not limited to this
Agreement, shall be governed by and construed in all
4

respects in accordance with the laws of the State of
Mississippi, and any suit or action arising out of or in
connection with same employment relationship or its
termination, or this Agreement or any breach hereof,
shall be brought and maintained in the federal or state
courts of Madison County, Mississippi, and the parties
consent to said venue and jurisdiction. ...
Personal jurisdiction can be waived by an enforceable forum
selection clause in which the parties consent to personal
jurisdiction in a specified forum.
n.14.

Rudzewicz, 471 U.S. at 473

The Court in Rudzewicz stated:

[B]ecause the personal jurisdiction requirement is a
waivable right, there are a “variety of legal
arrangements” by which a litigant may give “express or
implied consent to the personal jurisdiction of the
court.” Insurance Corp. of Ireland v. Compagnie des
Bauxites de Guinee, [456 U.S. 694, 702, 102 S. Ct. 2099,
2105, 72 L. Ed. 2d 492 (1982)]. For example,
particularly in the commercial context, parties
frequently stipulate in advance to submit their
controversies for resolution within a particular
jurisdiction. See National Equipment Rental, Ltd. v.
Szukhent, 375 U.S. 311, 84 S. Ct. 411, 11 L. Ed. 2d 354
(1964). Where such forum-selection provisions have been
obtained through “freely negotiated” agreements and are
not “unreasonable and unjust,” The Bremen v. Zapata
Off-Shore Co., 407 U.S. 1, 15, 92 S. Ct. 1907, 1916, 32
L. Ed. 2d 513 (1972), their enforcement does not offend
due process.
Rudzewicz, 471 U.S. at 473, 105 S. Ct. 2174.

See Sunday Riley

Modern Skin Care, L.L.C. v. Maesa, Civ. Action No. H–12–1650, 2013
WL 5231860, at *7 (S.D. Tex. Sept. 12, 2013) (“A party who signs a
contract with a forum selection clause has either consented to
personal jurisdiction or waived the requirements for personal
jurisdiction in a selected forum where the clause was obtained

5

through freely negotiated agreements and is not unreasonable or
unjust.”) (citing Rudzewicz, 471 U.S. at 473, 472 n.14).
The Fifth Circuit has repeatedly recognized that mandatory
forum selection clauses such as that at issue here are presumed to
be valid and enforceable,1 so that the party seeking to bar
enforcement bears the heavy burden of demonstrating that the
clause is unreasonable under the circumstances.

Afram Carriers,

Inc. v. Moeykens, 145 F.3d 298, 301 (5th Cir. 1998).

The Fifth

Circuit has identified four bases for concluding that a forum
selection clause is unreasonable:
(1) the incorporation of the forum selection clause into
the agreement was the product of fraud or overreaching;
(2) the party seeking to escape enforcement “will for
all practical purposes be deprived of his day in court”
because of the grave inconvenience or unfairness of the
selected forum; (3) the fundamental unfairness of the
chosen law will deprive the plaintiff of a remedy; or
(4) enforcement of the forum selection clause would
contravene a strong public policy of the forum state.
Calix–Chacon v. Global Intern. Marine, Inc., 493 F.3d 507, 511
(5th Cir. 2007) (citing Haynsworth v. Corp., 121 F.3d 956, 963
(5th Cir. 1997)).
Keener argues that the forum selection clause at issue here
is unenforceable because the Confidentiality and Non-Solicitation
Agreement is void as against public policy and because it would be
1

The forum selection clause at issue here is
unquestionably mandatory, as it states that “[a]ny suit or action
arising out of ... this Agreement or any breach hereof, shall be
brought and maintained in the federal or state courts of Madison
County, Mississippi.” (Emphasis added).
6

inconvenient and unfair for him to be hailed into court in
Mississippi.
Importantly, Keener does not contend that forum selection
clauses are against Mississippi public policy, and in fact they
are not.

On the contrary, the Mississippi Supreme Court has

explicitly ruled that forum selection clauses are presumptively
valid and will be enforced unless the party challenging the clause
can show:
1. Its incorporation into the contract was the result of
fraud, undue influence or overweening bargaining power;
2. The selected forum is so gravely difficult and
inconvenient that the resisting party will for all
practical purposes be deprived of its day in court; or
3. The enforcement of the clause would contravene a
strong public policy of the forum in which the suit is
brought, declared by statute or judicial decision.
Titan Indem. Co. v. Hood, 895 So. 2d 138, 145-46

(Miss. 2004)

(citing Zapata, 407 U.S. at 12-13, 92 S. Ct. 1907)).

Keener’s

position is instead that the Agreement which contains the forum
selection clause is itself void as against public policy and that
the forum selection clause is consequently unenforceable.
However, the Fifth Circuit has made clear that a court determining
whether or not to enforce a forum selection clause will not
inquire into the enforceability of the contract in which that
clause is found.

