Firearms manufacturer sues for stolen trade secrets

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Where a firearms manufacturer alleged facts plausibly suggesting its former distributor and employees stole trade secrets, including product designs and production blueprints, its claims for violation of state and federal trade secret laws, conversion, state statutory business conspiracy and tortious interference with contract survived the motion to dismiss.

Background

Makina ve Kimya Endustrisi A.S., a Turkish company that manufactures firearms, has filed suit against Kutlay Kaya, Hanri Kaya, Zenith Quest Corporation, Zenith Quest International Inc., Zenith Firearms Inc., ZNT Global, and former plaintiff employees. Plaintiff brings claims of violation of state and federal trade secret laws, conversion, state statutory business conspiracy, tortious interference with contract and piercing the corporate veil. Defendants have filed a motion to dismiss.

Upon information and belief

Defendants argue that the complaint fails because every material factual allegation is premised solely upon “information and belief.” The court disagrees. Many material factual allegations are not based upon “information and belief.”

Defendants next argue that in a prior lawsuit involving some of the same parties, plaintiff obtained more the 28,000 pages of discovery. As a result, defendants contend that plaintiff should be precluded from arguing “upon information and belief” given the already established access to information.

The fact that plaintiff received information in a previous litigation, centered on different allegations, does not automatically imply its possession of all, or even some, of the pertinent information required for this ongoing matter. Defendants have made no particular showing that the discovery received in the prior lawsuit provided plaintiff with the information necessary and relevant to this lawsuit.

Trade secrets

To assert a claim under the Federal Defend Trade Secrets Act a plaintiff must allege that: (1) it owns a trade secret, (2) the trade secret was misappropriated and (3) the trade secret implicates interstate or foreign commerce. The Virginia Uniform Trade Secrets Act requires a plaintiff to establish that: (1) the information in question constitutes a trade secret and (2) the defendant’s misappropriation of the trade secret.

The complaint satisfies the first element. The complaint sufficiently pleads that the purported trade secrets contain both technical and engineering information. In addition, plaintiff alleges that defendants took trade secrets relating to several specific weapons that plaintiff lists by name in its complaint. Moreover, plaintiff sufficiently pleads that it took reasonable measures to keep this information secret, and that it derives value from these trade secrets.

Second, plaintiff successfully pleads that confidential, proprietary and trade secret information stored on plaintiff’s computer system had been accessed by Doe defendants both before and after they had ceased working for plaintiff. And plaintiff subsequently learned that a number of its former employees were now working for Zenith.

Finally, plaintiff must show that the trade secrets implicate interstate or foreign commerce. This element is uncontested, and the court finds the pleadings sufficient.

Conversion

Defendants argue that plaintiff has not pled specific facts to establish what property was taken, who took the property and who is exercising ownership over the taken property. However, plaintiff directly alleges that “molds for components, as well as product designs and production blueprints used to produce and manufacture [plaintiff’s] firearms” were missing from plaintiff’s factories. Plaintiff alleges that these items were stolen by one or more Doe defendants and delivered to Zenith.

The third element of conversion requires a showing that the conversion was inconsistent with, or in denial of the owner’s rights. Plaintiff has sufficiently pled that these items were stored in a facility with physical security measures in place to ensure that the items would not be improperly taken.

Remaining claims

The defendants assert that plaintiff’s conspiracy claim contains only conclusory allegations and should not survive the motion to dismiss. This argument fails because the plaintiff’s complaint contains sufficient details that, taken as true, state a plausible statutory business conspiracy claim.

The court also finds that the plaintiff has pleaded a plausible tortious interference with contract claim. Plaintiff has established that it had an ongoing expectation that plaintiff and Doe defendants’ business relationships would continue, and certainly that Doe defendants would not leave plaintiff to go work for its competitor. And it alleges that the Doe defendants were prohibited from working for any of plaintiff’s competitors without prior board approval.

Defendants’ motion to dismiss denied.

Makina ve Kimya Endustrisi A.S. v. Zenith Quest Corporation, Case No. 3:22-cv-00066, Aug. 7, 2023. WDVA at Charlottesville (Moon). VLW 023-3-453. 17 pp.