Opinion
Case No.: 2:19-cv-1196-ACA
01-23-2020
McGRIFF SEIBELS & WILLIAMS, INC., Plaintiff, v. PAUL SPARKS, DARREN SONDERMAN, DAVID McMAHAN, JOHN TANNER, and J. GREGORY McCOLLISTER, Defendants.
MEMORANDUM OPINION AND ORDER
This matter is before the court on Plaintiff McGriff, Seibels & Williams, Inc.'s ("MSW") motion for leave to file a second amended complaint. (Doc. 59).
MSW alleges that Defendants Paul Sparks, Darren Sonderman, David McMahan, John Tanner, and J. Gregory McCollister breached the terms of their employment agreements with MSW by soliciting MSW clients and employees and using confidential information while planning to leave MSW and beginning work with an MSW competitor. MSW also contends that Defendants have tortuously interfered with its business relations and breached their fiduciary duties to MSW.
MSW seeks leave to: (1) amend certain factual allegations contained in its complaint; (2) add Defendants' new employer, Cobbs Allen Capital, LLC ("CAC") as a party defendant; and (3) add a claim under the Defendant Trade Secrets Act.
For the reasons explained below, the court GRANTS IN PART and DENIES IN PART the motion for leave to amend.
I. RELEVANT FACTUAL AND PROCEDURAL HISTORY
Defendants Paul Sparks, Darren Sonderman, David McMahan, John Tanner, and J. Gregory McCollister previously worked for MSW as executives in MSW's Financial Services Division. (Doc. 11 at ¶¶ 3-8). Defendants now work for CAC. (Id.).
On July 27, 2019, MSW filed its original complaint against Messrs. Sparks, Sonderman, McMahan, and Tanner, asserting state law claims for breach of contract, tortious interference with business relations, breach of fiduciary duty, and conspiracy to interfere with business relations. (Doc. 1). On August 13, 2019, MSW filed an amended verified complaint in which it added Mr. McCollister as a defendant and sought a temporary restraining order and preliminary injunction against all defendants. (Doc. 11; Doc. 12).
Based on the allegations in the amended verified complaint, the court entered a temporary restraining order against Messrs. Sparks, Sonderman, and McCollister on August 15, 2019. (Doc. 15). The court then conducted a four-day hearing on MSW's request for a preliminary injunction. (See August 26-29, 2019 minute entries; Docs. 47-50). The court denied MSW's request for a preliminary injunction and dissolved the temporary restraining order because the court concluded that MSW had not demonstrated a substantial likelihood of success on the merits of its claims. (Doc. 61).
Before the court issued an opinion on MSW's request for a preliminary injunction, MSW filed a second amended verified complaint. (Doc. 53). The court struck the second amended verified complaint because MSW already had amended its complaint once as a matter of course, and it did not receive Defendants' consent or the court's leave to file another complaint. (Doc. 54) (citing Fed. R. Civ. P. 15(a)).
MSW now moves for leave to file its second amended complaint. (Doc. 59).
II. ANALYSIS
Federal Rule of Civil Procedure 15 provides that the court "should freely give leave" to amend a complaint "when justice so requires." Fed. R. Civ. P. 15(a)(2). "A court may consider several factors when deciding whether to grant a motion to amend, including undue delay, bad faith or dilatory motive . . . , repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment." Perez v. Wells Fargo N.A., 774 F.3d 1329, 1340 (11th Cir. 2014) (quotation marks omitted) (alterations in original).
In its motion, MSW seeks leave to: (1) amend factual allegations in its complaint to conform the pleadings to the record and evidence in this case; (2) add CAC as a party defendant to the existing claims for intentional interference with business relations and conspiracy to interfere with business relations; and (3) add a new claim against CAC and the individual defendants for violations of the Defend Trade Secrets Act ("DTSA"). (Doc. 59 at 1-2).
Defendants do not oppose MSW's first request to amend certain factual allegations. (Doc. 64 at 6). Accordingly, MSW may amend its factual allegations as proposed.
Defendants' response in opposition to MSW's motion to amend does not address MSW's request to add CAC as a party defendant to the existing claims for intentional interference with business relations and conspiracy to interfere with business relations. (See Doc. 63 at 6-12). Therefore, the court considers this request unopposed and finds no reason to disallow those particular amendments. Accordingly, MSW may amend its complaint to add CAC as a party defendant to its claims for intentional interference with business relations and conspiracy to interfere with business relations.
Defendants do object to MSW's request to amend the complaint to add a DTSA claim against CAC and the individual defendants. (Doc. 63 at 7-9). Defendants argue that amendment is futile because the proposed amended complaint does not state a claim under the DTSA. (Id. at 7-8). The court agrees.
