Opinion
1784CV01798BLS2
02-22-2019
Alfred R. GENIS v. Martin CAMPBELL et al.
File Date: February 26, 2019
MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION TO FOR LEAVE TO AMEND COMPLAINT
Kenneth W. Salinger, Justice of the Superior Court
Alfred Genis filed suit in June 2017 claiming that Martin Campbell, David Campbell, their company Pure Crystal, LLC, and up to ten unidentified "John Doe" plaintiffs had allegedly misappropriated trade secrets. By statute, an unknown defendant may be sued in a civil action "by a fictitious name"; doing so "shall not be grounds for dismissal" so long as the actual defendant is identified in an amended complaint and served with process in a timely manner. See G.L.c. 223, § 19.
Genis now seeks leave to amend his complaint to substitute Campbell Technological Resources, Inc. ("CTR"), Fraunhofer USA, Inc., Fraunhofer-Gesellschaft, and Thomas Schuelke for the prior fictitious defendants.
Fraunhofer USA and Schuelke oppose the motion to amend. Neither CTR, nor the existing Defendants, nor Fraunhofer Gesellschaft (which is not represented by the same counsel as Fraunhofer USA and Schuelke) has opposed the motion.
The Court concludes that it would be futile to amend the complaint to assert claims against Fraunhofer USA and Schuelke because those claims could not survive a motion to dismiss. The Court will therefore deny the motion to amend in part to the extent that Genis seeks to assert claims against Fraunhofer USA and Schuelke, but will allow the motion in part to the extent it seeks to assert claims against CTR and Fraunhofer-Gesellschaft.
1. Legal Standards
"Courts are not required to grant motions to amend prior complaints where ‘the proposed amendment ... is futile.’" Johnston v. Box, 453 Mass. 569, 583 (2009), quoting All Seasons Servs., Inc. v. Commissioner of Health & Hosps. of Boston, 416 Mass. 269, 272 (1993); accord Thermo Electron Corp. v. Waste Mgmt. Holdings, Inc., 63 Mass.App.Ct. 194, 203 (2005) (affirming denial of motion for leave to assert counterclaim that would have been futile).
A proposed amendment that would add new claims to a complaint is futile if the new claims could not survive a motion to dismiss. Mancuso v. Kinchla, 60 Mass.App.Ct. 558, 572 (2004) (affirming denial of motion to amend).
To survive a motion to dismiss under Rule 12(b)(6), and thus to avoid being futile under Rule 15, a complaint must allege facts that, if true, would "plausibly suggest[ ] ... an entitlement to relief." Lopez v. Commonwealth, 463 Mass. 696, 701 (2012), quoting Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), and Bell A. Corp. v. Twombly, 550 U.S. 544, 557 (2007). For the purpose of deciding whether the proposed claims against Fraunhofer USA and Schuelke could survive a motion to dismiss, the Court must assume that the factual allegations in the proposed amended complaint and any reasonable inferences that may be drawn in Genis’s favor from those allegations are true. See Golchin v. Liberty Mut. Ins. Co., 460 Mass. 222, 223 (2011). In so doing, however, it must "look beyond the conclusory allegations in the complaint and focus on whether the factual allegations plausibly suggest an entitlement to relief." Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336, 339 (2015), quoting Curtis v. Herb Chambers I- 95, Inc., 458 Mass. 674, 676 (2011).
2. Futility of Proposed New Claims Against Fraunhofer USA and Schuelke
2.1. Trade Secret Claim
Count I of the proposed amended complaint would assert a claim for misappropriation of trade secrets against Fraunhofer USA and Schuelke. "The essence of an action for the wrongful use of trade secrets is the breach of the duty not to disclose or to use without permission confidential information acquired from another." Jet Spray Cooler, Inc. v. Crampton, 377 Mass. 159, 165 (1979).
In the typical case (as with the claims against the Campbells and Pure Crystal), to state a claim for misappropriation of trade secrets a plaintiff must allege facts plausibly suggesting that: "1) the information is a trade secret; 2) the plaintiff took reasonable steps to preserve the secrecy of the information; and 3) the defendant used improper means, in breach of a confidential relationship, to acquire and use the trade secret." See Protege Software Servs., Inc. v. Colameta, Middlesex civ. action 09-03168, 30 Mass.L.Rptr. 127, 2012 WL 3030268, at *11 (Mass.Super. July 16, 2012) (Kirpalani, J.), quoting Incase, Inc. v. Timex Corp., 488 F.3d 46, 52 (1st Cir. 2007) (applying Massachusetts law); accord J.T. Healy & Son, Inc. v. James A. Murphy & Son, Inc., 357 Mass. 728, 736-38 (1970); Peggy Lawton Kitchens, Inc. v. Hogan, 18 Mass.App.Ct. 937, 939 (1984) (rescript).
In addition, if a third party (like Fraunhofer USA) knowingly benefits from a trade secret that was improperly disclosed by someone who obtained it from the plaintiff "subject to an understanding of confidentiality," the third party may be held liable for misappropriation of a trade secret. See Curtiss-Wright Corp. v. Edel-Brown Tool & Die Co., 381 Mass. 1, 3 n.2 (1980). To state such a claim, a plaintiff must allege facts plausibly suggesting that the third party knew or should have known that the information it obtained and used was a trade secret, and also that the party from whom it obtained the information had a duty not to disclose it. Id. at 5-6 & n.4.
