A split has developed between District Court judges in the District of Columbia regarding the requirements to plead a count alleging tortious interference with business expectancy. In a post on June 18, 2009, I reported that Judge Ricardo Urbina had issued an opinion requiring the plaintiff to name the third parties with which it had a relationship or expectancy in order to survive a motion to dismiss the claim. Command Consulting Group, LL v. Neuraliq, Inc., 2009 U.S. Dist. Lexis 48082 (D.D.C. June 9, 2009). In a more recent opinion, Judge Richard Roberts rejected that requirement.
In Kimmel v. Gallaudet University, 639 F. Supp.2d 34 (D.D.C. 2009), plaintiff, the former Dean of the College of Liberal Arts, Sciences, and Technologies and a tenured professor, alleged that she was harrassed by various faculty members, excluded from administrative decisions, had her job responsibilities reduced and was a victim of defamatory statements because she supported an unpopular President of the University. In her complaint she alleged that Gallaudet tortiously interfered with her "valid business expectancy that she would be able to teach, and possibly also serve as an administrator, in higher education until her retirement." She also alleged that "agents and employees of Gallaudet intentionally interfered with this business expectancy by spreading false and defamatory lies" and that "[a]t least three potential sources of prospective employment have disappeared" as a result of those actions.
Gallaudet moved to dismiss the count arguing that Kimmel had not specifically identified a third party with whom she had the business expectancy. Judge Roberts rejected the argument, holding that "[a]lthough Kimmel has not specifically named each alleged potential source of prospective employment or expressly asserted that Gallaudet had knowledge of these expectancies, reasonable inferences can be drawn from Kimmel's factual assertions that Gallaudet acted intentionally, and notice pleading does not require the complaint to specify the entities with whom she had an expectancy." Id. at 45. The court relied upon Browning v. Clinton, 292 F.3d 235,243 (D.C. Cir. 2002) where the D.C. Circuit reversed a decision dismissing a count alleging tortious interference with business expectancy. In Browning, the plaintiff did not allege the names of specific publishers that had failed to positively respond to submission of her book for publication. Nevertheless, the circuit court found that the plaintiff was entitled to proceed with the claim, holding that whether a triable issue of fact existed should be reserved for summary judgment. Id.
Accordingly, as it stands in the District of Columbia there is no consensus with regard to what must be pled to allow a claim of tortious interference with business expectancy to proceed to trial.
Tuesday, November 24, 2009
Friday, October 23, 2009
Virginia Court Limits Reach of Preemption Provision of Uniform Trade Secrets Act
Does the Virginia Trade Secrets Act preempt all related business tort claims? Not necessarily, according to a recent unfair business practices case from the Eastern District of Virginia. In E.I. DuPont de Nemours and Co.v. Kolon Industries, Inc., 2009 U.S. Dist. LEXIS 76795, 2009-2 Trade Cas. (CCH) P76,728 (E.D. Va. August 27, 2009), click here, DuPont alleged that the defendant, Kolon, had hired one of its former employees, Michael Mitchell, and enticed him to reveal DuPont’s trade secrets not only relating to the development of KEVLAR aramid fiber, but also as to DuPont’s pricing and rebate practices. In addition, it alleged that Kolon had recruited other DuPont employees who possessed knowledge regarding the aramid fiber manufacturing process. And Kolon allegedly had solicited DuPont’s long-standing customers by using confidential pricing and rebate information and informing the customers that Kolon had hired former DuPont employees who had assisted Kolon in making significant improvements to its product.
DuPont included six counts in its complaint: (1) violation of the Virginia Trade Secrets Act, Va. Code §59.1-341; (2) statutory business conspiracy, Va. Code §18.2-499 et seq.; (3) tortious interference with contract; (4) tortious interference with business expectancy; (5) conversion; and (6) civil conspiracy. Kolon moved to dismiss the complaint in its entirety.
First, Kolon argued that the preemption provision of the Trade Secrets Act required dismissal of all counts in the complaint other than the one alleging a violation of the Act itself because all of the counts were based entirely upon a misappropriation of trade secrets theory. The court rejected this argument pointing out that Kolon disputed that the information at issue was a trade secret. As the court noted: “unless it can be clearly discerned that the information in question constitutes a trade secret, the Court cannot dismiss alternative theories of relief as preempted by the VUTSA,” quoting Stone Castle Fin., Inc. v. Friedman, Billings, Ramsey & Co., 191 F. Supp.2d 652, 659 (E.D. Va. 2002). Thus, as long as Kolon contended that the information at issue was not a trade secret the court could not consider the preemptive effect of the Trade Secrets Act based upon the pleadings alone.
Next, Kolon argued that, under the statute, all claims arising from the same nucleus of facts as the misappropriation of trade secrets claim were preempted by the Trade Secrets Act. The court rejected this argument also, holding that, under the prevailing interpretation in the Eastern District of Virginia, the preemption provision does not bar all claims that could arise out of factual circumstances that may involve a trade secret. Instead, preemption would apply only to claims that were predicated “entirely” upon the misappropriation of trade secrets.