In Afram Carriers, the court explained:

“The burden of proving unreasonableness (of a forum
selection clause) is a heavy one, carried only by a
7

showing that the clause results from fraud or
overreaching, that it violates a strong public policy,
or that enforcement of the clause deprives the plaintiff
of his day in court.” Mitsui, 111 F.3d at 35 (emphasis
added) (citing THE BREMEN, 407 U.S. at 12-13, 15, 18, 92
S. Ct. at 1914-17). Allegations that the entire
contract was procured as the result of fraud or
overreaching are “inapposite to our [forum-selection
clause] enforceability determination, which must ...
precede any analysis of the merits [of the contract's
validity].” Haynsworth v. The Corporation, 121 F.3d
956, 964 (5th Cir. 1997) (citation omitted), cert.
denied, 523 U.S. 1072, 118 S. Ct. 1513, 140 L. Ed. 2d
666 (1998).
145 F.3d 298, 301 (5th Cir. 1998).

Accordingly, Keener’s objection

to enforceability on public policy grounds fails.
Keener asserts, alternatively, that the forum selection
clause is unenforceable because “it would be inconvenient and
unfair for [him] to be hailed from his home state of Wisconsin
into Mississippi courts.”

Keener does not elaborate on this

assertion, which is hardly sufficient to sustain his burden to
establish that his being forced to trial in Mississippi would
effectively deprive him of his day in court.

The Supreme Court

has explained that to carry one’s “heavy burden” to demonstrate
that a forum selection clause is unenforceable based on
inconvenience, it is not enough to show only that “the balance of
convenience is strongly in favor of trial in [another forum] (that
is, that it will be far more inconvenient for [defendant] to
litigate [in Mississippi] than it will be for [plaintiff] to
litigate [elsewhere, presumably Wisconsin]), but [he must also

8

show] that a [Mississippi] trial will be so manifestly and gravely
inconvenient to [defendant] that [he] will be effectively deprived
of a meaningful day in court....”

Zapata, 407 U.S. at 19, 92 S.

Ct. 1907; Jimmie Lyles Carpets, Inc. v. Munlake Contractors, Inc.,
Civ. Action No. 5:11–cv–85(DCB)(JMR), 2012 WL 2222857, at *3 (S.D.
Miss. June 14, 2012) (stating that “[t]o meet the heavy burden
required to overcome the presumption that a forum selection clause
is valid, plaintiff must show that it is an impossibility for her
to try her case, not simply a less convenient or effective means
of doing so”); Titan Indemnity Co., 895 So. 2d at 147 (stating
that “mere reference to the expense the litigant may incur to
litigate the matter in another forum does not meet the burden of
proof”).

Keener has offered no other basis for invalidating or

refusing to enforce the forum selection clause to which he agreed
and his motion to dismiss for lack of personal jurisdiction will
therefore be denied.
Keener has also moved pursuant to Rule 12(b)(6) to dismiss
certain counts of the complaint.

Specifically, he argues, first,

that Count II (Violation of the Computer Fraud and Abuse Act)
should be dismissed because New South has not alleged the
requisite statutory elements of: (i) a “loss” in excess of $5,000;
(ii) “damage” to New South; and (iii) a “transmission” by Keener.
Further, he argues that Count IV (Conversion) and Count VI (Demand
for Accounting and Disgorgement of Unjust Enrichment) should be
9

dismissed because both of these counts are preempted by the
Mississippi Uniform Trade Secrets Act.

Finally, he argues that

Count I (Injunctive Relief) and Count VII (Punitive damages)
should be dismissed because neither of these counts is a
recognized cause of action under Mississippi law.

The court

considers each argument in turn.
In Count II of the complaint, New South alleges violations by
Keener of the Computer Fraud and Abuse Act (CFAA), 18 U.S.C.
§ 1030.

Specifically, it alleges that Keener violated:

18 U.S.C. § 1030(a)(5)(A)(i) of the CFAA by knowingly
causing the transmission of New South’s proprietary,
confidential and trade secret information downloaded
from New South’s computers, which are protected
computers as defined in 18 U.S.C. § 1030(e)(2)(B).... By
accessing, collecting and transmitting New South’s
proprietary, confidential and trade secret information,
Keener intentionally caused damage to New South and to
New South’s computers without authorization by impairing
the integrity of information and/or data.”
It also alleges that he violated:
18 U.S.C. § 1030(a)(5)(A)(iii) by intentionally
accessing New South’s computers, which are protected as
defined in 18 U.S.C. § 1030(e)(2)(B) ..., without
authorization, and as a result caused damage to New
South by impairing the integrity of the information
and/or data.
New South avers, finally, that it suffered loss by reason of
Keener’s alleged violations of CFAA, “including, without
limitation, expenses incurred in technical evaluation by IT
service providers to evaluate the breach of New South’s computer

10

systems and equipment and to determine what data was taken by
Keener, and the violation of the right of privacy.”
The CFAA proscribes certain fraudulent or damaging activities
related to the use of computers.