The proposed complaint does not state a viable trade secret claim against Fraunhofer USA or Schuelke because it does not allege any facts plausibly suggesting that either of those parties knew or had reason to know that Pure Crystal had an obligation not to disclose the alleged trade secrets. Genis alleges that he disclosed to the Campbells secret "recipes" for mass producing diamond crystals, with the understanding that these secrets would be used by the Campbells and their company but subject to an alleged oral agreement that the Campbells would not share those secrets with anyone else. But Genis alleges no facts suggesting that Fraunhofer USA or Schuelke knew about that oral confidentiality agreement, or even that they had any reason to suspect there was such an agreement.
Genis’s assertion that Fraunhofer USA must have known that the Campbells promised not to share his alleged trade secrets with others is "too speculative to support a claim" against Fraunhofer USA or Schuelke because the only way to reach such a conclusion based on the facts alleged in the proposed amended complaint would be "to jump from one inference to another absent any of the necessary factual support." See Edwards v. Commonwealth, 477 Mass. 254, 265 (2017) (holding that trial judge erred in denying motion to dismiss).
2.2. Tortious Interference Claim
Count VIII would assert a claim for tortious interference with contractual relations against Fraunhofer USA and Schuelke. The claim alleges that these defendants tortiously interfered with the contractual relationship between Genis and the Campbell defendants. Genis does not allege that these defendants interfered with any other advantageous relationship. As a result, any claim for intentional interference must be for tortiously inducing a breach of contract, not for tortious interference with a non-contractual advantageous business relationship. See Cachopa v. Town of Stoughton, 72 Mass.App.Ct. 657, 658 n.3 (2008).
To state a claim for tortious interference with a contract, a plaintiff must allege facts plausibly suggesting that: (1) it "had a contract with a third party; (2) the defendant knowingly induced the third party to break that contract; (3) the defendant’s interference, in addition to being intentional, was improper in motive or means; and (4) the plaintiff was harmed by the defendant’s actions." See Weiler v. PortfolioScope, Inc., 469 Mass. 75, 84 (2014), quoting G.S. Enters., Inc. v. Falmouth Marine, Inc., 410 Mass. 262, 272 (1991).
This claim is futile for much the same reason as the trade secret claim. Since Genis alleges no facts plausibly suggesting that Fraunhofer USA or Schuelke knew or should have known that the Campbell defendants had promised not to disclose the alleged trade secrets to anyone else, he has also failed to allege any facts plausibly suggesting that Fraunhofer USA or Schuelke "knowingly induced" the Campbell defendants to break that alleged contract.
2.3. Conversion Claim
Count XI would assert a conversion claim against Fraunhofer USA and Schuelke.
"The elements of conversion require that a defendant be proved to have ‘intentionally or wrongfully exercise[d] acts of ownership, control or dominion over personal property to which he has no right of possession at the time ...’" Bleicken v. Stark, 61 Mass.App.Ct. 619, 622 (2004), quoting Abington Natl. Bank v. Ashwood Homes, Inc., 19 Mass.App.Ct. 503, 507 (1985). Conversion can be proved by showing either the wrongful acquisition of property or a refusal to return it when asked. Waxman v. Waxman, 84 Mass.App.Ct. 314, 321 (2013) (son who lawfully possessed parents’ car committed conversion when, after father’s death, son refused to return it after a valid demand by mother); see generally Atlantic Finance Corp. v. Galvam, 311 Mass. 49, 50 (1942).
The proposed complaint does not state a viable claim for conversion against Fraunhofer USA or Schuelke because it does not allege facts plausibly suggesting that either of these Defendants has retained possession of any confidential information or other personal property belonging to Genis.
2.4. Unjust Enrichment and Quantum Meruit Claims
The proposed claims against Fraunhofer USA and Schuelke for unjust enrichment in Count III and quantum meruit in Count VII would be futile for the same reason.
There is no need to analyze these claims separately, as they are essentially indistinguishable. To state a claim for unjust enrichment, Genis must allege facts plausibly suggesting that Fraunhofer USA and Schuelke obtained a valuable benefit from Genis that was not covered by a contractual agreement, and that these defendants accepted or retained the benefit under circumstances where it would be unfair for them to do so without paying its value to Genis. See National Shawmut Bank of Boston v. Fidelity Mut. Life Ins. Co., 318 Mass. 142, 145-46 (1945); Santagate v. Tower, 64 Mass.App.Ct. 324, 329 (2005). Similarly, "[t]he underlying basis for awarding quantum meruit damages in a quasi-contract case is unjust enrichment of one party and unjust detriment to the other party." Liss v. Studeny, 450 Mass. 473, 479 (2008), quoting Salamon v. Terra, 394 Mass. 857, 859 (1985).
Genis has not alleged any facts plausibly suggesting that Fraunhofer USA or Schuelke retained possession of or derived any benefit from any personal property belonging to Genis. He has therefore not stated a viable claim for unjust enrichment or quantum meruit against these defendants.
ORDER
Plaintiff’s motion for leave to amend his complaint is ALLOWED IN PART to the extent Plaintiff seeks to assert claims against Campbell Technological Resources, Inc. ("CTR") and Fraunhofer-Gesellschaft, and is DENIED IN PART to the extent that Plaintiff seeks to assert claims against Fraunhofer USA, Inc., and Thomas Schuelke. Plaintiff shall file a revised amended complaint that is consistent with this order, and asserts no claims against Fraunhofer USA or Schuelke, by March 15, 2019.