Graham Engineering Corp. v. KramerBRIEF IN SUPPORT re MOTION TO DISMISS FOR FAILURE TO STATE A CLAIMM.D. Pa.February 27, 2017IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02523-CCC v. : (Honorable Christopher C. Conner) : WILLIAM KRAMER, : : Defendant : : DEFENDANT WILLIAM KRAMER’S BRIEF IN SUPPORT OF HIS MOTION TO DISMISS PLAINTIFF’S COMPLAINT February 27, 2017 John V. Gorman (PA 80631) Andrew C. Whitney (PA 201534) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 T: 215.963.5000 F: 215.963.5001 john.gorman@morganlewis.com andrew.whitney@morganlewis.com Counsel for Defendant William Kramer Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 1 of 27 TABLE OF CONTENTS Page I. INTRODUCTION .......................................................................................... 1 II. BACKGROUND ............................................................................................ 2 A. Statement of Facts ................................................................................ 2 B. Procedural History ................................................................................ 4 III. Questions Presented ........................................................................................ 4 IV. ARGUMENT .................................................................................................. 5 A. Legal Standard ...................................................................................... 5 B. Counts I and II Should Be Dismissed Because GEC Has Failed to Plead Facts Giving Rise to Plausible Breach of Contract Claims ................................................................................................... 6 C. Count III Should Be Dismissed Because the Unfair Competition Claim Is Derivative of the Flawed Breach of Contract Claims and Based On Conclusory Allegations ................... 11 D. Count IV Should Be Dismissed Because GEC Has Failed to Plead Sufficient Facts to Establish a Plausible Misappropriation of Trade Secrets Claim ....................................................................... 12 E. Count V Should Be Dismissed Because GEC Has Failed to Adequately Plead Essential Elements of a Civil Conspiracy Claim .................................................................................................. 16 F. Counts III and V are Barred by Pennsylvania’s Gist of the Action Doctrine .................................................................................. 17 V. CONCLUSION ............................................................................................. 19 Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 2 of 27 TABLE OF AUTHORITIES Page(s) CASES Accenture Global Servs. GmBH v. Guideware Software, Inc., 581 F. Supp. 2d 654 (D. Del. 2008).................................................................... 11 Alpha Pro Tech., Inc. v. VWR Int’l LLC, 984 F. Supp. 2d 425 (E.D. Pa. 2013) .................................................................... 6 Angino v. BB&T Bank, No. 1:15-cv-2105, 2016 WL 4408835 (M.D. Pa. June 7, 2016), aff’d 2016 WL 4366962 ................................................................................ 16, 17 Ascroft v. Iqbal, 556 U.S. 662 (2009) .......................................................................................... 5, 7 Bell Atl. Corp. v. Twombly, 550 U.S. 554 (2007) ........................................................................................ 5, 10 Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102 (3d Cir. 2010) ............................................................................... 13 Bioquell, Inc. v. Feinstein, No. 10-2205, 2010 WL 4751709 (E.D. Pa. Nov, 23, 2010) ......................... 10, 12 Bowe Mach. Co. v. Superbolt, Inc., No. 3:13-cv-00008, 2013 WL 12081103 (S.D. Iowa Dec. 20, 2013) .................. 7 Boyanowski v. Capital Area Intermediate Unit, 215 F.3d 396 (3d Cir. 2000) ............................................................................... 16 Chemtech Int’l, Inc. v. Chem. Injection Techs, Inc., 170 F. App’x. 805 (3d Cir. 2006) ................................................................... 6, 18 Cunningham Lindsey U.S., Inc. v. Bonnani, No. 1:13-cv-2528, 2014 WL 1612632 (M.D. Pa. Apr. 22, 2014) ................ 18, 19 Edios Commc’ns, LLC v. Skype Techs. SA, 686 F. Supp. 2d 465 (D. Del. 2010)...................................................................... 7 Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 3 of 27 iii First Health Group Corp. v. Nat’l Prescription Adm’rs, Inc., 155 F. Supp. 2d 194 (M.D. Pa. 2001) ........................................................... 11, 15 Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009) ................................................................................. 5 Franklin Music Co. v. Am. Broadcasting, Inc., 616 F.2d 528 (3d Cir. 1979) ............................................................................... 19 Giordano v. Claudio, 714 F. Supp. 2d 508 (E.D. Pa. 2010) .................................................................. 11 Goldthread v. Davidson, No. 3:06-0805, 2007 WL 2471803 (M.D. Tenn. Aug. 29, 2007) ...................... 14 Great Bay Condo. Owners Ass’n, Inc. v. McCormack, Civ. No. 2014-66, 2015 WL 4531715 (D.V.I. July 13, 2015) ........................... 13 Hot Stuff Foods, LLC v. Dornbach, 726 F. Supp. 2d 1038 (D. Minn. 2010) ............................................................... 14 Introsan Dental Prods., Inc. v. Dentsply Tulsa Dental, LLC, No. MJG-09-3111, 2012 WL 3011830 (D. Md. July 20, 2012)........................... 8 Milliken & Co. v. Smith, No. 10-0301, 2011 WL 939211 (D.S.C. Mar. 16, 2011) .............................. 10, 15 Moore v. Kulicke & Soffa Indus., Inc., 318 F.3d 561 (3d Cir. 2003) ............................................................................... 12 Moose Mtn. Toymakers Ltd. v. Majik Ltd., No. 10-4934, 2011 WL 3625057 (D.N.J. Aug. 12, 2011) .................................. 11 Msc. Software, Inc. v. Altair Eng’g, Inc., No. 07-12807, 2009 WL 1856222 (E.D. Mich. June 25, 2009) ......................... 15 Sedona Corp. v. Ladenburg Thalman & Co., No. 03 Civ. 3120, 2009 WL 1492196 (S.D.N.Y. May 27, 2009) ...................... 10 Synthes, Inc. v. Emerge Med., Inc., Civ. A. No. 11-1566, 2012 WL 4205476 (E.D. Pa. Sept. 19, 2012) .................. 17 Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 4 of 27 iv U.S. Bank Nat’l Ass’n v. Parker, No. 4:09-cv-1755, 2010 WL 2735661 (E.D. Mo. July 9, 2010) .................... 9, 15 STATUTES 1 Pa. C.S.A. § 1927 .................................................................................................. 14 12 Pa. C.S. § 5302 .................................................................................................... 12 Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 5 of 27 I. INTRODUCTION Plaintiff Graham Engineering Corporation (“GEC”) filed the instant lawsuit against defendant William Kramer (“Defendant”) with little more than GEC’s “belief” that Defendant is currently engaging or will “inevitably” in the future engage, in competitive activities and use confidential information (including trade secrets) in violation of a confidentiality agreement. To mask the lack of factual allegations, GEC has engaged in shot-gun style pleading and asserted a variety of claims in the hope that something will stick. These allegations are based on GEC’s speculation regarding Defendant’s alleged actions, including possible employment at a company that may eventually compete with GEC. However, GEC’s conclusory allegations are insufficient to transform conjecture into plausible claims. As such, each Count of the Complaint should be dismissed for failure to plead sufficient factual allegations to state a claim. Further, GEC’s unfair competition claim - which is a cut-and-paste of the breach of contract allegations under a tort claim heading - should also be dismissed because it is barred by Pennsylvania’s gist of the action doctrine. The derivative civil conspiracy claim should also be dismissed pursuant to the gist of the action doctrine. For these reasons and as more fully explained herein, the Court should dismiss the Complaint in its entirety. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 6 of 27 2 II. BACKGROUND A. Statement of Facts Defendant was formerly employed as President and CEO at American Kuhne (a predecessor of GEC) and GEC. Complaint1 ¶¶ 9, 27. Defendant has not been employed by either company since March 31, 2016. ¶ 36. During his employment, Defendant entered into a Confidentiality, Non- Solicitation, and Non-Competition Agreement (Dkt. 1-2) (the “Confidentiality Agreement”), which contains non-solicitation and non-competition provisions that prohibit Defendant from (1) soliciting clients of GEC or potential clients whom he had contact with in the final two years of his employment at GEC for a period of twelve months after cessation of employment at GEC and (2) becoming affiliated with competitors of GEC in North America. See Dkt. 1-2 at 3, ¶ 4. Thus, by the terms of the Confidentiality Agreement, the restrictive covenant non-solicitation and non-competition provisions remain in effect until March 31, 2017. ¶¶ 41, 70. The Confidentiality Agreement also contains a non-disclosure provision providing that Defendant will not “during his employment or at any time after his employment with GEC” disclose “GEC Confidentiality Information” without his employer’s consent. See Dkt. 1-2 at 2 ¶ 2. The Confidentiality Agreement broadly 1 Unless otherwise stated all ¶ __ citations refer to paragraphs in the Complaint (Dkt. 1). To the extent any claims survive dismissal, Defendant reserves all rights to challenge the factual allegations in the Complaint. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 7 of 27 3 defines “GEC Confidential Information” to encompass, inter alia, trade secrets, processes, and methods. See id. GEC alleges - “upon information and belief” - that since Defendant’s separation from GEC, Defendant has violated the terms of the non-solicitation and non-competition provision (id., ¶ 4) and non-disclosure provision (id., ¶ 2) by: (1) disclosing confidential information of GEC; (2) using confidential information of GEC for his own benefit; and (3) rendering services to a business that is engaged in a business in competition with GEC. ¶ 48. These three categories of alleged actions form the basis not only for breach of contract claims (Counts I and II), but also for unfair competition (Count III), and civil conspiracy (Count V) claims. GEC also asserts a statutory claim for misappropriation of trade secrets (Count IV). GEC bases its claims on conjecture - unsupported by any plausible factual allegations - regarding Defendant’s purported activities since Defendant ended his employment with GEC, including a conclusory belief that Defendant is using confidential information or trade secrets “for the purpose of establishing a new company - US Extruders,” which may now or in the future employ Defendant in an unidentified job capacity. ¶¶ 50-52. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 8 of 27 4 B. Procedural History GEC commenced the instant action on December 21, 2016. Dkt. 1. That same day, GEC filed a Motion for Temporary Restraining Order (“TRO”) and/or Preliminary Injunction (“PI”) seeking emergent relief. Dkt. 3. On December 28, 2016, after hearing oral argument - at which GEC was obligated to come forward with support for its claim of alleged irreparable harm - the Court denied the Motion for TRO and held that GEC had offered only conclusory allegations to support its allegations. Dkt. 11. Faced with having to present evidence to support its conclusory claims and purported “facts” at a Motion for PI hearing, GEC withdrew its PI Motion. Dkts. 12 & 14. III. QUESTIONS PRESENTED A. Should the Court dismiss the breach of contract, unfair competition, misappropriation of trade secrets, and civil conspiracy claims because GEC has failed to adequately plead a plausible basis for recovery under any of these legal theories? B. Should the Court dismiss the unfair competition and civil conspiracy claims because these claims are barred by the gist of the action doctrine? Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 9 of 27 5 IV. ARGUMENT A. Legal Standard To survive a motion to dismiss, a complaint must plead facts - not merely “labels and conclusions” - that on their face plausibly suggest entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007). In determining whether a complaint meets this standard, courts in the Third Circuit first must separate well- pleaded facts from mere legal conclusions, and disregard the latter. See Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). A court “must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.’” Id. at 211. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ascroft v. Iqbal, 556 U.S. 662, 678 (2009). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.’” Id. A pleading will not suffice “if it tenders ‘naked assertions’ devoid of ‘further factual enhancement.’” Id. Here, none of the claims satisfy these pleading standards. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 10 of 27 6 B. Counts I and II Should Be Dismissed Because GEC Has Failed to Plead Facts Giving Rise to Plausible Breach of Contract Claims. In Counts I and II, GEC merely states “that a contract was breached” without providing any “factual allegations that would underpin this legal conclusion.” See Chemtech Int’l, Inc. v. Chem. Injection Techs, Inc., 170 F. App’x. 805, 808 (3d Cir. 2006). Such allegations cannot survive a motion to dismiss. See Alpha Pro Tech., Inc. v. VWR Int’l LLC, 984 F. Supp. 2d 425, 442 (E.D. Pa. 2013) (“Pennsylvania law requires a plaintiff alleging breach of contract to plead facts establishing the existence of a contract, a breach of that contract, and resulting damages.”) (emphasis added). Specifically, GEC: 1. Recites a laundry list of contractual covenants from the Confidentiality Agreement.2 See ¶¶ 57-58 (“The Confidentiality Agreement prohibits [Defendant] from disclosing American Kuhne and GEC’s confidential information” or using it “for his own purpose or for the benefit” of anyone but GEC.); ¶ 69 (Confidentiality Agreement prohibits Defendant “from becoming employed by or rendering services to . . . or own[ing] any business” engaged in competition with GEC.); 2 Notably, GEC leaves out critical parts of the purportedly breached contractual covenants that limit the breadth of the covenants, and GEC has not even attempted to address such key aspects of these covenants. See, e.g., ¶ 72 (alleging breach of non-competition covenant, but neglecting to mention alleged conduct is prohibited only if it involves competitive activities in a limited geographic area, see Dkt. 1-2 ¶ 4(d)). Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 11 of 27 7 2. Asserts only “upon information and belief” that Defendant has breached those covenants.3 See ¶¶ 60-61 (Defendant “has disclosed, or participated in disclosing confidential information of American Kuhne and GEC” and has “used, and participated in the use of, confidential information of American Kuhne and GEC.”); ¶ 72 (Defendant has violated the Confidentiality Agreement by “rendering services to a business - US Extruders - that is engaged in competition with GEC.”); and 3. Declares that it is entitled to damages. See ¶¶ 65, 75. Stripped of labels and formulaic recitation of elements, the only purported facts supporting Counts I and II are (1) examples of “confidential information,” ¶¶ 50, 61, and (2) speculation regarding Defendant’s creation of a new potential competitor of GEC - “US Extruders” - to which Defendant purportedly “rendered” unidentified “services” and may be employed by. ¶¶ 50-53, 72. But, GEC’s allegations regarding US Extruders’ status as a “competitor” are nothing more than “naked assertions” unsupported by factual development, which are not entitled to any weight at the motion to dismiss phase. Iqbal, 556 U.S. at 678; see generally Bowe Mach. Co. v. Superbolt, Inc., No. 3:13-cv-00008, 2013 WL 12081103 , at *12 (S.D. Iowa Dec. 20, 2013) (finding complaint did not state claim requiring proof that parties were competitors where plaintiff “presents only 3 GEC claims that Defendant breached the Confidentiality Agreement “including, but not limited to” the ways listed in the Complaint. See ¶ 48. This conditional language fails to put Defendant on notice of the scope of the purported wrongdoing. See generally Edios Commc’ns, LLC v. Skype Techs. SA, 686 F. Supp. 2d 465, 467 (D. Del. 2010) (A plaintiff fails to properly “guid[e] the course of discovery by utilizing conditional language [such as “by way of example only” or “and/or”] in the complaint”). Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 12 of 27 8 bare assertions that amount to nothing more than a formulaic recitation of the elements that [party] was a competitor” and did not provide requisite factual information to support assertion of competitor status); Introsan Dental Prods., Inc. v. Dentsply Tulsa Dental, LLC, No. MJG-09-3111, 2012 WL 3011830, at *4 (D. Md. July 20, 2012) (rejecting allegation that party “was and is a competitor” as “totally conclusory” where there were no facts pled “that rendered it plausible” party “could be considered a competitor”).4 The remaining allegations of Count II leave open the very questions that must be answered in order to state a plausible claim for violation of the non- compete covenant, including: " Does US Extruders offer package design and plastic processing expertise as GEC claims it does, ¶ 6? " Does US Extruders operate globally like GEC, id.? Or does US Extruders just compete with GEC outside of North America? (In which case, even if US Extruders was a competitor of GEC, Defendant could still render services to US Extruders, see Dkt. 1-2 ¶ 4(d) (non-compete clause only applies to North America)). " What “services” did Defendant purportedly render to US Extruders, ¶ 72? " Is Defendant a director, independent contractor, consultant, or owner of US Extruders - roles prohibited by the Confidentiality Agreement, ¶ 32? Or does Defendant have another role with US Extruders that may not be prohibited by the Confidentiality Agreement? 4 All unpublished cases are included in the appendix filed contemporaneously herewith. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 13 of 27 9 Likewise, the Complaint leaves open many unanswered questions regarding the factual underpinnings for Plaintiff’s conclusory assertion in Count I that Defendant breached the non-disclosure provision of the Confidentiality Agreement. Indeed, Count I lacks critical and necessary factual allegations pled with requisite specificity to answer basic questions - the answers to which would reveal facts that may plausibly state a claim - including,: " Who Defendant disclosed confidential information to? " How the disclosure occurred? " What precisely was disclosed? See ¶ 61 (disclosure of “including, but not limited to” listed broad categories of information). Where, as here, a plaintiff has failed to plead plausible facts to answer basic questions regarding alleged breaches, courts have routinely dismissed breach of contract claims. See, e.g., U.S. Bank Nat’l Ass’n v. Parker, No. 4:09-cv-1755, 2010 WL 2735661, at *3 (E.D. Mo. July 9, 2010) (“Plaintiff simply alleges . . . Defendant breached her obligations under the Agreement by directly or indirectly soliciting Plaintiff’s clients for the purpose of providing [advice] in a manner that would benefit Defendant and Northern Trust in direct competition with Plaintiff, and that she retained, duplicated, and used Plaintiff’s confidential information . . . for the purposes of soliciting influencing or encouraging Plaintiff’s customers to do business with her after she left the employment of Plaintiff. These vague, albeit intriguing, references are not sufficient factual allegations to meet the Twombly Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 14 of 27 10 standard.”); Sedona Corp. v. Ladenburg Thalman & Co., No. 03 Civ. 3120, 2009 WL 1492196, at *10 (S.D.N.Y. May 27, 2009) (dismissing breach of contract claim containing “laundry list” of alleged breaches without supporting facts). The result should be the same here. GEC cannot salvage its defective breach of contract claims by asserting that Defendant will “inevitably” disclose confidential information “in order to perform his job with US Extruders.” ¶¶ 62-63, 73. Such “bald assertions” regarding inevitable disclosure are insufficient to state a claim for breach of contract. See Bioquell, Inc. v. Feinstein, No. 10-2205, 2010 WL 4751709, at *5 (E.D. Pa. Nov, 23, 2010) (dismissing breach of contract claim alleging former employees disclosed confidential information to current employer/competitor stating “[t]he very verbiage used in Plaintiff’s Complaint demonstrates that it lacks a basis for the allegations. . . . Plaintiff states that it believes that Defendants . . . have “disclosed or inevitably will disclose confidential trade secret information[.] These bald assertions do not suffice to allow this Court to draw the inference that Defendant[s] are liable for the breach of the confidentiality provisions.”); see generally Milliken & Co. v. Smith, No. 10-0301, 2011 WL 939211, at *3 (D.S.C. Mar. 16, 2011) (“Stating that the plaintiff suspects that the defendant will ‘inevitably’ disclose trade secret information without more is insufficient to meet the pleading standards of Rule 8.”). Indeed, GEC has failed to plead any factual Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 15 of 27 11 allegations giving rise to an inference that disclosure would be “inevitable” - i.e., why Defendant “could not operate or function without relying on Plaintiffs alleged trade secrets.” See First Health Group Corp. v. Nat’l Prescription Adm’rs, Inc., 155 F. Supp. 2d 194, 236 (M.D. Pa. 2001). C. Count III Should Be Dismissed Because the Unfair Competition Claim Is Derivative of the Flawed Breach of Contract Claims and Based On Conclusory Allegations. Under Pennsylvania law, an unfair competition claim is a derivative claim that depends on pleading a valid cause of action for other tortious or improper conduct. See Giordano v. Claudio, 714 F. Supp. 2d 508, 522 (E.D. Pa. 2010). GEC’s unfair competition claim is premised on the “conduct described above,” which encompasses Counts I and II asserting claims for breach of contract. ¶ 78. Within Count III, GEC does not plead any new factual allegations; instead, GEC merely adds in some unfair competition buzz words to disguise the lack of facts: “unfair method of competition” and “unfairly compete.” ¶¶ 78-79. As a result, GEC’s unfair competition claim fails for the same reasons as its breach of contract claims. See Moose Mtn. Toymakers Ltd. v. Majik Ltd., No. 10-4934, 2011 WL 3625057, at *4 (D.N.J. Aug. 12, 2011) (“[C]onclusory and formulaic recitation of the cause of action” is insufficient to state unfair competition claim.); Accenture Global Servs. GmBH v. Guideware Software, Inc., 581 F. Supp. 2d 654, 668 (D. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 16 of 27 12 Del. 2008) (dismissing unfair competition claim predicated on conclusory and insufficient allegations regarding tortious interference). D. Count IV Should Be Dismissed Because GEC Has Failed to Plead Sufficient Facts to Establish a Plausible Misappropriation of Trade Secrets Claim. A trade secret misappropriation claim cannot survive dismissal where it contains “merely a string of conclusory statements devoid of any factual basis.” Bioquell, 2010 WL 4751709, at *6. Instead, Plaintiff must plead facts demonstrating, inter alia, (1) existence of a legally protectable trade secret and (2) use of the trade secret in violation of a confidential relationship. See 12 Pa. C.S. § 5302; Moore v. Kulicke & Soffa Indus., Inc., 318 F.3d 561, 566 (3d Cir. 2003). Here, GEC has failed to plead these requisite facts. First, GEC fails to allege any facts supporting its claim that its broad categories of information “including, but not limited to, customer lists, price lists, pricing methodology, processes, and product specifications and designs” comprise legally protectable “trade secrets.” ¶ 42. In order to qualify as a legally protectable trade secret, information must (1) “[d]erive[ ] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use;” and (2) be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” 12 Pa. C.S. § 5302. The Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 17 of 27 13 Complaint contains nothing more than a rote recitation of these statutory requirements. See ¶¶ 45, 88 (“GEC does not disclose its trade secrets or confidential information to its competitors or outside third parties and has made reasonable efforts to protect its confidential information and trade secrets.”); ¶¶ 44, 87 (alleging trade secrets “derive economic value from the fact that they are neither generally known nor readily ascertainable”). And, GEC fails to plead any facts making it plausible that the various factors Pennsylvania courts consider in determining whether information qualifies as a legally protectable trade secret are satisfied by any of the broad categories of information it purports constitute trade secrets. See Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102, 109 (3d Cir. 2010) (listing factors). Instead, to the extent GEC even addresses these factors, GEC makes only conclusory assertions unsupported by facts. See, e.g., ¶¶ 43, 86 (“GEC and American Kuhne have expended substantial resources in developing their trade secrets.”). These conclusory allegations and parroting of statutory requirements are insufficient to plead that a legally protectable trade secret exists; thus, Count IV should be dismissed. See Great Bay Condo. Owners Ass’n, Inc. v. McCormack, Civ. No. 2014-66, 2015 WL 4531715, at *6 (D.V.I. July 13, 2015) (dismissing trade secret misappropriation claim where plaintiff failed to allege “what . . . protections were taken” to maintain confidentiality and pled only “a series of legal Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 18 of 27 14 conclusions which much be excised for purposes of determining if a claim has been stated”); Hot Stuff Foods, LLC v. Dornbach, 726 F. Supp. 2d 1038, 1044 (D. Minn. 2010) (dismissing trade secret claim and emphasizing that “[m]erely stating that the information is confidential is insufficient. Rather, [Plaintiff] must set forth facts showing [that Plaintiff] took efforts to maintain its secrecy.”); Goldthread v. Davidson, No. 3:06-0805, 2007 WL 2471803, at *5 (M.D. Tenn. Aug. 29, 2007) (“Plaintiff fails to plead any facts alleging that the combination of a fan and a scent derives some independent economic value from being unascertainable to others, and he consequently fails to allege the existence of a trade secret that would satisfy the first element of this cause of action.”).5 Second, GEC’s “belief” that Defendant “has used GEC and American Kuhne’s trade secrets” “to unfairly compete with Plaintiff,” ¶ 90, falls far short of giving rise to a plausible inference of the precise use of a trade secret in violation of the confidential relationship. Indeed, “[w]hile Plaintiff may have a confidential and proprietary interest in its customer’s information, merely ‘believing’ Defendant kept the information and believing [ ]he used that information [to 5 The Uniform Trade Secrets Act (“UTSA”) has been adopted by 47 states and the District of Columbia. As such, cases from other jurisdictions interpreting the UTSA are considered persuasive authority in interpreting the Pennsylvania UTSA. See 1 Pa. C.S.A. § 1927 (“Statutes uniform with those of other states shall be interpreted and construed to effect their general purpose to make uniform the laws of those states which enact them.”). Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 19 of 27 15 compete] is insufficient to state a claim beyond the speculative level.” U.S. Bank, 2010 WL 2735661, at *4. Finally, GEC cannot avoid its obligation to plead facts by claiming Defendant will “inevitably” disclose trade secrets in the future, ¶¶ 49, 51, 62. See generally Milliken, 2011 WL 939211, at *3 (“Stating that plaintiff suspects that the defendant will ‘inevitably’ disclose trade secret information without more is insufficient to meet the pleading standards of Rule 8.” “[Plaintiff] must allege more than that [Defendant] was formerly employed by it and now she works for someone else to adequately plead this [trade secret misappropriation] cause of action.”); Msc. Software, Inc. v. Altair Eng’g, Inc., No. 07-12807, 2009 WL 1856222, at *4 (E.D. Mich. June 25, 2009) (“The fact that trade secrets may exist, and the fact that [a competitor] employs the individual Defendants, who have knowledge of the alleged trade secrets, are insufficient to allege a threatened misappropriation claim.”). Indeed, there are no factual allegations giving rise to an inference that disclosure would in fact be “inevitable” - i.e., why Defendant “could not operate or function without relying on Plaintiffs alleged trade secrets.” See First Health, 155 F. Supp. 2d at 236. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 20 of 27 16 E. Count V Should Be Dismissed Because GEC Has Failed to Adequately Plead Essential Elements of a Civil Conspiracy Claim. GEC’s civil conspiracy claim fails for three reasons. First, GEC has failed to adequately allege an underlying tort. See Boyanowski v. Capital Area Intermediate Unit, 215 F.3d 396, 407 (3d Cir. 2000) (noting this is a prerequisite). GEC purports to rely on conduct described elsewhere in the Complaint to provide the basis for its civil conspiracy claim. ¶¶ 95-96. However, for the reasons set forth herein, each of these claims fails as a matter of law. Thus, so too does the civil conspiracy claim. See Angino v. BB&T Bank, No. 1:15-cv-2105, 2016 WL 4408835, at *12 (M.D. Pa. June 7, 2016) (recommending dismissal of civil conspiracy claim based on failure to plead underlying tort), aff’d 2016 WL 4366962 (Conner, J.). Second, GEC has failed to allege with whom Defendant supposedly conspired - a dispositive defect in the civil conspiracy claim. See Angino, 2016 WL 4408835, at *13 (“Given that [named defendant] cannot conspire with itself, and there are no other named defendants in this conspiracy count of the plaintiffs’ complaint, that count fails to satisfy an essential element of any civil conspiracy, the requirement that two or more persons act with a common purpose to commit an illegal act or to commit a lawful act by unlawful means or for an unlawful purpose.”) (emphasis in original). Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 21 of 27 17 Third, GEC has failed to allege - let alone plead requisite facts giving rise to a plausible inference - “that the sole purpose of the conspiracy is to injure the plaintiff.” See Synthes, Inc. v. Emerge Med., Inc., Civ. A. No. 11-1566, 2012 WL 4205476, at *37 (E.D. Pa. Sept. 19, 2012) (“[A] showing that a person acted for professional reasons, and not solely to injure the plaintiff, negates a finding of malice.”). GEC’s own allegations regarding the purported formation of US Extruders and Defendant’s involvement and potential employment there (¶¶ 50, 61, 73), give rise to an inference that Defendant acted for professional reasons, and not with the requisite malice. See Synthes, 2012 WL 4205476, at *37 (dismissing civil conspiracy claim for failure to plead malice where common purpose was to “found, develop, and operate a business that unlawfully competes with [Plaintiff]”). In short, this claim fails as pleaded “since we do not know who the alleged conspirators are, what the wrongful objects of the agreement were, and what concerted illegal acts or lawful acts committed by unlawful means or for an unlawful purpose are alleged to have taken as part of this corrupt agreement.” Angino, 2016 WL 4408835, at *13. F. Counts III and V are Barred by Pennsylvania’s Gist of the Action Doctrine. The gist of the action doctrine bars a tort claim when (1) it “arises from a contract between the parties, (2) the duties breached were created by the contract, (3) liability derives from the contract, or (4) the success of the tort claim is wholly Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 22 of 27 18 dependent upon the contract’s terms.” Cunningham Lindsey U.S., Inc. v. Bonnani, No. 1:13-cv-2528, 2014 WL 1612632, at *5 (M.D. Pa. Apr. 22, 2014) (Conner, J.).6 Here, Counts III, V, and VI of the Complaint are subject to dismissal pursuant to the gist of the action doctrine. First, GEC admits that its unfair competition claim (Count III) is premised on “conduct described above,” ¶ 78 - conduct which underlies two proceeding breach of contract counts, and which in turn demonstrates the duplicative nature of these two claims. Compare ¶ 79 (Unfair Competition) (alleging that Defendant’s “conduct demonstrates a persistent effort to use American Kuhne and GEC’s confidential information and trade secrets, interfere with Plaintiff’s business, and unfairly compete with Plaintiff”), with ¶ 64 (Breach of Contract) (alleging “disclosure of trade secrets and confidential information” as basis for breach of contract), ¶ 72 (alleging Defendant “render[ed] services to a business . . . engaged in competition with GEC” as basis for breach of contract). Further, GEC has failed to articulate any wrongs which transcend the Confidentiality Agreement itself. See Dkt. 1-2, ¶ 2 (precluding disclosure of trade secret and confidential information); id., ¶ 4 (precluding “solicit[ation],” to divert business away from GEC and consulting with, owning, or becoming employed by “any business that is engaged in any business activities in competition with GEC”). Because there are not a 6 The gist of action doctrine applies despite Plaintiff’s failure to adequately plead a claim for breach of contract. See Chemtech, 170 F. App’x. at 809. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 23 of 27 19 “broader set of wrongful acts” alleged in the unfair competition claim than in the breach of contract claims, the unfair competition claim should be dismissed. See Cunningham, 2014 WL 1612632, at *7 (dismissing as barred by gist of action doctrine unfair competition claim based on “conduct described” elsewhere in Complaint). Second, Plaintiff’s civil conspiracy claim (Count V) is barred by the gist of the action doctrine. “In an action on the case for conspiracy the gist of the action is not the conspiracy charged, but the tort working damage to the plaintiff.” Franklin Music Co. v. Am. Broadcasting, Inc., 616 F.2d 528, 548 (3d Cir. 1979). In its civil conspiracy claim, GEC seeks relief solely based on contractual covenants of the Confidentiality Agreement. See ¶ 98(a)-(c). This demonstrates, in turn, that the only tort cause of action underlying the claim is unfair competition, which, for the reasons discussed herein is barred by the gist of the action doctrine. Because this underlying tort cause of action is barred by the gist of the action doctrine, so too is the civil conspiracy claim. See Cunningham, 2014 WL 1612632, at *8 (dismissing civil conspiracy claim on gist of action doctrine and collecting cases doing same). V. CONCLUSION For the foregoing reasons, the Court should dismiss the Complaint. Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 24 of 27 20 Dated: February 27, 2017 Respectfully submitted, s/ Andrew C. Whitney John V. Gorman (PA 80631) Andrew C. Whitney (PA 201534) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 T: 215.963.5000 F: 215.963.5001 john.gorman@morganlewis.com andrew.whitney@morganlewis.com Counsel for Defendant William Kramer Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 25 of 27 CERTIFICATE OF SERVICE I, Andrew C. Whitney, certify that the foregoing was filed on this 27th day of February, 2017, using the electronic case filing (CM/ECF) for the U.S. District Court for the Middle District of Pennsylvania, which will send notification of such filing to the following: Richard L. Hackman Saxton & Stump LLC 280 Granite Run Drive, Suite 300 Lancaster, PA 17601 rlh@saxtonstump.com s/Andrew C. Whitney Andrew C. Whitney Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 26 of 27 CERTIFICATE OF WORD COUNT COMPLIANCE Pursuant to Local Rule 7.8(b)(2), I hereby certify that although the instant Brief exceeds 15 pages, it complies with the word count limitation described in Local Rule 7.8(b)(2). This Brief contains 4,638 words. This word count was performed using Microsoft Word 2010. s/Andrew C. Whitney Andrew C. Whitney Case 1:16-cv-02523-CCC Document 18 Filed 02/27/17 Page 27 of 27 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA GRAHAM ENGINEERING CORP., : Plaintiff : Civil Action No. 1:16-cv-02523-CCC v. : (Honorable Christopher C. Conner) : WILLIAM KRAMER, : : Defendant : : APPENDIX OF UNPUBLISHED CASES CITED IN DEFENDANT’S BRIEF IN SUPPORT OF MOTION TO DISMISS Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 1 of 134 CASE TAB Angino v. BB&T Bank, No. 1:15-cv-2105, 2016 WL 4408835 (M.D. Pa. June 7, 2016), aff’d 2016 WL 4366962 ....................................................................................... A Bioquell, Inc. v. Feinstein, No. 10-2205, 2010 WL 4751709 (E.D. Pa. Nov, 23, 2010) ................................ B Bowe Mach. Co. v. Superbolt, Inc., No. 3:13-cv-00008, 2013 WL 12081103 (S.D. Iowa Dec. 20, 2013) ................. C Cunningham Lindsey U.S., Inc. v. Bonnani, No. 1:13-cv-2528, 2014 WL 1612632 (M.D. Pa. Apr. 22, 2014) ....................... D Goldthread v. Davidson, No. 3:06-0805, 2007 WL 2471803 (M.D. Tenn. Aug. 29, 2007) ....................... E Great Bay Condo. Owners Ass’n, Inc. v. McCormack, Civ. No. 2014-66, 2015 WL 4531715 (D.V.I. July 13, 2015) ............................ F Introsan Dental Prods., Inc. v. Dentsply Tulsa Dental, LLC, No. MJG-09-3111, 2012 WL 3011830 (D. Md. July 20, 2012).......................... G Milliken & Co. v. Smith, No. 10-0301, 2011 WL 939211 (D.S.C. Mar. 16, 2011) ..................................... H Moose Mtn. Toymakers Ltd. v. Majik Ltd., No. 10-4934, 2011 WL 3625057 (D.N.J. Aug. 12, 2011) .................................... I Msc. Software, Inc. v. Altair Eng’g, Inc., No. 07-12807, 2009 WL 1856222 (E.D. Mich. June 25, 2009) ........................... J Sedona Corp. v. Ladenburg Thalman & Co., No. 03 Civ. 3120, 2009 WL 1492196 (S.D.N.Y. May 27, 2009) ....................... K Synthes, Inc. v. Emerge Med., Inc., Civ. A. No. 11-1566, 2012 WL 4205476 (E.D. Pa. Sept. 19, 2012) ................... L U.S. Bank Nat’l Ass’n v. Parker, No. 4:09-cv-1755, 2010 WL 2735661 (E.D. Mo. July 9, 2010) ........................ M Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 2 of 134 TAB A Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 3 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2016 WL 4408835 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. Richard Angino and Alice Angino, et al., Plaintiffs, v. BB&T Bank, Defendant. CIVIL NO. 1:15-CV-2105 | Signed 06/07/2016 Attorneys and Law Firms Richard C. Angino, Angino & Lutz, P.C., Harrisburg, PA, pro se/for Plaintiffs. Timothy J. Nieman, Rhoads & Sinon LLP, Harrisburg, PA, for Defendant. REPORT AND RECOMMENDATION Martin C. Carlson, United States Magistrate Judge I. Statement of Facts and of the Case *1 This lawsuit, which comes before us for consideration of three motions-a motion to dismiss, filed by the defendant, and motions for preliminary and permanent injunctive relief file by the plaintiffs-is one of several cases 1 brought by the plaintiffs against various financial institutions arising out of a common core of operative facts. The plaintiffs in this action are Richard Angino, a local attorney, his spouse, Alice Angino, his law firm, and several corporations owned and operated by the Anginos. (Doc. 1, ¶¶1-2.) The sole remaining defendant in this action, BB&T, 2 is a bank which has lent more than $2,000,000 to the Anginos, and their various businesses, over the years. These loan agreements have been modified numerous times by the parties, and these agreed-upon modifications now lie at the heart of this lawsuit, which seeks to un-do the current agreements between the parties, direct that the parties return to what the Anginos have described as their original understanding and agreement prior to 2007, and award compensatory and punitive damages to the Anginos. (Id., ¶¶70-71.) 1 See Angino v. Santander Bank, Civ No. 1:15-CV-438; Angino v. Santander Bank, Civ. No. 1:15-CV-1145; Angino v. Wells-Fargo Bank, Civ. No. 1:15-CV-418. 