As potentially relevant here, a

violation of the CFAA occurs when one:
(2) intentionally accesses a computer without
authorization or exceeds authorized access, and thereby
obtains–
...
(C) information from any protected computer.
...
(5)(A) knowingly causes the transmission of a program,
information, code, or command, and as a result of such
conduct, intentionally causes damage without
authorization, to a protected computer;
(B) intentionally accesses a protected computer without
authorization, and as a result of such conduct,
recklessly causes damage; or
(C) intentionally accesses a protected computer without
authorization, and as a result of such conduct, causes
damage and loss.
18 U.S.C. § 1030(a).2
2

Keener notes in his motion that while New South’s
complaint identifies §§ 1030(a)(5)(A)(i) and (iii) as the CFAA
sections that were allegedly violated, there are no such sections
in the CFAA. Keener speculates that New South likely intended to
allege violations of §§ 1030(a)(5)(A) and (C) since those are the
provisions to which New South’s allegations appear to correlate;
and its argument for dismissal proceeds on the basis of this
supposition. It is not apparent to the court that this was New
South’s intention as it seems just as likely that New South has
undertaken to allege a violation of § 1030(a)(2)(C), in addition
to one or more subsections of § 1030(a)(5). Inexplicably, New
South has not acknowledged its pleading error or addressed this
issue in its response. However, that omission is of no moment,
since in the court’s opinion, no claim is stated under any of
these potentially applicable provisions.
11

While “the CFAA is primarily a criminal statute, § 1030(g)
provides a civil cause of action in limited circumstances.”
Garland–Sash v. Lewis, No. 05–6827(WHP), 2012 WL 6188712, at *2
(S.D.N.Y. Dec. 6, 2011); 18 U.S.C. § 1030(g)(providing that “[a]ny
person who suffers damage or loss by reason of a violation of this
section may maintain a civil action against the violator to obtain
compensatory damages and injunctive relief or other equitable
relief.”).

“The elements of a private cause of action under this

statute are complex:
a civil action under subsection 1030(g) of the CFAA
requires; (1) establishing the elements of the
particular substantive (criminal) offense under
subsection 1030(a); (2) establishing that the plaintiff
suffered “damage or loss” as a result of such a
violation (although some, but not all, such offenses
themselves already require “damage” and one now requires
“damage and loss”); and (3) establishing one of the five
types of conduct specified under subsection
(c)(4)(A)(i), which are also required under subsection
1030(g) (some of which might also constitute “damage” or
“loss”).”
Nyack Hosp. v. Moran, No. 08–11112(SCR)(PED), 2010 WL 4118355, at
*6 (S.D.N.Y. June 1, 2010) (quoting Czech v. Wall St. on Demand,
Inc., 2009 U.S. Dist. LEXIS 114125, at *18–19 (D.Minn. Dec. 8,
2009)).
To the extent that New South has attempted to assert a claim
based on the alleged violation of any of the subparts of
§ 1030(a)(5), no claim is stated as each of these provisions
requires damage as an element of the claim, and no damage is

12

alleged.

Subsection 1030(e)(8) defines “damage” as “any

impairment to the integrity or availability of data, a program, a
system, or information.”

In construing the term “damage,” courts

have consistently held that “damage” refers to “the destruction,
corruption, or deletion of electronic files, the physical
destruction of a hard drive, or any ‘diminution in the
completeness or usability of the data on a computer system.’” See
TriTeq Lock & Sec. LLC v. Innovative Secured Solutions, LLC, Civ.
Action No. 10 CV 1304, 2012 WL 394229, at *6 (N.D. Ill. Feb. 1,
2012) (citing cases); Condux Intern. Inc. v. Haugum, No. 08-4824
ADM/JSM, 2008 WL 5244818, at *7 (D. Minn. Dec. 15, 2008) (relying
on the definition of “integrity” (“wholeness” or “soundness”) to
conclude that the CFAA’s definition of damage requires “some
diminution in the completeness or useability of data or
information on a computer system”).

“[T]he mere copying of

electronic information from a computer system is not enough to
satisfy the CFAA’s damage requirement.”

Compare Farmers Ins.

Exch. v. Auto Club Group, No. 11C1332, 2011 WL 4888889, at *4
(N.D. Ill. Oct. 13, 2011).

See also Landmark Credit Union v.

Doberstein, 746 F. Supp. 2d 990, 993-94 (E.D. Wis. 2010)
(“[S]eemingly every court in this circuit that has interpreted the
meaning of the word ‘damage’ in the CFAA has held that damage does
not encompass harm from the mere disclosure of information and the
CFAA is not intended to expansively apply to all cases where a
13

trade secret has been misappropriated by use of a computer”)
(internal quotations omitted).
New South alleges that Keener “access[ed] New South’s
computers ... without authorization ... and as a result caused
damages.”

Clearly, there is no basis for concluding that “damage”

resulted from Keener’s merely accessing the computers.

New South

further declares that by “accessing, collecting and transmitting
New South’s proprietary, confidential and trade secret
information, ... Keener intentionally caused damage to .... New
South’s computers ... by impairing the integrity of information
and/or data.”