Defendants also argue that the court should disallow this particular amendment as a sanction for MSW's repeated assertions of baseless allegations contained in the preceding versions of the complaint, particularly as it relates to Defendants' purported misuse of confidential information. (Doc. 63 at 8-10; see also Doc. 63 at 2-3). In addition, Defendants also seek attorney's fees incurred for responding to those certain sworn, but false allegations. (Id. at 9-11). The court declines Defendants' invitation to disallow amendment as a sanction. The court withholds ruling on sanctions on both fronts at this stage in the proceedings.
The DTSA creates a private cause of action for an "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). The DTSA defines trade secrets as tangible and intangible "financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes," if the owner "has taken reasonable measures to keep such information secret" and the information "derives independent economic value . . . from not being generally known." 18 U.S.C. § 1839(3). Under the statute, prohibited "misappropriation" includes both "acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means" and "disclosure or use of a trade secret" without the owner's consent. 18 U.S.C. § 1839(5)(A)-(B).
To state a claim for relief under the DTSA, a plaintiff must allege facts showing that it "(i) possessed information of independent economic value that (a) was lawfully owned by the plaintiff and (b) for which the plaintiff took reasonable measures to keep secret, and (ii) the defendant used and/or disclosed that information, despite (iii) a duty to maintain its secrecy." Trinity Graphic, USA, Inc. v. Tervis Tumbler Co., 320 F. Supp. 3d 1285, 1293 (M.D. Fla. 2018) (quotation marks omitted).
The parties have not cited, and the court has not located, an Eleventh Circuit opinion discussing the elements of a claim under the DTSA or substantively analyzing a claim under the statute.
Regarding Mr. Sparks, MSW's proposed amended complaint alleges only that Mr. Sparks "retained his MSW phone." (Doc. 59-1 at 35). MSW alleges absolutely no facts from which the court can plausibly infer that Mr. Sparks's phone contains trade secrets as defined under the DTSA. In addition, MSW alleges no facts suggesting that Mr. Sparks acquired any purported trade secrets by improper means or that he has used or disclosed the information sufficient to state a claim under either definition of "misappropriation." See 18 U.S.C. § 1839(5)(A)-(B). Accordingly, amendment of the complaint to include a DTSA claim against Mr. Sparks is futile because the claim would be subject to dismissal.
The proposed allegations against Mr. Sonderman, Mr. Tanner, and Mr. McCollister are nearly identical, so the court examines the allegations against these three Defendants together. The proposed amended complaint alleges that Mr. Sonderman "retained notebooks, client information, and a list of important things to do - people he was going to contact." (Doc. 59-1 at ¶ 119). The proposed amended complaint alleges that Mr. Tanner "retained 'information,'" including trade secrets. (Doc. 59-1 at ¶ 119; see also Doc. 59-1 at ¶ 92; Doc. 59-1 at 141-47). The proposed amended complaint alleges that Mr. McCollister "retained client information, renewal information, renewal strategy information and pricing information." (Doc. 59-1 at 119).
The court assumes without deciding that MSW's proposed amended complaint sufficiently alleges that Messrs. Sonderman, Tanner, and McCollister retained MSW's trade secrets and that MSW took steps to keep the information secret. (Doc. 59-1 at ¶¶ 116-19). But the proposed amended complaint contains no facts suggesting that Messrs. Sonderman, Tanner, and McCollister acquired the trade secrets through improper means sufficient to state a claim for misappropriation under 18 U.S.C. § 1839(5)(A). See 18 U.S.C. § 1839(6)(A)-(B) (as defined in the DTSA, "improper means" includes "theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means" but does not include "lawful means of acquisition"); JustMed, Inc. v. Byce, 600 F.3d 1118, 1129 (9th Cir. 2010) (defendant did not "acquire" trade secrets "through improper means because he already had possession of [the information] as an employee").
To the extent MSW alleges only that Mr. Tanner retained "information," the proposed amended complaint does not identify with particularity the trade secrets at issue. The same is true with respect to the allegation that Mr. Sonderman "retained notebooks" and "client information." With respect to Mr. Sonderman's "list of important things to do - people he was going to contact," the proposed amended complaint does not (and cannot plausibly) allege that MSW owned such information.
