Dichard v. Morgan et al
///ORDER granting 8 Motion to Dismis. Dichard's motion for judgment on the pleadings (doc. no. 8) is granted as to Jay-Mor's trade secrets claim without prejudice to Jay-Mor amending its counterclaim within fourteen days of the issuance of this Order." So Ordered by Magistrate Judge Andrea K. Johnstone.(vln)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Civil No. 17-CV-00338-AJ
Opinion No. 2017 DNH 243
Robert Morgan, et al.
MEMORANDUM AND ORDER
Plaintiff Michael Dichard brought this action in state court
against defendants Robert Morgan, Laureen Morgan, James Morgan, and
Jay-Mor Enterprises, Inc. (“Jay-Mor”), alleging counts stemming
from the termination of Dichard’s employment with Jay-Mor.
The defendants removed the matter here, and Jay-Mor
asserted a counterclaim against Dichard alleging, among other
things, that Dichard misappropriated Jay-Mor’s trade secrets in
violation of the Defend Trade Secrets Act of 2016, 18 U.S.C. §
1836, et seq.
See doc. no. 3 at 6.
Dichard moves for judgment on
the pleadings on this trade secrets claim.
Doc. no. 10.
Doc. no. 8.
For the reasons that follow, Dichard’s
motion is granted, albeit without prejudice to Jay-Mor filing an
amended counterclaim within fourteen days of the issuance of this
Standard of Review
“The standard of review of a motion for judgment on the
pleadings under Federal Rule of Civil Procedure 12(c) is the same
as that for a motion to dismiss under Rule 12(b)(6).”
Gutierrez v. Molina, 491 F.3d 1, 5 (1st Cir. 2007).
MarreroThe court must
accept the factual allegations in the complaint as true, construe
reasonable inferences in the plaintiff’s favor, and “determine
whether the factual allegations in the plaintiff’s complaint set
forth a plausible claim upon which relief may be granted.”
v. Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014)
(citation and quotation marks omitted).
A claim is facially
plausible “when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.”
662, 678 (2009).
Ashcroft v. Iqbal, 556 U.S.
Analyzing plausibility is “a context-specific
task” in which the court relies on its “judicial experience and
common sense.” Id. at 679.
Accepting the factual allegations set forth in Jay-Mor’s
counterclaim as true, the relevant facts are as follows.
Jay-Mor is a family-owned demolition contracting business
located in Hudson, New Hampshire.
See doc. no. 3, ¶ 6. Jay-Mor’s
services include demolition, site work, asbestos/hazardous
materials removal, surveys, and equipment and truck rental.
Jay-Mor offers its services in New Hampshire, Massachusetts,
See id. ¶ 8.
Dichard is a former employee of Jay-Mor who represented Jay-
Mor in a senior-level business development role.
Id. ¶ 9. In
exchange for his services, Jay-Mor provided Dichard with an
“unusually generous compensation package,” which was memorialized
in a contract dated September 9, 2014.
Id. ¶ 10.
responsible for identifying and developing new business
opportunities on behalf of Jay-Mor.
Id. ¶ 12.
As such, Dichard
served Jay-Mor in a position of trust and confidence and had
“unfettered” access to Jay-Mor’s confidential business information.
Id. ¶¶ 12-13.
Like other businesses in Jay-Mor’s industry, Jay-Mor relied on
a variety of confidential business information.
Id. ¶ 14.
Dichard’s employment, much of Jay-Mor’s confidential information
was stored in files pertaining to jobs on which Jay-Mor was
These files included information on how Jay-Mor
calculated its bids, cost data, overhead, and pricing-margin
information, as well as “bid worksheets” containing Jay-Mor’s
method of bidding.
Jay-Mor asserts that all of this
information was non-public and would be of tremendous value to
competitors, prospective subcontractors, vendors, and suppliers.
See id. ¶ 14.
When he was employed with Jay-Mor, Dichard and other employees
developed two large demolition project opportunities for Jay-Mor.
Id. ¶ 16.
One was located in Ayer, Massachusetts for the Pan Am
Railway (“Pan Am project”).
The other was located in Nashua,
New Hampshire for the Sacred Heart School (“Sacred Heart project”).
The estimated potential revenue for both projects exceeded $1
On or about March 2, 2017, Dichard tendered his resignation to
Jay-Mor. Id. ¶ 20.
In his resignation letter, Dichard specifically
threatened to divert the revenue from the Pan Am and Sacred Heart
projects to other demolition contractors to secure monies that he
contended were owed to him by Jay-Mor. Id. ¶ 21.
After Dichard resigned, Jay-Mor conducted an investigation and
discovered that Dichard had absconded with the confidential project
files for the Pan Am and Sacred Heart projects. Id. ¶ 22.
alleges, upon information and belief, that Dichard stole or
improperly retained additional Jay-Mor confidential information and
trade secrets when he departed.
Id. ¶ 23.
Jay-Mor later learned
that Dichard offered the Pan Am project to other demolition
Id. ¶ 24.