Yet there is nothing in the complaint’s factual

allegations to indicate that Keener did more than copy files and
transmit information.
files.

There is no allegation that he deleted

The reference to Keener’s actions as “impairing the

integrity of information and/or data” “essentially parrots the
statutory language and is insufficiently factual to frame
plausibly the damages element of defendant's CFAA claim.”

Bashaw

v. Johnson, No. 11–2693–JWL, 2012 WL 1623483, at *1-3 (D. Kan. May
9, 2012) (holding that conclusory allegation that claimant “has
been damaged,” unaccompanied by allegation as to the nature of
such damage, and further assertion that “data was erased” without
identification of the data that was allegedly erased, insufficient
to state CFAA claim); see also TriTeq Lock, 2012 WL 394229, at *6
(holding that plaintiff did not sufficiently allege “damage” for
14

purposes of CFAA claim where complaint alleged only that defendant
caused damage but failed to allege any facts “to give color to
this bare assertion of damage”); Ipreo Holdings LLC v. Thomson
Reuters Corp ., No. 09 Cv. 8099(BSJ), 2011 WL 855872, at *7
(S.D.N.Y. Mar. 8, 2011) (stating that complaint must allege with
some particularity “damage” as defined by the CFAA); Fink v. Time
Warner Cable, No. 08 Civ. 9628(LTS)(KNF), 2009 WL 2207920, at *4
(S.D.N.Y. July 23, 2009) (dismissing CFAA claim where plaintiff
alleged only that defendant caused damage by impairing the
availability of data).

Accordingly, the court finds that New

South has not sufficiently pled a claim for “damage” under
§ 1030(a)(5).3
Arguably, in addition to undertaking to state a claim for
relief based on an alleged violation of § 1030(a)(5), New South
has attempted to state a claim based on an alleged violation of
§ 1030(a)(2)(C), which prohibits “intentionally access[ing] a
computer without authorization or exceed[ing] authorized access,
and thereby obtain[ing] ... information from any protected
computer.”

Keener does not address this provision specifically in

its motion, but he does argue more generally that New South has
failed to state a cognizable claim for any violation of the CFAA
because it has failed to allege that it sustained any “loss” or
3

The court thus does not address Keener’s further
argument that New South has failed to allege a “transmission,” as
required to state a claim under 18 U.S.C. § 1030(a)(5)(A).
15

“damages” in excess of $5,000, which is a condition precedent to
bringing suit under the CFAA.

Indeed, in order to bring any civil

action under the CFAA, New South must show not only that it
suffered “damage” or “loss” by a defendant's alleged actions, but
such damage or loss must meet the $5,000 minimum statutory
threshold set forth in 18 U.S.C. § 1030(c)(4)(A)(i)(I).

See 18

U.S.C § 1030(c)(4)(A)(i)(I) (requiring that the plaintiff suffer a
“loss ... during any 1–year period ... aggregating at least $5,000
in value”); see also Register.com, Inc. v. Verio, Inc., 356 F.3d
393, 439-40 (2d Cir. 2004) (joining “(near) unanimous view that
any civil action under the CFAA involving ‘damage or loss,’ ...
must satisfy the $ 5,000 threshold”).4
New South alleges that it suffered loss by reason of Keener’s
alleged violations of CFAA, “including, without limitation,
expenses incurred in technical evaluation by IT service providers
to evaluate the breach of New South’s computer systems and
4

To state a claim under § 1030(a)(2)(C), New South need
not plead or prove that it sustained “damage,” but it must plead
and prove that it suffered a “loss” that meets the $5,000
statutory threshold. However, to state a claim under
§ 1030(a)(5), New South must plead and prove both that it
sustained “damage” and that such “damage” caused “loss aggregating
at least $5,000 in value during any 1–year period to one or more
individuals ....” Register.com, Inc. v. Verio, Inc., 356 F.3d
393, 439-440 (2d Cir. 2004) (quoting 18 U.S.C. § 1030(e)(8)).
Thus, even if New South had alleged facts that would support its
claim that Keener’s alleged actions resulted in “damage,” as that
term is defined by the CFAA, the court would still find that it
has failed to state a claim upon which relief can be granted since
there is no allegation that such “damage” caused a loss of at
least $5,000.
16

equipment and to determine what data was taken by Keener, and the
violation of the right of privacy.”

However, it has neither

alleged that it has sustained a loss of at least $5,000 nor pled
facts that would support a conclusion that it has suffered loss
totaling at least $5,000.

It has thus plainly failed to state a

claim for relief under the CFAA.

See Fontana v. Corry, Civil

Action No. 10–1685, 2011 WL 4473285, at *10 (W.D. Pa. Aug. 30,
2011) (holding that “generalized allegation of damage and loss in
excess of $5,000 during a one-year period is insufficient to plead
the requisite jurisdictional amount under the CFAA”); Oce North
America, Inc. v. MCS Servs., Inc., 748 F. Supp. 2d 481, 488 (D.
Md. 2010) (finding plaintiff’s allegation that it “has suffered
impairment to the integrity or availability of its data, programs,
systems and information resulting in losses or damages in excess
of $5000 during a one year period” to be merely conclusory and
insufficient to plead the $5000 minimum damages requirement to
bring suit under the CFAA).

