Employment: Company alleges former employee stole thousands of trade secret files

Where an environmental testing company plausibly alleged a former employee misappropriated tens of thousands of files containing its trade secrets, its trade secret and related claims survived the employee’s motion to dismiss.

Background

America Science Team Richmond Inc., or AmeriSci, alleges that Enoch Chan misappropriated tens of thousands of files containing its trade secrets. AmeriSci has brought nine federal and state claims against Chan. Chan has raised counterclaims against AmeriSci for allegedly violating federal human trafficking laws. Both parties have filed motions to dismiss.

Breach of contract

Chan agreed to not disclose, communicate or divulge any of AmeriSci’s confidential information. Although AmeriSci alleges that “Chan is using or intends to use” the company’s trade secrets, the company has not stated that Chan breached his duty of confidentiality by actually disclosing any trade secrets or communicating them to others. AmeriSci’s claim thus fails under this theory.

The confidentiality agreement also required Chan to return all of AmeriSci’s property, including all confidential information in his possession, at the end of his employment. AmeriSci’s allegation that Chan “is using or intends to use” the company’s trade secrets indicates that Chan failed to return these files at the end of his employment.

Moreover, Chan allegedly violated several company policies by accessing over 70,000 files without authorization, installing a virtual private network without approval, inappropriately removing the company’s trade secrets, engaging in unauthorized use of AmeriSci’s equipment and committing a fraudulent act or breach of trust. Thus, AmeriSci has plausibly stated a breach of contract claim on these grounds.

Fiduciary duty

AmeriSci alleges that Chan, as its employee, owed the company a fiduciary duty of loyalty; that Chan breached this duty by misappropriating AmeriSci’s trade secrets and confidential information and that the company has suffered and will continue to suffer damage both monetarily and from the risk that Chan or others may open a competing laboratory. AmeriSci may proceed with its breach of fiduciary duty claim.

Trade secrets

AmeriSci alleges that Chan’s misappropriation of the company’s trade secrets violated both the Virginia Uniform Trade Secrets Act, or VUTSA, and the Defend Trade Secrets Act of 2016. It has alleged facts sufficient to support these claims.

Conversion and trespass

The VUTSA contains a preemption provision which provides that “this chapter displaces conflicting tort, restitutionary, and other law of this Commonwealth providing civil remedies for misappropriation of a trade secret.” AmeriSci’s pleadings make clear that the company has premised its conversion claim “entirely on an alleged misappropriation of trade secrets.” Because AmeriSci offers no alternative theory other than Chan’s alleged misappropriation of trade secrets, the VUTSA preempts the company’s conversion claim.

Similarly the complaint indicates that Chan’s unauthorized activity impaired the value of AmeriSci’s trade secrets by exposing the company to the risk that Chan or others may open a competing laboratory. As a result, AmeriSci’s trespass to chattels claim can only proceed on the theory that Chan misappropriated the company’s trade secrets. The VUTSA preempts this claim.

VCCA

AmeriSci easily makes out a claim under § 18.2-152.4(A)(6), as the company alleges that “Chan willfully and maliciously used AmeriSci’s computers, computer programs, and devices to make unauthorized copies of AmeriSci’s confidential information and [t]rade [s]ecrets” housed in an internal shared folder. Accordingly, AmeriSci may proceed with its Virginia Computer Crimes Act claim.

CFAA

Chan allegedly used his virtual machine to intentionally access over 70,000 files of trade secrets and transfer the data offsite using an unauthorized virtual private network. Chan allegedly needed just one of these files to perform his job, indicating that he exceeded the scope of his authority in accessing these files. The virtual machine also “allows a user to access all of their data through a secure system using any computer,” demonstrating its protected nature. Finally, AmeriSci values the stolen information, which Chan allegedly took on a single day, at over $500,000. Thus, AmeriSci has plausibly stated a Computer Fraud and Abuse Act claim.

SCA

AmeriSci has not alleged that Chan accessed a “facility” within the meaning of the Stored Computer Act. And none of the files he allegedly stole appear to constitute a “wire or electronic communication” as defined in the statute. This claim is dismissed.

Counterclaim

Chan has not alleged facts plausibly showing he was forced to engage in labor. And while Chan alleges that AmeriSci’s refusal to submit a document confirming a bona fide job offer, that alleged refusal does not support a claim for document servitude under 18 U.S.C. § 1592 and 18 U.S.C. § 1597.

Defendant’s motion to dismiss granted in part, denied in part. Plaintiff’s motion to dismiss counterclaim granted.

America Science Team Richmond Inc. v. Chan, Case No. 3:22-cv-451, July 15, 2025. EDVA at Richmond (Gibney Jr.). VLW 025-3-292. 23 pp.