Jay-Mor believes that Dichard is shopping
the Pan Am and Sacred Heart projects to additional demolition
contractors, and is seeking to tie his new employer into the deal
in order to ensure that he is paid commission.
See id. ¶ 25.
Jay-Mor filed its trade secrets claim on the basis of these
Jay-Mor specifically contends that Dichard absconded
and willfully misappropriated Jay-Mor’s trade secrets and
confidential information, resulting in damages in an amount “yet to
Id. ¶¶ 44, 46, 47.
Dichard moves for judgment on the pleadings on the trade
Dichard specifically asserts that Jay-Mor has
failed to sufficiently allege: (1) that Dichard has disclosed any
confidential information to a third party; (2) that Jay-Mor took
reasonable steps to protect its information; and (3) that the
information in question constitutes a trade secret.
See doc. no.
The Defend Trade Secrets Act (“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 intended for use in, interstate or foreign
commerce.” 18 U.S.C. § 1836(b)(1).
Under the DTSA, the definition
of “trade secret” includes, inter alia, “all forms and types of
financial, business, scientific, technical, economic, or
engineering information,” provided that the owner “has taken
reasonable measures to keep such information secret” and the
information “derives independent economic value . . . 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. §
Only enacted in 2016, there is a relative paucity of case law
analyzing the elements of a claim under the DTSA.1
however, appear to be a general consensus among courts that a party
asserting a DTSA claim must sufficiently allege in its complaint
that it has taking reasonable measures or steps to keep secret the
information it believes was misappropriated.2
See, e.g., Xoran
Holdings LLC v. Luick, No. 16-13703, 2017 WL 4039178, at *6 (E.D.
Mich. Sept. 13, 2017); Deluxe Fin. Servs., LLC v. Shaw, No. CV 163065 (JRT/HB), 2017 WL 3327570, at *3 (D. Minn. Aug. 3, 2017); Wang
v. Golf Tailor, LLC, No. 17-cv-898-LB, 2017 WL 2861111, at *6 (N.D.
Cal. July 5, 2017); Singer v. Stuerke, No. 2:16-cv-2526-KJD-GWF,
2017 WL 2603305, at *3 (D. Nev. June 14, 2017); Gov’t Employees
Ins. Co. v. Nealey, __ F. Supp. 3d __, 2017 WL 2572519, at *8 (E.D.
Pa. June 13, 2017); Raben Tire Co., LLC v. McFarland, No. 5:16-cv141-TBR, 2017 WL 741569, at *2 (W.D. Ky. Feb. 24, 2017); Mission
There are no decisions from the First Circuit or this
district analyzing the FTCA. As best the court can tell, there
are only five federal appellate decisions that reference this
statute, none of which is particularly helpful in the present
context. See generally First W. Capital Mgmt. Co. v. Malamed,
__ F.3d __, 2017 WL 4872570 (10th Cir. Oct. 30, 2017); Waymo LLC
v. Uber Techs., Inc., 870 F.3d 1342 (Fed. Cir. 2017); Fres-co
Sys. USA, Inc. v. Hawkins, 690 F. App'x 72 (3d Cir. 2017);
United States v. Liew, 856 F.3d 585 (9th Cir. 2017); United
States v. Nosal, 844 F.3d 1024 (9th Cir. 2016), cert. denied,
No. 16-1344, 2017 WL 1807382 (U.S. Oct. 10, 2017). The court
accordingly relies on persuasive authority from other district
courts, as well state-court cases analyzing misappropriation of
trade secrets claims under state law. See infra p. 8 n. 4.
This is unsurprising, as the statutory definition of
“trade secret” under the DTSA includes this requirement. See 18
U.S.C. § 1839(3).
Measurement Corp. v. Blackbaud, Inc., 216 F. Supp. 3d 915, 921
(N.D. Ill. 2016); Syntel Sterling Best Shores Mauritius Ltd. v.
Trizetto Grp., Inc., No. 15-cv-211 (LGS) (RLE), 2016 WL 5338550, at
*6 (S.D.N.Y. Sept. 23, 2016); M.C. Dean, Inc. v. City of Miami
Beach, Fla., 199 F. Supp. 3d 1349, 1357 (S.D. Fla. 2016).
cases reveal the follow basic pleading requirement: while “at the
pleading stage, plaintiffs need only describe the . . . efforts to
maintain the confidentiality of the information in general terms,”
Mission Measurement Corp., 216 F. Supp. 3d at 921 (brackets and
citations omitted), this requires some affirmative step beyond
merely “[i]ntending to keep the information secret . . . .”
Singer, 2017 WL 2603305, at *3.
Here, Jay-Mor has failed to adequately plead that it took
reasonable measures to preserve the secrecy of the information it
alleges Dichard misappropriated.
Jay-Mor’s counterclaim does not,
for example, allege that Jay-Mor’s computer system or the documents
in question had any particular security, such a restricted server,
password protection, or encryption.
See, e.g., Grow Fin. Fed.