Count II will be dismissed.

Keener next seeks dismissal of New South’s claims for
conversion and for accounting/unjust enrichment (set forth as
Counts IV and VI) on the basis that such claims are are preempted
by the Mississippi Uniform Trade Secrets Act (MUTSA), Miss. Code
Ann. § 75-26-1 se seq.

MUTSA creates a cause of action for the

misappropriation of another's trade secrets when those secrets are
accessed by improper means.

By its express terms, the MUTSA
17

preempts “conflicting tort, restitutionary and other law of this
state providing civil remedies for misappropriation of a trade
secret.”

Miss. Code Ann. § 75-26-15(1).

However, the Act’s

preemptive reach does not extend to “[o]ther civil remedies that
are not based upon misappropriation of a trade secret....”

Id.

§ 75-26-15(1)(b).
In his motion, Keener argues that New South’s claims for
conversion and accounting/unjust enrichment are preempted by MUTSA
as those claims are factually premised on the same conduct that
underlies New South’s misappropriation of trade secrets claim.
New South argues in response that its claim for Keener’s alleged
conversion of trade secrets is not preempted by MUTSA since it can
prove the elements of its conversion claim without establishing
the elements of a misappropriation claim.

In Fred's Stores of

Mississippi, Inc. v. M & H Drugs, Inc., 725 So. 2d 902 (Miss.
1998),5 the only Mississippi case concerning Mississippi’s Uniform
Trade Secrets Act, the court cited with approval the opinion of

5

In its reply, Keener does not address this argument,
taking the position that “New South ... apparently concedes that
its conversion claim is preempted to the extent it is based on
Keener‘s alleged misappropriation of trade secrets.” In fact, New
South did not concede this and instead, plainly states in its
response that “MUSTA [sic] also does not preempt New South’s
conversion claim with respect to its trade secrets.”
However, the court notes that New South did not address
Keener’s preemption argument as it applies to New South’s
accounting/unjust enrichment claim. Keener asserts, and the court
is inclined to agree, that based on this failure, New South may
fairly be said to have confessed the motion as to this count.
18

the Virginia district court in Smithfield Ham and Products Co.,
Inc. v. Portion Pac, Inc., 905 F. Supp. 346, 348 (E.D. Va. 1995),
which held that a tort claim will not be preempted by the Uniform
Trade Secrets Act if the plaintiff is “able to show that the
distinct theories of relief sought are supported by facts
unrelated to the misappropriation of the trade secret.”
Smithfield Ham, 905 F. Supp. at 348-49.

The court in Fred’s

Stores thus concluded that where a claim can “stand alone and
withstand summary judgment even without [the plaintiff] proving
that the [property at issue] was a trade secret,” there is no
preemption.

Fred's Stores, 725 So. 2d at 908.

The court in Fred’s Stores did not consider the specific
issue presented here.

However, in Smithfield, upon which the

court in Fred’s Stores relied, the court observed that “[t]he
plain language of the preemption provision indicates that the law
was intended to prevent inconsistent theories of relief for the
same underlying harm by eliminating alternative theories of common
law recovery which are premised on the misappropriation of a trade
secret.”

Smithfield, 905 F. Supp. at 348.

See also K.F. Jacobsen

& Co., Inc. v. Gaylor, Case No. 3:12–CV–2062–AC, 2013 WL 2318853,
at *7 (D. Or. May 28, 2013)(stating that “[w]here the essence of
the claim relates primarily to the alleged misappropriation of a
trade secret, the claim is displaced by the preemptive language of
the Trade Secrets Act”); Mortgage Specialists, Inc. v. Davey, 153
19

N.H. 764, 775 (N.H. 2006) (holding that claim will be preempted
when it is “based solely on, or to the extent [that it is] based
on, the allegations or the factual showings of unauthorized use of
... information or misappropriation of a trade secret”).
Consistent with this purpose, courts that have considered the
issue, with one exception, have been consistent in holding that a
claim for conversion of trade secrets is preempted by the Uniform
Trade Secrets Act.6