2 The Anginos had initially named a number of other individual and institutional defendants, but have now voluntarily dismissed all of the defendants except for BB&T. (Docs. 6 and11.) In support of this unusual prayer for relief, the plaintiffs' complaint alleges that the Anginos have for many years enjoyed an extraordinarily successful law practice and “created an enviable reputation throughout the state with respect to civil litigation.” (Id., ¶9.) The Anginos, through various corporations, have also invested virtually all of their income to create and develop green, sustainable, resort communities. (Id.) According to the plaintiffs, as part of their business strategy, the Anginos “have always leveraged their substantial assets by financing their acquisitions and utilizing lines of credit for business operations....” (Id., ¶12.) Adopting this high-risk, high- reward business financing model, by 2002 the plaintiffs had in excess of $13,000,000 in loans with First Union Bank, loans that financed a variety of projects and developments, including several luxury homes, business lines of credit, and commercial mortgages for resort and residential developments. (Id., ¶13.) The Anginos allege that they began a business banking relationship with BB&T and Susquehanna, through its corporate predecessor, Graystone Bank, in 2006. At that time the plaintiffs' relationship with the bank consisted of a mortgage on the Angino law firm offices and a law firm line of credit. (Id., ¶¶16-17.) Over time, the amount of this indebtedness grew, as the law firm line of credit increased to $1,000,000 by 2007, and the bank provided the Anginos with a $2,2000,000 mortgage on their law office. (Id., ¶¶19-22.) This mortgage, negotiated by the Anginos with the bank, entailed interest-only until 2009, followed by principal and interest payments at a variable rate after 2009. (Id., ¶23.) *2 According to the Anginos their original intent was to treat this $1,000,000 line of credit in a fashion different than traditional lies of credit. In particular, the Anginos claim that the “$1,000,000 line was never intended to be a traditional line of credit that would be paid completely on an annual basis and fluctuate widely during the course of the year.” (Id., ¶24.) Rather, the Anginos seem to have just intended to use the line of credit to fund their various Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 4 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 projects on an on-going basis without any fixed repayment obligation on their part. (Id.) The complaint then recites that these two sophisticated parties engaged in a series of loan modifications between 2009 and 2011. (Id., ¶¶24-29.) These loan modifications took place against the backdrop of a severe financial recession, a recession which created extraordinary hardship for the plaintiffs who were now unable to sustain the millions of dollars in debt which they had previously elected to incur. By March of 2011, the Anginos sought an increase in their line of credit with the bank, from $1,000,000 to $1,250,000. While the bank agreed to this modification, it now sought additional collateral from the Anginos in the form of a second mortgage on other properties belonging to the plaintiffs. (Id., ¶¶30-33.) In 2012, Graystone Bank was acquired by Susquehanna Bank, and the plaintiffs began dealing with a senior vice president at Susquehanna Bank, Raymond Granger, who they identify as a loan “workout” specialist, a term which suggests that the bank now viewed the Anginos' indebtedness as distressed loans. (Id., ¶35.) According to the Anginos, at this time the bank also began to make demands of them which had deviated from their past business practices with this financial institution. Thus the bank sought to have the Anginos pay down and reduce their $1,250,000 line of credit, and indicated that they would not be able to renew that line of credit in the future without some reduction in this indebtedness or further security. (Id., ¶¶36-39.) The complaint makes it clear that these actions by the bank were compelled by financial hardships the plaintiffs were experiencing in their highly leveraged businesses in the wake of the economic recession of 2009. At that time a number of the Anginos' loans with other banks were coming due and those banks were calling in their loans. For example, the Anginos owed $6,400,000 to another financial institution, Santander Bank, in 2012 which had called its loans. (Id., ¶40.) Recognizing its own financial peril with respect to its outstanding loans to the Anginos caused by the actions of these other banks, BB&T attempted to accelerate, and collateralize its mortgage and line of credit with the Anginos, as well as calling for annual repayment of the line of credit. (Id., ¶¶41-42.) These efforts were manifested in a series of agreements executed between the parties, albeit agreements which the Anginos assert they were coerced into signing due to their grave financial straits. Thus, in January of 2013, the parties entered into a forbearance agreement, which reduced this line of credit from $1,250,000 to $1,000,000. (Id., ¶¶43-44.) In February 2013, the parties agreed to further reduce the line of credit from $1,000,000 to $600,000. The parties achieved this goal through the execution of a $400,000 mortgage secured by real property, and used these proceeds to reduce the unpaid balance of the line of credit. (Id., ¶¶44-48.) While BB&T obtained this addition security for its indebtedness, the bank declined to release any assets previously pledged as collateral on prior loan. (Id., ¶48.) Moreover, the $400,000 mortgage executed by the parties had a maturity date of February 2015, two years from the date if this loan agreement. (Id., ¶49.) Thus, the Anginos still faced a substantial impending financial liability as a result of this 2013 agreement. *3 As this deadline approached the bank and the Anginos entered into a series of further loan modification agreements. First, in May of 2014 the forbearance and loan agreements were modified to add guarantors on these loans, and change to duration of the loan agreements. (Id., ¶50.) Ten months later, in March of 2015, the parties signed yet another loan modification agreement, which extended the term of the $400,000 loan between the Anginos and the bank, but required that the Anginos agree to pledge further real estate as collateral and consent to the bank selling various properties to pay off this indebtedness. (Id., ¶¶51-52.) In the Fall of 2015 the Anginos and the bank became embroiled in further financial disputes. These disputes were multi-faceted, with the parties disagreeing regarding how funds derived from real estate sales should be applied to the various debts owed by the plaintiffs, and arguing about appraisals for this real estate. (Id., ¶¶55-61.) In the context of these disagreements, the Anginos demanded the rescission of the loan modification agreements which they had entered into with the bank between 2013 and 2015. The bank declined to rescind these agreements, and this lawsuit ensued. In its current form the Anginos' complaint brings two claims against BB&T. First, the Anginos have alleged a cause of action which conflates several theories of Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 5 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 contractual liability and is cast as a claim for breach of contract, failure to fulfill expectations, waiver and estoppel, coercion, “adhesionary” [sic] terms and breach of the duty of good faith. (Id., ¶¶63-71.) This claim seeks to: (1) reverse the financial history of these parties; (2) un-do a series of loan modification agreements executed by the parties over the past three years; (3) return the financial arrangement between the plaintiffs and the bank to what the plaintiffs considered that arrangement to be in 2007, namely, an open-ended $1,000,000 financing commitment; and (4) compel the bank to pay compensatory and punitive damages for refusing to rescind the current existing contracts between the parties. (Id.) The plaintiffs' second cause of action is a civil conspiracy claim against the bank and a law firm, which alleges in a summary fashion that the bank's effort to secure the Anginos' debts through the pledging of additional collateral, and the repayment of previously borrowed funds had a conspiratorial quality to it, entitling the Anginos to damages and injunctive relief. (Id., ¶¶72-75.) These claims are echoed in two other pleadings filed by the Anginos, motions seeking preliminary and permanent injunctions against the bank. (Docs. 16-17.) These motions are unaccompanied by any brief, and have a certain enigmatic quality to them, but appear to seek a court order which would un-do the prior agreements entered into between these parties between 2013 and 2015; unilaterally impose the Anginos' past expectations arising from prior dealings in 2007 upon the parties; require BB&T to forego rights which it has under its existing agreements with the plaintiffs; and require the bank to extend credit to the plaintiffs, something it is no longer willing to do. The defendants have responded to these pleadings by moving to dismiss the Anginos' complaint, (Doc. 12.), and opposing the plaintiffs' motions for injunctive relief. These motions are now fully briefed by the parties, and are, therefore, ripe for resolution. For the reasons set forth below, it is recommended that the defendant's motion to dismiss be granted, and the plaintiffs' motions for injunctive relief be denied. II. Discussion A. Rule 12(b)(6)- The Legal Standard *4 BB&T has filed a motion to dismiss this complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, which provides that a complaint should be dismissed for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). With respect to this benchmark standard for legal sufficiency of a complaint, the United States Court of Appeals for the Third Circuit has recently aptly noted the evolving standards governing pleading practice in federal court, stating that: Standards of pleading have been in the forefront of jurisprudence in recent years. Beginning with the Supreme Court's opinion in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (12007) continuing with our opinion in Phillips [v. County of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008)] and culminating recently with the Supreme Court's decision in Ashcroft v. Iqbal ___ U.S. ____, 129 S.Ct. 1937 (2009) pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss. Fowler v. UPMC Shadyside, 578 F.3d 203, 209-10 (3d Cir. 2009). In considering whether a complaint fails to state a claim upon which relief may be granted, the court must accept as true all allegations in the complaint and all reasonable inferences that can be drawn from the complaint are to be construed in the light most favorable to the plaintiff. Jordan v. Fox Rothschild, O'Brien & Frankel, Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). However, a court “need not credit a complaint's bald assertions or legal conclusions when deciding a motion to dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Additionally a court need not “assume that a ... plaintiff can prove facts that the ... plaintiff has not alleged.” Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 6 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 550 U.S. 544 (2007), in order to state a valid cause of action a plaintiff must provide some factual grounds for relief which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of actions will not do.” Id. at 555. “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), in order to state a valid cause of action a plaintiff must provide some factual grounds for relief which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of actions will not do.” Id. at 555. “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. In keeping with the principles of Twombly, the Supreme Court has underscored that a trial court must assess whether a complaint states facts upon which relief can be granted when ruling on a motion to dismiss. In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme Court held that, when considering a motion to dismiss, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678. Rather, in conducting a review of the adequacy of complaint, the Supreme Court has advised trial courts that they must: [B]egin by identifying pleadings that because they are no more than conclusions are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well- pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. *5 Id. at 679. Thus, following Twombly and Iqbal a well-pleaded complaint must contain more than mere legal labels and conclusions. Rather, a complaint must recite factual allegations sufficient to raise the plaintiff's claimed right to relief beyond the level of mere speculation. As the United States Court of Appeals for the Third Circuit has stated: [A]fter Iqbal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “plausible claim for relief.” In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to “show” such an entitlement with its facts. Fowler, 578 F.3d at 210-11. As the court of appeals has observed: “The Supreme Court in Twombly set forth the ‘plausibility’ standard for overcoming a motion to dismiss and refined this approach in Iqbal. The plausibility standard requires the complaint to allege ‘enough facts to state a claim to relief that is plausible on its face.’ Twombly, 550 U.S. at 570, 127 S.Ct. 1955. A complaint satisfies the plausibility standard when the factual pleadings ‘allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). This standard requires showing ‘more than a sheer possibility that a defendant has acted unlawfully.’ Id. A complaint which pleads facts ‘merely consistent with’ a defendant's liability, [ ] ‘stops short of the line between possibility and plausibility of “entitlement of relief.” ’ ” Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220-21 (3d Cir. 2011) cert. denied, 132 S. Ct. 1861, 182 L.Ed. 2d 644 (U.S. 2012). In practice, consideration of the legal sufficiency of a complaint entails a three-step analysis: “First, the court must ‘tak[e] note of the elements a plaintiff must plead to state a claim.’ Iqbal, 129 S.Ct. at 1947. Second, the court should identify allegations that, ‘because they are no more than conclusions, are not entitled to the assumption of truth.’ Id. at 1950. Finally, ‘where there are well-pleaded factual allegations, a court should assume their veracity Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 7 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 and then determine whether they plausibly give rise to an entitlement for relief.’ Id.” Santiago v. Warminster Tp., 629 F.3d 121, 130 (3d Cir. 2010). In undertaking this task, the court generally relies only on the complaint, attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2007). The court may also consider “undisputedly authentic document[s] that a defendant attached as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] documents.” Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, “documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered.” Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002); see also, U.S. Express Lines, Ltd. v. Higgins, 281 F.3d382, 388 (3d Cir. 2002) (holding that “[a]lthough a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss in one for summary judgment.”) However, the court may not rely on other parts of the record in determining a motion to dismiss. Jordan v. Fox, Rothschild, O'Brien &Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). B. As Currently Pleaded This Complaint Fails to State a Claim Upon Which Relief May Be Granted 1. The Plaintiffs Have Not Alleged Viable Breach of Contract Claims *6 At the outset, in Count I of their complaint the plaintiffs have alleged a cause of action which conflates several theories of contractual liability and is cast as a claim for breach of contract, failure to fulfill expectations, waiver and estoppel, coercion, “adhesionary” [sic] terms and breach of the duty of good faith. (Id., ¶¶63-71.) On the basis of these allegations, the Anginos seek wide-ranging relief which would: (1) reverse the financial history of these parties; (2) un-do a series of loan modification agreements executed by the parties over the past three years; (3) return the financial arrangement between the plaintiffs and the bank to what the plaintiffs considered that arrangement to be in 2007, namely, an open-ended $1,000,000 financing commitment; and (4) compel the bank to pay compensatory and punitive damages for refusing to rescind the current existing contracts between the parties. (Id.) While cast, in part, as a breach of contract claim, this characterization is something of a misnomer since the plaintiffs do not allege a breach of their current agreements with BB&T, which are embodied in a series of loan modification agreements. Instead, they seek to negate these agreements, re-write the history of these past dealings, and substitute their perception of their past working relationship with the bank for the current contractual realities of that relationship. 3 3 This invitation by the plaintiffs to have the Court refashion the agreement between the parties to what the plaintiffs describe as the prior status of those agreements, in turn, exposes an apparent, but unintended, irony in the plaintiffs' theory of this case. The plaintiffs have asked to reshape their current business arrangements to conform with what they claim to be some past understandings between the parties. However, when the defendant attempted to provide the Court with what seems to be an undisputed, and authentic, copy of a prior loan modification agreement in order to show that there has been not been any breach of these past understandings, the Anginos objected to any consideration of this prior written loan modification agreement on the grounds that the agreement was not attached to the complaint. Thus, it seems that the plaintiffs wish to have us reshape their business relationship in conformance with prior agreements between the parties, but object to us knowing what those prior written agreements actually stated. While this position has a certain hollow formalism to it, and ignore the proposition that “documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered,” Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002), we need not address this issue since the plaintiffs' claims fail on multiple independent legal grounds. As a federal court exercising diversity jurisdiction in this case, we are obliged to apply the substantive law of Pennsylvania to this dispute. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d. Cir. 2000). The legal principles governing the interpretation of contracts under Pennsylvania law are familiar and well-settled. To prevail on a claim for breach of contract under Pennsylvania Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 8 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 law, a plaintiff must plead the following elements: (1) the existence of a contract, including its essential terms; (2) defendant's breach of duty imposed by the terms; and (3) actual loss or injury as a direct result of the breach. See Diodato v. Wells Fargo Ins. Servs., USA, 44 F. Supp. 3d 541, 556 (M.D. Pa. 2014). Furthermore, the legal benchmarks applied to contract interpretation are also clearly established. Initially, “[w]hen a written contract is clear and unequivocal, its meaning must be determined by its contents alone.” Mellon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d 1001, 1010 (3d Cir. 1980) (citation omitted); Mace v. Atl. Ref. & Mktg. Corp., 785 A.2d 491, 496 (Pa. 2001). A contract is ambiguous only if it is reasonably susceptible to different constructions and capable of being understood in more than one sense. St. Paul Fire & Marine Ins. Co. v. Lewis, 935 F.2d 1428, 1431 (3d Cir. 1991). Under Pennsylvania law, ambiguous contracts are interpreted by the trier of fact, and unambiguous contracts are interpreted by the court as a matter of law. Mellon Bank, 619 F.2d at 1011 n.10. *7 The United States Court of Appeals for the Third Circuit has aptly summarized Pennsylvania law regarding the interpretation of contractual language and terms: The fundamental rule in interpreting the meaning of a contract is to ascertain and give effect to the intent of the contracting parties. The intent of the parties to a written agreement is to be regarded as being embodied in the writing itself. The whole instrument must be taken together in arriving at contractual intent. Courts do not assume that a contract's language was chosen carelessly, nor do they assume that the parties were ignorant of the meaning of the language they employed. When a writing is clear and unequivocal, its meaning must be determined by its contents alone. Only where a contract's language is ambiguous may extrinsic or parol evidence be considered to determine the intent of the parties. A contract contains an ambiguity if it is reasonably susceptible of different constructions and capable of being understood in more than one sense. This question, however, is not resolved in a vacuum. Instead, contractual terms are ambiguous if they are subject to more than one reasonable interpretation when applied to a particular set of facts. In the absence of an ambiguity, the plain meaning of the agreement will be enforced. The meaning of an unambiguous written instrument presents a question of law for resolution by the court. Great Am. Ins. Co. v. Norwin Sch. Dist., 544 F.3d 229, 243 (3d Cir. 2008) (internal citation omitted) (citing Murphy v. Duquesne Univ., 777 A.2d 418, 429-30 (Pa. 2001)). Furthermore, courts must, whenever possible, read contract provisions so as to avoid ambiguity. Id. at 247. Where a contract is not ambiguous, but is instead subject to only one reasonable interpretation, it is appropriate for a district court to resolve the issue of interpretation as a matter of law. See Norfolk S. Ry. v. Reading Blue Mountain & N. Ry., 346 F. Supp. 2d 720, 725 (M.D. Pa. 2004). Applying these legal benchmarks, we find that the Anginos' breach of contract failure to fulfill expectations, waiver and estoppel, coercion, “adhesionary” [sic] terms and breach of the duty of good faith claims, as currently pleaded, fail as a matter of law on several scores. Indeed, there is an intellectually elusive quality to these breach of contract claims which stems from a single source: This count ignores the terms of actual, existing, current agreements between these parties and instead asks us to re-write and rescind these current written agreements in a number of material respects. We cannot ignore the terms of these written agreements when considering this breach of contract claim. Further, when we consider the actual contracts between these parties, we find that each of the forbearance agreements executed by the parties recited that the bank was providing valuable consideration to the plaintiffs in the form of forbearance of its legal rights, in return for various actions by the plaintiffs, actions which included paying down outstanding indebtedness, collateralization of loans, and agreement to new repayment terms. Further, these agreements were set forth in integrated written contracts, contracts which on their face reflect a voluntary, mutual agreement between two financially Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 9 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 sophisticated parties. In addition, each of the written, integrated loan modification agreements executed by these parties contained express releases in favor of the bank, releases which provided as follows: *8 Release and Indemnification. The Borrower, for itself and any person or entity claiming by, through, from or under it, including without limitation its predecessors, successors and assigns, and the respective owners, subsidiaries and affiliates of Borrower and its predecessors, successors and assigns, and the stockholders, directors, officers, members, managers, partners, trustees, beneficiaries, heirs, personal representatives, employees, agents, insurers and attorneys of any of them, hereby releases and agrees to indemnify, defend and hold harmless the Bank and its predecessors, successors and assigns, and its and their respective owners, subsidiaries and affiliates, and the stockholders, directors, officers, members, managers, partners, trustees, beneficiaries, heirs, personal representatives, employees, agents, insurers and attorneys of any of them from, against and for any and all1iability of any nature whatsoever in connection with or arising out of or relating to the Loan, the Collateral, the Borrower in its capacity as Borrower, the Loan Documents, this Agreement, or the matters referred to in the Loan Documents or this Agreement, including without limitation any demand, claim, suit, proceeding or action of any nature whatsoever, and any damage, loss, cost, expense and fee (including attorneys' fees) or other liability of any nature whatsoever. Presented with these agreements, which contain express releases, we note that, when construing the terms of a general release, federal courts in Pennsylvania are guided by Pennsylvania law. Three Rivers Motor Co. v. Ford Motors Co., 522 F.2d 885, 892 (3d Cir. 1975). Moreover, “in Pennsylvania, the general rule for construction of releases is that the intention of the parties must govern, but this intention must be gathered from the language of the release. Evans v. Marks, 421 Pa. 146, 218 A.2d 802 (1966). A signed release is binding upon the parties unless executed and procured by fraud, duress, accident or mutual mistake. Kent v. Fair, 392 Pa. 272, 140 A.2d 445 (1958).” Id. When construing the effect of a general release: “First, a court must look to the language of the release. In examining the language of a release, the terms of the release will be given their ordinary meaning unless a different meaning was clearly intended. In addition, the language of the release must be viewed in the context of the entire document. See, e.g., Harrity v. Medical College of Pennsylvania Hosp., 439 Pa.Super. 10, 21, 653 A.2d 5 (1994). Each part of the release must be given effect.” Bickings v. Bethlehem Lukens Plate, 82 F.Supp.2d 402, 405 (E.D. Pa., 2000)(some citations omitted). Thus, a party may not pick and choose only those portions of a release that are convenient and seek selective enforcement of a release. Furthermore, a party, who seeks to set aside a general release on grounds of duress, coercion or mutual mistake must allege facts which make a particularly exacting showing. Thus, “A party asserting mutual mistake must show that a mistake was made by all parties to the release. See 8 Pennsylvania Law Encyclopedia § 84 (‘A mutual mistake is one common to both or all parties ...’). Cf. Miller v. Houseworth, 387 Pa. 346, 127 A.2d 742, 744 (1956) (‘A person who seeks to rectify a deed on the ground of mistake must establish, in the clearest and most satisfactory manner, that the alleged intention to which he desires it to be made conformable continued concurrently in the minds of all parties down to the time of its execution.’) (citations omitted). In addition, ‘[r]eformation of the release would require a showing of ... mutual mistake by clear, precise, and convincing evidence.’ Wolbach v. Fay, 488 Pa. 239, 412 A.2d 487, 488 (1980).” Crestar Mortg. Corp. v. Shapiro 937 F.Supp. 453, 460 (E.D. Pa. 1996)(emphasis in original). Similarly, claims of coercion and duress made by parties seeking to avoid responsibilities under a general release are also subject to careful scrutiny. It is clear that: Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 10 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 In Pennsylvania, a release is effective absent fraud, duress, accident or mutual mistake. Buttermore v. Aliquippa Hosp., 522 Pa. 325, 329-30, 561 A.2d 733, 735 (1989); Holmes v. Lankenau Hosp., 426 Pa.Super. 452, 627 A.2d 763, 767 (1993), app. denied, 538 Pa. 671, 649 A.2d 673 (1994); Popovich v. Empire Beauty Schs., Inc., 567 F.Supp. 1440, 1442 (E.D. Pa. 1983). Duress is not found when there is simple financial pressure. Three Rivers Motors Co. v. Ford Motor Co., 522 F.2d 885, 893 (3d Cir. 1975). Rather, the pleader must allege threats of physical harm to show duress. Id. (citing Carrier v. Wm. Penn Broadcasting Co., 426 Pa. 427, 430-31, 233 A.2d 519 (1967)); Killian v. McCulloch, 873 F.Supp. 938, 943 (E.D. Pa. 1995). *9 Williams v. Stone, 923 F.Supp. 689, 691 (E.D. Pa. 1996). This rule strictly limiting the ability of a party to avoid the effect of a general release by claiming duress or coercion applies with particular force to claims made by a parties, like the Anginos, who are highly sophisticated legally, and could draw upon great legal expertise when assessing the legal import of the various releases which they signed. In such instances, “ ‘Under Pennsylvania law, absent a threat of actual bodily harm, there can be no claim of duress “where the contracting party is free to consult with counsel.” ’ Cuchara v. Gai-Tronics Corp., 129 F. Appx. 728, 731 (3d Cir. 2005) (quoting Carrier v. Wm. Penn. Broad. Co., 426 Pa. 427, 233 A.2d 519, 521 (Pa. 1967)).” Gregory v. Derry Tp. School Dist. 2010 WL 146332 at *10. This principle applies with particular force here, where the Anginos represent that they are the principals behind an extraordinarily successful law practice which has “created an enviable reputation throughout the state with respect to civil litigation.” (Doc. 1, ¶9.) Given the undisputed, exceptional legal acumen of the plaintiffs, these legally sophisticated parties are bound by the plain language of these releases which they executed with the bank as part of a comprehensive series of forbearance agreements. The releases are, therefore, entirely enforceable and defeat any breach of contract claim. The Anginos' prospects on this particular claim do not improve if the claim is cast as a claim for a breach of a duty of good faith. As a general rule allegations of a breach of the covenant of good faith sound in contract, rather than tort. See Creeger Brick & Bldg. Supply, Inc. v. Mid-State Bank & Trust Co., 560 A.2d 151, 153 (Pa. Super. Ct. 1989) (“Where a duty of good faith arises, it arises under the law of contracts, not under the law of torts.”). As a result, courts have found that the breach of the covenant of good faith is subsumed in a claim for breach of contract. See McHale v. NuEnergy Group, No. Civ. A. 01-4111, 2002 WL 321797, *8 (E.D. Pa. Feb. 27, 2002) (concluding that Pennsylvania law would not recognize a claim for breach of the covenant of good faith and fair dealing as a separate cause of action apart from the breach of contract claim, since the actions forming the basis of the breach of contract claim were essentially the same as those brought in support of the bad faith claim); see also JHE, Inc. v. Se. Pa. Transp. Auth., 2002 WL 1018941, *7 (Pa. Com. Pl. May 17, 2002) (“[A] breach of the covenant of good faith is nothing more than a breach of contract claim and ... separate causes of action cannot be maintained for each, even in the alternative.”); Commonwealth v. BASF Corp., No. 3127, 2001 WL 1807788, *12 (Pa. Com. Pl. Mar. 15, 2001) (“Pennsylvania law does not allow for a separate cause of action for breach of either an express or implied duty of good faith, absent a breach of the underlying contract.”). Rather, under Pennsylvania law, such a duty of fair dealing is entirely dependent upon the existence of a contractual relationship. In short, Pennsylvania law grafts onto all contracts a responsibility by the contracting parties to deal fairly with one another. However, Pennsylvania law does not recognize an independent, and free-standing, duty of fair dealing outside a contractual context. As we have previously explained: *10 Whether express or implied, the covenant of good faith and fair dealing acts as a term of the contract, and that covenant arises from the contract itself. See Ash v. Cont'l Ins. Co., 593 Pa. 523, 932 A.2d 877, 884 (2007); Birth Center, 787 A.2d at 385; Murphy, 777 A.2d at 434 & n. 11; Gray, 223 A.2d at 11 (“We believe that this recent case law, employing contractual terms for the obligation of the insurer to represent in good faith the rights of the insured, indicates that a breach of such an obligation constitutes a breach of the insurance contract Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 11 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 for which an action in assumpsit will lie.”); Cowden v. Aetna Cas. & Sur. Co., 389 Pa. 459, 134 A.2d 223, 229 (1957). Because the covenant of good faith and fair dealing arises from the contract and not due to the mere relationship of the parties-as, for example, a fiduciary duty-a breach of the covenant sounds in contract, not tort. See Ash, 932 A.2d at 884. There is, however, no independent cause of action for a breach of the covenant of good faith and fair dealing-arising in contract-in Pennsylvania because such a breach is merely a breach of contract. See Birth Center, 787 A.2d at 385-86; Gray, 223 A.2d at 11. It has been said that a breach of the implied covenant of good faith and fair dealing merges with a breach of contract claim. See Meyer v. Cuna Mut. Group, No. 03-CV-602, 2007 WL 2907276, at *14-15 (W.D.Pa. Sept. 28) (citing cases). Zaloga v. Provident Life and Acc. Ins. Co. of America, 671 F.Supp.2d 623, 630-31 (M.D. Pa. 2009). Since there typically is no separate cause of action under Pennsylvania law for breach of the duties of good faith and fair dealing; Chanel, Inc. v. Jupiter Group, Inc., Civ. No. 3:04-CV-1540, 2006 U.S. Dist. LEXIS 43363, at *6 (M.D. Pa. June 27, 2006); In re K-Dur Antitrust Litig., 338 F. Supp. 2d 517, 549 (D.N.J. 2004); Blue Mt. Mushroom Co. v. Monterey Mushroom, Inc., 246 F. Supp. 2d 394, 400-01 (E.D. Pa. 2002); LSI Title Agency, Inc. v. Eval. Servs., Inc., 951 A.2d 384, 391 (Pa. Super. Ct. 2008), a claim for breach of the duties of good faith and fair dealing is, at bottom, simply a claim for breach of the underlying contract. Zaloga v. Provident Life and Acc. Ins. Co. of America, 671 F.Supp.2d 623, 630-631 (M.D. Pa. 2009). Yet, in this case the Anginos seem to be alleging a breach of the duty of good faith claim, without asserting a clearly articulated breach of the current underlying contracts between themselves and BB&T, contracts which contained express written releases. This is a fatal flaw and defeats this claim as it is currently pleaded. In any event, to the extent that some duty of good faith arises in a contractual setting, it is also clear that the scope of that duty in a borrower-lender transaction is narrowly defined and does not entail some legal obligation on the part of the lender to unilaterally agree to undermine, modify or defeat its own legal rights and interests under a commercial agreement. Thus, “the Supreme Court of Pennsylvania has refused to impose a duty of good faith which would modify or defeat the legal rights of a creditor. Heights v. Citizens National Bank, 463 Pa. 48, 342 A.2d 738 (1975).” Creeger Brick & Bldg. Supply Inc. v. Mid State Bank & Trust Co., 385 Pa. Super. 30, 36, 560 A.2d 151, 154 (1989) Likewise: It seems reasonably clear from the decided cases that a lending institution does not violate a separate duty of good faith by adhering to its agreement with the borrower or by enforcing its legal and contractual rights as a creditor. The duty of good faith imposed upon contracting parties does not compel a lender to surrender rights which it has been given by statute or by the terms of its contract. Similarly, it cannot be said that a lender has violated a duty of good faith merely because it has negotiated terms of a loan which are favorable to itself. As such, a lender generally is not liable for harm caused to a borrower by refusing to advance additional funds, release collateral, or assist in obtaining additional loans from third persons. *11 Creeger Brick & Bldg. Supply Inc. v. Mid State Bank & Trust Co., 385 Pa. Super. 30, 36-37, 560 A.2d 151, 154 (1989). In short, to the extent that Pennsylvania law recognizes a contractual duty of good faith, “courts have ... refused to apply a duty of good faith to alter or defeat the rights of a creditor which have been granted by law or contract.” Stewart v. SWEPI, LP, 918 F. Supp. 2d 333, 342 (M.D. Pa. 2013)(emphasis in original). Fairly construed, the plaintiffs' complaint invites us to do precisely what Pennsylvania law says we cannot do through the rubric of a duty of good faith and fair dealing; that is, require a creditor to alter, defeat, modify, or renounce some contractual rights which it possesses. The all-encompassing duty of good faith asserted by the Anginos in this complaint would also call upon us condemn BB&T for taking actions which the courts have expressly stated it is permitted to take such as “adhering to its agreement with the borrower ... by enforcing its legal and contractual rights as a creditor;” refusing “to surrender rights which it has been given by statute or by Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 12 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 the terms of its contract;” or “negotiat[ing] terms of a loan which are favorable to itself.” Creeger Brick & Bldg. Supply Inc. v. Mid State Bank & Trust Co., 385 Pa. Super. 30, 36-37, 560 A.2d 151, 154 (1989). Since Pennsylvania case law specifically rejects the notion that a lender must surrender its legal rights in order to demonstrate its good faith to its borrower, the Anginos' good faith claim, which is unmoored to any contractual breach by defendants and demands that defendants forego their contractual rights, fails as a matter of law and should be dismissed. Similarly, the Anginos cannot bolster this claim, as they attempt to do by cataloguing in their complaint a series of doctrines, claims and affirmative defenses like reasonable expectations, waiver and estoppel, and breach of good faith. As the Pennsylvania courts have previously informed the Anginos, these types of affirmative defenses under Pennsylvania law do not constitute an independent, free-standing legal claim. Angino & Rovner, PC v. Santander Bank, N.A., No. 489 MDA 2014, 2015 WL 6405714, at *7 (Pa. Super. Ct. Jan. 28, 2015). Indeed, the Pennsylvania courts have already specifically rejected the application of the reasonable expectations, waiver and estoppel, impracticability and impossibility doctrines to similar claims leveled by the Anginos against another bank in state court litigation. Id. Thus, the Pennsylvania courts have already advised the plaintiffs that they may not transmogrify these breach of contract defenses into quasi-contractual affirmative claims. More fundamentally, even construed as affirmative defenses to contract liability, these defenses are typically limited to instances of physical impossibility, and not mere fiscal impracticability. Thus: “[I]f the allegedly unforeseeable event was in reality a natural and fairly predictable risk arising in the normal course of business, then a court may not dissolve a[n] agreement .... An individual's financial position, for example, cannot generally be an implied ‘basic assumption’ of a contract, nor will it excuse a party's performance. See Restatement (Second) of Contracts § 261 (1981) Comment: b. Basic assumption. Illustration 2 (showing that contracting party's financial situation as result of bank failure does not excuse performance on contract).” Step Plan Servs., Inc. v. Koresko, 12 A.3d 401, 412-13 (Pa. Super. Ct. 2010). In this case, the well-pleaded facts in the Anginos' complaint reveal that, as part of their business strategy, the Anginos “have always leveraged their substantial assets by financing their acquisitions and utilizing lines of credit for business operations....” (Doc. 1, ¶12.) Having knowingly embraced this high-risk business financing philosophy, the Anginos fell prey to the economic effects of the 2009 recession, their own risky business judgment, and their inability to sustain the debt load which they allege that they deliberately elected to undertake. While this is a tragic and regrettable circumstance, it is also “a natural and fairly predictable risk arising in the normal course of business, [and does not permit a court to] dissolve a[n] agreement [since].... [a]n individual's financial position, ..., cannot generally be an implied ‘basic assumption’ of a contract, nor will it excuse a party's performance.” Step Plan Servs., Inc. v. Koresko, 12 A.3d 401, 412-13 (Pa. Super. Ct. 2010). 2. The Plaintiffs' Conspiracy Claims Also Fail as a Matter of Law *12 In Count II of this complaint, the Anginos allege a civil conspiracy claim, which is pleaded in a conclusory fashion without supporting factual detail. Moreover, the plaintiffs pursue this civil conspiracy claim in a setting where they are currently electing to sue a single institutional defendant, BB&T Bank. As pleaded, this civil conspiracy allegation simply fails to state a claim upon which relief may be granted. Under Pennsylvania law there are three essential elements to a civil conspiracy claim. To plead and prove such a claim a plaintiff must allege that: (1) two or more persons acted with a common purpose to commit an illegal act or to commit a lawful act by unlawful means or for an unlawful purpose, (2) overt action in furtherance of the common purpose has been taken and (3) actual legal damage has resulted. Weaver v. Franklin County, 918 A.2d 194,202 (2007) (citing Brown v. Blaine, 833 A.2d 1166 (2003)). Moreover: [I]n order to plead a civil ... action based upon a claim of conspiracy, a plaintiff must plead allegations that are: supported by facts bearing out the existence of the conspiracy and indicating its broad objectives and the role each defendant allegedly played in carrying out those objectives. Bare conclusory allegations of “conspiracy” or “concerted action” will not suffice to allege a conspiracy. The plaintiff must expressly allege an agreement or make averments of communication, consultation, cooperation, or command from which such an agreement can be inferred. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 13 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 Flanagan v. Shively, 783 F.Supp. 922, 928 (M.D. Pa. 1992). Furthermore, when pleading a conspiracy claim, a plaintiff cannot rely upon subjective suspicion and speculation. Young v. Kann, 926 F.2d 1396, 1405 n. 16 (3d Cir. 1991). Quite the contrary, “to properly plead an unconstitutional conspiracy, a plaintiff must assert facts from which a conspiratorial agreement can be inferred. D.R. v. Middle Bucks Area Vocational Tech. Sch., 972 F.2d 1364, 1377 (3d Cir. 1992); see also Startzell v. City of Philadelphia, 533 F.3d 183, 205 (3d Cir. 2008) (stating that a conspiracy requires a ‘meeting of the minds') (further citation omitted). This holding remains good law following Twombly and Iqbal, which, in the conspiracy context, require ‘enough factual matter (taken as true) to suggest that an agreement was made,’ in other words, ‘plausible grounds to infer an agreement.’ Twombly, 550 U.S. at 556, 127 S.Ct. 1955, 167 L.Ed.2d 929.” Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 178 (3d Cir. 2010) cert. denied, - U.S. -, 131 S.Ct. 1798, 179 L.Ed.2d 655 (U.S. 2011). We are mindful of these pleading requirements, which are considered together with the standards of pleading applicable to all civil actions in federal court as defined in Twombly and Iqbal, supra. Victor v. Huber, No. 3:12-CV-282, 2012 WL 7463723, at *14 (M.D. Pa. Nov. 29, 2012) report and recommendation adopted sub nom. Victor v. Hubbard, No. 3:12-CV-00282, 2013 WL 704654 (M.D. Pa. Feb. 26, 2013). Here the Anginos' civil conspiracy allegations fail to meet these basic requisites for a valid civil conspiracy cause of action for at least three reasons. First, “Pennsylvania law mandates that ‘absent a civil cause of action for a particular act, there can be no cause of action for civil conspiracy to commit that act.’ Goldstein v. Phillip Morris, Inc., 854 A.2d 585, 590 (Pa. Super. Ct. 2004) (quoting McKeeman v. Corestates Bank, 751 A.2d 655, 660 (Pa. Super. Ct. 2000)). A plaintiff charging civil conspiracy must therefore ‘plead or develop a[ ] separate underlying intentional or criminal act that can support a civil conspiracy claim.’ Id.” Accurso v. Infra-Red Servs., Inc., 23 F. Supp. 3d 494, 512 (E.D. Pa. 2014). Here, we have found that the Anginos' substantive breach of contract claim fails as a matter of law on multiple scores. Since the plaintiffs' complaint, as currently written, fails to sufficiently “plead or develop a[ ] separate underlying intentional or criminal act that can support a civil conspiracy claim,” it follows that this conspiracy claim also fails as a legal matter. *13 Second, the choices made by the plaintiffs in the course of this litigation now seem to preclude a conspiracy claim against BB&T Bank, the sole defendant now named in this lawsuit. While the plaintiffs initially identified five individual and institutional defendants in their complaint, they have voluntarily dismissed four of these five defendants. Thus, at present BB&T Bank is the only defendant named in the civil conspiracy claim. This election by the defendants now defeats their conspiracy claim since it is well-settled under Pennsylvania law that “[a] single entity cannot conspire with itself and, similarly, agents of a single entity cannot conspire among themselves.” Grose v. Procter & Gamble Paper Products, 2005 PA Super 8, ¶ 7, 866 A.2d 437, 441 (2005); Irish v. Farley, No. 483 EDA 2014, 2015 WL 7573607, at *11 (Pa. Super. Ct. Feb. 3, 2015); Agarwal v. Schuylkill Cty. Tax Claim Bureau, No. 3:CV 09 1921, 2010 WL 5175126, at *6 (M.D. Pa. Aug. 13, 2010), report and recommendation adopted sub nom. Agarwal v. Schuykill Cty. Tax Claim Bureau, No. 3:09 CV 1921, 2010 WL 5175003 (M.D. Pa. Dec. 15, 2010), aff'd sub nom. Agarwal v. Schuylkill Cty. Tax Claim Bureau, 442 Fed.Appx. 733 (3d Cir. 2011); Lilly v. Boots & Saddle Riding Club, No. 57 C.D. 2009, 2009 WL 9101459, at *6 (Pa. Commw. Ct. July 17, 2009). Given that BB&T Bank cannot conspire with itself, and there are no other named defendants in this conspiracy count of the plaintiffs' complaint, that count fails to satisfy an essential element of any civil conspiracy, the requirement that two or more persons act with a common purpose to commit an illegal act or to commit a lawful act by unlawful means or for an unlawful purpose. Weaver v. Franklin County, 918 A.2d 194,202 (2007). In sum, the conspiracy alleged by the Anginos entails a single juridical person, an entity which as a legal matter cannot conspire with itself. Since the conspiracy charge lacks the essential element of concerted unlawful action between two or more actors, this claim fails as a matter of law and should be dismissed. Finally, this conspiracy claim, which is set forth in wholly conclusory terms, fails as a matter of pleading since: “[b]are conclusory allegations of ‘conspiracy’ or ‘concerted action’ will not suffice to allege a conspiracy [and] [t]he plaintiff must expressly allege an agreement or make averments of communication, consultation, Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 14 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 12 cooperation, or command from which such an agreement can be inferred.” Flanagan v. Shively, 783 F.Supp. 922, 928 (M.D. Pa. 1992). In short, this claim also fails as pleaded by the plaintiffs since we do not know who the alleged conspirators are, what the wrongful objects of the agreement were, and what concerted illegal acts or lawful acts committed by unlawful means or for an unlawful purpose are alleged to have taken as part of this corrupt agreement. C. The Plaintiffs Are Not Entitled to Extraordinary Injunctive Relief Our recommendation that this complaint be dismissed, in turn, dictates the path the Court should follow in addressing the Anginos' motions which seek extraordinary injunctive relief in this matter. (Docs. 16-17.) As we have noted, these motions are unaccompanied by any brief, but appear to seek a court order which would un-do the prior agreements entered into between these parties between 2013 and 2015; unilaterally impose the Anginos' past expectations arising from prior dealings in 2007 upon the parties; require BB&T to forego rights which it has under its existing agreements with the plaintiffs; and require the bank to continue to extend credit to the plaintiffs, something it is no longer willing to do. The court should decline the Anginos' invitation to indulge in this breathtaking and sweeping exercise of its equitable jurisdiction. These motions fail on several scores. At the outset, while the plaintiffs filed these motions, their pleadings are unaccompanied by any brief, explaining their legal entitlement to this relief. This failure to file a brief has consequences for the plaintiffs since we are entitled by the Rules of this Court to deem the plaintiffs to have withdrawn a motion when they fail to properly support that motion by filing a brief in a timely fashion. See, e.g., Salkeld v. Tennis, 248 Fed.Appx. 341 (3d Cir. 2007) (affirming dismissal of motion under Local Rule 7.5); Booze v. Wetzel, 1:12- CV-1307, 2012 WL 6137561 (M.D. Pa. Nov. 16, 2012) report and recommendation adopted, 1:CV-12-1307, 2012 WL 6138315 (M.D. Pa. Dec. 11, 2012); Breslin v. Dickinson Twp., 1:09-CV-1396, 2011 WL 1577840 (M.D. Pa. Apr. 26, 2011) Prinkey v. Tennis, No. 09-52, 2010 WL 4683757 (M.D. Pa. Nov. 10, 2010) (dismissal under Local Rule 7.5); Griffin v. Lackawanna County Prison Board, No. 07-1683, 2008 WL 4533685 (M.D. Pa. Oct. 6, 2008) (dismissal under Local Rule 7.6). Therefore, as a threshold matter, since the plaintiffs have not made the showing required to secure relief sought in this motions and the motions are not accompanied by a brief which would have explained the plaintiffs' entitlement to relief, as required by the Local Rules, the motions should be deemed withdrawn and denied. *14 More fundamentally, the motions fail on their merits. Motions which request preliminary or permanent injunctions seek a special form of relief and require a specific and exacting showing. Pleadings, like those filed here, which seek extraordinary, or emergency relief, in the form of preliminary injunctions are governed by Rule 65 of the Federal Rules of Civil Procedure and are judged against exacting legal standards. As the United States Court of Appeals for the Third Circuit has explained: “Four factors govern a district court's decision whether to issue a preliminary injunction: (1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting preliminary relief will result in even greater harm to the nonmoving party; and (4) whether granting the preliminary relief will be in the public interest.” Gerardi v. Pelullo, 16 F.3d 1363, 1373 (3d Cir. 1994) (quoting SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244, 1254 (3d Cir. 1985)). See also Highmark, Inc. v. UPMC Health Plan, Inc., 276 F.3d 160, 170-71 (3d Cir. 2001); Emile v. SCI-Pittsburgh, No. 04-974, 2006 WL 2773261, *6 (W.D. Pa. Sept. 24, 2006)(denying inmate preliminary injunction). A preliminary injunction is not granted as a matter of right. Kerschner v. Mazurkewicz, 670 F.2d 440, 443 (3d Cir. 1982). It is an extraordinary remedy. Given the extraordinary nature of this form of relief, a motion for preliminary injunction places precise burdens on the moving party. As a threshold matter, “it is a movant's burden to show that the ‘preliminary injunction must be the only way of protecting the plaintiff from harm.’ ” Emile, 2006 WL 2773261, at * 6 (quoting Campbell Soup Co. v. ConAgra, Inc., 977 F.2d 86, 91 (3d Cir. 1992)). Thus, when considering such requests, courts are cautioned that: “[A] preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis deleted). Furthermore, the Court Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 15 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 13 must recognize that an “[i]njunction is an equitable remedy which should not be lightly indulged in, but used sparingly and only in a clear and plain case.” Plain Dealer Publishing Co. v. Cleveland Typographical Union # 53, 520 F.2d 1220, 1230 (6th Cir. 1975), cert. denied, 428 U.S. 909 (1977). As a corollary to the principle that preliminary injunctions should issue only in a clear and plain case, the Court of Appeals for the Third Circuit has observed that “upon an application for a preliminary injunction to doubt is to deny.” Madison Square Garden Corp. v. Braddock, 90 F.2d 924, 927 (3d Cir. 1937). Emile, 2006 WL 2773261, at *6. Accordingly, to sustain their burden of proof that they are entitled to a preliminary injunction under Fed.R.Civ.P. 65, the plaintiffs must demonstrate both a reasonable likelihood of success on the merits, and that they will be irreparably harmed if the requested relief is not granted. Abu-Jamal v. Price, 154 F.3d 128, 133 (3d Cir. 1998); Kershner, 670 F.2d at 443. If the movants fail to carry this burden on either of these elements, the motion should be denied since a party seeking such relief must “demonstrate both a likelihood of success on the merits and the probability of irreparable harm if relief is not granted.” Hohe v. Casey, 868 F.2d 69, 72 (3d Cir. 1989)(emphasis in original), (quoting Morton v. Beyer, 822 F.2d 364 (3d Cir. 1987)). Further, where the requested preliminary injunction “is directed not merely at preserving the status quo but...at providing mandatory relief, the burden on the moving party is particularly heavy.” Punnett v. Carter, 621 F.2d 578, 582 (3d Cir. 1980). In addition, to the extent that the plaintiffs seek a preliminary injunction with some enduring effect, they must show that they will be irreparably injured by the denial of this extraordinary relief. With respect to this benchmark standard for a preliminary injunction, in this context it is clear that: *15 Irreparable injury is established by showing that plaintiff will suffer harm that “cannot be redressed by a legal or an equitable remedy following trial.” Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 801 (3d Cir. 1989) (“The preliminary injunction must be the only way of protecting the plaintiff from harm”). Plaintiff bears this burden of showing irreparable injury. Hohe v. Casey, 868 F.2d 69, 72 (3d Cir.), cert. denied, 493 U.S. 848, 110 S.Ct. 144, 107 L.Ed.2d 102 (1989). In fact, the plaintiff must show immediate irreparable injury, which is more than merely serious or substantial harm. ECRI v. McGraw- Hill, Inc., 809 F.2d 223, 226 (3d Cir. 1987). The case law provides some assistance in determining that injury which is irreparable under this standard. “The word irreparable connotes ‘that which cannot be repaired, retrieved, put down again, atoned for ...’.” Acierno v. New Castle County, 40 F.3d 645, 653 (3d Cir. 1994) (citations omitted). Additionally, “the claimed injury cannot merely be possible, speculative or remote.” Dice v. Clinicorp, Inc., 887 F.Supp. 803, 809 (W.D. Pa. 1995). An injunction is not issued “simply to eliminate the possibility of a remote future injury ...” Acierno, 40 F.3d at 655 (citation omitted). Messner, 2009 WL 1406986, at *4. In assessing a motion for preliminary injunction, the court must also consider the possible harm to other interested parties if the relief is granted. Kershner, 670 F.2d at 443. Finally, a party who seeks an injunction must show that the issuance of the injunctive relief would not be adverse to the public interest. Emile, 2006 WL 2773261, at * 6 (citing Dominion Video Satellite, Inc. v. Echostar Corp., 269 F.3d 1149, 1154 (10th Cir. 2001)). Likewise, “in seeking a permanent injunction, ‘[a] plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that the remedies available at law, such as monetary damages,’ prove inadequate to compensate for that injury; (3) that the balance of hardships between the plaintiff and defendant favor equitable relief; and (4) ‘that the public interest would not be disserved by a permanent injunction.’ eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006).” Chanel, Inc. v. Matos, 133 F. Supp. 3d 678, 689 (D.N.J. 2015). Judged by these legal benchmarks, the plaintiffs' motions for injunctive relief fail on all scores. First, the Anginos have not shown a likelihood of success on the merits of their claim. Quite the contrary, we find that their claims are subject to dismissal as a matter of law and recommend that these claims be dismissed. Second, there is no showing that damages would not be adequate as a remedy in this case in the event that the plaintiffs were somehow able to state any claim upon which relief could be granted. Further, entering an injunction which, in effect, required the bank to continue to extend credit to the plaintiffs on terms defined by the plaintiffs and Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 16 of 134 Angino v. BB&T Bank, Slip Copy (2016) 2016 WL 4408835 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 14 compelling the bank to forego its legal rights under its loan modification agreements would plainly work a severe and unjustified hardship upon the defendant in this litigation. Finally, the public's interest would be disserved by the entry of such an injunction. The premise behind this request for injunctive relief is that the Court can re-write the contractual arrangements between sophisticated parties, compel lenders to forego their rights, and force financial institutions to continue to extend credit to a borrower on terms that the borrower demands. These are propositions which are breathtaking in their implications, and commercially unreasonable in their reach. Taken to its logical extreme this notion would wholly undermine confidence in commercial and residential lending markets, since it would suggest that borrowers may default on loan obligations, yet bar lenders from enforcing the terms of these loans, and use the courts to re-write these loan agreements. If we embraced this suggestion, we would, in effect, undermine confidence in these financial marketplaces by simultaneously eroding certainty in lenders' ability to enforce loan agreements, and creating a heightened, and largely undefined, legal risk for lenders, who would be subject to suit for exercising their rights under mortgage and loan agreements. Absent extraordinary circumstances, we should decline such a commercially novel, but legally untenable, invitation, particularly since in its current form the plaintiffs' complaint does not allege well-pleaded facts which would justify this extraordinary course. *16 In sum, finding that the plaintiffs' motions for injunctive relief fail to satisfy any of the elements required by law for this extraordinary relief, and are unsupported by any brief explaining the entitlement to such relief, these motions should be denied. III. Recommendation Accordingly, for the foregoing reasons, IT IS RECOMMENDED that the motion to dismiss filed by BB&T Bank (Doc. 12.) be GRANTED and the motions for injunctive relief (Docs. 16 and 17.) filed by the plaintiffs be DENIED. The parties are further placed on notice that pursuant to Local Rule 72.3: Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses or recommit the matter to the magistrate judge with instructions. Submitted this 7th day of June 2016. All Citations Slip Copy, 2016 WL 4408835 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 17 of 134 TAB B Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 18 of 134 Bioquell, Inc. v. Feinstein, Not Reported in F.Supp.2d (2010) 2010 WL 4751709 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Distinguished by Mattern & Associates, LLC v. Latham & Watkins LLP, E.D.Pa., September 26, 2014 2010 WL 4751709 Only the Westlaw citation is currently available. This decision was reviewed by West editorial staff and not assigned editorial enhancements. United States District Court, E.D. Pennsylvania. BIOQUELL, INC., Plaintiff, v. Steven FEINSTEIN, et al., Defendants. Civil Action No. 10-2205. | Nov. 23, 2010. Attorneys and Law Firms Mark F. Himsworth, Hamburg Rubin Mullin Maxwell & Lupin, Lansdale, PA, for Plaintiff. Michael J. Torchia, Stephen C. Goldblum, Semanoff, Ormsby, Greenberg & Torchia LLC, Huntingdon Valley, PA, for Defendants. MEMORANDUM OPINION TUCKER, District Judge. *1 Presently before the Court are Defendants Steven Feinstein, Robert Buscher and Six Log Corporation's Motion to Partially Dismiss Plaintiff's Complaint Pursuant to Fed. R. Civ. P 12(b)(6) (Doc. 10); Plaintiff Bioquell Inc.'s Response in Opposition thereto (Doc. 14); Defendants' Motion for Partial Judgment on the Pleadings (Doc. 22); Plaintiff Bioquell Inc.'s Response in Opposition thereto (Doc. 23); and Defendants' Motion for Leave to File a Reply Partial Judgment on the Pleadings (Doc. 18). For the reasons set forth below, this Court will grant Defendants' Motion to Partially Dismiss Plaintiff's Complaint. Additionally, this Court denies Defendants' Motion For Partial Judgment on the Pleadings and Motion for Leave to File a Reply. INTRODUCTION The instant action arises out of allegations of breach of a non-compete provision of an Employment Agreement. The Employment Agreement was entered into between Plaintiff Bioquell, Inc. (“Plaintiff”), as employer, and Defendants, Steven Feinstein (“Defendant Feinstein”) and Robert Buscher (“Defendant Buscher”), as employees. Plaintiff alleges that Defendants Feinstein and Buscher misappropriated trade secrets acquired during the course of said employment when they were employed by Defendant SixLog Corporation (“Defendant SixLog”). On June 10, 2010 Defendants collectively filed a Motion to Partially Dismiss the Complaint pursuant to Fed.R.Civ.P. 12(b) (6) for failure to state a claim upon which relief can be granted. Thereafter, on September 22, 2010 Defendants filed a Motion for Partial Judgment on the Pleadings pursuant to Fed.R.Civ.P. 12(c). These Motions are the subject of this opinion. FACTUAL BACKGROUND Plaintiff is in the business of providing hydrogen peroxide decontamination equipment and services to the healthcare, life sciences, food production, and defense sectors. (Compl.¶ 8.) Plaintiff hired Defendant Feinstein to serve as the Western Regional Sales Manager out of his home in Arizona. Defendant Feinstein's employment with Plaintiff commenced on October 1, 2008. (Compl.¶ 9.) In addition, Plaintiff hired Defendant Buscher, with employment commencing on December 1, 2008, to serve as the Vice-President of Operations of Bioquell Inc. (Compl.¶ 10.) During their employment with Bioquell Defendants Feinstein and Buscher had access to Plaintiff's confidential and proprietary information. As a condition of their employment, both Defendants Feinstein and Buscher were required to sign an Employment Agreement, which contained confidentiality and non- compete provisions. (Compl.¶ 11.) The Employment Agreement contained the following non-compete provision: Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 19 of 134 Bioquell, Inc. v. Feinstein, Not Reported in F.Supp.2d (2010) 2010 WL 4751709 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 You undertake and covenant to us that in order to protect BIOQUELL's legitimate business interests, for a period of two years from the date you cease to be an employee of BIOQUELL Inc. you will not in North America work for or be employed by or receive directly or indirectly any remuneration or consultancy fee or equity participation from: (i) other manufacturers of hydrogen peroxide vapor generators; (ii) companies or organizations selling hydrogen peroxide vapor generators; (iii) companies or organizations selling the servicing of hydrogen peroxide vapor generators; or (iv) companies or organizations selling a bio- decontamination service whether for buildings or rooms or equipment. *2 (Compl.¶ 12.) In addition, the Employment Agreement contains the following confidentiality provisions: You agree and acknowledge that you will have access to information which has significant value to the Company. This information includes, but is not limited to, customer information, proprietary BIOQUELL Group Information, product and technology know-how, trade secrets, business methods and details (including pricing and margin) and elements of the BIOQUELL Group's and the Company's strategy (together “Confidential Information”). You confirm and undertake to us that, in addition to your common law and/ or statutory obligations, during or after your employment ceases with the Company you will not divulge any Confidential Information in whole in part directly or indirectly to third parties, whether to competitors of the Company or others. (Compl.¶ 12.) (Doc. 11, Exs. A & B.) Furthermore, in the event of breach, the Employment Agreement provides, “BIOQUELL shall be entitled to the remedies of injunction, specific performance and other equitable relief for any threatened, anticipatory or actual breach of this Agreement,” and further provides that Defendants “agree in advance to the granting of injunctive relief in BIOQUELL's favour without proof of actual damage.” (Doc. 11, Exs. A & B.) Plaintiff avers that during their employment Defendants became familiar with Bioquell Inc.'s proprietary information, including customer information, proprietary group information, product and technology know-how, trade secrets and other information. In August 2009, Defendant Feinstein resigned from his position with Bioquell Inc., contending that Plaintiff misrepresented the terms of compensation in its offer of employment, and advised Plaintiff that he intended to contract for employment with Astro Pak Corporation (“Astro Pak”). (Compl.¶ 16.) On August 28, 2009, Plaintiff and Defendant Feinstein entered into a Release of Claims Agreement, wherein Defendant Feinstein agreed to release Plaintiff from any claims relating to the alleged misrepresentation. (Compl.¶ 17.) Additionally, Plaintiff agreed to release Defendant Feinstein from the non-compete provision as to Defendant Feinstein's prospective employment with Astro Pak. (Compl.¶ 18.) The Release of Claims Agreement provided, “FEINSTEIN understand[s] and agrees that the Non- compete shall remain in full force and effect with regards to any other employer or third party pursuant to the terms of such Non-compete.” (Compl.¶ 19.) Plaintiff claims that, prior to entering into the Release of Claims Agreement, Defendant Feinstein represented to Plaintiff that Astro Pak was not a competitor. (Compl.¶ 20.) Specifically, Plaintiff avers that in an email to Mike Heard, Bioquell Inc.'s Vice-President, Defendant Feinstein stated, “[a]s you know, we have never run in to Astro Pak on any project. They concentrate their business on the on-site passivisation and parts cleaning (in their cleanrooms).” (Compl.¶ 21.) *3 On September 10, 2009, after Defendant Feinstein had commenced employment with Astro Pak, Astro Pak formed Defendant SixLog to provide rapid on-site Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 20 of 134 Bioquell, Inc. v. Feinstein, Not Reported in F.Supp.2d (2010) 2010 WL 4751709 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 biological decontamination services utilizing proprietary ionized hydrogen peroxide technology. (Compl.¶ 22.) Defendant Feinstein then became employed as the Director of Technology at SixLog. (Compl.¶ 23.) Plaintiff avers that Defendant Feinstein was aware that he would be entering into an employment agreement with the newly incorporated SixLog at the time that he entered into the Release of Claims Agreement. (Compl.¶ 35.) Plaintiff alleges that Defendant SixLog's business is in direct competition with that of Plaintiff. Compl. ¶ 24.) After Defendant Feinstein began working for SixLog, on October 23, 2009, Plaintiff terminated Defendant Buscher's employment as a result of unsatisfactory job performance. (Compl.¶ 26.) Defendant Buscher was not released from either the confidentiality provision or the non-compete provision of the Employment Agreement. (Compl.¶ 27.) Plaintiff believes that Defendant Feinstein was substantially involved in Defendant Buscher's employment at SixLog. (Compl.¶ 29.) Plaintiff also believes that Defendants Feinstein and Buscher have conspired in misappropriating trade secrets learned during their respective employments with Plaintiff, have tortiously interfered with Plaintiff's business relations, and have acted in concert with Defendant SixLog in doing so. (Compl.¶ 30.) Consequently, Plaintiff sent correspondence to Defendants Feinstein and Buscher requesting that they cease and desist from their respective employments with SixLog. Neither Defendant Feinstein or Buscher responded to Plaintiff's request. (Compl.¶¶ 30- 31.) Based on the foregoing, Plaintiff brings the following claims for relief: (1) intentional misrepresentation claim against Defendant Feinstein; (2) breach of contract claim against Defendant Feinstein; (3) breach of fiduciary duty claim against Defendant Feinstein; (4) claim for violation of Pennsylvania's Uniform Trade Secrets Act against Defendant Feinstein; (5) claim for tortious interference with business relations against Defendant Feinstein; (6) conspiracy claim against Defendant Feinstein; (7) breach of contract claim against Defendant Buscher; (8) breach of fiduciary duty claim against Defendant Buscher; (9) claim for violation of Pennsylvania's Uniform Trade Secrets Act against Defendant Buscher; (10) claim for tortious interference with business relations against Defendant Buscher; (11) conspiracy claim against Defendant Buscher; (12) claim for tortious interference with business relations against Defendant SixLog; and (13) conspiracy claim against Defendant SixLog. LEGAL STANDARD A. Motion to Dismiss Pursuant to Federal Rule 12(b)(6) On a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), the court is required to accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and to view them in the light most favorable to the non-moving party. See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 (3d Cir.1994). A complaint should be dismissed only if the alleged facts, taken as true, fail to state a claim. See In re Warfarin Sodium Antitrust Litig., 214 F.3d 395, 397- 98 (3d Cir.2000). The question is whether the claimant can prove any set of facts consistent with his or her allegations that will entitle him or her to relief, not whether that person will ultimately prevail. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Semerenko v. Cendant Corp., 223 F.3d 165, 173 (3d Cir.2000). *4 While a court will accept well-pled allegations as true for the purposes of the motion, it will not accept bald assertions, unsupported conclusions, unwarranted inferences, or sweeping legal conclusions cast in the form of factual allegations. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.1997). The United States Supreme Court has recognized that “a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly et.al., 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In Twombly the Court made clear that it would not require a “heightened fact pleading of specifics,” but only “enough facts to state a claim to relief that is plausible on its face.” Id. at 570. A “pleader is required to ‘set forth sufficient information to outline the elements of his claim or to permit inferences to be drawn that these elements exist.’ ” Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993) (citation omitted). In 2009 the United States Supreme Court revisited the requirements for surviving a 12(b)(6) motion to dismiss in Ashcroft v. Iqbal, ---U.S. ----, ----, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). In Iqbal the Court made clear that “threadbare recitals of the elements of a cause of Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 21 of 134 Bioquell, Inc. v. Feinstein, Not Reported in F.Supp.2d (2010) 2010 WL 4751709 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 action, supported by mere conclusory statements [are] not suffice” to defeat a Rule 12(b)(6) motion to dismiss. Id. at 1949. “[O]nly a complaint that states a plausible claim for relief [will] survive[ ] a motion to dismiss.” Id. at 1950. In light of the decision in Iqbal, the Third Circuit set forth a two-part analysis to be applied by district courts when presented with a 12(b)(6) motion. First, the court must separate the legal elements and factual allegations of the claim, with the well-pleaded facts accepted as true but the legal conclusions disregarded. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir.2009). Second, the court must make determine whether the facts alleged in the complaint demonstrate that the plaintiff has a “plausible claim for relief.” Id. at 211. If the court can only infer the mere possibility of misconduct, the complaint must be dismissed because it has alleged-but has failed to show-that the pleader is entitled to relief. Id. DISCUSSION I. Breach of Contract Counts two and seven of Plaintiff's Complaint charge Defendants Feinstein and Buscher with breach of contract. Specifically, Plaintiff avers that Defendant Feinstein and Buscher are in breach of the confidentiality and non-compete provisions of the Employment Agreement. (Compl.¶¶ 40.) Defendants argue these claims should be dismissed to the extent that they allege violations of the confidentiality provision. In support of this claim for relief Plaintiff avers that it “believe[s] that Defendant Feinstein has disclosed or inevitably will disclose to Defendant SixLog confidential trade secret information belonging to Plaintiff.” (Compl.¶ 41.) Plaintiff argues this breach was the direct and proximate cause of placing Bioquell Inc. at a competitive disadvantage and its business activities will be severely impaired if Defendants Feinstein and Buscher are permitted to unlawfully misappropriate and otherwise use Plaintiff's confidential information. (Compl.¶ 43.) Plaintiff claims that Defendant Feinstein and Buscher's breach of the confidentiality provision have caused and will continue to cause Plaintiff significant financial loss, loss of good will and other irreparable harm. (Compl.¶ 44.) *5 To establish a claim for breach of contract, a plaintiff must plead the following elements: (1) the existence of a contract to which the plaintiff and defendant were parties, including its essential terms; (2) a breach of a duty imposed by the contract; and (3) damages. See Gorski v. Smith, 2002 PA Super 334, 812 A.2d 683, 692 (Pa.Super.Ct.2002). At the motion to dismiss stage, a court will accept as true the facts as contained in the complaint; however to survive a 12(b)(6) motion a plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal at 1949. Plaintiff has failed to properly plead the second and third element of this claim. Here, Plaintiff has merely made a series of conclusory statements devoid of any factual content. The very verbiage used in Plaintiff's Complaint demonstrates that it lacks a basis for the allegations made in counts two and seven. In support of these allegations Plaintiff states that it believes that Defendants Feinstein and Buscher have “disclosed or inevitably will disclose confidential trade secret information.” (Compl.¶¶ 41, 71.) These bald assertions do not suffice to allow this Court to draw the inference that Defendant Feinstein and Buscher are liable for the breach of the confidentiality provisions of the Employment Agreement. This Court is not “bound to accept as true legal conclusions couched as factual allegations.” Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). Accordingly, this Court will dismiss Plaintiff's second claim for relief against Defendant Feinstein and Plaintiff's first claim for relief against Defendant Buscher to the extent that they allege a breach of the confidentiality provision of the Employment Agreement. II. Breach of Fiduciary Duty Counts three and eight of Plaintiff's Complaint charge Defendant Feinstein and Defendant Buscher with breach of fiduciary duty. Defendants argue that these counts should be dismissed as they are vague assertions and do nothing more that recite the legal elements of a cause of action for breach of fiduciary duty. This Court agrees. In support of these allegations Plaintiff's Complaint merely states that Defendants Feinstein and Buscher were in a position of trust and confidence during their employment with Bioquell Inc. wherein they had access to Plaintiff's confidential information. (Compl.¶¶ 46, 47, 76, 77.) Plaintiff further alleges that upon information and belief Defendants Feinstein and Buscher breached this fiduciary duty by “wrongfully misappropriating and wrongfully using Plaintiff's confidential and proprietary information.” (Compl. ¶¶ 50, 80.) Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 22 of 134 Bioquell, Inc. v. Feinstein, Not Reported in F.Supp.2d (2010) 2010 WL 4751709 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 A claim for breach of fiduciary duty requires a Plaintiff to establish (1) a confidential or fiduciary relationship existed between the plaintiff and the defendant; (2) the defendant negligently or intentionally failed to act in good faith and solely for the benefit of plaintiff in all matters for which he or she was employed; (3) the plaintiff suffered injury; and (4) the defendant's failure to act solely for the plaintiff's benefit was a real factor bringing about plaintiff's injuries. Baker v. Family Credit Counseling Corp., 440 F.Supp.2d 392, 414-15 (E.D.Pa.2006). The Complaint fails to identify any facts to support the second, third and fourth elements of this claim. Noticeably missing from these counts are any details discussing when the information was misappropriated, to whom it was given, or what information was allegedly wrongfully disclosed. *6 While Fed.R.Civ.P. 12(b)(6) does not require a Plaintiff to set forth detailed facts it does require that a plaintiff set forth a plausible basis for the relief it requests. Thus, to survive a 12(b)(6) motion, a Plaintiff's Complaint must set forth direct or inferential factual allegations supporting all the material elements of the claims made therein.. Plaintiff's allegations of breach of a fiduciary duty are purely conjectural and are insufficient to survive a motion to dismiss. Accordingly, this Court finds the allegations asserted by Plaintiff do not establish a plausible claim for relief against Defendants Feinstein and Buscher for breach of fiduciary duty. III. Violation of the Pennsylvania Uniform Trade Secrets Act Plaintiff's Fourth Claim for Relief against Defendant Feinstein and Third Claim for Relief against Defendant Buscher charge Defendants with violating the Pennsylvania Uniform Trade Secrets Act, 12 Pa.C.S. § 5301 et seq. Specifically, Plaintiff avers that Defendants Feinstein and Buscher violated the Act by wrongfully misappropriating confidential and proprietary information which qualify as trade secrets. (Compl.¶¶ 52, 82.) In support of this allegation Plaintiff states merely that said trade secrets were acquired during the course of Defendant Feinstein and Buscher's employment with Plaintiff, said trade secrets were not generally available to the public, and that Defendant SixLog induced the Defendants to engage in the misappropriation of said trade secrets. (Compl.¶¶ 54, 56, 83.) Plaintiff further alleges that “[b]ased on Defendant Buscher's conduct to date, it is probable that Defendant Buscher will continue to use Plaintiff's trade secrets for his own benefit and the benefit of Defendant SixLog, to the detriment of Plaintiff.” (Compl.¶ 87.) The identical allegation was made against Defendant Feinstein. (Compl.¶ 57) Not once does Plaintiff identify these trade secrets nor discuss how said secrets were allegedly wrongfully misappropriated. Moreover, Plaintiff fails to allege in what manner Defendant SixLog allegedly induced Defendants Feinstein and Buscher to violate the Act. Plaintiff makes no effort to identify what conduct Defendant Buscher or Feinstein engaged in which leads it to this conclusion that Bioquell Inc.'s proprietary information has been and will continue to be used for Defendant SixLog's benefit. This Court finds that Plaintiff has failed to meet the pleading requirements of Fed.R.Civ.P. 12(b)(6), Plaintiff's claim for relief as it relates to a violation of the Pennsylvania Uniform Trade Secrets Act is merely a string of conclusory statements devoid of any factual basis. A Plaintiff's complaint must set forth “enough facts to state a claim for relief that is plausible on its face.” Twombly, 550 U.S. at 570. This Court will not assume that Plaintiff has the basis for the assertions that it makes nor will it attempt to fill-in where a complaint is lacking. Accordingly, this Court will dismiss Plaintiff's fourth claim for relief against Defendant Feinstein and Plaintiff's third claim for relief against Defendant Buscher for violation of the Pennsylvania Uniform Trade Secrets Act. IV. Tortious Interference with Business Relations A. Defendants Feinstein and Buscher *7 Plaintiff's fifth claim for relief against Defendant Feinstein and fourth claim for relief against Defendant Buscher charge Defendants with tortious interference of business relations. To establish a claim for tortious interference a plaintiff must plead: (1) the existence of an existing or prospective contractual relationship between plaintiffs and a third party; (2) intent on the part of defendants to harm the plaintiffs by interfering with this relationship; (3) absence of privilege or justification for such interference; and (4) actual harm or damage to plaintiffs as a result of defendants' conduct. United States Healthcare v. Blue Cross of Greater Phila., 898 F.2d 914, 925 (3d Cir.1990) (citing Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 208, 412 A.2d 466 (Pa.1979)). Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 23 of 134 Bioquell, Inc. v. Feinstein, Not Reported in F.Supp.2d (2010) 2010 WL 4751709 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 Defendants ask that this Court to dismiss Plaintiff's claims for tortious interference because Plaintiff has failed to plead sufficient facts to establish any of the elements of this cause of action. Specifically, Defendants argue that the Complaint fails to identify a business relationship that was terminated as a result of Defendants' alleged actions nor a single customer of Plaintiff that was allegedly contacted or solicited by Defendants Feinstein or Buscher. This Court agrees, Plaintiff's Complaint contains vague averments which fail to establish a plausible ground for relief. In support of these claims Plaintiff states merely that it has critical ongoing relationships with purchasers of hydrogen peroxide decontamination equipment services and that Defendants Feinstein and Buscher had direct knowledge of the existing contracts and prospective contracts of Plaintiff. (Compl.¶¶ 61, 62, 91, 92.) From this Plaintiff argues that Defendants Feinstein and Buscher have directly and/or indirectly used confidential and proprietary information to solicit business from Plaintiff's customers with whom they previously worked. (Compl.¶¶ 63, 93.) The Complaint fails to advance any facts which support the inference that Defendants targeted Plaintiff's customers with the intent to harm Plaintiff. Plaintiff's allegations of tortious interference with business relationships are purely conjectural. Plaintiff fails to identify a single contract or client that it lost as a result of Defendants' alleged actions. An existing or prospective contractual relationship is a required element to establish a cause of action for tortious interference. Thompson Coal Co., 488 Pa. at 208, fn. 7, 412 A.2d 466 (“underlying [the tort's] requisites, of course, is the existence of a contract or of a prospective contractual relation between the third person and the plaintiff”). Plaintiff has failed to plead sufficient facts that support the inference that it is entitled to the relief it seeks. See Twombly U.S. 550 at 557 (noting that allegations of the mere possibility of misconduct are not enough) Accordingly, this Court will dismiss Plaintiff's fifth claim for relief against Defendant Feinstein and fourth claim for relief against Defendant Buscher. B. Defendant SixLog *8 Plaintiff's allegations against Defendant SixLog for tortious interference with business relations are identical in substance to those made against Defendants Feinstein and Buscher. See (Compl.¶¶ 100-103.) For the reasons mentioned above this Court also dismisses Plaintiff's claim against Defendant SixLog for tortious inference with business relations. V. Conspiracy A. Defendants Feinstein and Buscher Plaintiff's sixth claim for relief against Defendant Feinstein and fifth claim for relief against Defendant Buscher charge Defendants with conspiracy. In support of this allegation Plaintiff states that “Defendants Buscher and SixLog agreed to act in concert and did act in concert with one another to breach the Employment agreement and to otherwise violate Pennsylvania's Uniform Trade Secret Act.” (Compl.¶¶ 97.) Plaintiff recites this same verbiage in its allegation that Defendants conspired to breach their employment agreements by misappropriating trade secrets learned during their respective employments. (Compl.¶¶ 98.) 1 1 The Complaint contains identical allegations in the claim for relief made against Defendant Feinstein for conspiracy. See (Compl.¶¶ 67-68). A claim for civil conspiracy under Pennsylvania law requires a plaintiff to establish: (1) a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose; (2) an overt act done in pursuance of the common purpose; and (3) actual legal damage. Gen. Refractories Co. v. Fireman's Fund Ins. Co., 337 F.3d 297, 313 (3d Cir.2003) (citing Strickland v. Univ. of Scranton, 700 A.2d 979, 987-988 (Pa.Super.Ct.1997)). A properly plead conspiracy claim “must set forth allegations that address the period of the conspiracy, the object of the conspiracy, and the certain actions of the alleged conspirators taken to achieve that purpose.” Great Western Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 179 (3d Cir.2010) (citing Beck v. Prupis, 529 U.S. 494, 120 S.Ct. 1608, 146 L.Ed.2d 561 (2000)). Plaintiff does little more than recite the elements for establishing the existence of a conspiracy. Formulaic recitations of the elements of a cause of action do not suffice to satisfy the pleading requirements of Fed.R.Civ.P. 12(b)(6). Twombly, 550 U.S. at 555. See also Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir.2008). Although this Court must accept as true all reasonable inferences that may be drawn from the allegations, and view those facts and inferences in the light most favorable to Plaintiff, as the non-moving party, it is Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 24 of 134 Bioquell, Inc. v. Feinstein, Not Reported in F.Supp.2d (2010) 2010 WL 4751709 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 under no obligation to accept unsupported conclusions. See City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 263 n. 13 (3d Cir.1998). While this Court recognizes that Fed.R.Civ.P. 12(b)(6) does not require detailed factual allegations it is also mindful that the rule does require more than “an unadorned, the-defendant- unlawfully-harmed-me accusation.” Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 555). Plaintiff has failed to allege sufficient facts that support a claim for conspiracy. Accordingly, this Court will dismiss Plaintiff's sixth claim for relief against Defendant Feinstein and fifth claim for relief against Defendant Buscher. B. Defendant SixLog *9 Plaintiff's allegations against Defendant SixLog are identical in substance to those made against Defendants Feinstein and Buscher. See (Compl.¶¶ 105-106.) For the reasons mentioned above this Court dismisses Plaintiff's claim against Defendant SixLog for conspiracy. CONCLUSION For the foregoing reasons, the Court will grant Defendants' motion to dismiss Plaintiff's second claim for relief against Defendant Feinstein to the extent that it alleges a breach of the confidentiality provision of the Employment Agreement. In addition, this Court grants Defendants' motion to dismiss Plaintiff's first claim for relief against Defendant Buscher to the extent that it alleges a breach of the confidentiality provision of the Employment Agreement. This Court also grants Defendants' Motion for Partial Dismissal of Plaintiff's Complaint as it relates to the following causes of action: • Plaintiff's third Claim for relief against Defendant Feinstein • Plaintiff's fourth claim for relief against Defendant Feinstein • Plaintiff's fifth claim for relief against Defendant Feinstein • Plaintiff's sixth claim for relief against Defendant Feinstein • Plaintiff's second claim for relief against Defendant Buscher • Plaintiff's third claim for relief against Defendant Buscher • Plaintiff's fourth claim for relief against Defendant Buscher • Plaintiff's fifth claim for relief against Defendant Buscher • Plaintiff's first claim for relief against Defendant SixLog • Plaintiff's second claim for relief against Defendant SixLog Additionally, this Court denies Defendants' Motion for Partial Judgment on the Pleadings. The dismissal of this action is without prejudice and the Court grants Plaintiff leave to submit an amended complaint. Last, the Court denies Defendant's Motion for Leave to Reply. An appropriate Order follows. All Citations Not Reported in F.Supp.2d, 2010 WL 4751709 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 25 of 134 TAB C Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 26 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2013 WL 12081103 Only the Westlaw citation is currently available. United States District Court, S.D. Iowa, Central Division. Bowe Machine Company, Plaintiff, v. Superbolt, Inc., a Pennsylvania corporation f/k/a SBRAZ, Inc., RHW Enterprises Corp., a Pennsylvania corporation f/k/a Steinbock Machinery Corp. f/k/a SMCZ Inc. Nord-Lock Switzerland GmbH, the Nord-lock Group, and Nord-Lock Inc., and Robert Steinbock and Allan Steinbock, Individually, Defendant. Case No. 3:13-cv-00008-JAJ-RAW | Signed 12/20/2013 Attorneys and Law Firms Charles A. Damschen, Jay R. Hamilton, Hamilton IP Law, Davenport, IA, Brett J. Trout, Brett J. Trout PC, Des Moines, IA, for Plaintiff. Jeffrey D. Harty, Nyemaster Goode PC, Des Moines, IA, Kevin C. Harkins, Leah R. Imbrogno, Cohen & Grigsby, P.C., Pittsburgh, PA, for Defendant. ORDER JOHN A. JARVEY, UNITED STATES DISTRICT JUDGE I. INTRODUCTION *1 This case arises from a complaint filed by Bowe Machine Company (“Bowe”) on January 3, 2013, and its first amended complaint filed on July 31, 2013. [Dkt. Nos. 1, 11.] Bowe alleges the Defendants violated 35 U.S.C. § 292(a) by “falsely marking and advertising products”- e.g., jackbolts for multi-jackbolt tensioners (“the MJTs”) -“as protected by patent for the purpose of deceiving purchasers, competitors, and the public into believing that they are protected by patent, when they are not.” Bowe seeks to certify as a class Defendants' customers and competitors “who were competitively injured by [Defendants'] false patent marking.” The Defendants include Superbolt, Inc. f/k/a SBRAZ, Inc. (“Superbolt”); Robert and Allan Steinbock (the “individual Defendants” or “Steinbocks”); RHW Enterprises Corp. f/k/a Steinbock Machinery Corp. (“Steinbock Machinery”); and Nord-Lock Switzerland GmbH (“Nord-Lock Switzerland”); the Nord-Lock Group (“Nord-Lock Group”); and Nord-Lock, Inc. (“Nord-Lock, Inc.”) (collectively, “Defendants”). 1 The case comes before the Court pursuant to Defendants' motion to dismiss Bowe's false patent marking claim. [Dkt. No. 20-1.] The Court GRANTS the Defendants' motion. In reaching this holding, it makes three findings. 1 According to the Defendants, “Nord-Lock Group is not a separate legal entity, but instead the unofficial name for the conglomeration of Nord- Lock businesses world-wide ... Nord-Lock Group, therefore, is inappropriately named as a defendant and not subject to suit.” [Dkt. No. 20-1 Page 5 n.1.] Accordingly, the claims against Nord-Lock Group are dismissed. First, the Court cannot exercise general or specific personal jurisdiction over the individual Defendants and Steinbock Machinery. See FED. R. CIV. P. 12(b)(2). Bowe's claims against these Defendants are dismissed pursuant to Federal Rule of Civil Procedure (“FRCP”) 12(b)(2) as Bowe fails to show the Defendants “purposefully directed” contacts at the forum state, Iowa. See Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir. 1995) (sets forth three-factor test to determine if asserting specific personal jurisdiction over out-of-state defendants comports with due process). Second, Bowe did not properly serve Nord-Lock Switzerland under FRCP 4. See FED. R. CIV. P. (b) (4). Nord-Lock Switzerland is not amendable to service of process, and therefore, this Court lacks personal jurisdiction over Nord-Lock Switzerland. See Viam Corp. v. Iowa Export-Import Trading Co., 84 F.3d 424, 430 (Fed. Cir. 1996) (citing Akro, 45 F.3d at 1543-44); see also M urphy Bros., Inc. v. M ichetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999) (“In the absence of service of process (or waiver of service by the defendant), a court ordinarily may not exercise power over a party the complaint names as defendant”). Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 27 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 Third, Bowe's complaint does not contain “direct or inferential allegations respecting all the material elements necessary to sustain a recovery” under 35 U.S.C. § 292. See Two Moms and a Toy, LLC v. International Playthings, LLC, 898 F.Supp.2d 1213, 1216 (D. Colo. Sept. 30, 2012) (quoting Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2002)). Bowe does present “factual content,” which “allows the court to draw the reasonable inference” that one or more Defendants falsely marked the MJTs with U.S. Patent No. 6,112,396 (“the '396 patent”). See Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Bowe's factual allegations about Defendants' “deceptive intent” were not pled with sufficient particularity to meet the bar set by FRCP 9(b). See Lutron Electronics Co., Inc. v. Crestron Electronics, Inc., No. 2:09-cv-707, 2012 WL 3192806, at *2 (D. Utah Aug. 6, 2012). Bowe also does not adequately allege who are its competitors or a competitive injury. See Twombly, 550 U.S. at 570; see also Saver Technology, Inc. v. American Power Conversion Corp., No. 3:06-CV-00698-LRH-VPC, 2012 WL 3061023, at *2 (D. Nev. July 26, 2012). Bowe's claims are dismissed without prejudice for Bowe to amend its complaint in the event Bowe can cure the deficiencies discussed in this order. See Aevoe Corp. v. AE Tech. Co., LTD., No. 2:12-cv-00053, 2013 WL 876036, at *2 (D. Nev. Mar. 7, 2013). II. FACTS *2 Defendant Superbolt is in the business of manufacturing, marketing, and selling bolt-securing systems for industrial applications, such as the MJTs. 2 In 1999, Defendant Superbolt filed an application for a patent, which was issued on September 5, 2000 as the '396 patent. On April 9, 1999, Rolf Steinbock, the named inventor of the '396 patent, and founder of Superbolt, assigned his interest in the patent to Defendant Steinbock Machinery. Rolf died in 2001, after which his sons, Defendants Robert and Allan Steinbock, continued to own and operate Superbolt. On August 3, 2011, Steinbock Machinery-an affiliated firm that held the patents on Superbolt's products-assigned its entire interest in the patent to Nord-Lock Switzerland. 