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Business tort claims to be decided by jury

Because there were disputed issues of material fact on multiple claims, including one for violation of the Defend Trade Secrets Act (DTSA), a jury will decide if a former employee misappropriated trade secrets or misused confidential information and used them against his former employer.

Background

Keystone Transportation Solutions LLC filed this action against Northwest Hardwoods Inc. (NWH) and Thomas Mereen, alleging a series of claims, all of which arise from their business dealings and subsequent events. Pending before the court is defendants’ motion for summary judgment.

Defend Trade Secrets Act

To make a claim under the DTSA, a plaintiff must establish that it owns a trade secret, that the trade secret was misappropriated and that the trade secret implicates interstate or foreign commerce.

Here, there is at least a dispute of material fact about the existence of trade secrets. Even if NWH maintains that it did not use confidential information from Keystone, these facts comprise the kind of “extensive circumstantial evidence” that raises a dispute of material fact as to whether misappropriation occurred.

Breach of contract

In count two, Keystone alleges that NWH’s misuse of its confidential information constituted a breach of the parties’ NDA. NWH argues that the NDA did not apply to the information disclosed to it by Keystone because it was available through legitimate means or already known to NWH and that Keystone did not suffer any harm because NWH did not misuse confidential information.

For the reasons discussed under the analysis for count one, there are genuine disputes of material fact as to both the existence of trade secrets (and thus a dispute about the independent economic value of the information) and the misappropriation of those alleged trade secrets. Further, NWH’s alleged misappropriation of Keystone’s trade secrets has, according to Keystone, allowed NWH to take over Keystone’s former operation and implement Keystone’s unique business model without purchasing Keystone’s business, arguably causing NWH’s unjust enrichment and loss to Keystone. Therefore, there are genuine disputes of material fact as to whether NWH is liable for breach of the NDA.

Breach of fiduciary duty

“A plaintiff may demonstrate a breach of the fiduciary duty of loyalty by showing that the defendant ‘misappropriated trade secrets, misused confidential information, or solicited clients or other employees prior to termination of employment.’”

Defendants maintain that Mereen did not share any trade secret information with NWH and attempt to refute Keystone’s allegations that Mereen supplied confidential information to NWH by explaining that the calls and text messages between Mereen and Keeling prior to Nov. 11, 2016, were related to either routine business matters or a potential joint venture for Keystone and NWH. Viewed in the light most favorable to Keystone, the evidence of what occurred before and after the November 11 email, and in such close temporal proximity, raises genuine disputes of material fact as to whether Mereen misappropriated trade secrets or misused confidential information in breach of his fiduciary duty of loyalty to Keystone.

Aiding and abetting

Keystone failed to cite any authority in support of its bald assertion that a cause of action for aiding and abetting the breach of fiduciary duty against NWH is cognizable. Therefore, the court will grant summary judgment as to count four.

Tortious interference

In Count Five, Keystone alleges that Mereen and NWH intentionally interfered with Keystone’s pending transaction with World Distribution Services by unlawfully using information obtained from Mereen and/or data obtained under the NDA. There is a genuine dispute of material fact as to the existence of a business relationship or expectancy here.

Common law and statutory business conspiracy

Keystone alleges that a conspiracy existed between Mereen and NWH for Mereen to help take over Keystone’s business and license agreement by violating his fiduciary duties and duty of loyalty through misappropriation of trade secrets. Keystone further alleges that these actions were undertaken to destroy Keystone as a company.

As noted previously, there are genuine disputes of material fact as to NWH’s misappropriation of Keystone’s alleged trade secrets. This, combined with the fact that Mereen and Keeling had 15 phone calls and exchanged 29 text messages between July and November 2016 is sufficient to create a factual dispute for the jury as to the business conspiracy claim.

Defendants’ motion for summary judgment granted in part, denied in part.

Keystone Transp. Solutions LLC v. Northwest Hardwoods Inc., Case No. 18-cv-00039, April 19, 2019. WDVA at Harrisonburg (Dillon). VLW 019-3-195. 19 pp.