In this case, New South’s claim for

6

The only case that has found a claim for conversion of
trade secrets is not preempted is J.T. Shannon Lumber Co., Inc. v.
Gilco Lumber, Inc., Cause No. 2:07CV119–SA–SAA, 2010 WL 234996, at
*8 (N.D. Miss. Jan. 15, 2010) (“Plaintiff's conversion of trade
secrets claim is not preempted.”). With respect, the court must
disagree. Every other court considering the issue has held to the
contrary. See K.F. Jacobsen & Co., Inc. v. Gaylor, Case No.
3:12–CV–2062–AC, 2013 WL 2318853, at *7 (D. Or. May 28, 2013)
(“[Oregon] Trade Secrets Act preempts conversion claims based on
alleged misappropriation of trade secrets”); Madison Oslin, Inc.
v. Interstate Resources, Inc., No. 2:11–cv–01343–SLB, 2012 WL
4730877, at *9 (N.D. Ala. Sept. 30, 2012) (conversion claim based
on alleged “‘wrongful use and benefit of plaintiffs' ‘novel idea,
trade secrets and/or other confidential information’ ... is
preempted because ‘the factual basis for this claim is essentially
the same as the one for the ATSA claim’”) (citation omitted);
Global Advanced Metals USA, Inc. v. Kemet Blue Powder Corp., No.
3:11–cv–00793–RCJ–VPC, 2012 WL 3884939, at *5 (D. Nev. Sept. 6,
2012) (claim for conversion was preempted as it was “base[d] upon
the alleged misappropriation of trade secrets”); Nova Design
Technologies, Ltd. v. Walters, 875 F. Supp. 2d 458 (E.D. Pa. 2012)
(conversion claim based on trade secret misappropriation preempted
by UTSA); Miami Valley Mobile Health Servs., Inc. v. ExamOne
Worldwide, Inc., 852 F. Supp. 2d 925, 940-41 (S.D. Ohio 2012)
(conversion claim based on defendant’s wrongful taking of “names,
addresses, or phone numbers of Plaintiffs' business contacts,” was
based on same operative facts as USTA claim and was thus preempted
by UTSA); B & F Sys., Inc. v. LeBlanc, Civ. No. 7:07–CV–192 (HL),
2011 WL 4103576, at *27 (M.D. Ga. Sept. 14, 2011) (conversion
claim preempted by GTSA where basis for claim, i.e. that
defendants allegedly took plaintiff’s proprietary information, was
20

same as its misappropriation of trade secrets claim); BlueEarth
Biofuels, LLC v. Hawaiian Elec. Co., 780 F. Supp. 2d 1061, 1080-81
(D. Hawaii 2011) (claim preempted by HUTSA “to the extent that
Plaintiff relies on Aloha's solicitation of business from
BlueEarth's clients by using its confidential proprietary
information to establish conversion”); Hallmark Cards v. Monitor
Clipper Partners, 757 F. Supp. 2d 904, 917 (W.D. Mo. 2010) (claim
for conversion would be preempted by MUTSA if the information
constituted a trade secret); Ultimate Timing, L.L.C. v. Simms, 715
F. Supp. 2d 1195, 1208 (W.D. Wash. 2010) (tort claim preempted
where facts alleged to support claim are the same as those that
support the UTSA claim); T.D.I. Intern., Inc. v. Golf
Preservations, Inc., Civ. Action No. 6:07-313-DCR, 2008 WL 294531,
at *6 (E.D. Ky. Jan. 31, 2008) (conversion claim would be
preempted by KUTSA where plaintiffs' allegations center
exclusively on the defendants' alleged unauthorized use of
plaintiff’s trade secrets); Polar Molecular Corp. v. Amway Corp.,
No. 1:07–CV–460, 2007 WL 3473112, at *7 (W.D. Mich. Nov. 14, 2007)
(conversion claim was based solely upon the theft or misuse of a
trade secret preempted by Michigan UTSA); Hauck Mfg. Co. v. Astec
Indus., Inc., 375 F. Supp. 2d 649 (E.D. Tenn. 2004) (conversion
claim against former employee who took documents with him when he
went to work for competitor was preempted under TUSTA where
documents derived their primary, if not entire, value from trade
secrets contained therein); AutoMed Techs., Inc. v. Eller, 160 F.
Supp. 2d 915, 922 (N.D. Ill. 2001) (conversion claim preempted by
the Illinois UTSA where it was “really just another way of
charging that defendants took AutoMed's secret information”);
Powell Prods., Inc. v. Marks, 948 F. Supp. 1469, 1475 (D. Colo.
1996) (UTSA preempted manufacturer's conversion claim only to the
extent the claim was based on the conversion or theft of the
manufacturer's idea or “trade secrets”); Silvaco Data Sys. v.
Intel Corp., 184 Cal. App. 4th 210, 238, 109 Cal. Rptr. 3d 27
(2010) (“[i]f the only arguable property identified in the
complaint is a trade secret, and the only basis for any property
right is trade secrets law, then a conversion claim predicated on
the theft of that property is unquestionably ‘based upon
misappropriation of a trade secret’ and the conversion claim is
preempted”); HDNet LLC v. North Am. Boxing Council, 972 N.E.2d
920, 927 (Ind. Ct. App. 2012) (claim for conversion of trade
secrets preempted); Mortgage Specialists, Inc. v. Davey, 153 N.H.
764, 775 (N.H. 2006) (claim for conversion of trade secrets
preempted); R.K. Enter., LLC v. Pro-Comp Mgmt., Inc., 356 Ark.
565, 574, 158 S.W.3d 685, 690 (Ark. 2004) (claim for damages for
conversion preempted as such claim stemmed from same acts
constituting a violation of UTSA); cf. Nucor Corp. v. Bell, 482 F.
21

conversion of trade secrets is premised on the same facts as its
claim for misappropriation of trade secrets.