3 2 In its amended complaint, Bowe asserts that when it refers to “Superbolt,” Bowe is referring to “all of the foregoing Defendants collectively.” [Dkt. No. 11 Page 1.] 3 The Defendants assert Steinbock Machinery “was the former owner of the patents used by Superbolt, Inc., and sold the patents to Nord-Lock, Inc. in August 2011.” Conversely, Bowe asserts Steinbock Machinery “assigned its entire interest to Nord- Lock Switzerland GMBH of Zurich, Switzerland on 8/3/2011.” A “Patent Assignment Abstract of Title” is attached to Bowe's amended complaint, indicating Steinbock Machinery transferred its patent assignment to Nord-Lock Switzerland. [Dkt. No. 11-4.] In its first amended complaint, filed on July 31, 2013, Bowe argues the Defendants falsely marked the '396 patent on their products. However, not until its resistance filed on October 25, 2013 does Bowe allege Defendants' MJTs have “flat ends,” not ends with a “protruding central area,” as is required by the '396 patent. Hence, Bowe's theory is the Defendants violated 35 U.S.C. § 292 as the Defendants' products-namely, the MJTs- fail to meet the '396 patent's description. Bowe does not clarify how Defendants' other products were marked with inapplicable patents in violation of 35 U.S.C. § 292. Bowe further alleges that the Defendants were aware on or about July 23, 2013 that no claims of the '396 patent covered the Defendants' products that were marked with the patent. At that time, “Bowe provided Defendants' counsel with a copy of the expert report detailing the precise degree to which the accused bolts failed to meet the claims of the '396 Patent.” Despite knowing this information, the Defendants continued to mark the products with the '396 patent, and Bowe alleges it suffered a “competitive injury” as a result of the false marking. Aside from Superbolt, Bowe sues other corporate Defendants and individuals, and argues Defendants collectively engaged in false marking. Bowe sues Robert and Allan Steinbock, for instance, who were the President and Vice President of Superbolt, respectively, and are residents of Pennsylvania. Robert served as President from the early-1990s to August 2012. Allan served as Vice President from the mid-1990s to August 2012. Bowe also sues Steinbock Machinery, a related corporation of Superbolt, and a Pennsylvania corporation with its principal place of business in Bridgeville, Pennsylvania. Lastly, Bowe sues Nord-Lock Switzerland, a Swiss corporation, with its principal location in St. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 28 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 Gallenkappel, Switzerland, and Nord-Lock, Inc., an Illinois-based company, which is a subsidiary of Nord- Lock International AB. III. DISCUSSION A. Lack of Personal Jurisdiction over the Individual Defendants and Steinbock Machinery A federal district court may dismiss an action for lack of personal jurisdiction. FED. R. CIV. P. 12(b)(2). At issue is whether the Court has specific or general personal jurisdiction over the individual Defendants and Steinbock Machinery. 1. Choice of Law *3 Where personal jurisdiction is “intimately related to patent law,” the Federal Circuit applies its own law regarding due process. See Breckenridge Pharmaceutical, Inc. v. Metabolite Laboratories, Inc., 444 F.3d 1356, 1361 (Fed. Cir. 2006) (quoting Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003)); see also Elecs. For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348 (Fed. Cir. 2003) (quoting Akro, 45 F.3d at 1543)). Before discovery, Bowe must “ ‘make a prima facie showing’ the Defendants are subject to personal jurisdiction,” and pleadings and affidavits are construed in the light most favorable to Bowe. Silent Drive, Inc., 326 F.3d at 1201 (quoting Deprenyl Animal Health, Inc. v. University of Toronto Innovations Foundation, 297 F.3d 1343, 1347 (Fed. Cir. 2002)). 2. General Versus Specific Personal Jurisdiction Two bases enable courts to exercise personal jurisdiction over defendants: (1) general and (2) specific personal jurisdiction. See Touchcom, Inc. v. Bereskin & Parr, 574 F.3d 1403, 1410 (Fed. Cir. 2009) (citing Synthes (U.S.A.) v. G.M. Dos Reis Jr. Ind. Com. de Equip. Medico, 563 F.3d 1285, 1297 (Fed. Cir. 2009)). In this case, Bowe does not argue the Court has personal jurisdiction based on the Defendants' “continuous and systematic” contacts with Iowa as per general personal jurisdiction. Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1017 (Fed. Cir. 2009). Rather, Bowe argues it has specific personal jurisdiction over the domestic Defendants. Thus, the Court's analysis is limited to whether specific personal jurisdiction exists. See Grober v. Mako Products, Inc., 686 F.3d 1335, 1346 (Fed. Cir. 2012); see also Red Wing Shoe Co., Inc. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998). A two-step inquiry determines whether specific personal jurisdiction over a foreign defendant is proper: (1) “whether a forum state's long-arm statute permits service of process” and (2) “whether assertion of personal jurisdiction violates due process.” Grober, 686 F.3d at 1345 (quoting Autogenomics, Inc., 566 F.3d at 1017). The two inquiries often “coalesce into one because the reach of the state long arm statute is the same as the limits of the due process clause, so that the state limitation ‘collapses into’ the due process requirement.” Trintec Industries Inc. v. Pedre Promotional Products, Inc., 395 F.3d 1275, 1279 (Fed. Cir. 2005). 3. Whether Iowa's Long-Arm Statute Permits Service of Process Iowa has a very broad long-arm statute. Westlake Investments, L.L.C. v. M LP Mgmt. L.L.C., 707 F.Supp.2d 904, 910 (S.D. Iowa 2010). The statute “expands its ‘jurisdictional reach to the widest due process parameters' that the Constitution allows.” Id.; see also Breckenridge Pharmaceutical, Inc., 444 F.3d at 1361; Trintec Industries Inc., 395 F.3d at 1279. Because Iowa's long-arm statute extends to the limits of due process, the personal jurisdiction analysis is narrowed to one question: whether jurisdiction comports with due process? See Campbell Pet Co. v. Miale, 542 F.3d 879, 884 (Fed. Cir. 2008). 4. Whether Assertion of Personal Jurisdiction Comports with Due Process The Federal Circuit follows the “three-part Akro test” in deciding if jurisdiction over an out-of-state defendant comports with due process. See Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1362 (Fed. Cir. 2001). In applying the three-part Akro test, the Court asks, whether: “(1) the defendant purposefully directed its activities at residents of the forum state, (2) the claim arises out of or relates to the defendant's activities with the forum state, and (3) assertion of personal jurisdiction is reasonable and fair.” See Grober, 686 F.3d at 1346 (quoting Elecs. For Imaging, Inc., 340 F.3d at 1350). Bowe has the burden of proving parts one and two of the Akro test. Id. If Bowe succeeds in meeting its burden, the burden shifts to the Defendants to prove personal jurisdiction is unreasonable. Id. “The first two factors correspond with the ‘minimum Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 29 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 contacts' prong of the International Shoe analysis, and the third factor corresponds with the ‘fair play and substantial justice’ prong of the analysis.” lnamed Corp., 249 F.3d at 1360. a. Prong 1 of Akro Test: “Purposefully Directed” *4 Initially, the Court analyzes the contacts the individual Defendants and Steinbock Machinery have with Iowa. In order for a federal court to exercise specific jurisdiction over a nonresident defendant, “[t]he defendant must ‘purposefully’ direct his activities at residents of the forum state.” See Westlake Investments L.L.C., 707 F.Supp.2d at 911 (citing Capital Promotions, L.L.C. v. Don King Prod., Inc., 756 N.W.2d 828, 833 (Iowa 2008)); see also Elecs. For Imaging, Inc., 340 F.3d at 1351. Bowe's allegations fall short in explaining how Defendants “purposefully directed” activities at Iowa. In fact, Bowe makes conclusory jurisdictional allegations: Bowe argues the Defendants “collectively engaged” in false marking and “direct[ed] their false marking activities to Iowa.” Citing to Silent Drive, Inc., 326 F.3d at 1205, and Calder v. Jones, 465 U.S. 783, 789-90 (1984), Bowe alleges the Defendants “should have realized that the brunt of the harm would be felt” in Iowa as the Defendants “purposely and repeatedly direct [ed] their fraudulent activities at Iowa residents.” Yet, Bowe does not differentiate between the conduct of the domestic Defendants to prove personal jurisdiction exists over the Steinbocks and Steinbock Machinery. Defendants argue Bowe's first amended complaint fails to “allege any Iowa contacts on the part of” the Steinbocks or Steinbock Machinery. Relying on Grober, 686 F.3d at 1347, and Westlake Investments, L.L.C., 707 F.Supp.2d at 913-14, Defendants contend that Robert and Allan Steinbock are protected by the “fiduciary shield doctrine,” which may be used to “buffer[ ] corporate offers [sic] from personal jurisdiction when their official duties were their only contact with a forum state.” Additionally, Defendants make a separate argument as to why the Court lacks personal jurisdiction over Steinbock Machinery: “Bowe has not set forth any basis for jurisdiction over Steinbock Machinery,” or “alleged any contacts (minimum or otherwise) Steinbock Machinery had with Iowa.” Moreover, Steinbock Machinery's principal place of business is in Bridgeville, Pennsylvania. Finally, to bolster their contentions, Defendants refer to Magistrate Judge Ross Walters's denial of Bowe's motion for leave to conduct jurisdictional discovery. 4 In brief, Defendants argue the Court should dismiss the claims against the individual Defendants and Steinbock Machinery for lack of personal jurisdiction. This Court agrees. 4 Magistrate Judge Walters wrote, “[Bowe] has made only a bare assertion that all of the defendants, including the Steinbocks in their individual capacity and Steinbock Machinery, conducted business in this District ... Bowe has provided only conclusory, unsupported allegations that defendants conducted business in Iowa. [Bowe] has not provided - with any reasonable particularity - a basis on which the Court should allow further inquiry because it does not allege factually supported, requisite minimum contacts.” [Dkt. No. 31 Page 6.] b. Analysis of the Parties' Arguments Regarding Prong 1 of Akro Test First, the Court lacks specific personal jurisdiction over the Steinbocks. “Personal jurisdiction can only successfully be asserted despite the corporate shield doctrine, if the employee's own activities would subject him to personal jurisdiction, such that the ‘agent is a primary participant[ ] in an alleged wrongdoing intentionally directed at [forum-state] resident[s], and jurisdiction over [him] is proper on that basis.’ ” Westlake Investments, L.L. C., 707 F.Supp.2d at 914. Here, Robert and Allan Steinbock did not perform any duty or act outside their status as corporate officers to establish jurisdiction in Iowa. See Grober, 686 F.3d at 1347. Additionally, the Steinbocks submitted compelling declarations, which provide: they have never “been to Iowa,” “had any contact with Iowa outside” of their former positions with Superbolt, “directed any calls or email communications to Iowa for anything other than a business purpose,” and their contacts with Iowa were only “insofar as the company did business with companies based in Iowa.” [Dkt. Nos. 20-3, 20-4.] All of which leads this Court to find Bowe did not meet its burden of proving the Akro test's first prong as to the Steinbocks. *5 Second, the Court lacks specific personal jurisdiction over Steinbock Machinery. In Grober v. Mako Products, Inc., the Federal Circuit Court of Appeals held that the district court did not err in finding that it lacked specific personal jurisdiction over the defendants, the Kleins and Oppenheimer Cine Rental, LLC (“Oppenheimer”). Grober, 686 F.3d at 1346. The Federal Circuit reasoned Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 30 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 that the plaintiffs could not establish that the defendants operated and rented the patented product (“the MakoHead”) in California, and the plaintiff-appellants failed to show that the defendant (Oppenheimer) had sufficient contacts with California to warrant specific jurisdiction. Id. at 1347. In the words of the Federal Circuit, Appellants could not establish that Oppenheimer has operated or rented the MakoHead in California. Beyond shipment of an unspecified amount of products between itself and Spectrum Effects, Inc., Oppenheimer did not operate at all in California. In fact, Appellants did not show that out of the hundreds of available products, the accused MakoHead, was ever shipped to California. While Oppenheimer advertised the MakoHead twice per year in a magazine based in California, this trade publication was nationally distributed and not limited to California. Appellants could not show that Oppenheimer targeted the California market at all. Appellants at best showed Oppenheimer on a list as a North West contact, with two other West Coast contacts also on the list. Again, this attenuated evidence does not show that California was a target market for Oppenheimer. In sum, Oppenheimer, on this record, did not purposefully avail itself of the privileges of conducting activities within California, “thus invoking the benefits and protections of its laws.” Grober, 686 F.3d at 1347. Here, even more compelling than the facts in Grober, Steinbock Machinery “has had no contacts with Iowa and has not conducted any business in Iowa, nor has it marketed any materials in Iowa, marked any patents in Iowa, or knowingly directed any calls or email communications to Iowa.” Unlike lnamed and Akra-cases in which the Federal Circuit reversed dismissals for lack of personal jurisdiction-Steinbock Machinery did not enter into an “exclusive license agreement” with Bowe; it has no binding obligation in the forum state. See Grober, 686 F.3d at 1347; see also Hildebrand v. Streck Mfg. Co., Inc., 279 F.3d 1351, 1356 (Fed. Cir. 2002). If there was such an agreement, it is not of record. Thus, Bowe fails to meet its burden of proving the first prong of the Akro test as to Steinbock Machinery. c. Prongs 2-3 of Akro Test: “Arises out of or relates to” and “Reasonable and Fair” Because Bowe did not establish the first prong of the Akro test as to the Steinbocks and Steinbock Machinery, it is unnecessary to analyze the Akro test's other two prongs. This decision is influenced by 3D Sys., Inc. v. Aarotech Labs., Inc., where, as here, the plaintiff failed to prove that a corporation “purposefully direct[ed] any activities at” residents of the forum state, and the Court held it did not need to examine the Akro test's other prongs. 160 F.3d 1373, 1380 (Fed. Cir. 1998). The defendant “did not take any direct actions toward the residents of California, except that its name appeared, in a different spelling (Aarotec), on the letterhead used by Aaroflex to correspond with certain California residents.” Id. The Defendant's website was viewable in the forum state, but it did not direct activity toward the state's residents. Id. B. Bowe did not Serve Nord-Lock Switzerland pursuant to FRCP 4(a)(1) and 4(f)(1) According to the Federal Circuit Court of Appeals, “Before a court may exercise personal jurisdiction over a defendant, the defendant must be amendable to service of process under some federal or state statute.” Viam Corp., 84 F.3d at 430 (citing Akro, 45 F.3d at 1543--44). To properly serve a foreign corporation, a plaintiff must follow FRCP 4(f)(1). 5 Bowe is required to follow the rules for service of process set forth by the Hague Convention as Switzerland is a signatory to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents. Under Article 3 of the Hague Convention, “The authority or judicial officer competent under the law of the State in which the documents originate,” must forward to the foreign defendant's state's central authority, “a request conforming to the model annexed to the present Convention ...” Service Abroad of Judicial and Extrajudicial Documents, art. 3, Nov. 15, 1965, 20 U.S.T. 361, 1969 WL 97765. At issue is whether Bowe served process on Nord-Lock Switzerland in line with the requirements of FRCP 4 and the Hague Convention. 5 (f) Serving an Individual in a Foreign Country. Unless federal law provides otherwise, an individual-other than a minor, an incompetent person, or a person whose waiver has been filed-may be served at a place not within any judicial district of the United States: (1) by any internationally agreed means of service that is reasonably calculated to give notice, such as those Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 31 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents. FED. R. CIV. P. 4(f)(1). 1. The Parties' Arguments Regarding Service of Process *6 Bowe argues it served Stephan Gribok of the law firm of Duane Morris LLP, who was Nord-Lock Switzerland's agent for the purpose of its patent assignment. Bowe also asserts the summons for Nord-Lock Switzerland met FRCP 4(a) (1)'s requirements, and that Defendant is being served with process in line with FRCP 4(f) and the Hague Convention. Bowe alleges it had “good cause” for the delay in serving Nord-Lock Switzerland as defense counsel led Bowe's counsel to believe his clients would waive service of process. Bowe contends that to allow Nord-Lock Switzerland to evade litigation “because it may not yet have been served would allow it to benefit from a ‘bait-and-switch’ maneuver relating to waiver of service.” Responding to Bowe's first amended complaint, Defendants argue Nord-Lock Switzerland is a Swiss corporation, with its principal place of business in St. Gallenkappel Switzerland, and Nord-Lock Switzerland does “not have an office in the United States of America, nor does it have a registered agent for service of process in the United States of America.” It may be true that a Duane Morris attorney was an agent for Nord-Lock Switzerland as to a patent assignment, but that same attorney cannot accept process for this lawsuit. To be clear, Bowe never properly served process on Nord-Lock Switzerland in the United States or Switzerland: “Upon information and belief, Bowe has not even attempted to serve Nord-Lock Switzerland pursuant to [Article 3 of the Hague Convention], nor has Bowe provided any evidence to this Court of its intention to comply with the Hague Convention.” 2. Analysis of the Parties' Arguments Regarding Service of Process Bowe's arguments do not withstand scrutiny. Magistrate Judge Walters set a deadline to effect service of process on all Defendants for August 16, 2013. Bowe filed its original complaint on January 3, 2013, eight months before August 16, 2013. Based on the record, Bowe's counsel did not take necessary steps to serve process on Nord-Lock Switzerland through the Hague Convention until after July 31, 2013 when Bowe's counsel indicated he would “directly serve all of the defendants.” In the end, Bowe's claims that defense counsel somehow misled Bowe into believing his clients would waive the requirements of service of process lack merit. As of September 16, 2013, Bowe concedes that Nord-Lock Switzerland was the “lone party not served.” Thus, Bowe simply failed to meet its deadline for service of process. In Defendants' reply brief, Defendants disclose the fact that “[d]efendants did initially agree to waive service on behalf of all defendants but, because there was an international party, anticipated that it would take additional time to obtain the waiver signature.” Defense counsel also portrayed to Bowe's counsel in an e- mail on July 31, 2013 that he “recommended to all defendants that they sign the waiver form,” and he explained, “I expect that my clients will accept the recommendation.” It is noteworthy that defense counsel never definitively waived service of process on his clients' behalf in that writing. Because Nord-Lock Switzerland is not amendable to service of process, the Court cannot exercise personal jurisdiction over that Defendant. See Viam Corp., 84 F.3d at 430 (citing Akro, 45 F.3d at 1543-44). Accordingly, Bowe's claims against Nord- Lock Switzerland are dismissed for insufficient service of process. C. Bowe Fails to State a Claim Upon Which Relief can be Granted Under FRCP 12(b)(6), a defendant may move to dismiss a claim for “failure to state a claim upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). At issue is whether Bowe's complaint states a cognizable legal theory or sufficient facts in light of FRCP 8(a) and 9(b). 1. Choice of Law *7 The application of FRCP 12(b)(6) in a patent case is a “procedural question not pertaining to patent law” and so, is governed by the law of the regional circuits. See Polymer Indus. Prods. Co. v. Bridgestone/Firestone, Inc., 347 F.3d 935, 937 (Fed. Cir. 2003). Here, the regional circuit is the United States Court of Appeals for the Eighth Circuit. However, whether Bowe-the party alleging false marking- satisfied the heightened pleading standard of FRCP 9(b) is governed by the Federal Circuit's law as “it bears on an issue that ‘pertains to or is unique to patent law.’ ” Aevoe Corp., 2013 WL 876036, at *2 (quoting Central Admixture Pharmacy Servs., Inc. v. Advanced Cardiac Solutions, P.C., 482 F.3d 1347, 1356 (Fed. Cir. 2007)). Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 32 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 2. FRCP 8(a) and FRCP 12(b)(6) FRCP 8(a) requires a plaintiff s complaint to present “a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the ... claim is and the ground upon which it rests.” FED. R. CIV. P. 8(a)(2); see also Twombly, 550 U.S. at 555 (interpreting FED. R. CIV. P. 8(a)(2)); Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009). The United States Supreme Court set forth a “two-pronged approach” for deciding a motion under 12(b)(6): (1) factual and legal allegations are divided; the former are accepted as true, but the latter need not be accepted as true; and (2) factual allegations are parsed for facial plausibility as “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S. at 678-79 (citing Twombly, 550 U.S. at 556). The Eighth Circuit Court of Appeals has summarized the governing standard, in light of Twombly and Iqbal: “In order to meet [the plausibility] standard, and survive a motion to dismiss under Rule 12(b)(6), ‘a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Braden, 558 F.3d at 594 (citing Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570)). A plausible claim for relief includes “factual content,” which “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). On the one hand, “[a] pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). On the other hand, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of the facts alleged is improbable, and ‘that a recovery is very remote and unlikely.’ ” Twombly, 550 U.S. at 556. In ruling on a 12(b) (6) motion, the Court must ask: do the facts alleged raise a reasonable expectation discovery will reveal evidence of the necessary elements? Id. “[A] complaint ... must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory.” Two Moms and a Toy, LLC, 898 F.Supp.2d at 1216 (quoting Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2002) (finding insufficient facts to show accused infringer knowingly applied “patent pending” marking, or patentee suffered a competitive injury where patentee did not compete against accused infringer and only provided speculative allegations)). a. Elements of a Claim Under 35 U.S.C. Section 292 To prove a 35 U.S.C. § 292 claim, a plaintiff has the burden of proving: “(1) marking an unpatented article; and (2) intent to deceive the public.” 35 U.S.C. § 292(a); see also Juniper Networks, Inc. v. Shipley, 643 F.3d 1346, 1350 (Fed. Cir. 2011) (quoting Forest Grp. Inc. v. Bon Tool Co., 590 F.3d 1295, 1300 (Fed. Cir. 2009)). Based on the America Invents Act of 2011, the plaintiff must also have “suffered a competitive injury” from the false marking. 35 U.S.C. § 292(b); see also Hall v. Bed Bath & Beyond, Inc., 705 F.3d 1357, 1373 (Fed. Cir. 2013). b. The Parties' Arguments Regarding the Sufficiency of the Complaint *8 Bowe claims that its complaint presents sufficient facts to state a claim upon which relief can be granted under 35 U.S.C. § 292. First, Bowe argues it “has evidence Defendants' MJTs were marked as patented when they were not” as the MJTs have “flat ends.” Second, the Defendants “intent to deceive” was shown when Defendants “continued to mark the unpatented MJTs as patented” even after Bowe notified the Defendants of the falsely marked MJTs. See Pequignot v. Solo Cup Co., 608 F.3d 1356, 1362-63 (Fed. Cir. 2010); see also Clontech Labs, Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005). Third, Bowe suffered a “competitive injury” as Defendants charged inflated rates on products and gained a market advantage, which would not have occurred “if Defendants' [sic] had not falsely marked the MJTs.” [Dkt. No. 32 Page 11.] Bowe's amended complaint provides “much more detail than the complaint in Server Technology,” in which “competitive injury was sufficiently pled.” Defendants disagree. Bowe has “failed to meet the Iqbul [sic] and Twombly standards” as Bowe has not “specified the facts needed to satisfy the statutory requirements” set forth under 35 U.S.C. § 292. [Dkt. No. 20-1 Page 8.] Bowe's complaint is insufficient as it merely reiterates the “barest elements of the false patent marking cause of action.” Bowe fails to indicate the “products” that were marked falsely, and “why the marking was insufficient or incorrect.” “Moreover, and importantly, Bowe does not specify how each of the named Defendants fit into Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 33 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 the alleged false marking scheme, nor does it make any showing of intentionality as required under the false patent marking statute.” In Defendants' reply brief, Defendants argue Bowe fails to explain in any detail its “competitive injury” or “business loss.” Bowe also does not indicate that it was a “competitive rival” of the Defendants, and Bowe fails to cite authority that a non-competitor can allege injury under the statute. Thus, Bowe's amended complaint should be dismissed for failure to state a claim upon which relief can be granted. This Court agrees. 3. Analysis of Defendants' 12(b)(6) Motion At this stage in the proceedings, the Court is required to accept the well-pleaded facts alleged in Bowe's first amended complaint as true, and take them in the light most favorable to Bowe. See Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008) (citing Twombly, 550 U.S. at 556)). The Court finds Bowe's complaint does not state a facially plausible claim for relief as Bowe has not pled factual allegations establishing Defendants (1) intended to deceive the public, (2) were competitors, or (3) caused a tangible competitive harm. a. First Element under Section 292: “Marking an Unpatented Article” Section 292 prohibits marking an “unpatented article.” 35 U.S.C. § 292. An unpatented article “means that the article in question is not covered by at least one claim of each patent with which the article is marked.” Juniper Networks, Inc., 643 F.3d at 1350 (citing Clontech Labs., Inc., 406 F.3d at 1352). The statute was aimed at false marking with expired or inapplicable patents. See Hall, 705 F.3d at 1373. Here, Defendants contend “Bowe does not specify what products were marked.” This contention is not accurate. Bowe has alleged facts that Defendants marked unpatented articles-namely, the MJTs-to satisfy the pleading standard of FRCP 8(a). Also, if the MJTs have “flat ends,” and the '396 patent requires articles to have “ends with a ‘protruding central area’,” as Bowe alleges, then the patent would be inapplicable. Thus, Bowe has successfully alleged facts supporting its claims the Defendants marked unpatented articles. b. Second Element under Section 292: “Intent to Deceive the Public” and FRCP 9(b) The false marking statute is a specific intent statute that requires evidence that the Defendants “act for the purpose of deceiving the public.” See Brinkmeier v. BIC Corp., 733 F.Supp.2d 552, 561 (D. Del. 2010) (citing Clontech Labs. Inc., 406 F.3d at 1352; Symbol Technologies, Inc. v. Proxim Inc., Civ. No. 01-801-SLR, 2002 WL 1459476, at *1 (D. Del. June 25, 2002)). The Federal Circuit Court of Appeals has defined the “intent to deceive” as: *9 [A] state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true ... Intent to deceive, while subjective in nature, is established in law by objective criteria. Clontech Labs., Inc., 406 F.3d at 1352. Since a false marking claim under § 292 requires intent to deceive the public, and sounds in fraud, it “must satisfy the heightened pleading standard of Fed.R.Civ.P. 9(b), which provides that ‘a party must state with particularity the circumstances constituting fraud or mistake.” West v. Quality Gold, Inc., No. 5:11-cv-02531, 2012 WL 2913207, at *2 (N.D. Cal. July 16, 2012) (quoting Juniper Networks, Inc., 643 F.3d at 1350). Therefore, “deceptive intent” pursuant to a claim under § 292 “must be pled with sufficient particularity.” Lutron Electronics, 2012 WL 3192806, at *4. This means Bowe must plead in detail “the specific who, what, when, where, and how of the alleged fraud.” West, 2012 WL 2913207, at *2 (citing Juniper Networks, Inc., 643 F.3d at 1350); see also DiLeo v. Ernst & Young, 901 F.2d 624, 627-28 (7th Cir. 1990). Because the statute requires the Defendants act “ ‘for the purpose of deceiving the public,’ a purpose of deceit, rather than simply knowledge that a statement is false, is required.” 35 U.S.C. § 292(a); see also Pequignot, 608 F.3d at 1363. In this case, Bowe's amended complaint provides a general allegation regarding Defendants' intent to deceive the public: the Defendants “intended to deceive customers by marking products with the '396 patent after being put on actual notice that no claims of the '396 patent covered the falsely marked products sold by Defendants.” As in In re BP Lubricants USA Inc., Bowe's scienter allegations Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 34 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 also include Defendants were “sophisticated compan[ies]” with knowledge of technology and intellectual property issues, and Bowe suggests Defendants knew or should have known the patents were inapplicable. 637 F.3d 1307, 1312 (Fed. Cir. 2011). Bowe fails to specify the “who, what, when, where, and how” of the alleged false marking. See West, 2012 WL 2913207, at *2 (citing Juniper Networks, Inc., 643 F.3d at 1350). First, “who”-among the seven Defendants sued- knew about the falsely marked products? Robert and Allan Steinbock, for example, were not put on notice of the false marking as they stopped working at Superbolt almost a year before Bowe allegedly informed the Defendants of the false marking on July 23, 2013. Second, as Bowe uses the plural form of “product,” “what” products, aside from the MJTs, are mismarked? A photo labeled “EXHIBIT A: SUPERBOLT® PRODUCT” is attached to Bowe's amended complaint, but the product is not identified. [Dkt. No. 11-1.] Third, “when” did the Defendants begin falsely marking and selling the products? Bowe only alleges it occurred before and after it filed its complaint on January 3, 2013, and the attached photo of Superbolt's product does not include a date. Fourth, “where” were the products manufactured and where is the patent on the products themselves? Finally, “how” did the Defendants falsely mark products with inapplicable patent numbers? Not until its resistance brief does Bowe assert the '396 patent is inapplicable on Defendants' MJTs as they have “flat ends,” and Bowe does not explain how the '396 patent is inapplicable as to other products. For the foregoing reasons, Bowe did not set forth particularized factual bases to show Defendants knowingly acted with “a purpose of deceit.” Two Moms and a Toy, LLC, 898 F.Supp.2d at 1217 (citing In re BP Lubricants USA Inc., 637 F.3d at 1313). It may be that discovery “would answer most of the questions relating to [the Defendants'] state of mind,” but “Rule 9(b) places the burden of initial allegation on Plaintiff, not on Defendant or the Court.” San Francisco Tech v. Bayer Corp., No. 11 Civ. 402, 2011 WL 2207534, at *3 (S.D. N.Y. June 6, 2011). Thus, Bowe has not satisfied the heightened pleading requirement of FRCP 9(b). c. Third Element under Section 292: “Suffered a Competitive Injury” *10 The United States Supreme Court has defined “competitive injury” as meaning predatory pricing, price discrimination, injury to competition, or loss of business opportunities. See Volvo Trucks N. Am., Inc. v. Reeder- Simco GM C, Inc., 546 U.S. 164, 176 (2006). The parties agree a competitive injury is defined as “[a] wrongful economic loss at the hands of a commercial rival.” U S. ex. rel. FLFMC, LLC v. TFH Publ'n, Inc., 855 F.Supp.2d 300, 308 (D. N.J. 2012) (quoting BLACK'S LAW DICTIONARY 302 (8th ed. 2004)). After reviewing relevant case law, the United States District Court for Oregon explained, “[C]ompetitive injury is adequately pleaded where ‘the parties are in competition in the relevant market and the alleged false marking harms the plaintiff s ability to compete.’ ” RB Rubber Products, Inc. v. ECORE Intern., Inc., Civ. No. 3:11-cv-319-AC, 2013 WL 3432081, at *2 (D. Or. July 8, 2013). Bowe must allege sufficient facts that, when taken as true, plausibly establish that Bowe's ability to compete in a market was impaired, and it suffered a “tangible economic loss.” Aevoe Corp., 2013 WL 876036, at *4. i. Analysis: Bowe Lacks a Competitive Relationship with the Defendants Bowe failed to explain how it is a “commercial rival” of, or has a competitive relationship with, any of the Defendants. Nor has Bowe proven that as a non- competitor, it may sue under the false-marking statute. In fact, case law points in the opposite direction. See, e.g., Two Moms and a Toy, LLC, 898 F.Supp.2d at 1218 (noting “[s]everal district courts interpreting the newly enacted America Invents Act have required a plaintiff to be a competitor of the defendant in order to show competitive injury”). As in Aevoe Corp., Bowe does not allege it produced, or even considered producing, a competing product. See Aevoe Corp., 2013 WL 876036, at *4 (dismissed false marking counterclaim as counterclaimant failed to adequately plead intent to deceive and competitive injury); see also Fisher-Price, Inc. v. Kids II, Inc., No. 10-CV-00988A(F), 2011 WL 6409665, at *10 (W.D. N.Y. Dec. 21, 2011). ii. Analysis: Bowe Failed to Allege Sufficient Facts of a Competitive Injury Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 35 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 Like the complainant in Fisher-Price, Inc. v. Kids II, Inc., Bowe has not alleged sufficient facts to make it plausible Defendants caused a competitive injury, specific business loss, or inability to compete in a market. 2011 WL 6409665, at *10. If Bowe was injured, then Bowe “would or should be in possession of such information without resort to discovery from Plaintiffs.” Id. Instead, Bowe focuses on the unjust inflation in Defendants' product prices and protection of markets for fastener products as its “competitive injuries,” but Bowe does not compare the prices of Defendants' products and its own or other competitors' products. Other than the bare- bone allegations that Bowe paid higher prices, or the Defendants safeguarded themselves from the markets for fastener products, Bowe nowhere alleges facts supporting its conclusory statements. Unlike the plaintiff in RB Rubber Products, Inc., Bowe's claims as to its alleged injury are insufficient. See RB Rubber Products, Inc., 2013 WL 3432081, at *4. Bowe does not allege it lost (or continues to lose) sales for one of Bowe's products because of a Defendant, or Bowe was hindered in competing with Defendants in a relevant market, or Defendants' sales increased as Bowe's sales decreased, the result of Defendants' actions. See id. iii. Server Technology, Inc. is Factually Distinguishable This Court is unconvinced that Bowe's first amended complaint provides, as Bowe alleges, “much more detail than did the complaint in Server Technology, where competitive injury was sufficiently pled.” In Server Technology, Inc., the United States District Court for the District of Nevada held that the plaintiff “sufficiently alleged a competitive injury from [the Defendant's] alleged false marking to survive a motion to dismiss.” 2012 WL 3061023, at *2. In reaching that holding, the Court reasoned that the plaintiff specifically alleged that it suffered competitive injury that was causally connected to the defendant's false marking because: *11 (1) [the plaintiff] and [the defendant] are direct competitors in the intelligent power distribution industry; (2) the falsely marked products compete directly with [the plaintiff s] similar products; (3) [the defendant's] false marking upset the competitive relationship between the parties as customers were presented with an allegedly patented product design; and (4) [the defendant's] false marking created an unfounded image of [the defendant] as a product innovator with superior products to its competitors. Id. The plaintiff also alleged that the defendant's false marking served as an impetus for “customers to purchase only those products which have patent markings.” Id. All of which led the United States District Court of Nevada to find the plaintiff sufficiently alleged a competitive injury caused by the defendant's false marking, and it denied the defendant's motion to dismiss. The facts the district court relied upon in Saver Technology, Inc. are distinguishable. First, Bowe has not proven it is a direct competitor of the Defendants. Bowe merely suggests it is a competitor in the market for fastener products as it suffered an injury by the Defendants' “protection of markets for fastener products.” Second, Bowe does not explain how the falsely marked products directly compete with Bowe's similar products. Third, if a competitive relationship exists between Bowe and the Defendants, then presenting customers with a falsely marked product would upset that relationship. See id. However, insufficient facts were alleged to infer a competitive relationship exists. Finally, Bowe recites language from Server Technology, Inc., without alleging facts, that Defendants' false marking “created an unfounded image” that Defendants are “product innovator[s] with superior products to its competitors.” [Dkt. No. 32 Page 10.] iv. McCabe and Introsan Dental Products, Inc. are Factually Similar Two cases persuade this Court to find Bowe has not sufficiently alleged a competitive injury. First, in McCabe, the plaintiff did not directly compete with the defendant guitar manufacturer; he just owned pertinent patents. See McCabe v. Floyd Rose Guitars, No. 10CV581, 2012 WL 1409627, at *7 (S.D. Cal. Apr. 23, 2012). The United States District Court for the Southern District of California reasoned the “bare-bone allegations that [the plaintiff] was unable to procure licenses ‘at least in part’ Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 36 of 134 Bowe Machine Company v. Superbolt, Inc., Slip Copy (2013) 2013 WL 12081103 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 due to [the defendant's] false marking” was insufficient. Id. “[W]hat McCabe does not allege is telling: he does not allege that but for entering into those fraudulent agreements, those licensees would have entered into license agreements with McCabe.” Id. The court found no “competitive injury” was alleged. Second, in Introsan Dental Products, Inc., the plaintiff alleged it “was and is a would-be competitor” of the defendant. Introsan Dental Products, Inc. v. Dentsply Tulsa Dental, LLC, No. MJG-09-3111, 2012 WL 3011830, at *l, *4 (D. Md. July 20, 2012). Yet, the United States District Court of Maryland held the plaintiff did not “plead facts that rendered it plausible that [the defendant] could be considered a competitor for any pertinent purpose.” Id. Importantly, the court reasoned that even when a plaintiff and defendant are competitors in a § 292 lawsuit, “that fact alone does not create a plausible claim of competitive injury.” Id. at *5 (citing Fisher- Price, Inc., 2011 WL 6409665, at *10). The court reasoned that the allegation of competitive injury to the plaintiff was “totally conclusory and manifestly inadequate,” even where the plaintiff alleged that the injury occurred because plaintiff “owns patents, engages in research and development and tests prototypes in the field in which [the Defendant] manufacturers and markets dental products.” Id. at *4. *12 Here, like the plaintiff in McCabe, what Bowe does not allege is telling: Bowe does not allege which Defendant-among the seven Defendants sued-is a competitor. Nor does Bowe sufficiently explain how it suffered a specific competitive injury, such as losing a licensing opportunity, customers, or funds. Bowe presents only bare assertions that amount to nothing more than a formulaic recitation of the elements that Bowe was a competitor and suffered a competitive injury. Bowe has not argued it owns patents in the market for fastener products, or engages in “research and development” or “tests prototypes,” or sells competing products in the same market as the Defendants. Id. Thus, Bowe's papers do not sufficiently allege a cause of action. See Davis v. TPI Composites, Inc., No. 4: 11-cv-00233, 2011 WL 3706560, at *3 (S.D. Iowa Aug. 3, 2011) (“At this stage in the pleadings, the Court need only determine if the facts sufficiently allege a cause of action ...”). Accordingly, Defendants' motion to dismiss is GRANTED. IV. DISPOSITION For the reasons stated above, the Defendants' motion to dismiss for lack of personal jurisdiction over the Steinbocks and Steinbock Machinery; inadequate service of process over Nord-Lock Switzerland; and failure to state a claim as to the other Defendants is GRANTED. IT IS ORDERED that the dismissal of Bowe's claims is without prejudice for Bowe to amend its complaint on or before January 13, 2014 in order to cure the deficiencies identified above. See Aevoe Corp., 2013 WL 876036, at *2 (finding defendants' false marking counterclaim must be dismissed, but granted defendants leave to amend its counterclaim). DATED this 20th day of December, 2013. All Citations Slip Copy, 2013 WL 12081103 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 37 of 134 TAB D Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 38 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2014 WL 1612632 Only the Westlaw citation is currently available. United States District Court, M.D. Pennsylvania. CUNNINGHAM LINDSEY U.S., INC. and CL Acquisitions Holdings Limited, Plaintiffs v. Pat BONNANI, Dale Fohl, and Vericlaim, Inc., Defendants. Civil No. 1:13-CV-2528. | Signed April 22, 2014. Attorneys and Law Firms Aryeh Zuber, Nicholas J. Pappas, Weil Gotshal & Manges LLP, New York, NY, Jack M. Stover, Kyle J. Meyer, Jan L. Budman, II, Jayson R. Wolfgang, Buchanan Ingersoll & Rooney PC, Harrisburg, PA, for Plaintiffs. Aruna B. Subramanian, James V. Garvey, Travis J. Quick, Vedder Price P.C., Chicago, IL, Alan R. Boynton, Jr., McNees, Wallace & Nurick, Harrisburg, PA, for Defendants. MEMORANDUM CHRISTOPHER C. CONNER, Chief Judge. *1 Presently pending before the court is the motion (Doc. 41) of Pat Bonanni (“Bonanni”), Dale Fohl (“Fohl”), and Vericlaim, Inc. (“Vericlaim”), collectively “defendants,” asking the court to dismiss counts II, III, V, VI, VII, VIII, and X of the complaint (Doc. 1) of Cunningham Lindsey U.S., Inc., and CL Acquisition Holdings Limited (collectively “Cunningham Lindsey”). For the reasons that follow, the court will grant in part and deny in part the defendants' motion. I. Procedural History Cunningham Lindsey commenced this matter with the filing of a ten-count complaint (Doc. 1) on October 8, 2013. Cunningham Lindsey alleges that two of its former employees, Pat Bonanni (“Bonanni”) and Dale Fohl (“Fohl”), together with officers of Vericlaim, Inc., (“Vericlaim”), orchestrated and implemented a scheme to eliminate Cunningham Lindsey's regional presence by instigating a mass exodus of all Cunningham Lindsey employees at its Camp Hill, Pennsylvania, office during the late summer of 2013. (See Doc. 1 at ¶ 2). Specifically, Cunningham Lindsey asserts ten (10) claims: breach of contract against Bonanni and Fohl (Count I); breach of fiduciary duty against Bonanni and Fohl (Count II); aiding and abetting breach of fiduciary duty against all defendants (Count III); misappropriation and misuse of trade secrets and confidential information in violation of Pennsylvania's Uniform Trade Secrets Act, 12 PA. CONS.STAT. § 5301 et seq., against all defendants (Count IV); tortious interference with existing and prospective contractual and business relationships against all defendants (Count V); civil conspiracy against all defendants (Count VI); unfair competition against all defendants (Count VII); unjust enrichment against all defendants (Count VIII); violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, against Bonanni and Fohl (Count IX); and breach of contract for failure to pay for preference shares of CL Holdings against Fohl (Count X). Contemporaneously with the complaint, Cunningham Lindsey filed a motion for preliminary injunctive relief (Doc. 5), asking the court to enjoin defendants from virtually all direct and indirect competition with Cunningham Lindsey pending final resolution of this litigation. The parties fully briefed the motion (Docs.9, 39, 44), and the court held a preliminary injunction hearing on October 31, 2013, taking evidence in the form of documentary exhibits and witness testimony. Thereafter, the parties submitted proposed findings of fact and conclusions of law (Docs.54-55) and jointly submitted relevant exhibits and deposition transcripts. (Doc. 56). On November 19, 2013, the court issued a memorandum (Doc. 62) and order (Doc. 63) denying Cunningham Lindsey's request for a preliminary injunction, concluding that Cunningham Lindsey had failed to demonstrate continuing, irreparable harm, and that the appropriate resolution of its claims must await trial on the merits. *2 In the instant motion (Doc. 41), defendants seek dismissal of Counts II, III, V, VI, VII, VIII, and X of Cunningham Lindsey's complaint. The motion has been fully briefed (Docs.42, 43, 53, 64) and is ripe for disposition. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 39 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 II. Standard of Review Federal notice and pleading rules require the complaint to provide “the defendant notice of what the ... claim is and the grounds upon which it rests.” Phillips, 515 F.3d at 232 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). To test the sufficiency of the complaint in the face of a Rule 12(b) (6) motion, the court must conduct a three-step inquiry. See Santiago v. Warminster Twp., 629 F.3d 121, 130-31 (3d Cir.2010). In the first step, “the court must ‘tak[e] note of the elements a plaintiff must plead to state a claim.’ ” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 675, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). Next, the factual and legal elements of a claim should be separated; well-pleaded facts must be accepted as true, while legal conclusions may be disregarded. Id.; see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir.2009). Once the well-pleaded factual allegations have been isolated, the court must determine whether they are sufficient to show a “plausible claim for relief.” Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556); Twombly, 550 U.S. at 555 (requiring plaintiffs to allege facts sufficient to “raise a right to relief above the speculative level”). A claim “has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. When the complaint fails to present a prima facie case of liability, however, courts should generally grant leave to amend before dismissing a complaint. See Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir.2002); Shane v. Fauver, 213 F.3d 113, 116-17 (3d Cir.2000). III. Allegations of the Complaint Cunningham Lindsey and Vericlaim are both in the business of claims adjustment and loss management for insurers and large self-insured clients. (Doc. 1 ¶ 14, 25). The two companies compete directly with one another. (Id.) Bonanni and Fohl both joined Cunningham Lindsey in January of 2011 after signing written offers of employment which included, inter alia, confidentiality 1 and employee non-solicitation 2 clauses. (Id. ¶¶ 36-38, 45-47). In their roles as executive general adjusters at Cunningham Lindsey's Camp Hill office, Bonanni and Fohl each had access to confidential documents. (Id. ¶¶ 41-42, 49). Additionally, in June of 2013, Fohl executed a subscription agreement wherein he agreed to purchase certain Cunningham Lindsey shares. (Id. ¶¶ 50-55; Ex. C). The subscription agreement contained broad non-competition, non-solicitation, non-hire, and confidentiality provisions. (Id.) The provisions prohibit Fohl from soliciting Cunningham Lindsey customers or employees for a period of six months after departing Cunningham Lindsey for any reason. (Id.) 1 Each agreement contained the following confidentiality provision: At all times, both during and after termination of employment, I shall keep and retain in confidence and shall not disclose, except as required in the course of my employment with [Cunningham Lindsey], to any person, firm or corporation, or use for my own purposes, any Confidential Information. For purposes of this paragraph, such information shall include, but is not limited to, material, data, and information of [Cunningham Lindsey] and/or its customers or clients that is confidential, proprietary and/or a trade secret (“Confidential Information”). (Doc. 1, Ex. A at 2-3; Ex. B at 2-3). 2 The agreements contained the following non- solicitation clause: While employed by Cunningham Lindsey, and for one year after termination of my employment for whatever reason, I will not directly or indirectly solicit or recruit, nor take any action to assist any other person to solicit or recruit for employment, any employee of Cunningham Lindsey. Such assistance includes, without limitation, identifying employees of Cunningham Lindsey who have special knowledge of the trade secrets and/or business of Cunningham Lindsey. Because damages for violation of this provision would be difficult to measure, the parties mutually agree that if I violate this provision, I will be liable for liquidated damages in an amount equal to the annual salary of any employee as to whom I am proven to have violated this paragraph. (Doc. 1, Ex. B at 2; Ex. C at 2). *3 On September 5, 2013, Bonanni, Fohl, and all other Cunningham Lindsey employees working at the Camp Hill office resigned simultaneously, without notice, and began working for Vericlaim. (Id. ¶¶ 2, 74-75, 77). According to Cunningham Lindsey's complaint, in the period leading up to this mass resignation, defendants prepared interim invoices for customers, Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 40 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 accessed Cunningham Lindsey documents on company computers, downloaded documents to personal devices, scanned an unusually large number of documents, and deleted information from equipment. (Id. ¶¶ 62, 63-66, 71-72). Cunningham Lindsey also alleges that Vericlaim and the individual defendants communicated with Cunningham Lindsey clients before the mass resignation and caused clients to request transfer of their files to Vericlaim after the mass resignation. (Id. ¶¶ 83- 86). Cunningham Lindsey alleges that this scheme was orchestrated by Vericlaim, together with Bonanni and Fohl, with the intent of crippling and dismantling its Camp Hill office. (Id . ¶ 5). IV. Discussion Defendants' motion to dismiss tests the sufficiency of several counts of Cunningham Lindsey's complaint. Defendants assert that Counts II, III, VI, VII, and VIII of Cunningham Lindsey's complaint are preempted by the Pennsylvania Uniform Trade Secrets Act (“PUTSA”), 12 PA. CONS.STAT. § 5301 et seq., that Counts II, V, VI, and VII are barred by the gist of the action doctrine, and that Count X fails to state a claim for breach of contract because the subscription agreement is not supported by consideration. (Doc. 41). The court will address each argument seriatim. A. PUTSA Preemption The parties do not dispute that PUTSA expressly “displaces conflicting tort, restitutionary and other law of this Commonwealth providing civil remedies for misappropriation of a trade secret.” 12 PA. CONS.STAT. § 5308(a). The Act excepts only three categories of claims from the scope of its preemption power: contractual and criminal remedies, whether or not based upon misappropriation of a trade secret, and other civil remedies that are not based upon misappropriation of a trade secret. See id. § 5308(b). The parties do not dispute that PUTSA preempts certain civil claims having their basis in trade secret misappropriation. Instead, the parties' arguments concern whether Cunningham Lindsey's claims in Counts II, III, VI, VII, and VIII involve allegations beyond misappropriation of a trade secret sufficient to avoid PUTSA preemption. Courts within the Third Circuit have construed PUTSA as preempting common law tort claims for breach of fiduciary duty and confidentiality, civil conspiracy, unfair competition, and unjust enrichment when the Court determines that the allegedly misappropriated information is indeed a trade secret. See Kimberton Healthcare Consulting v. Primary PhysicianCare, Inc., 2011 U.S. Dist. LEXIS 139980, *10-11,2011 WL 6046923 (E.D.Pa. Dec. 6, 2011) (unfair competition, conversion, misappropriation); Hecht v. Babyage.com, 2010 U.S. Dist. LEXIS 106895, *10-14,2010 WL 3940882 (M.D.Pa. Oct. 6, 2010) (breach of duty of loyalty, breach of fiduciary duty, unfair competition); Ideal Aerosmith, Inc. v. Acutronic USA, Inc., 2008 U.S. Dist. LEXIS 33463, S *6 (W. D.Pa. Apr. 23, 2008) (civil conspiracy, unfair competition). This rule of preemption assumes two overlapping contingencies: first, that the plaintiff's tort claims do not involve anything other than trade secrets and, second, that the allegedly misappropriated information is properly classified as a trade secret. See Youtie v. Macy's Retail Holding, Inc., 653 F.Supp.2d 612, 620 (3d Cir.2009) (preemption exists only to the extent that PUTSA trade secret claim and common law tort claim are premised on exclusively the same conduct). The court cannot conclude that either contingency is satisfied at this preliminary stage. *4 First, preemption exists only to the extent that plaintiff's common law tort claim is “based on the same conduct that is said to constitute a misappropriation of trade secrets.” Youtie, 653 F.Supp.2d at 619 (collecting cases from district courts throughout the United States holding same); Hecht, 2010 U.S. Dist. LEXIS 106895 at *10-11,2010 WL 3940882 (same) (citing Hecny Transp., Inc. v. Chu, 430 F.3d 402, 405 (7th Cir.2005) (“An assertion of trade secret in a customer list does not wipe out claims of theft, fraud, and breach of the duty of loyalty that would be sound even if the customer list were a public record.”)). Cunningham Lindsey's claims for breach of fiduciary duty, civil conspiracy, unfair competition, and unjust enrichment each contemplate acts beyond misappropriation of trade secrets. In support of its fiduciary duty claims, for example, Cunningham Lindsey contends that both Fohl and Bonanni failed to act consistently with the interests of their employer, orchestrated and implemented a plan by which all Cunningham Lindsey employees at the Camp Hill office would resign simultaneously with the intent of eviscerating the Cunningham Lindsey's regional presence, and directed others in copying and destroying client files and paperwork. (Doc. 1 ¶¶ 109-112). Further, Cunningham Lindsey contends that Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 41 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 Bonanni and Fohl worked with Vericlaim to cajole known Cunningham Lindsey clients into terminating their business relationships with Cunningham Lindsey and transitioning their files to Vericlaim. (Id. ¶ 116). All of these allegations form the basis of Cunningham Lindsey's claims for civil conspiracy, unfair competition, and unjust enrichment. (Id. ¶ 141, 144, 147). Each of the challenged counts thus contemplates tortious conduct which, assumed true, falls outside of the scope of PUTSA's preemption clause. See Hecht, 2010 U.S. Dist. LEXIS 106895 at *12-13,2010 WL 3940882 (rejecting similar argument when plaintiff's allegations “would constitute the named torts even if the conduct involved information that did not constitute a trade secret within the meaning of PUTSA”). Accordingly, the court cannot conclude that these counts are preempted by PUTSA at this stage. Moreover, the record as presently developed does not establish whether the information and documents purportedly taken by Bonanni and Fohl constitute trade secrets at all. Cunningham Lindsey contends that its customer lists are trade secrets. (Doc. 1 ¶ 125 (asserting that books, files, records, and client lists constitute confidential trade secret information). And in their Rule 12(b)(6) brief, defendants apparently assume for purposes of their argument that this is true. (Doc. 42 at 7-10). The court is disinclined to make such a determination without the benefit of a fully developed record. See Alpha Pro Tech, Inc. v. VWR Int'l LLC, 2013 U.S. Dist. LEXIS 167762, *54 (E.D.Pa. Nov. 25, 2013) (PUTSA “does not preempt common law tort claims when it has yet to be determined whether the information at issue constitutes a trade secret.”) (quoting Cenveo Corp. v. Slater, 2007 U.S. Dist. LEXIS 9966, *3 (E.D.Pa. Feb. 12, 2007)); Hecht, 2010 U.S. Dist. LEXIS 106895 at *13 (“To prevail under the terms of the PUTSA, the ... plaintiff would have to demonstrate the existence of a trade secret, and that determination requires discovery.”). Neither preemption contingency is satisfied at this stage. Consequently, the court rejects defendants' PUTSA argument. *5 Many of our sister courts have also determined that resolution of a PUTSA preemption challenge at the Rule 12(b)(6) stage is premature. See Kimberton, 2011 U.S. Dist. LEXIS 139980 at *14 (“The vast majority of courts to have addressed whether PUTSA preempts common law tort claims on a motion to dismiss have determined that such a determination is inappropriate in such circumstances.”) (citing, inter alia, Council for Educ. Travel v. Czopek, 2011 U.S. Dist. LEXIS 9923, *7 (M.D.Pa. Sept. 2, 2011); EXL Labs. v. Egolf, 2011 U.S. Dist. LEXIS 25295, *7-8 (E.D.Pa. Mar. 11, 2011); Hecht, 2010 U.S. Dist. LEXIS 106895 at *5; Partners Coffee Co. v. Oceana Servs. & Prods. Co., 2009 U.S. Dist. LEXIS 113209, *11 (W.D.Pa. Dec. 4, 2009); Ideal Aerosmith, 2008 U.S. Dist. LEXIS 33463, *16-18 (W.D.Pa. Apr. 23, 2008); Weiss v. Fiber Optic Designs, Inc., 2007 U.S. Dist. 83585, *1 (E.D.Pa. Nov. 9, 2007)). The court concurs with the ratio decidendi of these cases. 3 3 As the court observed in Kimberton, to dismiss common law tort claims on preemption grounds at the motion to dismiss stage only to later determine that the information was not in fact a trade secret would deprive plaintiffs of a deserved remedy. Id. at *15 (preemption rulings under Rule 12(b)(6) “risk[ ] leaving the claimant without a remedy for information he proves has been stolen”) (quoting EXL Labs., 2011 U.S. Dist. LEXIS 25295 at *8; Cenveo Corp., 2007 U.S. Dist. LEXIS 9966 at *4)); see also EXL Labs., 2011 U.S. Dist. LEXIS 25295 at *8; (“If we dismiss the plaintiff's conversion claim, and later determine that plaintiff's confidential information does not constitute trade secrets, we risk leaving plaintiff without a remedy.”). For all of these reasons, defendants' preemption argument must await summary judgment. B. Gist of the Action Defendants next contend that the “gist of the action” doctrine bars Cunningham Lindsey's claims in Counts II, III, V, VI, and VII for breach of (and aiding and abetting breach of) fiduciary duty, tortious interference with existing and prospective contractual and business relationships, civil conspiracy, and unfair competition, respectively. For breach of a contract to constitute an actionable common law tort, the allegedly tortious conduct “must be the gist of the action, the contract being collateral.” eToll, Inc. v. Elias/Savion Adver., Inc., 811 A.2d 10, 14 (Pa.Super.Ct.2002). The gist of the action doctrine bars a tort claim when (1) the claim arises from a contract between the parties, (2) the duties breached were created by the contract, (3) liability derives from the contract, or (4) the success of the tort claim is wholly dependent upon the contract's terms. 4 Id. at 19. When applying the gist of the action doctrine, the Pennsylvania Superior Court has explained that “a claim should be Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 42 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 limited to a contract claim when ‘the parties' obligations are defined by the terms of the contracts, and not by the larger social policies embodied by the law of torts.’ ” Id. at 14 (quoting Bohler-Uddeholm Am., Inc. v. Ellwood Group, Inc., 247 F.3d 79, 104 (3d Cir.2001)). In other words, the court must inquire as to the source of the duties allegedly breached: “if the duties in question are intertwined with contractual obligations, the claim sounds in contract, but if the duties are collateral to the contract, the claim sounds in tort.” Knit With v. Knitting Fever, Inc., 2009 U.S. Dist. LEXIS 98217, *13-14 (E.D.Pa. Oct. 20, 2009). Defendants argue that Cunningham Lindsey's breach of contract claim subsumes the majority of its common law tort claims. 4 The Pennsylvania Supreme Court has not expressly adopted the gist of the action doctrine, but the Third Circuit Court of Appeals and Pennsylvania Superior Court have predicted that it will do so. See Williams v. Hilton Group, PLC, 93 Fed. App'x 384, 385-86 (3d Cir.2004); eToll, 811 A.2d at 14. Cunningham Lindsey concedes that misappropriation of confidential information and solicitation of employees and customers are contemplated by Bonanni and Fohl's employment agreements and Fohl's subscription agreement, implicitly acknowledging that tort claims based on those actions would be precluded by the gist of the action doctrine. (Doc. 43 at 17 (observing that “misappropriation of confidential information and solicitation of employees” and “other limitations on Fohl” are “covered by the letter agreements” and “covered by the Subscription Agreement”)). Cunningham Lindsey argues, however, that its claims are much broader, emphasizing that Fohl and Bonanni engaged in (and encouraged others to engage in) improper interim invoicing prior to their departure “as part of an effort to prepare the clients to transition their ongoing work to Vericlaim,” (Doc. 1 ¶ 62), deleted all contacts and calendar entries before returning company-issued phones to Cunningham Lindsey (id. ¶¶ 72-73), left the Camp Hill office in a state of disarray to hinder its ability to transition clients to new Cunningham Lindsey adjusters, (id. ¶¶ 77-82), and attempted to destroy entire lines of business for Cunningham Lindsey. (Id. ¶¶ 89, 92-94). Cunningham Lindsey asserts that these alleged wrongdoings constitute “a much broader set of wrongful acts” than breach of a contractual promise and that, in any event, it is premature to apply the gist of the action doctrine at this stage of the litigation. The court will address each argument seriatim. *6 With respect to Cunningham Lindsey's claims for breach of fiduciary duty and interference with a contractual relationship, the court is compelled to agree with defendants. To this end, Brown & Brown, Inc. v. Cola, 745 F.Supp.2d 588 (E.D.Pa.2010) is instructive. In Brown & Brown, the defendants, Robert Cola (“Cola”) and Ryan Tola (“Tola”), were insurance brokers employed by Doyle Consulting. Id. at 598-99. Brown & Brown acquired Doyle Consulting and hired its owner, Francis Doyle (“Doyle”), as an executive officer. Id. at 597-98. Brown & Brown also hired Cola and Tola, and each executed an employment agreement containing employee and customer non-solicitation provisions and broad confidentiality clauses. Id. at 598-99. According to Brown & Brown, Doyle then developed a plan to take back his business and former employees, and enlisted both Cola and Tola to assist him. Id. at 600. The complaint averred that while Cola and Tola were working for Brown & Brown, they “engaged in building a competitive business by meeting with Doyle, setting up an office, soliciting Brown & Brown's customers, and using Brown & Brown's proprietary information,” and that Cola and Tola went so far as to make “false, detrimental, and disparaging statements about” Brown & Brown. Id. at 601. Brown & Brown responded with a lawsuit against Cola, Tola, and Doyle, asserting, inter alia, claims for breach of contract, breach of fiduciary duty, and tortious interference with contractual relationships. With respect to the fiduciary duty claims, the court observed that such claims are barred by the gist of the action doctrine when the fiduciary duty at issue does not “transcend or exist outside [of] obligations under the employment agreements.” Id. at 621 (citing Ginley v. E.B. Mahoney Builders, Inc., 2005 U.S. Dist. LEXIS 118, *3 (E.D.Pa. Jan. 5, 2005)). The court noted an exception to the rule, opining that when the “obligations arising under a fiduciary duty are imposed ‘as a matter of social policy’ rather than ‘by mutual consensus' ” of the parties, claims sounding in tort can coexist with contract claims, with neither precluding the other. Id. (citing Bohler-Uddeholm, 247 F.3d at 104). The court held, however, that when fiduciary obligations derive from the parties' employment agreement, the gist of the action doctrine compels their dismissal. See id. at 620-21. Concluding that the gravamen of Brown & Brown's fiduciary duty claims was the breach of confidentiality and non-solicitation provisions, the court held that the gist of the action doctrine required Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 43 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 dismissal of Brown & Brown's fiduciary duty and duty of loyalty claims. See id. Further, the court concluded that the gist of the action doctrine bars Brown & Brown's tortious interference claims. The court observed that the doctrine bars such a claim when “it is not independent of a contract claim that is pled along with it.” Id. at 621 (quoting Alpart v. Gen. Land Partners, Inc., 574 F.Supp.2d 491, 499 (E.D.Pa.2008)). The court identified two types of relationships with which Cola and Tola purportedly interfered: those between Brown & Brown and its customers, and those between Brown & Brown and its employees. Id. at 621-22. Observing that any allegation that Cola or Tola solicited customers or employees was expressly governed by their employment agreements' non- solicitation clauses, the court concluded that each claim must be dismissed pursuant to the gist of the action doctrine. Id. at 622. *7 Cunningham Lindsey has failed to distinguish Brown & Brown from the instant matter. The court finds the decision to be persuasive authority and properly applied to the matter sub judice. Here, the gravamen of the complaint is that Bonanni and Fohl orchestrated the mass resignation of Cunningham Lindsey's Camp Hill employees, and encouraged all of its Camp Hill customers to follow them to Vericlaim. Indeed, in the opening paragraphs of its complaint, Cunningham Lindsey summarized the nature of its claims by alleging that defendants: (1) implemented a scheme by which all employees would resign at the same time to begin working for a competitor; (2) coordinated the mass resignation to exact maximum harm on client relationships and transition clients to Vericlaim; (3) accessed and destroyed confidential information; and (4) conspired with and aided and abetted each other in accomplishing the same. (Doc. 1 ¶¶ 2-4). If true, these claims are governed entirely by the employment agreements and their respective non- solicitation and non-competition provisions. Cunningham Lindsey's attempt to highlight facts which it considers to be beyond the scope of the employment agreement is unavailing. Rather than offering a response to Brown & Brown, Cunningham Lindsey selectively emphasizes certain paragraphs of its complaint which avoid reference to a contract. For example, Cunningham Lindsey highlights its allegation that the defendants issued interim invoices to customers, disorganized or destroyed files, and attempted to cripple its Camp Hill office. (Doc. 43 (citing Doc. 1 ¶ ¶ 71, 77-82, 89, 92-94)). These facts simply do not support separate causes of action beyond Cunningham Lindsey's breach of contract claim; instead, they merely represent those actions taken by defendants in furtherance of their contractual breach. Cunningham Lindsey has failed to allege any conduct underlying its fiduciary duty or tortious interference claims that is not contemplated by the defendants' contracts, and those claims cannot survive the gist of the action bar. Cunningham Lindsey's unfair competition claim is based on the same conduct as its fiduciary duty and tortious interference claims. Consequently, the court concludes that it is similarly barred by the gist of the action doctrine. The court notes that Cunningham Lindsey has not articulated a “broader set of wrongful acts” which would bring its unfair competition claim beyond the scope of the doctrine, (see Doc. 43 at 18), and the court's examination of the complaint reveals no allegation transcending the contractual agreement itself. Count VII alleges only that “by engaging in the conduct described,” defendants engaged in unfair competition with Cunningham Lindsey. (Doc. 1 ¶ 144). As set forth above, the “conduct described” is governed entirely by the contractual relationship. See, e.g., Bohler-Uddeholm, 247 F.3d at 103 (dismissal appropriate pursuant to gist of the action doctrine when common law tort claim is “collateral” to a breach of an employment agreement). Cunningham Lindsey's common law unfair competition claim is therefore barred by the gist of the action doctrine. *8 Cunningham Lindsey's civil conspiracy claim must also be dismissed. Courts within this Circuit routinely dismiss civil conspiracy claims when the underlying tort claim is barred by the gist of the action doctrine. See, e.g., Oldcastle Precast v. VPMC, Ltd., 2013 U.S. Dist. LEXIS 67481, *30 (E.D.Pa. May 13, 2013) (dismissing civil conspiracy claim when underlying claims of negligent misrepresentation and fraud were barred by gist of the action doctrine); Alexander Mill Servs., LLC v. Bearing Distribs., Inc., 2007 U.S. Dist. LEXIS 72829, *30 n. 2 (W.D.Pa. Sept. 28, 2007) (“It is well settled that a cause of action for civil conspiracy cannot stand where all causes of action in tort have been dismissed.” (citing Thompson Coal Co. v. Pike Coal Co., 412 A.2d 466,472 (Pa.1979))). 5 Because Cunningham Lindsey's common law tort claims for breach of fiduciary duty, tortious interference, and unfair competition are barred by the gist of the action Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 44 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 doctrine, so too is its civil conspiracy claim. See, e.g. Synthes, Inc. v. Emerge Med., Inc., 2012 U.S. Dist. LEXIS 134886, *48 (E.D.Pa. Sept. 19, 2012) (“[A] cause of action for civil conspiracy requires a distinct underlying tort as a predicate to liability.”) (citing In re Ortho. Bone Screw Prods. Liab. Litig., 193 F.3d 781, 789 (3d Cir.1999); Kist v. Fatula, 2007 U.S. Dist. LEXIS 60615, *9 (W.D.Pa. Aug. 17, 2007)). 5 Cunningham Lindsey has raised no objection to this general principle. (See Doc. 43 at 16-20). Finally, Cunningham Lindsey contends broadly that application of the gist of the action doctrine at the Rule 12(b)(6) stage is premature and inappropriate. (Doc. 43 at 18-19). Specifically, Cunningham Lindsey asserts that it is “factually unclear” at this juncture whether its claims sound in contract or tort. (See Doc. 64 at 4-7). Cunningham Lindsey also argues that defendant Fohl's subscription agreement is not adequately supported by consideration, precluding application of the gist of the action doctrine. (Doc. 43 at 20). The court rejects these arguments. Despite Cunningham Lindsey's broad and generalized allegations that its tort claims “may” sound in either tort or contract, the complaint makes clear that each of the defendants' alleged wrongs derives from a perceived violation of a specific contractual provision. See supra at 13-17. That is, each action challenged by Cunningham Lindsey stems from violations of either affirmative obligations or restrictions created or imposed by the parties' contractual agreements. See id. Many courts have applied the gist of the action doctrine at the Rule 12 stage when, as here, it is unequivocal that the gist of the parties' claim is contractual and the tort claim is collateral. See, e.g., Brown & Brown, 745 F.Supp.2d at 620-22 (claims for breach of fiduciary duty and tortious interference dismissed on Rule 12(b)(6) motion); Alexander Mill Servs., 2007 U.S. Dist. LEXIS 72829 at *23-28 (fraud, intentional misrepresentation, and negligent misrepresentation claims dismissed despite plaintiff's “attempt to recast its contracts claims” in tort); Ginley, 2005 U.S. Dist. LEXIS 118 at *3 (common law tort claims, including breach of fiduciary duty, dismissed when claims are “wholly dependent on the existence of a contract” between the parties). The court rejects Cunningham Lindsey's argument that the gist of the action doctrine may not be applied at this stage. 6 6 The bulk of the decisions cited by Cunningham Lindsey involved factual ambiguities with respect to whether the duties allegedly breached were created by the contracts. See, e.g. ClinMicro Immunology Ctr., LLC v. PrimeMed, P.C., 2013 WL 3776264, *---- - ----, 2013 U.S. Dist. LEXIS 99909, *14-15 (M.D.Pa. July 17, 2013) (declining to apply doctrine at Rule 12 stage when it was “not clear that the duties [defendants] allegedly breached were grounded in the parties' agreements”); Synthes, 2012 U.S. Dist. LEXIS 134886 at *36-37 (“Where the factual nature of the allegations is unclear, this issue is best left for resolution ... on a post-amendment motion to dismiss or, even more appropriately, on a post-discovery motion for summary judgment.” (emphasis added)). Here, in contrast, there is no question that the parties' contracts expressly contemplate the wrongdoings alleged by Cunningham Lindsey. *9 Cunningham Lindsey's second argument is also unavailing. It argues that because Fohl has challenged the validity and enforceability of a provision of his subscription agreement, any defense based on the gist of the action doctrine-which requires the existence of a valid contract-is misplaced. (Doc. 43 at 20). At least one court has squarely addressed, and rejected, this argument. In Synthes, 2012 U.S. Dist. LEXIS 134886, the plaintiff argued that “dismissal under the gist of the action doctrine is premature” because the validity and scope of the contract was disputed. Id. at *22 n. 5. The plaintiff relied on Premier Payments Online, Inc., v. Payment Systems Worldwide, 848 F.Supp.2d 513 (E.D.Pa.2012), where the district court declined to apply the gist of the action doctrine, observing that its application is premature if “the validity and if valid, the effect, of a contract is uncertain.” Id. at 529. Ruling in favor of the defendants, the Synthes court highlighted a key distinction between the two cases: in Premier Payments, the very existence of the contract was unsettled, whereas in the case before it, as here, no party disputed the actual existence of the actual contract. Synthes, 2012. U.S. Dist. LEXIS 134886 at 22 n.5 (observing that it was the “scope and validity of the contractual provisions” and not the “very existence of the contract” which was disputed). Accordingly, the court rejected the plaintiff's argument, noting that application of the gist of the action doctrine is appropriate when “no party questions the existence of the pertinent contracts.” Id. (citing Brown & Brown, 745 F.Supp.2d at 619- Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 45 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 25). This court concurs with the Synthes decision and its rationale. In the case sub judice, no party disputes the existence of defendants' employment agreements in the first instance, and there is no question that the conduct ascribed to defendants is contemplated by those agreements. The court notes that the gist of the action doctrine bars common law tort claims only as to those parties that have or had a contractual relationship with the purported tortfeasor. eToll, 811 A.2d at 14 (gist of the action doctrine bars tort claim when it “arises from a contract between the parties”). Count II names only Fohl and Bonanni, both of whom had employment contracts with Cunningham Lindsey, and it will be dismissed in its entirety pursuant to the gist of the action doctrine. However, the remaining claims for aiding and abetting breach of a fiduciary duty, interference with contractual relationships, civil conspiracy, and unfair competition name the individual defendants and Vericlaim, which had no contractual relationship with Cunningham Lindsey. The gist of the action doctrine bars those additional common law tort claims only against the individual defendants. Cunningham Lindsey's claims for aiding and abetting breach of a fiduciary duty, tortious interference, civil conspiracy, and unfair competition shall therefore proceed against Vericlaim. C. Failure of Consideration *10 Defendant Fohl argues that Cunningham Lindsey's claim against him for breach of his subscription agreement fails for want of consideration. (Doc. 42 at 19-20). In Count X, Cunningham Lindsey asserts a claim for breach of contract, in particular the subscription agreement, against Fohl arising from his “failure to pay for preference shares of CL Holdings.” (Doc. 1 ¶¶ 160-169). Cunningham Lindsey avers that Fohl agreed to pay to it the subscription amount of $50,000 in exchange for the purchase of 500 preference shares. (Id. ¶¶ 161-62). Cunningham Lindsey argues that this mutual exchange of promises constitutes sufficient consideration to support the subscription agreement. (Doc. 64 at 9-11). In defendants' motion to dismiss, Fohl contends that a separate arrangement between Cunningham Lindsey and himself required his former employer to accelerate the deferred compensation due to him, and that Cunningham Lindsey's failure to accelerate that compensation renders the entire subscription agreement void for lack of consideration. (Doc. 42 at 19-20). At this procedural juncture, the court must reject Fohl's contention. Fohl is correct that black letter law renders unenforceable any agreement which is not supported by consideration. Blair v. Scott Specialty Gases, 283 F.3d 595, 603 (3d Cir.2002) (“Without consideration, a contract is unenforceable.”). The Third Circuit has explained that this consideration requirement is satisfied when the parties' contract “confers a benefit upon the promisor or causes a detriment to the promisee and must be an act, forbearance or return promise bargained for and given in exchange for the original promise.” Id. (quoting Channel Home Centers v. Grossman, 795 F.2d 291, 299 (3d Cir.1986)). Cunningham Lindsey alleges that, under the subscription agreement, Fohl promised to pay the subscription amount of $50,000, to be drawn from Fohl's deferred compensation, in exchange for its delivery to Fohl of 500 shares of preference stock. (Doc. 1 ¶¶ 161- 63). Assuming this to be true, as the court must at this stage, Cunningham Lindsey has sufficiently alleged that the subscription agreement was supported by a mutual exchange of promises, and the court thus rejects Fohl's argument that the agreement is void for lack of consideration. V. Conclusion For the reasons articulated above, the court will grant in part and deny in part the defendants' motion (Doc. 41) to dismiss. An appropriate order follows. ORDER AND NOW, this 22nd day of April, 2014, upon consideration of the motion (Doc. 41) filed by Pat Bonanni (“Bonanni”), Dale Fohl (“Fohl”), and Vericlaim, Inc. (“Vericlaim”), collectively “defendants,” asking the court to dismiss counts II, III, V, VI, VII, VIII, and X of the complaint (Doc. 1) of Cunningham Lindsey U.S., Inc., and CL Acquisition Holdings Limited (collectively “Cunningham Lindsey”), and for the reasons discussed in the accompanying memorandum, it is hereby ORDERED that: *11 1. Defendants' motion (Doc. 41) is GRANTED to the extent it seeks dismissal of Count II in its entirety and Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 46 of 134 Cunningham Lindsey U.S., Inc. v. Bonnani, Not Reported in F.Supp.3d (2014) 2014 WL 1612632 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 Counts III, V, VI, and VII to the extent those claims name Fohl and Bonanni as defendants. 2. Defendants' motion (Doc. 41) is DENIED in all other respects. 3. The following claims remain: breach of contract (Count I) against Fohl and Bonanni; aiding and abetting in breach of fiduciary duty (Count III) against Vericlaim; misappropriation and misuse of trade secrets and confidential information under the Pennsylvania Uniform Trade Secrets Act (“PUTSA”), 12 PA. CONS.STAT. § 5301 et seq. (Count IV) against all defendants; tortious interference with contractual and business relationships (Count V) against Vericlaim; civil conspiracy (Count VI) against Vericlaim; unfair competition (Count VII) against Vericlaim; unjust enrichment (Count VIII) against all defendants; violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, (Count IX) against Fohl and Bonanni; and breach of contract (Count X) against Fohl. All Citations Not Reported in F.Supp.3d, 2014 WL 1612632 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 47 of 134 TAB E Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 48 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2007 WL 2471803 Only the Westlaw citation is currently available. United States District Court, M.D. Tennessee, Nashville Division. Anthony GOLDTHREAD, Plaintiff, v. George M. DAVISON, et al., Defendants. No. 3:06-0805. | Aug. 29, 2007. Attorneys and Law Firms Anthony Goldthread, Nashville, TN, pro se. Adrienne L. Anderson, Kramer, Rayson, Leake, Rodgers & Morgan, LLP, Knoxville, TN, Britt K. Latham, Kathryn Hannen Walker, Bass, Berry & Sims, Nashville, TN, for Defendants. ORDER ROBERT L. ECHOLS, United States District Judge. *1 This is a pro se action brought by Plaintiff against the Defendants alleging that they fraudulently misappropriated his intellectual properly. This case was referred to the Magistrate Judge and is back is before the Court on a Report and Recommendation (“R & R”) (Docket Entry No. 41). In the R & R, the Magistrate Judge addressed Motions to Dismiss the Amended Complaint filed separately by Defendant S.C. Johnson & Son and Defendant George M. Davison (Docket Entry Nos. 32 & 37). An earlier Motion to Dismiss by Defendant Davison became moot with the filing of the Amended Complaint. The Magistrate Judge also addressed the viability of this action against Defendants Medo, Inc. and Airwick Co. in light of the fact that those Defendants do not appear to have been properly served. The Magistrate Judge recommends that this action be dismissed with prejudice as to Defendant S.C. Johnson & Son, Inc. and without prejudice as to Defendants George M. Davison, Davison Design and Development, Inc., Medo, Inc. and Airwick Co. The R & R was issued on July 11, 2007, and Plaintiff has filed no objections thereto, even though he was informed in the R & R that any objections needed to be filed within ten (10) days (Docket Entry No. 41 at 17). Under Federal Rule of Civil Procedure 72(b) and 28 U.S.C. § 636(b)(1), the Court may accept, reject, or modify in whole or in part the findings or recommendations made by the Magistrate Judge. Having carefully reviewed the entire record in this case, including the Amended Complaint (Docket Entry No. 27), the Motions to Dismiss (Docket Entry Nos. 32 & 37), and the R & R, the Court finds that the Magistrate Judge was correct in concluding that dismissal with prejudice against Defendant S.C. Johnson & Son, Inc. is appropriate because Plaintiff's Amended Complaint fails to state a claim upon which relief may be granted for breach of contract, breach of implied contract, violation of the Tennessee Uniform Trade Secrets Act, unjust enrichment, fraud, or breach of a confidential relationship. The Court also finds that the Magistrate Judge was correct in concluding that the claims against Defendants George M. Davison and Davison Development Inc. should be dismissed without prejudice due to insufficiency of process, lack of personal jurisdiction, and improper venue. Finally, the Court agrees with the Magistrate Judge's conclusion that the claims against Defendants Medo, Inc. and Airwick Co. should be dismissed without prejudice because the record does not reflect that those Defendants were properly served and because the Amended Complaint lacks any allegations against those Defendants. Accordingly, for the reasons stated above and as more specifically set forth in the Magistrate Judge's R & R, the Court rules as follows: (1) The Report and Recommendation (Docket Entry No. 41) is hereby ACCEPTED; (2) The Motion to Dismiss filed by Defendant George M. Davison (Docket Entry No. 25) is MOOT in light of the filing of the Amended Complaint; *2 (3) The Motion to Dismiss Amended Complaint filed by Defendant S.C. Johnson & Son, Inc. (Docket Entry No. 32) is hereby GRANTED; Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 49 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 (4) The Motions to Dismiss Amended Complaint filed by Defendant George M. Davison (Docket Entry No. 37) is hereby GRANTED; (5) The claims against Defendant S.C. Johnson & Son, Inc. are hereby DISMISSED WITH PREJUDICE; (6) The claims against Defendants George M. Davison, Davison, Design and Development, Inc., Medo, Inc. and Airwick Co. are hereby DISMISSED WITHOUT PREJUDICE; and (7) Entry of this Order on the docket shall constitute entry of a final judgment in accordance with Federal Rules of Civil Procedure 58 and 79(a). It is so ORDERED. REPORT AND RECOMMENDATION JOHN S. BRYANT, United States Magistrate Judge. By order entered September 27, 2006, the District Judge referred this case to the Magistrate Judge for consideration of all pretrial matters and reports and recommendations on all dispositive motions. (Docket Entry No. 7). By order also entered September 27, 2006, Magistrate Judge Griffin reassigned this case to the undersigned. (Docket Entry No. 8). Pending before the court are motions to dismiss on behalf of defendants S.C. Johnson & Son, Inc. (“Johnson”), Davison Design and Development, Inc., and George M. Davison. 1 (Docket Entry Nos. 32 and 37). Plaintiff has failed to file any response to these motions. For the reasons stated below, the undersigned RECOMMENDS that defendants' motions to dismiss be GRANTED, that the complaint against defendant S.C. Johnson & Son, Inc. be DISMISSED WITH PREJUDICE, and that the complaint against defendants George M. Davison, Davison Design and Development, Inc., Medo, Inc. and Airwick Co. be DISMISSED WITHOUT PREJUDICE. 