Applying these principles to the separate counts for tortious interference with contract and business expectancy the court found that DuPont had pled facts separate from the trade secrets allegations in support of those counts. Notably DuPont alleged that Kolon had “used DuPont’s confidential information and trade secrets.” Because the allegations were phrased in the conjunctive and were not predicated solely upon the misappropriation of trade secrets, the court refused to dismiss those counts. Likewise, it denied the motion to dismiss the conspiracy counts on the basis that the concerted action included allegations separate from misappropriation of trade secrets.
Finally, Kolon argued, unsuccessfully, that the conversion count was subject to dismissal because conversion could not apply to the taking of electronic copies of a document, only to the original. The court, again, sided with DuPont, finding that even though Virginia courts have not addressed whether the possession of “copies” of documents can constitute conversion, the courts have “demonstrated a distinct willingness to expand the scope of the doctrine of conversion in light of advancing technology.” Thus, it held that “the purloining of copies of documents would constitute conversion because such action is an act of ‘dominion’ inconsistent with the true owner’s property rights.”
DuPont included six counts in its complaint: (1) violation of the Virginia Trade Secrets Act, Va. Code §59.1-341; (2) statutory business conspiracy, Va. Code §18.2-499 et seq.; (3) tortious interference with contract; (4) tortious interference with business expectancy; (5) conversion; and (6) civil conspiracy. Kolon moved to dismiss the complaint in its entirety.
First, Kolon argued that the preemption provision of the Trade Secrets Act required dismissal of all counts in the complaint other than the one alleging a violation of the Act itself because all of the counts were based entirely upon a misappropriation of trade secrets theory. The court rejected this argument pointing out that Kolon disputed that the information at issue was a trade secret. As the court noted: “unless it can be clearly discerned that the information in question constitutes a trade secret, the Court cannot dismiss alternative theories of relief as preempted by the VUTSA,” quoting Stone Castle Fin., Inc. v. Friedman, Billings, Ramsey & Co., 191 F. Supp.2d 652, 659 (E.D. Va. 2002). Thus, as long as Kolon contended that the information at issue was not a trade secret the court could not consider the preemptive effect of the Trade Secrets Act based upon the pleadings alone.
Next, Kolon argued that, under the statute, all claims arising from the same nucleus of facts as the misappropriation of trade secrets claim were preempted by the Trade Secrets Act. The court rejected this argument also, holding that, under the prevailing interpretation in the Eastern District of Virginia, the preemption provision does not bar all claims that could arise out of factual circumstances that may involve a trade secret. Instead, preemption would apply only to claims that were predicated “entirely” upon the misappropriation of trade secrets.
Applying these principles to the separate counts for tortious interference with contract and business expectancy the court found that DuPont had pled facts separate from the trade secrets allegations in support of those counts. Notably DuPont alleged that Kolon had “used DuPont’s confidential information and trade secrets.” Because the allegations were phrased in the conjunctive and were not predicated solely upon the misappropriation of trade secrets, the court refused to dismiss those counts. Likewise, it denied the motion to dismiss the conspiracy counts on the basis that the concerted action included allegations separate from misappropriation of trade secrets.
Finally, Kolon argued, unsuccessfully, that the conversion count was subject to dismissal because conversion could not apply to the taking of electronic copies of a document, only to the original. The court, again, sided with DuPont, finding that even though Virginia courts have not addressed whether the possession of “copies” of documents can constitute conversion, the courts have “demonstrated a distinct willingness to expand the scope of the doctrine of conversion in light of advancing technology.” Thus, it held that “the purloining of copies of documents would constitute conversion because such action is an act of ‘dominion’ inconsistent with the true owner’s property rights.”
Thursday, October 22, 2009
Private Regulation of Business Competition Through State Statutes and Common Law Theories
The news lately is peppered by the federal governments' (lack of?) regulation of businesses, but how do state statutes and the common law regulate businesses? That is the question addressed in the article The Use of State Statutes and Common Law Tort Theories to Regulate Business Conduct which can be found here.
The article "examine[s] how differences in state law can shape and influence what constitutes the appropriate bounds of business competition in a particular state." It focuses on the common law claims of intentional interference with contract or business expectancy and certain state statutory private rights of actions, such as the Massachusetts' Unfair and Deceptive Trade Practices Statute, North Carolina's unfair methods of competition statute or "little FTC act", and Virginia's statutory business conspiracy statute.
The article "examine[s] how differences in state law can shape and influence what constitutes the appropriate bounds of business competition in a particular state." It focuses on the common law claims of intentional interference with contract or business expectancy and certain state statutory private rights of actions, such as the Massachusetts' Unfair and Deceptive Trade Practices Statute, North Carolina's unfair methods of competition statute or "little FTC act", and Virginia's statutory business conspiracy statute.
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