The court therefore

concludes that to the extent that New South’s claim is for
conversion of information that is properly classified as trade
secrets, the claim is preempted.
In its response, New South points out that it has alleged
that in addition to seeking relief for conversion of trade
secrets, it has also alleged that Keener converted confidential
and proprietary information, and it submits that the conversion
claim, to the extent it is based on the conversion of confidential
and proprietary information, is not preempted by MUTSA.

Most of

the courts that have considered this issue hold that UTSA
preemption extends to claims for the misappropriation of
confidential or proprietary information that does not qualify as
trade secrets.
Supp. 2d 714, 726-27 (D.S.C. 2007) (summary judgment denied since
“only claims purporting to provide a remedy for the
misappropriation of ‘trade secrets’ are preempted” and fact issue
was presented as to whether misappropriated information was “trade
secrets”); Russo v. Ballard Med. Prods., No. 2:05 CV 59, 2006 WL
2345868, at *10 (D. Utah Aug. 10, 2006) (dismissal denied as it
was “too early to know if [the plaintiff’s] conversion and unjust
enrichment claims [were] ‘based upon misappropriation of a trade
secret’ and therefore preempted”); Callaway Golf Co. v. Dunlop
Slazenger Group Americas, Inc., 318 F. Supp. 2d 216, 219-20 (D.
Del. 2004) (“if a fact finder were to find that the processes and
formulas ... are Dunlop's trade secrets ... then Dunlop's common
law claims for conversion and unjust enrichment are preempted
....”); Int'l Paper Co. v. Gilliam, 63 Va. Cir. 485, 490 (Va. Cir.
Ct. 2003) (“VUSTA does not preempt alternative tort recovery
unless it is clear that the price list falls within the confines
of the Act,” i.e. constitutes a trade secret).
22

[This] line of cases holds that determining whether the
allegedly misappropriated information constitutes a
trade secret is irrelevant for preemption purposes
because the UTSA preempts all claims based upon the
unauthorized use of information, even if the information
does not meet the statutory definition of a trade
secret.” Mediware Information Sys., Inc. v. McKesson
Information Solutions, LLC, 2007 WL 926142, *2 (D. Kan.
Mar. 26, 2007) (declining to address the issue because
the tortious interference claims alleged by the
plaintiff are not “based upon misappropriation of a
trade secret” and thus are not preempted). See, e.g.,
AirDefense, Inc. v. AirTight Networks, Inc., 2006 WL
2092053, *3 (N.D. Cal. July 26, 2006) (agreeing with
“multiple federal courts” that claims based on the same
factual allegations as the claim for misappropriation of
trade secrets are preempted and evaluating claims when
ruling on a motion to dismiss); Mortgage Specialists,
Inc. v. Davey, 904 A.2d 652, 664 (N.H. 2006); Ethypharm
S.A. France v. Bentley Pharms., Inc., 388 F. Supp. 2d
426, 433 (D. Del. 2005) (“Because all claims stemming
from the same acts as the alleged misappropriation are
intended to be displaced, a claim can be displaced even
if the information at issue is not a trade secret.”);
Savor, Inc. v. FMR Corp., 812 A.2d 894, 898 (Del. 2002)
(upholding the district court's determination that
common law claims based on “the same alleged wrongful
conduct as the trade secrets claims” are precluded);
Thomas & Betts Corp. v. Panduit Corp., 108 F. Supp. 2d
968, 971 (N.D. Ill. 2000) (rejecting an argument that
“preemption is improper because the confidential
information taken by [defendant] may not rise to the
level of a trade secret,” and explaining that this
“theory would render [the displacement provision]
meaningless, for it would forbid preemption of state law
claims until a final determination has been made with
respect to whether the confidential information at issue
rises to the level of a trade secret”); Glasstech, Inc.
v. TGL Tempering Sys., Inc., 50 F. Supp. 2d 722, 730
(N.D. Ohio 1999).
Chatterbox, LLC v. Pulsar Ecoproducts, LLC, No. CV 06–512–S–LMB,
2007 WL 1388183, at *2-3
as the majority view).

(D. Idaho May 9, 2007) (describing this

Mattel, Inc. v. MGA Entertainment, Inc.,

23

782 F. Supp. 2d 911 (C.D. Cal. 2011), is representative of the
reasoning of these courts.

In Mattel, the court opined that

allowing the plaintiff to claim to maintain a claim for conversion
of non-trade secret confidential information would undermine the
courts’ interest in redeeming the UTSA’s purpose of “provid[ing]
unitary definitions of trade secret and trade secret
misappropriation,” id. at 996-97 (internal quotation marks and
citations omitted).

See also Silvaco Data Sys. v. Intel Corp.,

184 Cal. App. 4th 210, 239 n.22, 109 Cal. Rptr. 3d 27 (2010) (“We
emphatically reject the [] suggestion that the uniform act was not
intended to preempt ‘common law conversion claims based on the
taking of information that, though not a trade secret, was
nonetheless of value to the claimant.’”) (quoting Cenveo v.
Slater, Civ. Action No. 06-CV-2632, 2007 WL 527720, at *4 (E.D.
Pa. Feb. 12, 2007)).