1 The original complaint (Docket Entry No. 1) names the individual, George M. Davison, as a defendant in the enumerated field provided. Id. at ¶ 3. However, the location given for Mr. Davison in this field is the business address for the corporate defendant, Davison Design and Development, Inc. The factual allegations against Mr. Davison in the original complaint appear to stem from his role as signatory for the company. The corporate Davison defendant is not named in the third paragraph of the original complaint, but is named in the caption of the complaint, and is the subject of various factual allegations in the body of the complaint. Plaintiff's amended complaint (Docket Entry No. 27), however, appears to focus exclusively on the corporation known as “Davison” (presumably Davison Design and Development, Inc.) rather than any individual by that name. For that reason, although plaintiff refers to George M. Davison and the corporate entity interchangeably as “Davison,” for purposes of this Report and Recommendation George M. Davison shall be referred to as “George M. Davison” and Davison Design and Development Inc. shall be referred to as “D & D Inc.” Procedural History The Complaint. Plaintiff Anthony Goldthread, proceeding pro se, has filed an amended complaint alleging that the defendants have fraudulently misappropriated his intellectual property. (Docket Entry No. 27). Although the complaint is inartfully drafted, the following facts appear from the complaint and its exhibits. In June 2002, Mr. Goldthread had communications with a representative of Davison Design & Development, Inc. (“D & D Inc.”) about Mr. Goldthread's idea for a new product which he called a “Ceiling Fan Air Freshener.” In a document exhibited to the original complaint, Mr. Goldthread described his device as a “pouch” containing air freshener that was to be attached to the blade of a ceiling fan by Velcro® straps. (Docket Entry No. 1, Ex. 1). Although not expressly stated, it appears that the device is intended to spread fragrance as the fan blades revolve during operation. Plaintiff alleges that the combination of a fan device with devices designed to deliver scents throughout a room constitutes a wholly original composition of matter that is protected by law. (Docket Entry No. 27). From a letter agreement dated June 11, 2002, it appears that D & D Inc. was a company located in Pittsburgh, Pennsylvania that offered to provide certain “preinventegration services” for a fee. (Docket Entry No. 1, Ex. 2). These services included an “industry product search” to identify competitive products available in the Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 50 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 marketplace, patent searches for design and development purposes, and the filing of disclosure documents with the U.S. Patent & Trademark Office. Id. In addition, D & D Inc. offered to promote the client's product to appropriate manufacturers in an effort to secure a license agreement on behalf of the client for the commercial production of the product. *3 In his amended complaint, Mr. Goldthread alleges that he had discussions with a representative of D & D Inc. in June 2002, and that the corporation mailed him proposed written agreements for signature. (Docket Entry No. 27). However, Mr. Goldthread refused to sign the agreements or to employ the services of D & D Inc. Id. Nevertheless, Mr. Goldthread alleges that in the October 28, 2003 issue of the National Enquirer he saw what he describes as “clear and convincing proof” that his product idea had been wrongfully appropriated by others. Id. Attached to the original complaint is a photograph of a product called “Swirling Scents,” bearing the Medo label, which appears to be an air freshener that includes a small fan intended for an automobile air vent, and a similar photograph of a Glade® PlugIn® scented oil fan, which consists of a scented oil warmer attached to a small fan that circulates fragrance when plugged into a wall electrical outlet. (Docket Entry No. 1 Ex. 4 and 5). Seeing these products advertised apparently convinced plaintiff that his intellectual property had been wrongfully taken by defendants (Docket Entry No. 27). Plaintiff pleads federal court jurisdiction under 28 U.S.C. § 1332, alleging that D & D Inc. is a corporation incorporated under Pennsylvania law, with its principal place of business in Pittsburgh, Pennsylvania. Id. The amended complaint also alleges that defendant Medo, Inc. is a corporation under California law with its principal place of business in California, that defendant S.C Johnson & Sons is a corporation under Wisconsin law with its principal place of business in Wisconsin, and that defendant Airwick Co. is incorporated under Texas law with its principal place of business in Texas. Id. Plaintiff also alleges the amount in controversy exceeds $75,000, thus completing the required allegations to support federal subject matter jurisdiction based upon diversity of citizenship. Plaintiff concludes by alleging the following causes of action against the various defendants: (1) breach of contract, (2) breach of implied contract, (3) common law misappropriation, (4) violations of the Uniform Trade Secret Act, (5) unjust enrichment, (6) fraud, and (7) breach of confidential relationship. Johnson's motion to dismiss. Defendant Johnson has filed its motion to dismiss the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Docket Entry No. 32). In support of its motion, Johnson argues that (1) Johnson applied for and was awarded a patent protecting their Glade® PlugIn®scented oil fan product prior to plaintiff's contact with D & D Inc.; (2) the complaint fails to state a claim against Johnson for any of plaintiff's causes of action; and (3) the Tennessee Uniform Trade Secret Act preempts plaintiff's misappropriation, unjust enrichment, implied contract, and fraud claims. Id. George M. Davison and Davison Design and Development, Inc.'s motion to dismiss. Defendants George M. Davison and Davison Design and Development have filed two motions to dismiss plaintiff's complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Docket Entry Nos. 25 and 37). Although the court has not yet ruled on either of these motions, the second motion, filed in response to plaintiff's amended complaint, is virtually identical to the first motion to dismiss. Consequently, the first motion should be deemed moot inasmuch as it relates to a superseded complaint and its legal arguments have been taken up in a subsequent motion. In support of their motion, the Davison defendants argue: (1) that there has been insufficiency of process for these defendants; (2) that there was an insufficiency of service of process for these defendants; (3) that the amended complaint does not allege a federal question as a basis for subject matter jurisdiction; (4) that the amended complaint fails to sufficiently allege facts establishing personal jurisdiction over these defendants; and (5) that venue is improper in the Middle District of Tennessee. Analysis *4 Plaintiff proceeds pro se. (Docket Entry No. 1). Pro se complaints are to be construed liberally, Boag v. MacDougall, 454 US. 364, 365 (1982), but courts have not been willing to abrogate basic pleading essentials in pro se suits. Wells v. Brown, 891 F.2d 591, 594 (6th Cir.1989). In particular, Wells provides that pro se plaintiffs are required to provide a plain statement of the grounds for Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 51 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 relief such that the court must no be forced to guess about the factual circumstances that led to the complaint. Id. In ruling on a motion to dismiss pursuant to Rule 12(b)(6), the court is obligated to accept as true all allegations in the complaint, and to construe the complaint liberally in favor of the party opposing the motion. Miller v. Currie, 50 F.3d 373, 377 (6th Cir.1995). To survive a motion to dismiss, “[the] complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.” Caldwell v. Rowland, 932 F.Supp. 1018, 1020 (E.D.Tenn.1996) (quoting Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988)). The essential elements of the plaintiff's claim “must be alleged in more than vague and conclusory terms.” Foundation for Interior Design Educ. Research v. Savannah Coll. of Art & Design, 244 F.3d 521, 530 (6th Cir.2001). “[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.” Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir.2005). Because the motions pending before the court are very different in content and contain arguments unique to each defendant, they are best addressed separately. Johnson's motion to dismiss. Defendant Johnson argues that their Glade® PlugIn® scented oil fan products are protected under a previously existing patent, that Mr. Goldthread fails to state a claim against Johnson for any of the seven counts outlined in the complaint, and that many of the common law claims asserted by the plaintiff have been preempted by the Tennessee Uniform Trade Secret Act. These arguments are addressed separately below. Previously existing patent. Defendant asserts that its Glade® scented oil fan product is protected by United States patent No. 5,909,845, which was registered by the United States Patent and Trademark Office (“USPTO”) on June 8, 1999. (Docket Entry No. 33). A review of the patent 2 awarded to defendant indicates that the protected intellectual property consists of a “wick-based liquid emanation system with child-resistant overcap.” Although this establishes that Johnson possesses a patent for many of the core features of the Glade® PlugIn® device including the tamper-resistant covering and oil wicking system, it does not address the heart of plaintiff's claims. Fundamentally, plaintiff asserts his right to the composition of matter wherein a fan system is combined with a scented product, and this combination is discussed nowhere within the referenced patent. While defendant's ownership of this patent may show that it had prior rights to the scent container on its product, the patent alone does not dispose of plaintiff's claim. 2 The patent documents are contained in the record, at Docket Entry No. 15-2, pages 8-12. The court may take judicial notice of patent documents, as matters of public record, and consider them in ruling on a motion to dismiss without necessitating conversion of the motion to one for summary judgment. Snap- On, Inc. v. Hunter Engineering Co., 29 F.Supp.2d 965, 969 (E.D.Wis.1998); See Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir.1997)(quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1357 (2d ed.1990)). *5 Breach of Contract (Count I). In order to establish a prima facie breach of contract claim under Tennessee Law, a plaintiff must allege that a valid contract existed between the plaintiff and the defendant. Life Care Centers of Am., Inc. v. Charles Town Assocs. Ltd. P'ship, 79 F.3d 496, 514 (6th Cir.1996). Although the amended complaint appears to allege an implied confidentiality agreement between plaintiff and D & D Inc., it cannot be fairly construed as alleging a valid contract between plaintiff and Johnson. Consequently, plaintiff fails to state a claim against Johnson for breach of contract. Breach of Implied Contract (Count II). A contract implied in fact exists when, even though no contract is memorialized in writing, an agreement between the parties can be inferred from the conduct of the parties showing, in light of the surrounding circumstances, their tacit understanding. Hercules Inc. v. United States, 516 U.S. 417, 424 (1996) (citing Baltimore & Ohio R. Co. v. United States, 261 U.S. 592, 597 (1923)). Although plaintiff appears to allege some negotiations that could fairly lead to the implication that some tacit agreement of confidentiality existed between D & D Inc. and the plaintiff, he fails to allege any facts that would indicate the existence of an implied contract with Johnson. Furthermore, the amended complaint fails to allege what terms of the implied contract Johnson would have breached. Therefore, plaintiff's claim against Johnson for breach of implied contract must be dismissed. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 52 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 Common Law Misappropriation and Violation of the Tennessee Uniform Trade Secret Act (Counts III and IV). The amended complaint also fails to state a claim against Johnson under the Tennessee Uniform Trade Secrets Act (“TUTSA”), Tenn.Code Ann. § 47-25-1701 et seq., or common law misappropriation. This statute provides for injunctive relief and recovery of money damages against a person who misappropriates a trade secret of another through improper means. The elements of a claim for misappropriation of a trade secret under Tennessee law are: (1) the existence of a trade secret; (2) communication of the trade secret to the defendant while in a position of trust and confidence; (3) the defendant's use of the communicated information; and (4) resulting detriment to the plaintiff. Stratienko v. Cordis Corp., 429 F.3d 592, 600 (6th Cir.2005) (citing Hickory Specialties, Inc. v. B & L Labs, Inc., 592 S.W.2d 583, 586 (Tenn.Ct.App.1979)). In order to qualify as a “trade secret” within the meaning of TUTSA, information must derive “independent economic value ... from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use [.]” T.C.A. § 47-25-1702(4). Plaintiff fails to plead any facts alleging that the combination of a fan and a scent derives some independent economic value from being unascertainable to others, and he consequently fails to allege the existence of a trade secret that would satisfy the first element of this cause of action. *6 Plaintiff also fails to allege facts that satisfy the second element of a misappropriation claim: that the defendant received communication of the trade secret “while in a position of trust and confidence.” Stratienko, 429 F.3d at 600. In order to misappropriate plaintiff's idea for a ceiling fan air freshener, Johnson would have needed some access to his concept, which the amended complaint does not allege. (Docket Entry No. 27). While the amended complaint indicates that plaintiff communicated his idea and design to D & D Inc., it does not allege that Johnson had any information about or knowledge of the plaintiff's ideas or designs. Id. Furthermore, the amended complaint fails to allege that Johnson had any sort of communication, arrangement, or agreement with either the plaintiff or D & D Inc. concerning the plaintiff's ideas and designs. Finally, TUTSA has been held to preempt common law claims for misappropriation of trade secrets. Hauck Mfg. Co. v. Astec Indus., Inc., 375 F.Supp.2d 649, 654-658 (E.D.Tenn.2004). For these reasons, the undersigned finds that the complaint fails to state a claim against Johnson for violation of TUTSA or common law misappropriation of a trade secret. Unjust Enrichment (Count V). In order to state a claim for unjust enrichment, a plaintiff must allege: (1) a benefit has been conferred upon the defendant by the plaintiff; (2) appreciation by the defendant of such benefit; and (3) acceptance of such benefit under circumstances that would make it inequitable for him to retain the benefit without payment of the value thereof. See PHG Techs., LLC v. St. John Cos., 459 F.Supp.2d 640, 646 (M.D.Tenn.2006) (citing Freeman Indus. LLC v. Eastman Chem. Co., 172 S.W.3d 512, 525 (Tenn.2005)). As clearly indicated above in relation to plaintiff's breach of implied contract claim, plaintiff fails to allege that he conferred any benefit on Johnson directly or indirectly. Furthermore, plaintiff fails to allege that Johnson knew of plaintiff's idea before it developed its scented oil fan product. As a result, plaintiff has failed to state a claim against Johnson for unjust enrichment. Fraud (Count VI). In order properly to state a claim for fraud under Tennessee law the plaintiff must allege that the defendant intentionally misrepresented a material fact in order to mislead or obtain undue advantage over the plaintiff. Black v. Black, 166 S.W.3d 699, 705 (Tenn.2005) (citing Brown v. Birman Managed Care, Inc., 42 S.W.3d 62, 66-67 (Tenn.2001)). The amended complaint fails to allege that Johnson made any representations to the plaintiff, false or otherwise, and thus fails to establish the key element of a fraud claim. Furthermore, the Federal Rules of Civil Procedure require that any claim of fraud “shall be stated with particularity,” which the plaintiff fails to do in his amended complaint. Fed.R.Civ.P. 9(b). Consequently, plaintiff's fraud allegation against Johnson should be dismissed. *7 Breach of Confidential Relationship (Count VII). Under Tennessee law, a relationship is confidential if “confidence is placed by one in the other and the recipient of that confidence is the dominant personality, with ability, because of that confidence, to influence and exercise dominion and control over the weaker or dominated party.” Givens v. Mullikin, 75 S.W.3d 383, 410 (Tenn.2002). Thus, in order to establish a claim for breach of a confidential relationship, it is imperative Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 53 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 that the plaintiff establish that some relationship existed between the plaintiff and the defendant, and that confidential information passed through the channels of that relationship. In plaintiff's amended complaint, there are no allegations that either Mr. Goldthread or any of Johnson's codefendants had any relationship, contact, or communication with Johnson. As a result, plaintiff is unable to allege a prima facie claim for this cause of action. TUTSA preemption. As briefly discussed above, the Tennessee Uniform Trade Secret Act preempts plaintiff's misappropriation, unjust enrichment, implied contract and fraud claims because TUTSA “preempts all general tort claims for theft of secret information.” Hauck Mfg. Co. v. Astec Indus., Inc., 375 F.Supp.2d 649, 661 (E.D.Tenn.2004). Consequently, the above analysis- indicating that plaintiff fails to state a claim upon which relief can be granted under TUTSA because his composition of matter concept fails to qualify as a “trade secret” within the meaning of the law-directs the conclusion that these common law causes of action should also be dismissed. George M. Davison and D & D Inc.'s motion to dismiss. Defendants George M. Davison and Davison Design and Development, Inc ., argue that the complaint against them should be dismissed because: (1) there has been insufficiency of process with regard to at least one of the defendants and possibly both; (2) there has been insufficient service of process; (3) the amended complaint does not establish personal jurisdiction over the defendants; and (4) venue is improper in the Middle District of Tennessee. 3 (Docket Entry No. 38). These arguments are addressed separately below. 3 These defendants argued in their original motion to dismiss that the court lacked subject matter jurisdiction over this action. (Docket Entry No. 26). However, in response to plaintiff's pleading of citizenship details and a sufficient amount in controversy in his amended complaint, Docket Entry No. 27, defendants in their renewed motion to dismiss have conceded that this court's diversity jurisdiction has been properly invoked. (Docket Entry No. 38). Insufficiency of process. Rule 4 of the Federal Rules of Civil Procedure requires that the plaintiff shall identify and serve all defendants with a summons by specifying that the summons shall “identify the court and the parties” and “[a] summons, or a copy of the summons if addressed to multiple defendants, shall be issued for each defendant to be served.” Fed.R.Civ.P. 4(a) and (b). In the absence of service of process (or waiver of service by the defendant), a court ordinarily may not exercise power over a party the complaint names as a defendant. Murphy Bros. v. Michetti Pipe Stringing, 526 U.S. 344, 350 (1999). One becomes a party officially “only upon service of a summons or authority-asserting measure stating the time within which the party served must appear and defend.” Id. As a result, insufficiency of service constitutes appropriate grounds for dismissal of a complaint without prejudice. *8 Plaintiff's original form complaint listed George M. Davison individually as a defendant and listed no other entity associated with Mr. Davison in the space provided for identification of the parties, but did name D & D Inc. in the caption and in various allegations within the document (Docket Entry No. 1). Plaintiff's amended complaint seems to contemplate D & D Inc. as the sole “Davison” defendant in the case, with no mention of George M. Davison individually as a defendant. (Docket Entry No. 27). Despite this seeming contemplation of two separate defendants, only a single summons, directed to “Davison,” has been delivered to the business address of D & D Inc., and no summons was issued or served in connection with the amended complaint. (Docket Entry No. 38). While defendants argue that the single summons directed only to “Davison” fails to meet the plaintiff's basic burden of making it clear through the summons whom, exactly, is being sued, the undersigned finds no defect in the summons served upon D & D Inc., since the corporation's own letterhead reveals that “Davison” is the trade name it employs in the marketplace (Docket Entry No. 1 at 7). However, the undersigned must conclude that the summons addressed to “Davison” is insufficient to hale George M. Davison into this Court, and that dismissal without prejudice of the complaint against this individual is therefore proper pursuant to Rule 12(b)(4) of the Federal Rules of Civil Procedure for insufficiency of process. Insufficiency of Service of Process. Rule 4 of the Federal Rules of Civil Procedure mandates that a “summons shall be served together with a copy of the complaint” and that “[t]he plaintiff is responsible for service of a ... complaint.” Fed R. Civ. P. 4(c)(1). The plaintiff may request that the defendant waive service of a summons, but must do so in writing, provide the defendant with a copy of the complaint, and provide the defendant with a waiver form Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 54 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 to be returned to the court. Fed.R.Civ.P. 4(d)(2). If the plaintiff fails to properly serve a defendant within 120 days of the filing of the complaint, “the court shall dismiss the action without prejudice as to the defendant or direct that service be effected within a specified time.” Fed.R.Civ.P. 4(m). In the instant case, defendants allege, and plaintiff fails to respond to the allegation, that the plaintiff's attempted service by mail included only documents entitled “opening brief,” while failing to include copies of the actual complaint (Docket Entry No. 38). Additionally, the plaintiff did not properly request waiver of service by providing the defendants with any of the necessary materials outlined in Rule 4(d)(2) of the Federal Rules of Civil Procedure. Id. In the absence of a showing of good cause by the plaintiff to excuse his failure to properly serve the defendants, it is within the court's discretion to dismiss the complaint without prejudice. See Slenzka v. Landstar Ranger, Inc., 204 F.R.D. 322, 324-26 (E.D.Mich.2001). In this case, the defense of insufficiency of service of process has been asserted twice (Docket Entry Nos. 26 and 38), and plaintiff has failed to show good cause for such failure or to cure the defect in service of process. As a result, dismissal without prejudice of the complaint against these defendants under Rule 12(b)(5) is appropriate at this stage of the proceedings. *9 Personal Jurisdiction. In the Sixth Circuit, a court may exercise jurisdiction over a nonresident defendant only to the extent permitted by the state's long-arm statute and by the due process clause of the United States Constitution. Neal v. Janssen, 270 F.3d 328, 331 (6th Cir.2001). The Tennessee long-arm statute contains a provision that functionally serves to extend the court's personal jurisdiction to the limits allowed by the Constitution. T.C.A. § 20-2-214(a)(6) (providing personal jurisdiction as to any action or claim for relief arising from “any basis not inconsistent with the constitution of this state or of the United States”). As a result, the court's personal jurisdiction over the defendant is best analyzed within the context of the permissible limits of the due process clause. The traditional test of compliance with the due process clause is whether or not the defendant has sufficient minimum contacts with the forum state so that “traditional notions of fair play and substantial justice” are not offended. International Shoe Company v. Washington, 326 U.S. 310, 316 (1945); Tharo Sys. Inc. v. Cab Produkttechnik GmbH & Co., 196 Fed. Appx. 366, 370 (6th Cir.2006). Fundamentally, the defendant must have conducted itself in such a way that it could reasonably anticipate being brought into court in Tennessee. Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); Days Inns Worldwide, Inc. v. Patel, 445 F.3d 889, 904 (6th Cir.2006). In the Sixth Circuit, the courts employ a three-part test to determine if these due process requirements are satisfied. First, the defendant must purposefully avail himself of the privilege of acting in the forum state; second, the cause of action must arise from the defendant's activities there; and third, the acts of the defendant must have a substantial enough connection with the forum to make the exercise of jurisdiction over the defendant reasonable. Neal, 270 F.3d at 332. Although the amended complaint contains some allegations in paragraphs 9 and 10 indicating that D & D Inc. may have advertised its services by publishing “1-800” numbers and solicitations of inventors for the use of its services, it is unclear if it has directed such activities towards the state of Tennessee. (Docket Entry No. 27). In fact, it is unclear from the amended complaint whether these activities were actively directed towards the state of Tennessee by the defendant, or whether it was the plaintiff who actively sought out this information from the defendant. Although pro se plaintiffs enjoy a liberal construction of their inartful pleadings, the court must not be forced to guess about the factual circumstances underlying the complaint. Wells v. Brown, 891 F.2d 591, 594 (6th Cir.1989). Consequently, although personal jurisdiction may have been established through further pleadings or evidentiary hearings, plaintiff's failure to respond to the defendants' repeated objections on the basis of personal jurisdiction, along with the shortcomings of his pleadings, lead the undersigned to recommend that the complaint be dismissed without prejudice with respect to these Davison defendants. *10 Improper Venue. In this case, subject matter jurisdiction over plaintiff's claims is founded solely on diversity of citizenship. (Docket Entry No. 27). As a result, the venue statute applicable to this case is 28 U.S.C. § 1391(a), which provides: (a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 55 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought. The amended complaint's allegations clearly indicate that the first prong of § 1391(a) cannot support the Middle District of Tennessee as the appropriate venue because none of the defendants resides in the state of Tennessee. (Docket Entry No. 27). Furthermore, there are no factual allegations in the amended complaint that indicate a substantial part of the events giving rise to the Plaintiff's claims occurred in the Middle District of Tennessee. In fact, as pled, it is impossible for the court to determine where the complained of events occurred without engaging in significant guesswork. Finally, the catch-all at the end of the venue statute allowing a suit to be brought in any district in which any defendant is subject to personal jurisdiction applies “only if there is no district in which the action may otherwise be brought.” Applying this catch-all to find proper venue in Tennessee is problematic for two reasons. First, as indicated above, it is an open question whether or not any defendant is subject to personal jurisdiction within the state of Tennessee, and the pleadings do not allege sufficient facts for the court to determine affirmatively that personal jurisdiction over any defendant is appropriate. Second, the pleadings do seem to indicate that a number of the incidents giving rise to this action occurred within the state of Pennsylvania, where D & D Inc. is headquartered. As a result, § 1391(a) (2) would allow for suit to be brought within the Western District of Pennsylvania. Because there is another district in which this action could be filed, the language of § 1391 bars the application of the catch-all. Consequently, venue is improper in the Middle District of Tennessee. “The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.” 28 U.S.C. § 1406(a). Although nominal defendants Medo, Inc. and Airwick Co. have not objected to venue in this district or otherwise been heard from on this record, it does not appear that they were properly served with plaintiff's original complaint and/or summonses, 4 nor are there any allegations against them in the amended complaint. Accordingly, in view of the numerous deficiencies in plaintiff's lawsuit discussed above, the undersigned finds that transfer would not be in the interest of justice, and that this case should therefore be dismissed without prejudice to being refiled in the proper venue. 4 The original complaint names both entities as “parties of interest” (Docket Entry No. 1, ¶ 3). The summons directed to Medo, Inc. bears addresses in Parsippany, New Jersey and Fresno, California (Docket Entry No. 2). The amended complaint alleges that Medo, Inc.'s principal place of business is in Moon Park, California. The summons directed to Airwick Co. bears an address in Parsippany, New Jersey (Docket Entry No. 2), while the amended complaint alleges that it is a Texas company doing business in Del Rio, Texas. RECOMMENDATION *11 For the reasons stated above, the undersigned RECOMMENDS that defendants' motions to dismiss be GRANTED, that the complaint against defendant S.C. Johnson & Son, Inc. be DISMISSED WITH PREJUDICE, and that the complaint against defendants George M. Davison, Davison Design and Development, Inc., Medo, Inc., and Airwick Co. be DISMISSED WITHOUT PREJUDICE. Under Rule 72(b) of the Federal Rules of Civil Procedure, any party has ten (10) days from receipt of this Report and Recommendation in which to file any written objections to this Recommendation with the District Court. Any party opposing said objections shall have ten (10) days from the receipt of any objections filed to this Report in which to file any responses to said objections. Failure to file specific objections within ten (10) days of receipt of this Report and Recommendation can constitute a waiver of further Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 56 of 134 Goldthread v. Davison, Not Reported in F.Supp.2d (2007) 2007 WL 2471803 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 appeal of this Recommendation. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985), reh'g denied 474 U.S. 1111 (1986). All Citations Not Reported in F.Supp.2d, 2007 WL 2471803 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 57 of 134 TAB F Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 58 of 134 Great Bay Condominium Owners Association, Inc. v...., Not Reported in... 2015 WL 4531715 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2015 WL 4531715 Only the Westlaw citation is currently available. District Court of the Virgin Islands, Division of St. Thomas and St. John. GREAT BAY CONDOMINIUM OWNERS ASSOCIATION, INC., Plaintiff, v. Matthew MCCORMACK, Defendant. Civil No. 2014-66 | Signed 07/13/2015 Attorneys and Law Firms James M. Derr, Esq., Law Offices of James M. Derr, St. Thomas, VI, For the Plaintiff, William N. Drabble, Esq., Gray Reed & McGraw, P.C., Dallas, TX, Archie Jennings, Esq., The Law Office of Archie Jennings, St. Thomas, VI, For defendant Matthew McCormack. MEMORANDUM OPINION AND ORDER GÓMEZ, District Judge. *1 Before the Court is the motion of defendant Matthew McCormack to dismiss the Complaint filed by plaintiff Great Bay Condominium Association, Inc. pursuant to Federal Rule of Civil Procedure 12(b)(6). I. FACTUAL AND PROCEDURAL BACKGROUND The Ritz-Carlton Club on St. Thomas is a community of timeshare properties. Owners of such properties own timeshare interval interests. The plaintiff, Great Bay Condominium Owners Association, Inc. (“Great Bay”), is a condominium association organized under the Virgin Islands Condominium Act. Great Bay is the organized association of unit owners for the Ritz-Carlton Club. Members of Great Bay own timeshare interval interests, allowing use of the condominium in which a member owns a timeshare for three fixed weeks each year. This three week period is referred to as a “reserved allocation.” Owners are not charged for their reserved allocation. Owners may also book rooms at times other than their reserved allocation at a reduced rate. Owners may invite guests or friends to rent rooms at the reduced rate, provided the owner is in residence while the guest or friend is there. If an owner is an entity, rather than a natural person, the entity may designate up to four shareholders or members to use the reserved allocation and/or the special reduced rate. Carsey Management, LLC (“Carsey”) is a limited liability company incorporated in Texas. Lawrence Gregory Whaley (“Whaley”) is the sole manager/member of Carsey. On or about August 1, 2005, Carsey purchased a timeshare interest in No. 1102-9 at the Ritz-Carlton Club and became a member of Great Bay. When asked by the Ritz-Carlton Club which four individuals should be added to Carsey's title for the time share, Whaley instructed the Ritz-Carlton Club to include Matthew McCormack (“McCormack”) on Carsey's title. Matthew McCormack is a citizen of Canada. McCormack is alleged to have used in excess of 560 nights of the reduced rental rate for his guests. Great Bay also alleges that McCormack was not in residence for most, or all, of the nights when his guests resided at the Ritz-Carlton Club. Great Bay asserts that it was thereby deprived of the difference in value between the usual rental rate and the reduced rate offered to the guests of owners- in-residence. On June 11, 2014, Great Bay filed a complaint in the Superior Court of the Virgin Islands (the “Superior Court”) against McCormack and Carsey. On July 30, 2014, Carsey removed the case to this Court. Thereafter, Great Bay amended its complaint (the “amended complaint”). The amended complaint asserts four claims: (1) fraud and misrepresentation as against Carsey; (2) fraud and misrepresentation against McCormack; (3) breach of contract against both Carsey and McCormack; and (4) violation of the Uniform Trade Secrets Act against McCormack. 1 1 The fourth claim is labeled “third cause of action.” The third claim is also labeled “third cause of action.” Because there is another third cause of action, and because the Uniform Trade Secrets Act claim is the fourth claim that appears in the complaint, the Court refer to it as Count Four. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 59 of 134 Great Bay Condominium Owners Association, Inc. v...., Not Reported in... 2015 WL 4531715 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 *2 McCormack and Carsey moved to dismiss the complaint in its entirety on November 3, 2014. On April 3, 2015, Great Bay voluntarily dismissed its claims as against Carsey. As such, the only claims remaining are those against McCormack. II. DISCUSSION When reviewing a motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court construes the complaint “in the light most favorable to the plaintiff.” In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010). The Court must accept as true all of the factual allegations contained in the complaint and draw all reasonable inferences in favor of the non-moving party. Alston v. Parker, 363 F.3d 229, 233 (3d Cir.2004). A complaint may be dismissed for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b) (6). “[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007). The Supreme Court in Bell Atlantic v. Twombly, 550 U.S. 544 (2007), set forth the “plausibility” standard for overcoming a motion to dismiss and refined this approach in Ashcroft v. Iqbal, 556 U.S. 662 (2009). The plausibility standard requires the complaint to allege “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. A complaint satisfies the plausibility standard when the factual pleadings “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). This standard requires showing “more than a sheer possibility that a defendant has acted unlawfully.” Id. A complaint which pleads facts “ ‘merely consistent with’ a defendant's liability, ... ‘stops short of the line between possibility and plausibility of “entitlement of relief.” ’ ” Id. (citing Twombly, 550 U.S. at 557). To determine the sufficiency of a complaint under the plausibility standard, the Court must take the following three steps 2 : First, the court must “tak[e] note of the elements a plaintiff must plead to state a claim.” Second, the court should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Finally, “where there are well- pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief. Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 556 U.S. at 674, 679). 2 Iqbal describes the process as a “two-pronged approach” but the Supreme Court took note of the elements a plaintiff must plead to state a claim before proceeding to its two-step approach. Accordingly, the Third Circuit has deemed the process a three step approach. See Santiago, 629 F.3d at 130. III. ANALYSIS A. Count Two: Fraud and Misrepresentation In Count Two, Great Bay asserts that McCormack made fraudulent misrepresentations to Great Bay. McCormack argues that Great Bay has failed to properly plead a claim for fraud and misrepresentation. Generally, he asserts that Great Bay has failed to sufficiently plead the elements of a fraud claim. *3 Under Virgin Islands law, in order to state a claim for common law fraud, plaintiffs must allege (1) a false representation of material fact, (2) the defendant's intent that the statement be acted upon, (3) reliance upon such a statement by the persons claiming to have been deceived, and (4) damages. Charleswell v. Chase Manhattan Bank, N.A., 308 F.Supp.2d 545, 568-69 (D.V.I. 2004). “In addition to alleging facts sufficient to support these elements, a plaintiff must satisfy the pleading requirements of Federal Rule of Civil Procedure 9(b) (“Rule 9(b)”).” Id. at 569. Rule 9(b) states that, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 60 of 134 Great Bay Condominium Owners Association, Inc. v...., Not Reported in... 2015 WL 4531715 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 and other conditions of a person's mind may be alleged generally.” Fed.R.Civ.P. 9(b). Pursuant to Rule 9(b), a plaintiff alleging fraud must state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the “precise misconduct with which [it is] charged.” Lum v. Bank of America, 361 F.3d 217, 223-224 (3d Cir. 2004). To satisfy this standard, the plaintiff must plead or allege the date, time and place of the alleged fraud or otherwise inject precision or some measure of substantiation into a fraud allegation. Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir.2007). A thorough review of the complaint in this matter reveals the following allegations as relates to McCormack's purported fraud or misrepresentation: (1) McCormack, using his status as a listed member of Carsey, used in excess of 560 nights of the reduced rates for guests who were not entitled to Great Bay member benefits; (2) McCormack was not in residence during some or all of those 560 nights. That is the extent of the allegations as relate specifically to any representations made by McCormack which were purportedly fraudulent. Notably, there are no allegations concerning the date, time, or place of any fraudulent representations, or even that any communication or representation was made by McCormack at all. That is, it is impossible to know the “precise misconduct with which [the defendant] is charged.” Id. (citing Lum v. Bank of America, 361 F.3d 217, 223-224 (3d Cir.2004)). As Great Bay has failed to allege that McCormack made a fraudulent misrepresentation with the particularity required by Rule 9(b), it has failed to state a claim for fraud and misrepresentation. B. Count Three: Breach of Contract In Count Three, Great Bay alleges that McCormack has breached a contractual agreement with it. McCormack argues that Great Bay has failed to state a claim for breach of contract. There are four elements to a contract claim in the Virgin Islands: “(1) an agreement, (2) a duty created by that agreement, (3) a breach of that duty, and (4) damages.” Bank of Nova Scotia v. Ross, Civ. No.2010-118, 2012 WL 4854776 (D.V.I. Oct. 12, 2012)(slip op.)(citing to Arlington Funding Services, Inc. v. Geigel, 51 V.I. 118, 135 (V.I.2009)). An agreement may be either express or implied wholly or partially from the parties' conduct. Restatement (Second) of Contracts § 4; see Delta Elec. v. Biggs, 2011 WL 4463211, *3 (D.V.I.App.Div.2011). “A party who breaches a contract is liable for all natural and probable consequences of the breach of that contract.” Mendez v. Coastal Sys. Dev., Inc., 2008 WL 2149373, *12 (D.V.I.2008). *4 In considering what has been well pled, for purposes of disposing of a motion to dismiss, the Court excises from the complaint any allegations which are simply legal conclusions. Santiago, 629 F.3d at 130. As such, the Court will disregard statements in the complaint such as, “Defendants Carsey and McCormack were and are obligated to comply with all the governing documents of [Great Bay][.]” (Amend.Compl.¶ 25.) Similarly, the Court will disregard the assertion that, “[b]y making reservations for purported friends or guests when he was not actually in residence at [Great Bay], Defendant McCormack breached his agreement with [Great Bay].” (Id. ¶ 26.) The Court finds that the following facts have been well pled: (1) Great Bay has something called “Reservation Procedures”; (2) the “Reservation Procedures” require that the unit owner or authorized representative be in residence at Great Bay whenever reservations are made for guests at the reduced rate; (3) these “Reservation Procedures” were part of Great Bay's governing documents; (4) McCormack was provided a copy of these rules; and (5) McCormack's guests paid the reduced rate during times that McCormack was not in residence at Great Bay. A condominium association's governing documents are contracts between the association and the property owners or renters. See Weary v. Long Reef Condo. Assoc., 57 V.I. 163, 174 n. 2 (V.I.2012)(“Since the articles of incorporation and By-Laws create a contractual relationship between the parties, we apply the general rules for contracts to construe an Association's governing documents.”); Opera Plaza Residential Parcel Homeowners Assoc. v. Hoang, 376 F.3d 831, 840 (9th Cir. 2004)(characterizing a claim for “breach of governing documents” as a common law breach of contract claim). Pursuant to Virgin Islands law, the obligations imposed by an association's governing documents extend to “all apartment owners, tenants of such owners, employees of Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 61 of 134 Great Bay Condominium Owners Association, Inc. v...., Not Reported in... 2015 WL 4531715 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 owners and tenants, or any other person that may in any manner use property or any part thereof[.]” V.I. CODE ANN. tit. 28, § 927. Great Bay has alleged that the policies at issue in this case were within its governing documents. As such, Great Bay has properly alleged that a contract existed and created certain duties. By operation of law, those duties extended to McCormack as a tenant of the apartment owned by Carsey. Great Bay has further alleged that McCormack violated the rules contained within the governing documents. Such behavior could constitute a breach. Finally, Great Bay has alleged that due to the alleged breach it was deprived of certain rental amounts. Great Bay has, therefore, alleged damages. As Great Bay has alleged each element of a breach of contract claim, this Count is sufficient to survive McCormack's motion to dismiss. C. Count Four: Breach of Uniform Trade Secrets Act Finally, Great Bay asserts that McCormack has misappropriated trade secrets, in violation of the Virgin Islands Trade Secrets Act (“VIUTSA”). McCormack argues that Great Bay has failed to state a claim for relief under the VIUTSA. [T]o prove misappropriation of a trade secret, a plaintiff must show: (i) that he or she possessed a valid trade secret, (ii) that the trade secret was disclosed or used without consent, and (iii) that the defendant knew, or should have known, that the trade secret was acquired by improper means. Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823, 847 (10th Cir.1993). 