Likewise, there are no facts in the proposed amended complaint suggesting that Messrs. Sonderman, Tanner, and McCollister used or disclosed any trade secrets sufficient to state a claim for misappropriation under 18 U.S.C. § 1839(5)(B). See Camick v. Holladay, 758 F. App'x 640, 645 (10th Cir. 2018) ("[A]n allegation that a defendant merely continues to possess a trade secret is not an allegation the defendant acquired, disclosed, or used a trade secret—the DTSA's definitions of misappropriation."). Therefore, amendment of the complaint to include a DTSA claim against Messrs. Sonderman, Tanner, and McCollister is futile because the claim would be subject to dismissal.
MSW's proposed amended complaint alleges that Mr. McMahan "retained client renewal account [sic] o[n] a four to ten deck document and client information in his phone which he has used to contact clients since his resignation." (Doc. 59-1 at 119). To the extent MSW alleges that Mr. McMahan retained trade secrets, MSW's proposed amended complaint fails to state a claim under the DTSA for the same reasons explained above with respect to Messrs. Sonderman, Tanner, and McCollister.
To the extent MSW alleges that Mr. McMahan used "client information," the proposed amended complaint fails to state a claim. The broad reference to "client information" does not "describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special persons who are skilled in the trade." Alta Devices, Inc. v. LG Electronics, Inc., 343 F. Supp. 3d 868, 881 (N.D. Cal. 2018) (quotation marks omitted); see Bombardier Inc. v. Mitsubishi Aircraft Corporation, 383 F. Supp. 3d 1169, 1178 (W.D. Wash. 2019) (a complaint "need not spell out the details of the trade secret," but the plaintiff "must identify the trade secret with sufficient particularity . . . to permit the defendant to ascertain at least the boundaries within which the secret lies") (quotation marks omitted).
The court is left to assume, as MSW's briefing implies, that "client information" refers solely to clients' email addresses and telephone numbers. (Doc. 64 at 9, 15; see also Doc. 48 at 105-114). A client's email address or telephone number is not MSW's trade secret as defined in the DTSA. This information is not owned by MSW. There is no allegation that this information is not otherwise publicly available. Even if the client email addresses and telephone numbers were trade secrets, MSW did not take reasonable steps to keep such information secret. When Mr. McMahan left MSW, MSW voluntarily released Mr. McMahan's cell phone to him, and MSW did not ask Mr. McMahan to delete his contacts from the phone. (Doc. 52-1 at 1). --------
Therefore, amendment of the complaint to include a DTSA claim against Mr. McMahan is futile because the claim would be subject to dismissal.
MSW's proposed amended complaint alleges that CAC "has acquired and used the client information to send an email blast and/or solicitations" and that CAC "knew or should have known that the client information was derived from or through MSW employees who had a duty to maintain their secrecy or limit the use of the MSW trade secrets." (Doc. 59-1 at ¶¶ 120-21). The proposed amended complaint also alleges that CAC "may have used other trade secrets." (Doc. 59-1 at 121).
Again, the broad references to "client information" and "other trade secrets" are insufficient to state a claim against CAC under the DTSA because the allegations do not describe with sufficient particularity the subject matter of the trade secret. See Bombardier, 383 F. Supp. 3d at 1178; Alta Devices, 343 F. Supp. 3d at 881. The proposed amended complaint does not identify what trade secrets CAC purportedly used other than "client information," which as explained above, does not constitute a trade secret under the DTSA.
Accordingly, amendment of the complaint to include a DTSA claim against CAC is futile because the claim would be subject to dismissal.
Defendants also object to the reassertion of Count I for a temporary restraining order and preliminary injunction. The court agrees that a request for a temporary restraining order and preliminary injunction is futile. The court already heard four days of testimony on MSW's motion for a preliminary injunction on its breach of contract and tort claims and issued a lengthy opinion explaining why MSW had not met its extremely high burden of showing that it is entitled to preliminary injunctive relief on its breach of contract and tortious interference claims. (Doc. 61). The court will not repeat itself here, and the factual allegations in the proposed amended complaint do not change the result with respect to those claims.
Accordingly, MSW's second amended complaint shall not contain a count for a temporary restraining order and preliminary injunction.
III. CONCLUSION
The court GRANTS IN PART and DENIES IN PART MSW's motion for leave to file a second amended complaint. (Doc. 59).
On or before January 27, 2020, MSW SHALL file its amended complaint. The amended complaint may be filed as proposed (see doc. 59-1), except the amended complaint SHALL NOT contain a count for a temporary restraining order and preliminary junction, and the amended complaint SHALL NOT contain a claim under the DTSA against any Defendant.
DONE and ORDERED this January 23, 2020.
/s/_________
ANNEMARIE CARNEY AXON
UNITED STATES DISTRICT JUDGE