It further reasoned that

a claim for conversion requires the existence of a
property right, and “information is not property unless
some law makes it so.” Silvaco, 184 Cal. App. 4th at
239, 109 Cal. Rptr. 3d 27. [The plaintiff] cannot
“identif[y] any property right” in its confidential
information “outside of trade secrets law,” because no
such property right exists under California law. Id.
Mattel, 782 F. Supp. 2d at 997.
In J.T. Shannon Lumber Co., Inc. v. Gilco Lumber, Inc., Cause
No. 2:07CV119–SA–SAA, 2010 WL 234996 (N.D. Miss. Jan. 15, 2010),
in response to the defendant’s argument that the plaintiff’s claim
for conversion of alleged trade secrets was preempted by MUTSA,
24

the court ruled that “the plaintiff’s claim for conversion
fail[ed],” reasoning that a claim for conversion requires “proof
of a wrongful possession, or the exercise of a dominion in
exclusion or the defiance of the owner's right, or of an
unauthorized and injurious use, or of a wrongful detention after
demand[,]” id. at 8 (quoting Wilson v. GMAC, 883 So. 2d 56, 68
(Miss. 2004)), and that “[t]o the extent that this Court has ruled
that information is not a trade secret, J.T. Shannon can not prove
any ownership right in such information,” id.

It is not clear

whether the court in Gilco considered the conversion claim (to the
extent it was based on non-trade secret information)7 to be
preempted or rather to be without merit.
Regardless, in the case at bar, it appears that while
plaintiff’s complaint references Keener’s wrongful taking and
disclosure of “confidential information,” “business information”
and “proprietary information,” the nature of the information which
the complaint identifies as having been taken is trade secrets.
In Unified Brands, Inc. v. Teders, 868 F. Supp. 2d 572 (S.D. Miss.
2012), the plaintiff Unified Brands alleged that it owned
confidential and proprietary information, which included product
pricing and customer-related information.

The court observed that

“[t]his type of information has been found to be trade secrets for
7

The court clearly held that the claim was preempted to
the extent it was based on trade secret information. See supra
note 6.
25

the purpose of the MUTSA,” id. at 583 (citing Union Nat'l Life
Ins. Co. v. Tillman, 143 F. Supp. 2d 638, 644 (N.D. Miss. 2000)
(finding that information regarding the plaintiff's business
methods and procedures as well as business accounts which included
the names of its customers, were trade secrets for the purposes of
the MUTSA); Fred's Stores, 725 So. 2d at 911 (finding the
plaintiff's master customer list was a trade secret for the
purposes of the MUTSA)); and it held that based on allegations
that the defendant Teders had obtained, i.e., made copies of, said
proprietary and confidential information when he knew he was
planning to leave his employment with Unified and begin working
for a competitor and that he later disclosed information, “Unified
ha[d] alleged a plausible MUTSA claim.”

Id. at 583-84.

In the case at bar, New South alleges, similar to the
plaintiff in Unified, that Keener converted its “confidential,
proprietary, business information and trade secrets,” which it
identifies as “all of his Outlook Contacts and New South-related
clients and vendors” and “New South’s customer list” and
information regarding “some of New South’s customers, the
availability of New South’s product” and “highly confidential
communications between New South and New South’s clients.”
Neither in the complaint nor in its response to Keener’s motion
has New South identified any non-trade secret information.
court’s opinion, New South’s conclusory charge that Keener
26

In the

converted “confidential” or “proprietary” information, without any
accompanying allegation to suggest that such information was of a
non-trade secret nature, is insufficient to state a cognizable
claim for relief.
Keener last argues in its motion that New South’s putative
claims for punitive damages and injunctive relief are due to be
dismissed since Mississippi law recognizes no cause of action for
punitive damages or injunctive relief and instead treats these as
remedies only.

In fact, although denominated as a count for

“Punitive Damages,” New South’s claim is in substance a claim for
bad faith, the remedy for which it seeks an award of punitive
damages.

The motion to dismiss this claim will be denied.

Further, in substance, the count for injunctive relief
alleges that New South is entitled to injunctive relief for
Keener’s alleged violation of the Confidentiality and NonDisclosure Agreement in order to prevent irreparable harm to New
South.

In the court’s view, regardless whether this claim for

relief should have been denominated as a separate cause of action,
the request for relief is properly before the court and the motion
to dismiss will be denied.
Based on all of the foregoing, it is ordered that Keener’s
motion to dismiss for lack of personal jurisdiction is denied, and
it is further ordered that his motion to dismiss for failure to

27

state a claim is granted except as to New South’s claims for bad
faith and injunctive relief.
SO ORDERED this 5th day of November, 2013.

/s/ Tom S. Lee
UNITED STATES DISTRICT JUDGE

28