Trade secret, tort interference, fiduciary duty claims survive motion to dismiss

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A judge of the United States Court of Appeals for the Third Circuit, sitting by designation in the United States District Court for the District of Delaware, dismissed a motion to dismiss allegations of misappropriation of trade secrets, d torts and breach of fiduciary duty, finding that the plaintiff was plausibly pleading the facts to support each allegation. Park Lawn Corp. vs. PlotBox Inc., Case n ° 20-cv-01484-SB (D. Del. 29 Oct. 2021) (Bibas, J., sitting by designation).

Park Lawn and PlotBox are competitors in the cemetery business. In 2018, Park Lawn began developing software to automate various cemetery management tasks to reduce costs. Park Lawn also hoped to generate income by licensing the software to competitors. Park Lawn’s CEO, however, had disclosed to PlotBox information about the software, its unique features, and Park Lawn’s licensing strategy. The CEO also aided PlotBox in its efforts to recruit Park Lawn’s CTO, who oversaw the software project. The CEO acted despite signing confidentiality, non-competition and non-solicitation agreements. Park Lawn eventually found out about the CEO’s involvement with PlotBox and fired him. Shortly thereafter, the CEO became the chairman of PlotBox. Park Lawn sued PlotBox for stealing its trade secrets, interfering with the CEO’s employment contracts, and aiding the CEO in breaching his fiduciary duty to Park Lawn. PlotBox moved to reject.

The Tribunal de Grande Instance rejected the request. Regarding the trade secret allegations, PlotBox argued that it had not hijacked any trade secrets since the CEO had in fact not provided any information to PlotBox. The court concluded that the complaint alleged otherwise. In particular, the court noted the alleged complaint:

  • The CEO and PlotBox have exchanged compromising emails about “status”, “developments in” technology of death “” and the CEO’s interest in becoming president of PlotBox.

  • The CEO invited PlotBox executives to his home to discuss a “park lawn update” and a “technical presentation”.

The court concluded that these allegations plausibly alleged that the CEO may have disclosed a trade secret.

PlotBox argued that even though she learned something from the CEO, she never knew that the CEO obtained this information through improper means. The district court again disagreed, saying PlotBox should have known something was wrong since the CEO broke his promise to be silent. Although the court acknowledged that PlotBox may never have read the CEO’s confidentiality agreement, PlotBox should have reasonably inferred that it was inappropriate for a competitor’s CEO to disclose his company’s innovations.

PlotBox also argued for the dismissal because any information she received from the CEO does not count as a trade secret under the Defense of Trade Secrets Act. Once again, the district court disagreed, explaining that Park Lawn alleged that the information provided was of a technical nature (for example, unique features of the software and sales strategy to competitors), Park Lawn has taken adequate measures to protect the information by allowing only a small number of employees who have signed confidentiality agreements to access the software and information. were precious because they were secret. The court therefore authorized the continuation of the trade secret claim.

The district court ruled that while the tort interference claim could not be based on the CEO’s non-compete agreement, it could be based on his other employment contracts. Regarding the non-compete agreement, the court concluded that the employment contract was governed by Canadian law, which states that non-compete agreements are only valid in “exceptional circumstances”, which no longer exists. were not present in this case. Regarding the non-solicitation agreement, the court found that Park Lawn plausibly pleaded violation of the agreement due to the CEO soliciting his CTO despite the CEO’s promise that ‘he would not’ apply for the job. . . of any Park Lawn employee with whom he dealt. Regarding the confidentiality agreement, the court ruled that Park Lawn had sufficiently pleaded that its CEO had provided PlotBox with confidential information relating to projects and strategies.

Regarding the allegation of assistance in breach of fiduciary duty, PlotBox argued that it was not responsible as the CEO never breached any fiduciary duty since PlotBox never knew that the CEO had a fiduciary duty and never recruited Park Lawn’s CTO. The district court rejected these arguments, finding that a CEO had fiduciary duties, PlotBox knew he was dealing with a CEO and PlotBox also knew that the CEO had not acted with loyalty since he had tried to recruit the chief technology officer. The court therefore concluded that the fiduciary duty claim was upheld.


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