Credit Union v. GTE Fed. Credit Union, No. 8:17-cv-1239-T-30JSS,
2017 WL 3492707, at *3 (M.D. Fla. Aug. 15, 2017); Heralds of Gospel
Found., Inc. v. Varela, No. 17-22281-CIV, 2017 WL 3868421, at *5
(S.D. Fla. June 23, 2017); Sleekez, LLC v. Horton, No. CV 16-09BLG-SPW-TJC, 2017 WL 1906957, at *4 (D. Mont. Apr. 21, 2017),
report and recommendation adopted, No. CV 16-09-BLG-SPW, 2017 WL
1929473 (D. Mont. May 9, 2017); Prot. Techs., Inc. v. Ribler, No.
3:17-cv-144-LRH-WGC, 2017 WL 923912, at *2 (D. Nev. Mar. 8, 2017).
Jay-Mor has similarly not asserted that its employees were trained
regarding the sensitive nature of this information or that it
otherwise made those who used the information subject to
confidentiality provisions and limitations, such as nondisclosure
See, e.g., Grow Fin. Fed. Credit Union, 2017 WL
3492707, at *3; Syntel Sterling Best Shores Mauritius Ltd., 2016 WL
5338550, at *6; see also Heralds of Gospel Found., Inc., 2017 WL
3868421, at *5.
Nor, too, does Jay-Mor allege that it implemented
any policies or procedures regarding the preservation of the
information at issue.
3327570, at *3.3
See, e.g., Deluxe Fin. Servs., LLC, 2017 WL
Indeed, the only allegation Jay-Mor makes that can
be construed as an affirmative act with respect to the information
at issue is that it “was stored in files.”
See doc. no. 3 ¶ 14.
Even when viewed in the light most favorable to Jay-Mor, this act —
which, without further context, could seemingly apply to
confidential and non-confidential information alike — does not
support a plausible inference that Jay-Mor took some particular
measure to preserve the secrecy of that information.4
These are merely examples of the types of allegations
courts have found to be sufficient under the DTSA and
accordingly should not be construed as an exhaustive list.
As the DTSA’s definition of “misappropriation” is modeled on
the Uniform Trade Secrets Act, which has been adopted in 48 states,
see H.R. Rep. No. 114-529, at 5, cases analyzing trade secrets
claims brought under state law are also instructive. These cases
do not alter the court’s determination, however; indeed, a review
Jay-Mor appears to rely on its small size and relative lack of
sophistication to contend that it has adequately alleged
misappropriation of trade secrets in its counterclaim.
is unpersuaded by this argument.
Without foreclosing the
possibility that a company’s size and sophistication might have
some bearing on whether the measures a company took were reasonable
under the circumstances, the fact remains that Jay-Mor has not
alleged that it did anything beyond storing its information in
files to preserve the secrecy of that information.
above, the case law establishes that a party must allege that it
took some affirmative step to protect the secrecy of its
information in order to state a claim for misappropriation of trade
As Jay-Mor has not done so here, its trade secrets claim
fails regardless of Jay-Mor’s size and sophistication.
of federal decisions from courts in the First Circuit only further
supports the conclusion that Jay-Mor has inadequately alleged its
trade secrets claim here. Compare Karter v. Pleasant View Gardens,
Inc., 248 F.Supp.3d 299, 312 (D. Mass. 2017)(holding that plaintiff
“failed to plead that she took reasonable steps to maintain [the
trade secrets] safety,” where her complaint merely alleged that
“she ‘had in her possession certain confidential trade secrets,’
that she ‘took reasonable measures to maintain the confidentiality
of the trade secrets.’”) with Bruno International Ltd. V. Vicor
Corp., No. 14-10037-DPW, 2015 WL 5447652, at *12 (D. Mass Sept. 16,
2015) (reasoning that plaintiff’s specific request that defendant
keep the information confidential was sufficient, on the pleadings,
to allege that plaintiff took “reasonable, affirmative steps to
protect its trade secrets.”); cf. Incase Inc. v. Timex Corp., 488
F.3d 46, 53 (1st Cir. 2007) (concluding that a there was no
evidence in the record to support a conclusion that the party
bringing the trade secrets claim “took reasonable steps to preserve
the secrecy” of its purported trade secrets).
In sum, Jay-Mor has not adequately alleged a necessary element
of a misappropriations of trade secrets claim under the DTSA.
Dichard’s motion for judgment on the pleadings must accordingly be
This determination is without prejudice, however, to Jay-
Mor amending its counterclaim to allege additional facts with
respect to its DTSA claim.
Any amendment must be filed no later
than fourteen days from the date this Order is issued.
For the reasons set forth above, Dichard’s motion for judgment
on the pleadings (doc. no. 8) is granted as to Jay-Mor’s trade
secrets claim without prejudice to Jay-Mor amending its
counterclaim within fourteen days of the issuance of this Order.
Andrea K. Johnstone
United States Magistrate Judge
November 22, 2017
J. Daniel Marr, Esq.
Mark M. Whitney, Esq.
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