3 3 The Uniform Trade Secrets Act has been adopted by a number of states, Colorado among them, whose versions of the Act are substantially similar if not identical to that contained in the VIUTSA. Furthermore, the VIUTSA specifically instructs, in pertinent part, that, “[t]his chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.” V.I. CODE ANN. tit. 11, § 1009. *5 A valid trade secret is defined by the VIUTSA as, information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. V.I. CODE ANN. tit. 11, § 1002 (definitions). Improper means of obtaining such information is defined as, “include[ing] theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means[.]” Id. In considering what has been well pled, for purposes of disposing of a motion to dismiss, the Court excises from the complaint any allegations which are simply legal conclusions. Santiago, 629 F.3d at 130. As such, the Court will disregard statements in the complaint such as, “Great Bay has made efforts that are reasonable under the circumstances to maintain secrecy of said information.” (Amend. Compl. ¶ 32.) The Court finds that the following facts have been well pled as relate to the VIUTSA claim: (1) Great Bay maintained a list of its members; (2) McCormack is in possession of a list of Great Bay's members; (3) McCormack used his list of Great Bay's members to contact members in order to offer to rent the members' residences to non-members at prices discounted from the reduced rate and general rates; and (4) Great Bay's governing documents prohibit rental by individual members. The Court notes that Great Bay has not alleged what methods it took to maintain the secrecy of its list of members, what independent value the list derived by not being generally known, or that the list was acquired by improper means. The United States Court of Appeals for the Federal Circuit was faced with the issue of what constituted sufficient pleading of a Uniform Trade Secrets Act claim Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 62 of 134 Great Bay Condominium Owners Association, Inc. v...., Not Reported in... 2015 WL 4531715 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 in ABB Turbo Systems AG v. Turbousa, Inc., 774 F.3d 979 (Fed.Cir.2014). In that case, ABB Turbo had alleged some, if not all, of the particular methods it had used to maintain confidentiality and secrecy as related to its trade secrets. ABB Turbo Sys., 774 F.3d at 986. ABB Turbo also alleged the method of misappropriation, “clandestine communications and cash payments[.]” Id, at 985. The trial court held that such protections were not “reasonable” as a matter of law, and granted a motion to dismiss the claim. Id. at 985-86. The Federal Circuit reversed. Id. at 989. The Uniform Trade Secrets Act, the Court noted, required that “reasonable” efforts at protection be made. Id. at 986. The Federal Circuit noted that a plaintiff invoking the protection of the Uniform Trade Secrets Act was required to plead enough to nudge a claim “across the line from conceivable to plausible.” Id. The legal determination of reasonableness was not to be considered at the motion to dismiss stage of proceedings. Id. *6 Here, as in ABB Turbo Sys., the plaintiff, Great Bay, is obligated to plead enough about its protections and the alleged misappropriation to nudge its claim “across the line from conceivable to plausible.” ABB Turbo Sys., 774 F.3d at 986. Unlike ABB Turbo, Great Bay has failed to do so. There is no allegation of what protections, if any, were taken or how its information was misappropriated. Indeed, there are very few factual allegations relating to the necessary elements of a VIUTSA claim. Instead, the complaint contains a series of legal conclusions which much be excised for purposes of determining if a claim has been stated. As Great Bay has failed to allege any facts which make a claim under the VIUTSA plausible in this case, it has failed to state a claim under VIUTSA. D. Failure to Include Indispensable Parties McCormack also argues that this matter should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(7) (“Rule 12(b)(7)”) for failure to join necessary parties. Rule 12(b) states in pertinent part that, “[A] party may assert the following defenses by motion ... failure to join a party under Rule 19.” Fed. R. Civ. P. 12(b)(7). Federal Rule of Civil Procedure 19 requires certain parties to be joined in a civil action where feasible. See Fed. R. Civ. P. 19. Specifically, it instructs in pertinent part that A person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if: (A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may: (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest. Fed. R. Civ. P. 19(a). McCormack argues that the other members and owners of property at Great Bay must be joined as indispensable parties. He provides no information which supports an inference or in fact at all suggests that other owners or members would be impacted by this litigation. This is a case brought against McCormack specifically by Great Bay. Great Bay alleges that McCormack, individually, engaged in fraudulent behavior and breached a contract between Great Bay and McCormack. The other owners and members of Great Bay are not needed to afford Great Bay the relief it seeks. Additionally, resolution of those claims neither implicates the interests of any other owner, nor exposes either of the parties to this litigation to the risk of multiple obligations. As such, the other owners and members are not indispensable parties, and McCormack's motion under Rule 12(b)(7) must be denied. IV. CONCLUSION It is evident that as the Complaint currently stands, two of its three claims are deficient. Where a claim is subject to dismissal, district courts are instructed to provide the plaintiff with leave to amend even if the plaintiff has not requested such leave. See Phillips v. Cnty. Of Allegheny, 515 F.3d 224, 245 (3d Cir.2008). The only exception to this general rule is where the district court finds that amendment would be inequitable or futile. See id. The Court does not find that amendment would be futile or inequitable here. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 63 of 134 Great Bay Condominium Owners Association, Inc. v...., Not Reported in... 2015 WL 4531715 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 The premises considered, it is hereby ORDERED that McCormack's motion to dismiss is GRANTED IN PART AND DENIED IN PART; it is further ORDERED that Count Two of the Complaint is DISMISSED without prejudice; it is further *7 ORDERED that Count Four of the Complaint is DISMISSED without prejudice; and it is further ORDERED that Great Bay shall, to the extent it wishes to do so, amend Counts Two and Four of its Complaint by no later than 3:00 PM on July 24, 2015. All Citations Not Reported in F.Supp.3d, 2015 WL 4531715 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 64 of 134 TAB G Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 65 of 134 Introsan Dental Products, Inc. v. Dentsply Tulsa Dental, LLC, Not Reported in F.Supp.2d... 2012 WL 3011830 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 2012 WL 3011830 Only the Westlaw citation is currently available. United States District Court, D. Maryland. INTROSAN DENTAL PRODUCTS, INC., Plaintiff v. DENTSPLY TULSA DENTAL, LLC, et al., Defendants. Civil Action No. MJG-09-3111. | July 20, 2012. Attorneys and Law Firms Jennifer Fountain Connolly, Hagens Berman Sobol Shapiro LLP, Washington, DC, Matthew Aaron Pequignot, Pequignot and Myers LLC, Encinitas, CA, Robert Bruce Carey, Hagens Berman Sobol Shapiro LLP, Phoenix, AZ, for Plaintiff. Richard M. Barnes, Derek McIntosh Stikeleather, Linda S. Woolf, Goodell Devries Leech and Dann LLP, Baltimore, MD, Harvey Freedenberg, Shawn K. Leppo, McNees Wallace and Nurick LLC, Harrisburg, PA, for Defendants. MEMORANDUM AND ORDER RE: MOTION TO DISMISS MARVIN J. GARBIS, District Judge. *1 The Court has before it Defendants' Motion to Dismiss Plaintiff's Third Amended Complaint [Document 67] and the materials submitted related thereto. The Court has held a hearing and had the benefit of the arguments of counsel. I. BACKGROUND 1 1 The “facts” herein are set forth as alleged by Plaintiff. At all times relevant hereto, Defendants, Dentsply Tulsa Dental, LLC and its parent, Dentsply International Inc. (collectively “Dentsply”), have been engaged in the business of manufacturing and marketing dental products. Plaintiff, Introsan Dental Products, Inc. (“Introsan”) initially pleaded: INTROSAN was and is a would-be competitor of DENTSPLY which, via the innovations of one of its principals Dr. David Gibbs, owns various patents to intraosseous anesthetic delivery systems. Compl. ¶ 12, ECF No. 1 (emphasis added). However, in the Third Amended Complaint, Introsan transforms its relationship vis-à-vis Dentsply from “would-be” to actual competitor, stating: INTROSAN was and is a competitor of DENTSPLY which, via the innovations of one of its principals Dr. David Gibbs (“Dr.Gibbs”), owns various patents to intraosseous anesthetic delivery systems. 2 2 The Third Amended Complaint also states in ¶ 11: In addition to owning patents in the dental anesthetic arts, INTROSAN, during times relevant to this complaint, engaged in research and development of dental anesthetic devices and produced and tested prototypes of such devices for the purpose of entering the commercial market place. Additionally, Dr. Gibbs and other members of INTROSAN developed technologies related to dental implants, endodontic files, dental protective wear, and other dental anesthesia and medicine delivery related technologies. Additional patents were applied for and obtained in these technologies. Third Am. Compl. ¶ 11. Third Am. Compl. ¶ 11, ECF No. 62. Introsan filed the instant case as a “qui tam” false marking action, pursuant to 35 U.S.C. § 292, seeking half of any fine that would be imposed on Dentsply. After the case proceeded through the 478-paragraph, 100-page Second Amended Complaint [Document 47], the Leahy-Smith America Invents Act (“AIA”) 3 was passed, retroactively amending 35 U.S.C. § 292. Therefore, Introsan filed the 430-paragraph, 92-page Third Amended Complaint, presenting 51 counts 4 asserting claims labeled “False Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 66 of 134 Introsan Dental Products, Inc. v. Dentsply Tulsa Dental, LLC, Not Reported in F.Supp.2d... 2012 WL 3011830 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 Advertising and False Patent Marking.” The claims are based upon Dentsply's identifying, in regard to a number of its products, patents that had expired or did not have a claim that would cover the product. 3 Pub.L. No. 112o29, § 16(b), 125 Stat. 284, 329 (2011). 4 The Third Amended Complaint labels each count as a “Cause of Action.” By the instant motion, Dentsply seeks dismissal of all claims, primarily 5 pursuant to Rule 12(b)(6) 6 for failure to state a viable claim. 5 The Court finds Dentsply's Rule 8 and 9 contentions immaterial and finds its jurisdictional contentions to warrant no more than a minor discussion. 6 All Rule references herein are to the Federal Rules of Civil Procedure. II. DISMISSAL STANDARD A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint. A complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations omitted). When evaluating a 12(b) (6) motion to dismiss, a plaintiff's well-pleaded allegations are accepted as true and the complaint is viewed in the light most favorable to the plaintiff. However, conclusory statements or a “formulaic recitation of the elements of a cause of action” will not suffice. Id. A complaint must allege sufficient facts to “cross ‘the line between possibility and plausibility of entitlement to relief.’ ” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.2009) (quoting Twombly, 550 U.S. at 557). *2 Inquiry into whether a complaint states a plausible claim is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. Thus, if the well-pleaded facts contained within a complaint “do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)) (internal quotation marks omitted). III. DISCUSSION In the Third Amended Complaint, Introsan seeks to restate claims made under the prior version of § 292 as being made, in the alternative, either under the current version or for false advertising under the Lanham Act. The essence of all claims, however, is that Dentsply marked, affixed, or used a false patent identification in regard to its products. Two counts, Counts 1 and 32, are based only upon what is referred to herein as “Scope Claims.” That is, claims based on the identification of a patent or patents relating to a product that “is not covered by at least one claim of each patent with which the article is marked.” Clontech Labs., Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed.Cir.2005). Six Counts 7 are based upon both Scope Claims and what are referred to herein as “Expired Patent Claims.” These are claims based on the identification of a patent or patents that have expired. The remaining forty-three counts 8 are based solely upon Expired Patent Claims. 7 Counts 18, 23, 25, 31, 39, and 41. 8 There is no Count 14. A. False Marking Claims Title 35 § 292, as amended by the Leahy-Smith America Invents Act, provides in pertinent part: (a) Whoever ... marks upon, or affixes to, or uses in advertising ... [a false patent identification] ...- .... Shall be fined not more than $500 for every such offense. Only the United States may sue for the penalty authorized by this subsection. Only the United States may sue for the penalty authorized in this subsection. (b) A person who has suffered a competitive injury as a result of a violation of this section may file a civil action in a district court of the United States for recovery of damages adequate to compensate for the injury. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 67 of 134 Introsan Dental Products, Inc. v. Dentsply Tulsa Dental, LLC, Not Reported in F.Supp.2d... 2012 WL 3011830 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 (c) The marking of a product, in a manner described in subsection (a), with matter relating to a patent that covered that product but has expired is not a violation of this section. U.S.C. 35 § 292. 1. Constitutional Contentions a. The Fourteenth Amendment Introsan contends that the retroactive aspect of the amendment to § 292 is violative of its due process rights under the Fourteenth Amendment. The only provision in the Fourteenth Amendment that relates to due process states: No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. *3 U.S. CONST. amend. XIV, § 1 (emphasis added). The Leahy-Smith America Invents Act is a federal, not a state, statute. Hence, there appears to be no reasonable basis for Introsan's Fourteenth Amendment contention. b. Other Constitutional Contentions Introsan makes other constitutional contentions based upon provisions that are applicable to federal legislation. However, a panel of the United States Court of Appeals for the Federal Circuit recently rejected a constitutional challenge to the retroactive amendment of § 292. Rogers v. Tristar Products, Inc., Nos.2011-1494 and 2011- 1495, 2012 WL 1660604 (Fed.Cir. May 2, 2012) (non- precedential). Introsan presents no reason why the Court should not follow the Rogers court's rationale. Thus, the Court rejects Introsan's constitutional challenges. 2. The Jurisdictional Defense Dentsply contends that, by virtue of the amendment of 35 U.S.C. § 292, the Court lacks jurisdiction over Introsan's claims under that section. It suffices to state that the amendment's elimination of certain types of claims does not oust the federal courts of jurisdiction over claims that could properly be asserted by virtue of that section. 3. Statutory Construction-Expired Patents Introsan presents false marking claims based upon expired patents in 49 counts. 9 Dentsply contends that all of these claims are statutorily barred. Introsan disagrees. 9 Six of these counts also involve a contention that an identified patent did not “read on” the marked product. The parties present an academically interesting, but moot, statutory construction issue. Section 292(a) is violated if one “marks upon, or affixes to, or uses in advertising” a false patent identification. However, Section 292(c) states: (c) The marking of a product, in a manner described in subsection (a), with matter relating to a patent that covered that product but has expired is not a violation of this section. Introsan contends that § 292(c) blocks an Expired Patent Claim only with regard to “marking.” Thus, Introsan argues, an Expired Patent Claim under § 292 remains viable against one who “affixes to, or uses in advertising” a false patent identification. Dentsply contends that the word “marking” in Section 292(c) should be read to include all acts of “mark[ing] upon,” or “affix[ing] to,” and “us[ing] in advertising.” There appear to be reasonable arguments on both sides of the issue. If the Court were to reach the issue, it would hold for Dentsply although the matter is not free from doubt. However, as discussed herein, Introsan has failed adequately to plead any competitive injury that would render viable any of its § 292 claims. Hence, even if the Court were to accept Introsan's statutory construction, it would nevertheless dismiss all of its § 292 claims. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 68 of 134 Introsan Dental Products, Inc. v. Dentsply Tulsa Dental, LLC, Not Reported in F.Supp.2d... 2012 WL 3011830 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 4. Competitive Injury The viability of all of Introsan's § 292 claims are dependent upon an adequate pleading that Introsan “suffered a competitive injury as a result of a violation of” § 292. 35 U.S.C. § 292(b). Introsan has not pleaded factual allegations establishing a plausible claim of competitive injury. *4 Of course, Introsan's statement in the Third Amended Complaint that it “was and is a competitor of Dentsply” is inconsistent with the statement in the Complaint that it “was and is a would-be competitor of Dentsply.” Compare Third Am. Compl. ¶ 11 with Compl. ¶ 12 (emphasis added). However, it is not the inconsistency 10 but the totally conclusory nature of the statement that renders it inadequate. 10 As could be the case in a summary judgment context. See Halperin v. Abacus Tech. Corp., 128 F.3d 191, 198 (4th Cir.1997) (noting that in a summary judgment context, a party cannot create an issue of fact by presenting conflicting versions of its own testimony). The factual allegations purportedly supporting the competitive injury contention amount to allegations that Introsan owns patents, engages in research and development, and tests prototypes in the field in which Dentsply manufactures and markets dental products. Third Am. Compl. ¶ 11. The allegation of competitive injury to Introsan is: By way of copying INTROSAN's patented intraosseous anesthesia delivery systems, and by falsely marking and advertising certain of its products (e.g., including false marking related literature and labeling) as patented by certain patents, when they were not, DENTSPLY has caused significant and permanent harm to INTROSAN. Third Am. Compl. ¶ 12. The Court will assume that the aforesaid statement can be read as contending that there was harm due to false marking alone and not due to some kind of “copying” action. Nevertheless, the allegation of competitive injury is totally conclusory and manifestly inadequate. Two recent district court decisions present situations analogous to the instant case. In McCabe v. Floyd Rose Guitars, No. 10CV581 JLS (JMA), 2012 WL 1409627, at *7 (S.D.Cal. Apr.23, 2012), the plaintiff owned pertinent patents but did not directly compete with the defendant guitar manufacturer. The “bare-bone allegations that [the plaintiff] was unable to procure licenses ‘at least in part’ due to [the defendant's] false marking” was insufficient. Id. Introsan does not even make “bare-bone” allegations rising to the level of those rejected in McCabe. Advanced Cartridge Techs. LLC v. Lexmark Intern., Inc., No. 8:10-cv-486-T-23TGW, 2011 WL 6719725, at *3- 5 (M.D.Fl. Dec.21, 2011) is another false marking suit by a patent owner who did not directly compete with the defendant manufacturer. Although speaking in terms of a lack of standing, the court stated, “even if [the patent owner plaintiff] could prove lost licensing money because of false marking by [the defendant], the harm is still too derivative or indirect to support prudential standing.” Id. at 5. Certainly, some courts have recognized that there can be a presumption of competitive injury in a false marking case where the plaintiff and defendant are competitors. See Ira Green, Inc. v. J.L. Darling Corp., No. 3:11-cv-05796-RJB, 2011 WL 6218146 (W.D.Wash. Dec.5, 2011); Fasteners for Retail Inc. v. Andersen, No. 11 C 2164, 2011 WL 5130445 (N.D.Ill. Oct.28, 2011). However, Introsan does not plead facts that render it plausible that Dentsply could be considered a competitor for any pertinent purpose. *5 Moreover, even when the § 292 claimant and defendant are competitors, that fact alone does not create a plausible claim of competitive injury. For example, in Fisher-Price v. Kids II, Inc., No. 10-CV-00988A(F), 2011 WL 6409665, at *10 (W.D.N.Y. Dec.21, 2011), the court dismissed a § 292 counterclaim brought by an actual competitor of the false marker. Id. The court held that, the § 292 claimant has not “alleged sufficient facts making it plausible to find [the false marker's] alleged mismarking has resulted in [the § 292 claimant] suffering a competitive injury ....” Id. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 69 of 134 Introsan Dental Products, Inc. v. Dentsply Tulsa Dental, LLC, Not Reported in F.Supp.2d... 2012 WL 3011830 © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 The Court finds that Introsan has failed to plead facts presenting a plausible claim that it suffered a “competitive injury” as that term is used in § 292. Accordingly, all § 292 claims shall be dismissed. B. False Advertising Claims In each Count, Introsan adds to its false marking claim a Lanham Act claim for false advertising. To establish a Lanham Act false advertising claim, a plaintiff must prove that: (1) the defendant made a false or misleading description of fact or representation of fact in a commercial advertisement about his own or another's product; (2) the misrepresentation is material, in that it is likely to influence the purchasing decision; (3) the misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience; (4) the defendant placed the false or misleading statement in interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its products. PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111, 120 (4th Cir.2011) (citing Scotts Co. v. United Indus., 315 F.3d 264, 272 (4th Cir.2002)). The Court will assume, without deciding, that Introsan has pleaded adequately each of the first four elements of a Lanham Act claim. Introsan does not, however, allege facts that support any plausible claim as to the fifth element. That is, Introsan does not present factual allegations that render plausible a claim that it has been or is likely to be injured “either by direct diversion of sales or by a lessening of goodwill associated with its products.” Id. Accordingly, the Court shall dismiss all Lanham Act claims. IV. CONCLUSION For the foregoing reasons: 1. Defendant's Motion to Dismiss Plaintiff's Third Amended Complaint [Document 67] is GRANTED. 2. Judgment shall be entered by separate Order. SO ORDERED. All Citations Not Reported in F.Supp.2d, 2012 WL 3011830 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 70 of 134 TAB H Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 71 of 134 Milliken & Co., Inc. v. Smith, Not Reported in F.Supp.2d (2011) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Distinguished by Milliken & Company v. Evans, D.S.C., February 8, 2016 2011 WL 939211 Only the Westlaw citation is currently available. United States District Court, D. South Carolina, Spartanburg Division. MILLIKEN & COMPANY, INC., Plaintiff, v. Dana M. SMITH, Defendant. C.A. No. 7:10-cv-00301-JMC. | March 16, 2011. Attorneys and Law Firms John C. Glancy, John Timothy Merrell, Ogletree, Deakins, Nash, Smoak and Stewart, Greenville, SC, William Pinkerton Steinhaus, Ogletree, Deakins, Nash, Smoak and Stewart, Atlanta, GA, for Plaintiff. Jeffrey A. Lehrer, Ford and Harrison, Spartanburg, SC, for Defendant. OPINION AND ORDER J. MICHELLE CHILDS, District Judge. *1 This matter is before the court on Defendant Dana M. Smith’s (“Smith”) Motion to Dismiss Plaintiff Milliken & Company, Inc.’s (“Milliken”) Complaint pursuant to Rules 12(b)(6) and 12(b)(3) of the Federal Rules of Civil Procedure, or in the alternative, Motion to Transfer Venue [Doc. # 15]. For the reasons set forth below, the court grants Smith’s Motion to Dismiss. FACTUAL AND PROCEDURAL HISTORY1 Milliken is a Delaware Corporation that is duly authorized and registered to do business in South Carolina, and its corporate headquarters for all of its operations worldwide are located in Spartanburg, South Carolina. As part of its business operations, Milliken designs, manufactures, markets, and sells commercial carpet products, including a wide range of high performance modular and broadloom floor coverings for customers in the commercial hospitality industry, both inside and outside of the United States. Milliken hired Smith on May 7, 2007 to work as an Account Manager in the Atlanta, Georgia metro area of its Southeastern Region for its Hospitality Carpets Business. Smith signed an Associate Agreement (the “Agreement”) on her first day of work at Milliken. As an Account Manager, Smith was responsible for working with existing and prospective Milliken customers, including specifically, furniture, fixtures and equipment purchasing companies (“FF & E Purchasers”) in the hospitality industry, hotel ownership groups, hotel management groups, interior design firms, commercial business owners, and carpet dealers, to solicit sales of Milliken’s hospitality carpet products and assist with the design, implementation, installation, and maintenance of these products. Smith resigned her position with Milliken on January 25, 2010, to take a position with Desso, a flooring company that manufactures and sells broadloom and printed carpet products that allegedly compete directly with the products Smith sold for Milliken. Smith’s last day of employment with Milliken was February 3, 2010, at which time Milliken collected from Smith Milliken property in her possession, including her computer, cell phone, credit card, and company car. Milliken contends that, during Smith’s employment, it provided Smith with confidential, proprietary, and trade secret information about the company’s hospitality carpet products, including design, development, and manufacturing processes and limitations, the Company’s current and future marketing and sales strategies for these products to help Milliken compete against traditional broadloom and printed carpet products sold by Milliken’s competitors, and detailed customer data and pricing information related to these products and Smith’s customer base. Milliken further asserts that it has provided Smith with strategic business information regarding the Company’s plans to compete against Desso and other competitors who sell broadloom and printed carpet products in the hospitality industry, as well as significant training and education in the textiles business in general and commercial hospitality carpet sales in particular. *2 After Smith began working for Desso, Milliken brought this action against her alleging breach of contract and misappropriation of trade secrets. Smith filed this Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 72 of 134 Milliken & Co., Inc. v. Smith, Not Reported in F.Supp.2d (2011) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 motion with the court to dismiss the matter on the bases of Milliken’s failure to state a claim and improper venue. Alternatively, Smith requests the court transfer venue of the case to the U.S. District Court for the Northern District of Georgia. STANDARD OF REVIEW For a complaint to survive a motion to dismiss, the Federal Rules of Civil Procedure require that it contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Although Rule 8(a) does not require “detailed factual allegations,” it requires “more than an unadorned, the- defendant-unlawfully-harmed-me accusation,” Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-57, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)), in order to “give the defendant fair notice ... of what the claim is and the grounds upon which it rests,” Twombly, 550 U.S. at 555 (internal citations omitted). Stated otherwise, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 570). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw [a] reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 556). A complaint alleging facts which are “merely consistent with a defendant’s liability ... stops short of the line between possibility and plausibility of ‘entitlement to relief.’ ” Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. at 1955) (internal quotation marks omitted). In evaluating a motion to dismiss, a plaintiff’s well- pleaded allegations are taken as true, and the complaint, including all reasonable inferences therefrom, is liberally construed in the plaintiff’s favor. McNair v. Lend Lease Trucks, Inc., 95 F.3d 325, 327 (4th Cir.1996). The court may consider only the facts alleged in the complaint, which may include any documents either attached to or incorporated in the complaint, and matters of which the court may take judicial notice. Tellabs v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). Although the court must accept the plaintiff’s factual allegations as true, any conclusory allegations are not entitled to an assumption of truth, and even those allegations pled with factual support need only be accepted to the extent that “they plausibly give rise to an entitlement to relief.” Iqbal, 129 S.Ct. at 1950. DISCUSSION Smith argues that Milliken has failed to state a claim in its Complaint upon which relief may be granted. A plaintiff asserting a breach of contract action must demonstrate: (1) a binding contract entered into by the parties; (2) a breach or unjustifiable failure to perform the contract; and (3) damage suffered by the complaining party as a direct and proximate result of the breach. See Fuller v. E. Fire & Cas. Ins. Co., 240 S.C. 75, 89, 124 S.E.2d 602, 610 (1962). Milliken has pled facts demonstrating that Smith entered into the Agreement at issue in consideration of her initial employment and the relevant terms of that Agreement. Milliken has also pled facts demonstrating that Smith began employment with Desso, an allegedly “Conflicting Organization” under the Agreement, to sell hospitality carpet products, which are allegedly “Conflicting Products” under the Agreement. However, as Milliken points out in its memoranda, the Agreement does not prohibit employment with a Conflicting Organization or employment concerning merely the sale of Conflicting Products. The Employment Agreement actually provides that an employee “will not render the same or similar services ... to any Conflicting Organization in connection with the promotion of any Conflicting Product to any person or organization upon whom [the employee] called, or whose account [the employee] supervised on behalf of Milliken, at any time during the last two years of my employment by Milliken.” See Employment Agreement at F [Doc. # 1-1] (emphasis added); see also Milliken’s Mem. in Opp. at 17. Milliken makes no factual allegations in the Complaint that Smith has actually solicited Milliken customers or promoted any Conflicting Product to a Milliken customer in breach of her Employment Agreement. *3 Additionally, Milliken makes no factual allegations in the Complaint that Smith has disclosed any of Milliken’s trade secret information in breach of confidence. To state a cause of action under the South Carolina Trade Secrets Act for the misappropriation of trade secrets by a former employee, a plaintiff must show: (1) the existence of a trade secret; (2) communicated in confidence by the plaintiff to the employee; (3) disclosed by the employee in breach of that confidence; (4) acquired by the defendant with knowledge of the breach of confidence; and (5) used by the defendant to the detriment of the plaintiff. See Nucor Corp. v. Bell, 482 F.Supp.2d 714 (D.S.C.2007). Milliken relies on Nucor Corp. v. Bell for its recitation of the elements of its claim of misappropriation of trade Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 73 of 134 Milliken & Co., Inc. v. Smith, Not Reported in F.Supp.2d (2011) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 secrets. However, Nucor Corp. v. Bell does not sanction Milliken’s view that a bald assertion of “threatened” disclosure, without more, fulfills the elements of the action. In Nucor Corp., Nucor alleged that the former employee engaged in acts of misappropriation including downloading the plaintiff’s information for competitive use and actually recruited Nucor employees for positions with the new company in contravention of the employee’s agreement with Nucor that threatened Nucor’s trade secrets. Nucor claimed that, given the former employee’s acts of misappropriation and breaches of loyalty, disclosure of Nucor’s confidential trade secret information was inevitable and injunctive relief was necessary to prevent further harm to Nucor. No such allegations of actual breach of contract, breach of loyalty, or misappropriation appear in Milliken’s Complaint against Smith. Although the Complaint does contain the averment that “Smith has either used and disclosed, or will inevitably use and disclose, Milliken’s Trade Secrets in violation of S.C.Code § § 39-8-10 et seq,” Complaint at ¶ 28, it contains no factual allegations beyond this conclusory statement amounting to little more than an assertion of the elements of the claim. In defending the Motion to Dismiss, Milliken has provided additional information tending to show that, at this time, Milliken only believes that Smith will inevitably use Milliken’s confidential information to Desso’s advantage. Milliken’s Mem. in Opp. at 7. Although Milliken argues for the application of the “inevitable disclosure” doctrine, South Carolina courts have not adopted the application of the theory in the circumstances at issue in this case. In a subsequent order in Nucor Corp. v. Bell, et al., No. 2:06-CV-02972-DCN (D.S.C. Mar. 14, 2008), the district court recognized that, although never directly addressed by the South Carolina Supreme Court, the “inevitable disclosure” doctrine could be viable under South Carolina law. Again, this recognition was in the context of allegations of actual misappropriations. See Id. While this court does not doubt that “inevitable disclosure” could be properly pled as part of a misappropriation claim, a plaintiff must include factual allegations in the Complaint for which one could conclude that inevitable disclosure is actually plausible. Stating that the plaintiff suspects that the defendant will “inevitably” disclose trade secret information without more is insufficient to meet the pleading requirements of Rule 8, Fed.R.Civ.P. Milliken must allege more than that Smith was formerly employed by it and now she works for someone else to adequately plead this cause of action. *4 Viewing the allegations of the Complaint in the light most favorable to Milliken, there are simply insufficient allegations in the Complaint to state a claim to relief that is plausible on its face. Accordingly, the court GRANTS Smith’s Motion to Dismiss [Doc. # 15] and dismisses Milliken’s Complaint without prejudice.2 IT IS SO ORDERED. All Citations Not Reported in F.Supp.2d, 2011 WL 939211 Footnotes 1 This factual recitation is taken substantially from Plaintiff’s Memorandum in Opposition to Defendant’s Motion to Dismiss Plaintiff’s Complaint Pursuant to Rule 12(b)(6) and Motion to Dismiss Pursuant to Rule 12(b)(3) or, in the Alternative, Motion to Transfer Venue [Doc. # 22] (“Milliken’s Mem. In Opp.”). 2 The court declines to address the remaining issues raised by the parties as unnecessary given the court’s disposition of Smith’s Rule 12(b)(6) Motion to Dismiss. End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 74 of 134 TAB I Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 75 of 134 Moose Mountain Toymakers Ltd. v. Majik Ltd., LLC, Not Reported in F.Supp.2d (2011) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite citing references available 2011 WL 3625057 Only the Westlaw citation is currently available. NOT FOR PUBLICATION United States District Court, D. New Jersey. MOOSE MOUNTAIN TOYMAKERS LTD. and Moose Mountain Marketing, Inc., Plaintiffs, v. MAJIK LTD., LLC and East Point Sports, Defendants. Civ. No. 10-4934 (DMC)(JAD). | Aug. 12, 2011. Attorneys and Law Firms Stephen F. Roth, Lerner, David, Littenberg, Krumholz & Mentlik, LLP, Westfield, NJ, for Plaintiffs. Robert J. Schoenberg, Stephanie R. Wolfe, Riker, Danzig, Scherer, Hyland & Perretti, LLP, Morristown, NJ, for Defendants. OPINION DENNIS M. CAVANAUGH, District Judge. *1 This matter comes before the Court upon the motion of Defendants East Point Sports, LLC and Majik, Ltd., LLC (“Defendants”) for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c). No oral argument was heard under Rule 78. For the reasons stated below, Defendants’ motion is GRANTED. I. BACKGROUND1 Plaintiffs Moose Mountain Toymakers Ltd. and Moose Mountain Marketing, Inc. (“Plaintiffs”) design, manufacture and distribute the Arcade Alley® Bowlercade® game (“Bowlercade”), which is a toy bowling game. Bowlercade is protected by Patent No. D497,187 (the “′187 Patent”) and Patent No. D520,067 (the “′067 Patent”), both of which cover the ornamental appearance of the game. Moose Mountain Toymakers Ltd. is the owner of the entire right, title and interest in the ′187 and ′067 Patents. Moose Mountain Marketing, Inc. is the exclusive licensee of both patents. Plaintiffs claim that Defendants knowingly misappropriated key distinguishing features of Bowlercade to make the Majik Bowl game (“Majik Bowl”), a nearly identical bowling game. Accordingly, Plaintiffs assert claims for infringment of the ′187 and ′067 Patents. In addition to infringing upon Plaintiffs’ patents, Plaintiffs also allege that Defendants “interfered with the relationship between [a] specific retailer and Moose Mountain, and agreed to manufacture and supply retailers, including the specific retailer, with the Majik Bowl game, at a price that would undercut the price of [Bowlercade].” Compl. ¶¶ 47-49. Accordingly, Plaintiffs also bring claims for Tortious Interference with Prospective Economic Advantage, Unfair Competition in Violation of N.J.S.A. §§ 56:4-1 et seq., Common Law Unfair Competition and Unjust Enrichment. II. STANDARD OF REVIEW Federal Rule of Civil Procedure 12(c) allows a party to move for judgment on the pleadings after the pleadings are closed. To succeed on such a motion, the moving party must show that “no material issue of fact remains to be resolved and that [the moving party] is entitled to judgment as a matter of law.” Rosenau v. Unifund Corp., 538 F.3d 218, 221 (3d Cir.2008) (quoting Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290-91 (3d Cir.1988) (internal quotation marks omitted)). As in a motion to dismiss for failure to state a claim, in deciding a motion for judgment on the pleadings, all allegations in the complaint must be taken as true and viewed in the light most favorable to the plaintiff. See Turbe v. Gov’t of Virgin Islands, 938 F.2d 427, 428 (3d Cir.1991). Moreover, a court may consider only the complaint, exhibits attached to the complaint, matters of public record, and undisputedly authentic documents if the plaintiff’s claims are based upon those documents. See Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.1993). “In the design patent context, the facts alleged in the Complaint include the patent and the pictures of the infringing products.” Cotapaxi Custom Design and Mfg., LLC v. Corporate Edge, Inc., No. 06-5183, 2007 WL 2908265, at *4 (D.N.J. Oct.1, 2007). The review of these documents is “sufficient for this Court to determine if ‘it appears Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 76 of 134 Moose Mountain Toymakers Ltd. v. Majik Ltd., LLC, Not Reported in F.Supp.2d (2011) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 beyond a reasonable doubt that plaintiff can prove no set of facts in support of his claim which would be entitled to relief.” Id. (quoting Hughes v. Rowe, 449 U.S. 5, 19, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980)). III. DISCUSSION Patent Infringement Claims *2 The Court must engage in a two-step analysis to determine whether Defendants have infringed on Plaintiffs’ Patents. First, the design patent must be properly construed, as a matter of law. Cotapaxi, 2007 WL 2908265, at *3. “Second, the patented design must be compared to the alleged infringing product in order to determine whether or not it infringes the design patent.” Id. Specifically, the Court must apply the ordinary observer test to determine “whether an ordinary observer, familiar with the prior art designs, would be deceived into believing that the accused product is the same as the patented design.” Richardson v. Stanley Works, Inc., 597 F.3d 1288, 1295 (Fed.Cir.2010) (noting that “the ‘ordinary observer’ test should be the sole test for determining whether a design patent has been infringed” (citation and internal quotation marks omitted)). This is a question of fact that the patentee must establish. Id. A. Claim Construction The ′187 and ′067 Patents are each titled “Bowling Claim”. Schoenberg Decl., Ex. A and B. The only claim for each Patent recites: “The ornamental design for the bowling game, as shown and described.” Id. There are six drawings showing the different views of the each Patent. On each respective Patent, the drawings show, a perspective view (figure 1), right side elevational view (figure 2), left side elevational view (figure 3), rear elevational view (figure 4), front elevational view (figure 5), and top plan view (figure 6). Id. “Where a design [patent] contains both functional and nonfunctional elements, the scope of the claim must be construed in order to identify the non-functional aspects of the design as shown in the patent.” Richardson, 597 F.3d at 1293 (citation and internal quotation marks omitted). This is so because “[a] design patent only protects the novel, ornamental features of the patented design.” See Oddzon Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396, 1405 (Fed.Cir.1997). Accordingly, each of the Patents will be reviewed and the Court will distinguish the functional elements from those that are ornamental. The functional aspects of the ′187 Patent are the alley apron, the alley side rails, the sleeves, the pins, and the enclosure. These components are common to many other bowling games that existed prior to the issuance of the ′ 187 and ′067 Patents. See Cotapaxi, 2007 WL 2908265, at *4; Defs.’ Br. 12. The alley apron covers the floor so that the game can be played on any floor surface. In conjunction with the side rails, the alley apron defines the alley down which the plastic bowling ball is thrown. The side rails hold the alley apron flat to minimize creases and to keep the ball from rolling off the alley apron. The sleeves, which lie along the sides of the alley apron, receive the alley side rails. The pins serve the functional purpose that is the object of the game-they are meant to be knocked down. Finally, the enclosure-a rectangular box with a missing side, which serves as an opening-at the end of the alley keeps the ball from rolling or bouncing away after hitting the pins. Once the functional elements above have been properly discounted, the remaining ornamental features are: (1) the rectangular shape of the enclosure (2) the rounded alley side rails; and (3) the intermittent spacing of the sleeves of the alley apron within which the rounded alley side rails are received. *3 The ′067 Patent is nearly identical to the ′187 Patent except that it includes a ball return track and a game controller or console at the end of the ball return. The ball track return functions to direct the ball back toward the player. The track is simply a third rail that extends parallel to the right alley side rail. The rectangular game console serves as a ball stop, keeps score, and allows players to release the pins when switching between players. The positioning of the game console is also functional because it stops the ball and is positioned at the end fo the alley where players may have easy access to it. Once these functional elements are discounted, the remaining ornamental features are: (1) the rectangular shape of the enclosure (2) the rounded alley side rails; and (3) the intermittent spacing of the sleeves of the alley apron within which the rounded alley side rails are received; and (4) the particular rectangular shape of the game console. B. Ordinary Observer Test After visually comparing the drawings of the ′067 and ′187 Patents, Schoenberg Decl., Ex. A and B, to the photographs of Majik Bowl, Defs.’ Br. 13-21, this Court concludes that there are no material issues of fact or allegations in the pleadings that could lead this Court to find for Plaintiffs. Under the ordinary observer test, the Patents are not substantially similar to Majik Bowl. As such, an ordinary observer would not be induced to Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 77 of 134 Moose Mountain Toymakers Ltd. v. Majik Ltd., LLC, Not Reported in F.Supp.2d (2011) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 mistake one for the other. See Goham Co. v. White, 14 Wall. 511, 81 U.S. 511, 528, 20 L.Ed. 731 (1871). Though there are certainly similarities between Majik Bowl and the Patents, as there must be between all toy bowling ball games, they are trumped by the ornamental differences. Majik Bowl has a distinct triangular enclosure. On top of the enclosure rests a cartoon-like sign advertising the name of the game and displaying a bowling ball knocking into pins. The sides of the enclosure include similar pictures of a bowling ball and pins. Unlike in the Patents, Majik Bowl has a netting behind the pins which is for catching the pins when they fall. This net extends the back of the enclosure such that when images of Majik Bowl are compared to figures 4 and 5 of the ′187 Patent and figure 3 of the ′067 Patent, it is clear that the profile of Majik Bowl is different from the design in the Patents. The alley side rails in Majik Bowl are triangular and attached with Velcro to the top of the alley apron, as opposed to in the Patents wherein the side rails are round rails received within sleeves along the sides of the alley apron. While both Majik Bowl and the ′ 067 Patent have a ball track and console, both of which are functional, Majik Bowl’s console is triangular to match its enclosure. Due to the obvious and noticeable differences in overall appearance between Majik Bowl and the Patents, this Court concludes that Defendants do not infringe on Plaintiffs’ Patents under the ordinary observer test. Non-Patent Claims A. Tortious Interference with Prospective Economic Advantage *4 Plaintiffs allege that “Defendants were aware of Moose Mountain’s prior relationship and business dealings with the specific retailer and wrongfully interfered with that relationship for their own benefit” and that this conduct was “committed willfully, knowingly, maliciously, and in conscious disregard of Moose Mountain’s rights.” Compl. ¶¶ 59, 61. Defendants argue that the allegations are formulaic and “at most demonstrate that Defendants compete with Moose Mountain, and the unnamed customer obtained the Maj ik bowling game at a lower price than it would have paid for [Bowlercade]; nothing more, nothing less.” Defs.’ Br. 24. The Court agrees. To state a claim for tortious interference with prospective economic advantage, Plaintiffs must plead that “it had a reasonable expectation of economic advantage that was lost as a direct result of defendants’ malicious interference, and that it suffered losses thereby.” Lamorte Burns & Co., Inc. v. Walters, 167 N.J. 285, 306, 770 A.2d 1158 (2001) (citing Baldasarre v. Bulter, 132 N.J. 278, 293, 625 A.2d 458 (1993)). Malice in this context means “harm ... inflicted intentionally and without justification or excuse .... [t]he relevant inquiry is whether the conduct was sanctioned by the ‘rules of the game,’ for where a plaintiff’s loss of business is merely the incident of healthy competition, there is no compensable tort injury.” Id. at 306, 770 A.2d 1158. Here, the threadbare allegations give no indication that Defendants did anything beyond offer a retailer that Plaintiffs worked with a better price for a similar product. Plaintiffs do not plead any facts to show that Defendants acted with malice.2 Simply making the conclusory statement that Defendants acted “maliciously” will not suffice. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (noting that a plaintiff’s “obligation to provide the ‘grounds’ of his ‘entitle [ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do”). Accordingly, the Court finds that Defendants are entitled to judgment on the pleadings for this claim. B. Unfair Competition Plaintiffs’ claims for both statutory and common law unfair competition also prove unavailing as they are nothing more than a conclusory and formulaic recitation of a cause of action. Accordingly, this Court will also finds that Defendants are entitled to judgment on the pleadings for these claims. C. Unjust Enrichment Plaintiffs allege that Defendants “profited from Moose Mountain’s ideas, goodwill, and proprietary designs without compensating Moose Mountain” and that “retention of [those benefits] without compensation to Moose Mountain [ ] would be unjust.” Compl. ¶¶ 75-76. Again, Defendants argue that these allegations are conclusory. The Court agrees. Moreover, Plaintiffs’ unjust enrichment claim is incongruous with the present dispute. “To establish unjust enrichment, a plaintiff must show both that defendant received a benefit and that retention of that benefit without payment would be unjust.” VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554, 641 A.2d 519 (1994); see Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 110, 922 A.2d 710 (2007). A plaintiff must also show “that it expected remuneration from the defendant at the time it Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 78 of 134 Moose Mountain Toymakers Ltd. v. Majik Ltd., LLC, Not Reported in F.Supp.2d (2011) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 performed or conferred a benefit on defendant and that the failure of remuneration enriched defendant beyond its contractual rights.” Id. Here, Plaintiffs have not alleged, nor can they, that they expected remuneration from a benefit that they conferred upon Defendants because they did not intend to confer any benefit upon Defendants- Defendants allegedly copied Plaintiffs designs, Plaintiffs did not voluntarily share them. See Wiatt v. Winston & Strawn, LLP, No. 10-6608(JLL), 2011 U.S. Dist. LEXIS 68827, at *42, 2011 WL 2559567 (D.N.J. June 27, 2011) (dismissing plaintiffs’ unjust enrichment claim because they did not allege “that they performed or otherwise conferred a benefit ... under a quasi-contractual relationship with the expectation of remuneration” but instead “assert[ed] a variety of tort claims for which they clearly did not anticipate or expect remuneration”). Accordingly, judgment on this claim must be entered in favor of Defendants. CONCLUSION *5 For the reasons stated, Defendant’s motion for judgment on the pleadings is GRANTED. All Citations Not Reported in F.Supp.2d, 2011 WL 3625057 Footnotes 1 The facts in the Background section have been taken from the parties’ submissions. 2 Notably, Plaintiffs do not base their tortious interference, unfair competition, and unjust enrichment claims on Defendants’ allegedly patent infringing conduct and proclaim that there is no “interdependence between [Plaintiffs’] claims of patent infringement and their ‘nonpatent claims.’ ”. Pl.’s Opp’n Br. 10. End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 79 of 134 TAB J Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 80 of 134 Msc.Software, Inc. v. Altair Engineering, Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite history available 2009 WL 1856222 Only the Westlaw citation is currently available. United States District Court, E.D. Michigan, Southern Division. MSC.SOFTWARE, INC., Plaintiff, v. ALTAIR ENGINEERING, INC., et al, Defendants. No. 07-12807. | June 25, 2009. West KeySummary 1 Antitrust and Trade Regulation Pleading Injunction Disclosure or use of trade secrets or confidential information 29TAntitrust and Trade Regulation 29TIVTrade Secrets and Proprietary Information 29TIV(B)Actions 29Tk428Pleading 212Injunction 212IVParticular Subjects of Relief 212IV(L)Trade or Business 212k1384Disclosure or use of trade secrets or confidential information (Formerly 212k56) Software company failed to state an inevitable disclosure claim for misappropriation of trade secrets. The fact that employees of a competing company have knowledge of the alleged trade secrets and that the companies are strong competitors was insufficient to allege a threatened misappropriation claim. 2 Cases that cite this headnote Attorneys and Law Firms James F. Hermon, Janis L. Adams, Erin M. Rozycki, Patrick F. Hickey, Dykema Gossett, Detroit, MI, for Plaintiff. Catherine T. Dobrowitsky, Larry J. Saylor, Marcy L. Rosen, Wendolyn W. Richards, Miller, Canfield, Detroit, MI, Matthew P. Allen, Michael C. Fayz, Miller, Canfield, Troy, MI, C. Thomas Ludden, Phillip E. Seltzer, Lipson, Neilson, Bloomfield Hills, MI, for Defendants. ORDER GRANTING MOTION TO PARTIALLY DISMISS CLAIMS PREDICATED UPON THE INEVITABLE DISCLOSURE DOCTRINE VICTORIA A. ROBERTS, District Judge. I. INTRODUCTION *1 This matter is before the Court on Defendants’ (except Michael Hoffman) “Motion to Partially Dismiss Claims Predicated Upon the ‘Inevitable Disclosure’ Doctrine.” (Doc. # 189). These Defendants ask the Court to dismiss all aspects of MSC’s First Amended Complaint that rely upon the “inevitable disclosure” doctrine, including paragraph 64. MSC bases this cause of action on Employee Confidentiality and Inventions Agreements signed by all individual Defendants except Michael Hoffman. In an e-mail dated November 26, 2008, the Court required supplemental briefs on two issues: (1) the elements of an inevitable disclosure claim under Michigan law; and (2) whether the Court can apply California law to a claim under the Michigan Uniform Trade Secrets Act (“MUTSA”). The parties filed supplemental briefs on December 3, 2008. Neither party addressed the second issue. Defendants’ motion is GRANTED. II. BACKGROUND On June 18, 2008, MSC filed a First Amended Complaint. Count III alleges all individual Defendants Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 81 of 134 Msc.Software, Inc. v. Altair Engineering, Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 misappropriated trade secrets in violation of the MUTSA. Paragraph 64 is in Count III. It says: if the individual Defendants have not yet used, disclosed, or otherwise misappropriated MSC.Software Proprietary Information for the benefit of Altair, it is inevitable that they will do so in the future in the normal course of their employment with Altair. Paragraph 64 is the only paragraph that relies on the “inevitable disclosure” doctrine. Importantly, because MSC captions this Count “Misappropriation of Trade Secrets in Violation of Michigan Uniform Trade Secrets Act”, the Court finds MSC intends to limit this Count to a statutory claim. Therefore, this Count does not consider the Agreements entered into by the individual Defendants. III. STANDARD OF REVIEW When reviewing a Fed.R.Civ.P. 12(b)(6) motion, the trial court “must construe the complaint liberally in the plaintiff’s favor and accept as true all factual allegations and permissible inferences therein.” Gazette v. City of Pontiac, 41 F.3d 1061, 1064 (6th Cir.1994) (citing Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir.1976)); see also Miller v. Currie, 50 F.3d 373, 377 (6th Cir.1995). Because a Fed.R.Civ.P. 12(b)(6) motion rests upon the pleadings rather than the evidence, “[i]t is not the function of the court [in ruling on such a motion] to weigh evidence or evaluate the credibility of witnesses.” Miller, 50 F.3d at 377 (citing Cameron v. Seitz, 38 F.3d 264, 270 (6th Cir.1994)). However, while this standard is decidedly liberal, it requires more than the bare assertion of legal conclusions. In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir.1993) (citing Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988)). Rather, the complaint must contain either direct or inferential allegations with regard to all the material elements to sustain recovery under some viable legal theory. DeLorean, 991 F.2d at 1240 (citations omitted). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]’-‘that the pleader is entitled to relief.’ ” Ashcroft v. Iqbal, 556 U.S. 662, ----, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868, ---- (2009) (quoting Fed.R.Civ.P. 8(a) (2)). IV. APPLICABLE LAW AND ANALYSIS *2 The Court first decides what law applies. Defendants ask the Court to apply California law regarding “inevitable disclosure” to MSC’s claim under the MUTSA, and argue that the claim should be dismissed since California does not recognize a cause of action for inevitable disclosure. In their Reply Brief, Defendants say even if Michigan law applies, the Court should dismiss the claim. MSC says Michigan law applies. A federal court sitting in diversity must apply the law of the forum state, including its choice of law rules. Auto. Logistics Productivity Improvement Sys. Inc. v. Burlington Motor Carriers, Inc. ., 986 F.Supp. 446, 447- 48 (E.D.Mich.1997) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Erie v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); In re Air Crash Disaster at Detroit Metro. Airport v. Northwest Airlines, 757 F.Supp. 804, 807 (E.D.Mich.1989)). Misappropriation of trade secrets is a tort. Mike’s Train House, Inc. v. Lionel, L.L.C., 472 F.3d 398, 413 (6th Cir.2006) (citing Bliss Clearing Niagara, Inc. v. Midwest Brake Bond Co., 270 F.Supp.2d 943, 948-49 (W.D.Mich.2003); Vic’s Quality Fruit Market, III, Inc. v. Busch’s, Inc., 2002 WL 1374174 at *4 (Mich.Ct.App. June 25, 2002)). Under Michigan’s choice of law rules, Michigan law applies to tort actions absent a “rational reason” to displace it with the law of a foreign jurisdiction. See Whitfield v. Bic Corp., 1994 WL 520892 at *6 (6th Cir. Sept.21, 1994) (citing Olmstead v. Anderson, 428 Mich. 1, 400 N.W.2d 292 (1987)). To determine if a “rational reason” exists, the Court engages in a two-step analysis. First, it determines if a foreign state has an interest in having its law applied. If no other state has an interest, Michigan law applies. If another state has an interest, the Court determines if Michigan’s interests mandate that Michigan law be applied despite the foreign state’s interests. Foster v. Fed. Express Corp., 2005 WL 3369484 at *3 (E.D.Mich. Dec.12, 2005) (quoting Sutherland v. Kennington Truck Serv., Ltd., 454 Mich. 274, 286, 562 N.W.2d 466 (1997)). Defendants say “rational reasons” exist for the Court to apply California law: (1) MSC chose California law to govern the individual Defendants’ Agreements; (2) MSC’s principal place of business and world headquarters are in California (MSC only has an office in Michigan); and (3) the Agreements govern the post-employment behavior of the individual Defendants. The Court disagrees. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 82 of 134 Msc.Software, Inc. v. Altair Engineering, Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 Paragraph 64 relates to MSC’s claim under the MUTSA, not its breach of contract claim. The State of California does not have an interest in having its law applied to a claim brought under a specific Michigan statute. Accordingly, the Court applies Michigan law to MSC’s “inevitable disclosure” claim. Michigan has not endorsed the “inevitable disclosure” doctrine. See Degussa Admixtures, Inc. v. Burnett, 277 Fed.Appx. 530, 535 (6th Cir.2008). Nonetheless, that doctrine has been mentioned in federal and state cases arising in Michigan. *3 In Allis-Chalmers Mfg. Co. v. Cont’l Aviation & Eng’g Corp., 255 F.Supp. 645 (E.D.Mich.1966), the Court granted a preliminary injunction because the hearing led to the following conclusions: (1) the former employer had confidential proprietary information which constituted protectable trade secrets that were not disclosed to the public; (2) the nature of the research and development work performed by the employee at his former place of employment, and the type of work that the employee would perform at his future place of employment led to an “inevitable and imminent” danger of disclosure of the former employer’s trade secrets and use of those trade secrets by the future employer; and (3) it was virtually impossible for the employee to perform his duties for the future employer to the best of his ability without giving the future employer the benefit of the former employer’s confidential information. Allis-Chalmers Mfg. Co., 255 F.Supp. at 654. In CMI Int’l, Inc. v. Intermet Int’l Corp., 251 Mich.App. 125, 649 N.W.2d 808 (2002), the plaintiff appealed, inter alia, the trial court’s order denying a preliminary injunction and granting defendants summary disposition on plaintiff’s claim under the MUTSA. The appellate court affirmed the trial court’s decision, stating that although a court can enjoin actual or threatened misappropriation of a trade secret, “[n]o Michigan case has interpreted the statutory provision concerning threatened misappropriation.” CMI Int’l, Inc., 251 Mich.App. at 132-33, 649 N.W.2d 808 (citing MCLA § 445.1903). According to the court, even if a threatened misappropriation claim encompasses the concept of inevitable disclosure, a former employer could not compromise an employee’s right to change jobs. See id. at 133-34, 649 N.W.2d 808 (citing Hayes-Albion Corp. v. Kuberski, 421 Mich. 170, 188, 364 N.W.2d 609 (1984)). CMI, Int’l, Inc. made it clear that “for a party to make a claim of threatened misappropriation, whether under a theory of inevitable disclosure or otherwise, the party must establish more than the existence of generalized trade secrets and a competitor’s employment of the party’s former employee who has knowledge of trade secrets.” See id. at 134, 649 N.W.2d 808 (citing PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir.1995)); see also Strenstrom Petroleum Services Group, Inc. v. Mesch, 375 Ill.App.3d 1077, 1096, 314 Ill.Dec. 594, 874 N.E.2d 959 (2007) (“The fact that a former employee accepted a similar position with a competitor, without more, will not demonstrate inevitable disclosure. Courts also consider the level of competition between the parties and the new employer’s actions to prevent unlawful disclosure of trade secrets”) (citing Liebert Corp. v. Mazur, 357 Ill.App.3d 265, 284, 293 Ill.Dec. 28, 827 N.E.2d 909 (2005)). MSC’s Complaint does not allege anything more than what the Court in CMI, Int’l, Inc. found to be insufficient. In PepsiCo, Inc., a case arising under The Illinois Trade Secret Act, there was evidence that the employee demonstrated a lack of trustworthiness and a willingness to misuse the former employer’s trade secrets: *4 [The employee’s] lack of forthrightness on some occasions, and out and out lies on others, in the period between the time he accepted the position with defendant Quaker and when he informed plaintiff that he had accepted that position leads the court to conclude that [the employee] could not be trusted to act with the necessary sensitivity and good faith under the circumstances in which the only practical verification that he was not using plaintiff’s secrets would be [the employee’s] word to that effect. PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1270 (7th Cir.1995). Count III of MSC’s First Amended Complaint does not allege that the individual Defendants engaged in deceitful conduct or could not be trusted with MSC’s trade secrets. It simply says the individual Defendants had access to MSC’s Proprietary Information; “[u]pon information and Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 83 of 134 Msc.Software, Inc. v. Altair Engineering, Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 belief,” the individual Defendants misappropriated MSC’s Proprietary Information for Altair’s benefit; and it is inevitable that the individual Defendants will misappropriate MSC’s Proprietary Information in the future. In its supplemental brief, MSC says the individual Defendants are likely to misappropriate its trade secrets because: (1) Rajiv Rampalli told Mr. McDevitt to destroy certain documents evidencing trade secret misappropriation; (2) Rampalli told Mr. Krueger to destroy troubling documents; and (3) e-mails exist which demonstrate efforts to stop discussions “on line” to avoid leaving evidence of misappropriation. The destruction and concealment of evidence is always troubling. However, these allegations are outside of the pleadings. The Court confines itself to the allegations in the First Amended Complaint for purposes of considering this Rule 12(b)(6) motion. The individual Defendants have knowledge of MSC’s alleged trade secrets, MSC and Altair are strong competitors, and the individual Defendants may perform the same type of work at Altair that they performed at MSC, and use general knowledge gained from MSC at Altair. However, the fact that trade secrets may exist, and the fact that Altair employs the individual Defendants, who have knowledge of the alleged trade secrets are insufficient to allege a threatened misappropriation claim. Since discovery is ongoing, MSC may be in a position to amend its First Amended Complaint to add a threatened misappropriation claim, or seek injunctive relief. V. CONCLUSION Defendants’ motion is GRANTED. Paragraph 64 under Count III of the First Amended Complaint is DISMISSED as to all individual Defendants except Michael Hoffman. While the Court believes only paragraph 64 relies on the “inevitable disclosure” doctrine, MSC is prohibited from arguing that the individual Defendants (except Michael Hoffman) will “inevitably disclose” its confidential or proprietary information in breach of their Agreements (count I of the First Amended Complaint). See Order dated April 10, 2008 at p. 15-16. All Citations Not Reported in F.Supp.2d, 2009 WL 1856222 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 84 of 134 TAB K Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 85 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite history available 2009 WL 1492196 Only the Westlaw citation is currently available. United States District Court, S.D. New York. SEDONA CORPORATION, Plaintiff, v. LADENBURG THALMANN & CO., INC., et al., Defendants. No. 03 Civ. 3120(LTS)(THK). | May 27, 2009. West KeySummary 1 Securities Regulation Fraud on the market; price manipulation Securities Regulation Pleading 349BSecurities Regulation 349BIFederal Regulation 349BI(C)Trading and Markets 349BI(C)7Fraud and Manipulation 349Bk60.17Manipulative, Deceptive or Fraudulent Conduct 349Bk60.25Fraud on the market; price manipulation 349BSecurities Regulation 349BIFederal Regulation 349BI(C)Trading and Markets 349BI(C)7Fraud and Manipulation 349Bk60.50Pleading 349Bk60.51In General 349Bk60.51(1)In general A corporation’s bare allegation that shareholders and brokers were involved in short sales did not state a claim for market manipulation. The mere fact that short sales may have occurred, either by itself or in conjunction with the fulfillment of convertible securities agreements, did not mean that investors in the market have been misled. Furthermore, the corporation failed to allege actual short sales or how the sales deceived the market. 6 Cases that cite this headnote Attorneys and Law Firms White and Williams LLP, by: Carl Selden Koerner, Esq., New York, NY, for Plaintiff. Heard, Robins, Cloud, Lubel & Greenwood, LLP, by: Denman Heard, Esq., Sean Greenwood, Esq., Houston, TX, for Plaintiff. Christian Smith & Jewell, by: Gary M. Jewell, Esq., James Christian, Esq., Stephen R. Smith, Esq., Scott R. Link, Esq., Houston, TX, for Plaintiff. Tate Moerer & King, LLP, by: Richard Tate, Esq., Richmond, TX, for Plaintiff. Maryann Peronti, Esq., New York, NY, for Plaintiff. Hanly Conroy Bierstein & Sheridan, LLP, by: Thomas I. Sheridan, III, Esq., New York, NY, for Plaintiff. Arkin Kaplan LLP, by: Howard J. Kaplan, Esq., Sean R. O’Brien, Esq., Niehaus LLP, by: Paul Robert Niehaus, Esq., New York, NY, for Defendants Ladenburg Thalmann & Co. and David Boris. Proskauer Rose LLP, by: Stephen L. Ratner, Esq., New York, NY, for Defendant Pershing, LLC. Dla Piper Rudnick Gray Cary U.S. LLP (N.Y.C), by: Caryn G. Mazin, Esq ., Howard S. Schrader, Esq., New York, NY, for Defendants Westminster, Securities Corporation, Rhino Advisors, Inc., Amro International, S.A., Roseworth Group Ltd., Cambois Finance Inc. and Thomas Badian. Bahn, Herzfeld & Multer, LLP, by: Richard L. Herzfeld, Esq., New York, NY, for Defendant Wm. V. Frankel & Co., Inc. The Law Office of Sheldon Eisenberger, by: Sheldon Eisenberger, Esq., New York, NY, for Defendants Markham Holdings Ltd. and J. David Hassan. Siller Wilk LLP, by: Jay S. Auslander, Esq., New York, NY, for Defendants Thomas Tohn, Michael Vasinkevich, and Joseph Smith. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 86 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 OPINION AND ORDER1 LAURA TAYLOR SWAIN, District Judge. *1 In this securities action brought by Plaintiff Sedona Corporation (“Plaintiff” or “Sedona”), the Court previously granted in part the Defendants’ motions to dismiss the First Amended Complaint (“FAC”), dismissing some of Plaintiff’s claims with leave to replead. Familiarity with that decision, as well as with the Court’s decision resolving the parties’ motions for reconsideration of that decision, is presumed. See Sedona Corp. v. Ladenburg Thalmann & Co., Inc., No. 03 Civ. 3120(LTS)(THK), 2005 WL 1902780 (S.D.N.Y. Aug. 9, 2005) (hereinafter “Sedona I” ); Sedona Corp. v. Ladenburg Thalmann & Co., Inc., No. 03 Civ. 3120(LTS) (THK), 2006 WL 2034663 (S.D.N.Y. July 29, 2006) (hereinafter “Sedona II” ). Plaintiff thereafter filed a Second Amended Complaint (“SAC”). The SAC asserts largely the same claims for relief, in the same order, against various combinations of the Defendants, with the following exceptions: Plaintiff’s Section 20(a) claim is now its Eighth Claim for Relief, Plaintiff sues for rescission of the Settlement Agreement releases as its Ninth Claim for Relief against Amro, Roseworth, Cambois, Rhino and Badian, and Plaintiff raises a claim of fraudulent inducement in the procurement of the releases as its Tenth Claim for Relief against those parties. Groupings of Defendants Ladenburg, Boris, Vasinkevich, Tohn, Smith, Amro, Roseworth, Cambois, Rhino, Badian, Markham, Hassan, Westminster, Pershing and Frankel (collectively, the “Moving Defendants”) have moved separately to dismiss some or all of the claims asserted against them in the SAC (hereinafter “motion(s) to dismiss the SAC”). Defendants Amro, Rhino, Roseworth, Cambois and Badian request that, should the Court deny their motion to dismiss, the Court compel arbitration of any remaining claims asserted against them or, in the alternative, strike Plaintiff’s jury demand. After the Second Circuit decided ATSI Commcn’s, Inc. v. The Shaar Fund, Ltd., 493 F.3d 87 (2d Cir.2007), the Moving Defendants submitted a joint memorandum in further support of their motions to dismiss and arguing for dismissal of additional claims on the basis of ATSI, and Plaintiff filed a memorandum in response.2 The Court has considered thoroughly all of the parties’ submissions. For the reasons that follow, the Moving Defendants’ motions to dismiss the SAC are granted, and the motion to compel arbitration and to strike Plaintiff’s jury demand is denied as moot. DISCUSSION After Sedona I and Sedona II were issued, and after the parties had fully briefed the Moving Defendants’ motions to dismiss the SAC, the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007), that, in order to survive a motion to dismiss pursuant to Rule 12(b)(6), the complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir.2008) (quoting Twombly, 127 S.Ct. at 1974). This plausibility standard was recently reaffirmed. See Ashcroft v. Iqbal, ---U.S. - - - - , 129 S.Ct. 1937, --- L.Ed.2d - - - - , 2009 WL 1361536, *12 (May 18, 2009). *2 With respect to the pleading standards of Rule 8, a complaint must have “more than an unadorned, the- defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. 662, at ----, 129 S.Ct. 1937, 173 L.Ed.2d 868, at -- --, 2009 WL 1361536, at *12. “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’ Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ “ Id. (citations omitted). Ninth and Tenth Claims for Relief Defendants Amro, Roseworth, Cambois, Rhino and Badian (collectively, the “Release Defendants”) move to dismiss Plaintiffs Ninth and Tenth Claims for Relief, which concern the releases executed by Plaintiff as to these Defendants. (SAC ¶ 199 .) As the Court explained in Sedona II, a party repudiating a release must choose one of the following three options: “(1) he may return the consideration paid for the release, thereby rescinding the transaction; (2) he may sue for a rescission and offer to return the consideration; or (3) he may retain the consideration and sue at law for his damages.” Sedona II, 2006 WL 2034663, at * 6 (quoting Inman v. Merchants Mut. Cas. Co., 190 Misc. 720, 74 N.Y.S.2d 87, 89 (Sup.Ct.1947)). Plaintiff’s Ninth Claim for Relief elects the second option (see SAC ¶ 275 (Plaintiff “hereby offers ... to restore the consideration allegedly received by it in exchange for rescission of the Releases ....”)), and seeks rescission on the bases of lack of consideration and Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 87 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 fraudulent inducement.3 The Tenth Claim for Relief elects the third option (see SAC ¶ 291 (“SEDONA was harmed because it released the Released Parties for a lesser sum than it would have received if not for the fraud.”)), and seeks damages on the basis of fraudulent inducement.4 Plaintiff’s attempt to invoke fraudulent inducement as a basis for repudiation of the releases, however, was already rejected by the Court in Sedona I. Plaintiff raises no argument concerning fraudulent inducement that was not raised in its previous submissions in connection with the motions to dismiss the FAC, or that was not already addressed substantively by Sedona I, and the allegations in the FAC that precluded Plaintiff from alleging fraudulent inducement reappear in largely the same form in the SAC. Accordingly, for substantially the reasons articulated in Sedona I, Plaintiff’s claims for rescission or damages (as asserted in the Ninth and Tenth Claims for Relief) in connection with the releases are dismissed insofar as they are premised on a theory of fraudulent inducement. Plaintiff’s theory, asserted in the Ninth Claim for Relief, that the releases should be voided for lack of consideration, is also invalid as a matter of law. Under New York law, which governs the releases, see Sedona I, 2005 WL 1902780, at * 5, a release is enforceable even in the absence of consideration so long as it is given in writing. See N.Y. Gen. Oblig. Law § 15-303 (West 2001) (“A written instrument which purports to be a total or partial release of all claims, debts, demands or obligations, or a total or partial release of any particular claim, debt, demand or obligation, ... shall not be invalid because of the absence of consideration or of a seal.”). Plaintiff’s reliance on Chaput v. Unisys Corp., 964 F.2d 1299, 1301 (2d Cir.1992), is misplaced, as that case dealt with a release solely in the context of an antidiscrimination claim arising under federal law. See Shain v. Center for Jewish History, Inc., No. 04 Civ. 1762(NRB), 2006 WL 3549318, * 5 n. 9 (S.D.N.Y. Dec.6, 2006) (applying Chaput to require consideration in order for release to be enforceable but only as to plaintiff’s federal antidiscrimination claim, while noting plaintiff’s concession that, with respect to her New York state law claim, the New York General Obligations Law precluded her from arguing that the release was unenforceable for lack of consideration). Neither Chaput nor the New York case upon which it relied addressed Section 15-303, and the New York case relied upon did not address releases at all. See Weiner v. McGraw-Hill, 57 N.Y.2d 458, 457 N.Y.S.2d 193, 443 N.E.2d 441 (N.Y.1982). Accordingly, Plaintiff’s effort to rescind the releases for lack of consideration must fail. *3 The Ninth and Tenth Claims for Relief are, accordingly, dismissed in their entirety as against the Moving Defendants. The Releases Preclude Plaintiff’s Claims Against Amro, Roseworth, Cambois, Rhino and Badian In Sedona I, the Court stated in clear terms that Plaintiff could seek rescission of the releases on a theory of duress and, in Sedona II, the Court provided Plaintiff an opportunity to articulate such a theory in the form of a cause of action. The SAC does not, however, assert any rescission claim premised on duress. As the Ninth and Tenth Claims for Relief are dismissed and Plaintiff has asserted no other viable cause of action for rescission or invalidation of the releases, the Court concludes that the releases bar Plaintiff’s claims against the Release Defendants.5 As explained in Sedona I, the releases covered, inter alia, all claims that could have been asserted and all controversies that may have occurred prior to the date of the releases, which were executed in February 2002. (SAC ¶ 194.) For the reasons explained in the Court’s earlier decisions and in the discussion that follows, the SAC’s generalized allegations of stock-related misbehavior, even where premised on post-February 2002 conduct, are plainly insufficient to state valid claims under any of the statutes and legal principles Plaintiff has invoked. Accordingly, Plaintiff’s claims against Defendants Amro, Roseworth, Cambois, Rhino and Badian are dismissed in their entirety.6 The ATSI Case In the same year that its Twombly decision was issued, the Supreme Court decided Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007), in which the Court held, with respect to the pleading, standard in PSLRA oases, that “in determining whether the pleaded facts give rise to a ‘strong’ inference of scienter, the court must take into account plausible opposing inferences.” Id. at 2509. For an inference of scienter to be strong, “a reasonable person [must] deem [it] cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Id. at 2510. Thereafter, the Second Circuit decided ATSI Commcn’s, Inc. v. The Shaar Fund, Ltd., 493 F.3d 87 (2d Cir.2007), applying Twombly and Tellabs to a private securities action asserting Section 10(b) claims. The plaintiff in that case, ATSI Communications, Inc. (“ATSI”), alleged that Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 88 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 the defendants had perpetrated a classic “death spiral” scheme against it. In that connection, ATSI alleged that the defendants had manipulated the market and made false representations to ATSI in connection with their acquisition of convertible preferred stock in ATSI, that they would not sell ATSI stock short. The convertible preferred stock permitted the defendant recipients, after a certain point in time, to convert such stock into a number of shares of common stock, pursuant to a formula under which the number of shares of common stock received on conversion increased as the common stock price decreased. ATSI, 493 F.3d at 95. ATSI alleged that the defendants entered into these agreements with the intent to engage in massive short selling of the stock, resulting in the manipulation downward of ATSI’s stock price, which in turn would permit the defendants to cover their short sales with the returns on their conversions, m ax imized by the plummeting stock prices. Id. *4 ATSI, however, did not allege any specific acts of short selling by the defendants. ATSI, 493 F.3d at 97. Rather, it made circumstantial allegations, claiming that 30 out of 38 companies in which the defendants invested experienced stock price declines indicative of a death spiral financing scheme, that the other companies’ stock sales soared and stock values plummeted after defendants’ investment agreements were executed (with specific numbers illustrating these trends), and that the companies’ stock prices reacted negatively to positive news. Id. ATSI alleged that these trends could only be explained by the defendants’ aggressive short sales following their respective investments. Id . Lastly, ATSI alleged that the defendants engaged in “wash trades, matched trades, phantom shares, and other manipulative trading.” Id. at 105. The Second Circuit held that the complaint failed to state Section 10(b) market manipulation and misrepresentation claims under the particularity standards established by the PSLRA and Rule 9(b) and as explained by Tellabs. These deficiencies were relevant to both the plaintiff’s obligation to explain with particularity the deception at issue as well as the plaintiff’s obligation to plead scienter. See ATSI, 493 F.3d at 102 (“in some cases scienter is the only factor that distinguishes legitimate trading from improper manipulation.”). Two of the deficiencies discussed by the Second Circuit in ATSI are equally significant here. First, with respect to ATSFs Section 10(b) market manipulation claims, the Second Circuit noted that the complaint had failed to identify the means by which the market was actually manipulated. See ATSI, 493 F.3d at 104 (“Nowhere does ATSI particularly allege what the defendants did-beyond simply mentioning common types of manipulative activity-or state how this acti vity affected the market in ATSI’s stock.”). In setting forth the relevant pleading standard, the Second Circuit held that, while a plaintiff “need not plead manipulation to the same degree of specificity as a plain misrepresentation claim,” ATSI, 493 F.3d at 102, “a manipulation complaint must plead with particularity the nature, purpose, and effect of the fraudulent conduct and the roles of the defendants” and the complaint must set forth, “to the extent possible, what manipulative acts were performed, which defendants performed them, when the manipulative acts were performed, and what effect the scheme had on the market for the securities at issue.” Id. (citation omitted). Manipulation, the Court explained, “connotes intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities.” Id. at 100 (quoting Ernst & Ernst, 425 U.S. 185, 199, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976)). The plaintiff must show that an alleged manipulator engaged in market activity aimed at deceiving investors as to how other market participants have valued a security. The deception arises from the fact that investors are misled to believe ‘that prices at which they purchase and sell securities are determined by the natural interplay of supply and demand, not rigged by manipulators.’ *5 Id. (quoting Gurary v. Winehouse, 190 F.3d 37, 45 (2d Cir.1999)). In identifying such manipulative activity, courts “generally ask whether a transaction sends a false pricing signal to the market.” Id. at 100. In this connection, the Second Circuit explained that “short selling-even in high volumes-is not, by itself, manipulative,” because it “enhances pricing efficiency by helping to move the prices of overvalued securities toward their intrinsic values.” ATSI, 493 F.3d at 101, “[S]hort selling must be combined with something more to create a false impression of how market participants value a security.” Id. at 101. Furthermore, “purchasing a floorless convertible security is not, by itself or when coupled with short selling, inherently manipulative. Such securities provide distressed companies with access to much-needed capital and, so long as their terms are fully disclosed, can provide a transparent hedge against a short sale.” Id. Because ATSI’s complaint premised its market manipulation theory almost entirely on allegations of short sales following the purchase of floorless convertible securities, market manipulation was not adequately alleged. Second, the Second Circuit found that the plaintiff had failed to allege with any specificity that the defendants actually engaged in short selling, either of ATSI’s stock, Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 89 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 or of the stock of companies in which defendants had invested in the past. See ATSI, 493 F.3d at 104 (the plaintiff failed to adequately plead “that the defendants engaged in any short sales or other potentially manipulative activity”). As a result, ATSI also failed adequately to plead its misrepresentation claim since the allegedly misleading nature of the representations and the corresponding scienter element were premised substantially on the same allegations of short selling, both of ATSI stock and of the stock of prior alleged victims. With respect to ATSI’s stock, the circumstantial factors noted in the complaint, such as fluctuating stock prices and trade volume, the negative price reactions to positive news, and the opportunities for manipulation created by the convertible preferred stock arrangements, were held insufficient to raise an inference that manipulative short selling had in fact occurred. See id. at 103 (“One does not observe constant prices or trading volumes in the stock markets.”); id. (“ATSI pleads no particular connection between the negative reaction of the stock price and anything the defendants did. Adopting ATSI’s reasoning would subject large holders of convertible preferred stock to the risk of suit ... whenever the stock price does not react to news as the issuer expects.”); id. (the fact that “a legitimate investment vehicle, such as a convertible preferred stock ..., [could create] an opportunity for profit through manipulation” is a circumstance “present for any investor in floorless convertibles”). With respect to the alleged prior victims, ATSI’s attempt to substantiate its claims of fraudulent conduct with allegations of the defendants’ participation in past death spiral schemes similarly failed, as the complaint did not “allege with particularity what, if anything, the defendants did to cause the decline [in share price of the alleged prior victims]; it simply offers a generalized allegation that the defendants engaged in death spiral financing combined with a detailed definition of how death spiral financing works.” ATSI, 493 F.3d at 106. The fact that the purported victims’ stock prices fell after the defendants invested in them created no reasonable inference of short sales, since “[n]o inference of sabotage is available from the circumstance that some (or many) risky investments come to nothing.” Id. *6 The Moving Defendants argue that Tellabs and ATSI warrant the dismissal of Plaintiff’s First, Second and Fifth Claims for Relief as against several of the Defendants, notwithstanding the Court’s prior rulings as to some of those Defendants in Sedona I. (See Br. at 2 n. 1 (“Certain defendants did not move to dismiss the securities fraud claims in the SAC because of the Court’s prior rulings. In light of Tellabs and ATSI, however, this Court may properly consider the additional bases for dismissal discussed herein ....”).) The Court has now considered and applied ATSI (as well as Tellabs, Twombly and Iqbal ) in determining whether all of Plaintiff’s fraud claims against the Moving Defendants should be dismissed.7 First, Second and Fifth Claims for Relief As Asserted Against Ladenburg, Boris, Vasinkevich, Tohn, Smith, Markham and Hassan Plaintiff’s First and Fifth Claims for Relief (for Section 10(b)/Rule 10b-5 liability on the basis of misrepresentations and omissions, and common law fraud and deceit principles, respectively) are asserted against Defendants Ladenburg, Markham, Aspen, Tohn, Boris, Vasinkevich and Smith, while the Second Claim for Relief (for Section 10(b)/Rule 10b-5 liability on the basis of market manipulation) is asserted against all Defendants. All of the Moving Defendants seek dismissal of these claims as asserted against them. The Second Claim for Relief, concerning market manipulation, must be dismissed because the SAC fails to plead with any particularity precisely how the Defendants’ alleged actions deceived the market. As the Second Circuit noted in ATSI, the mere fact that short sales occurred, either by itself or in conjunction with the fulfillment of convertible securities agreements, does not mean that investors in the market have been misled. To the extent that the SAC appears to premise its manipulation theory on the fact that the investment agreements in this case contained an explicit promise not to sell short, and that therefore the market would be led to attribute the massive selling of Sedona stock to deficiencies in the intrinsic quality of Sedona stock rather than aggressive short selling by the investors in violation of the agreements, the manipulation claim fails because specific allegations of actual short selling by the Defendants are missing, as the Court explains in more detail below. Similarly, the SAC’s vague references to various manipulative techniques are unsubstantiated by any particularized allegations.8 Therefore, market manipulation has not been sufficiently plead, nor are there sufficient allegations of conscious wrongdoing or recklessness that would raise a strong inference of scienter. Accordingly, the Second Claim for Relief as asserted against the Moving Defendants must be dismissed. Plaintiff’s First and Fifth Claims for Relief concerning misrepresentations are similarly premised almost entirely on allegations of Defendants’ short selling activities, but the SAC simply does not contain specific allegations of actual short selling, or of culpable participation in short selling, on the part of Ladenburg, Boris, Vasinkevich, Tohn, Smith, Markham or Hassan9 that are sufficient to Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 90 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 meet the standards articulated in ATSI.10 Plaintiff alleges that the volume of sales in Sedona’s stock skyrocketed after the convertible agreements were executed (e.g., SAC ¶¶ 57, 103), that Sedona’s stock price plummeted following these sales (e.g., SAC ¶¶ 58, 104), and that Sedona’s stock price reacted negatively to positive news (e.g ., SAC ¶ ¶ 168, 172). However, as explained in ATSI, these types of circumstantial allegations, even if supported by specific numbers illustrating these trends, are insufficient to support an inference that Defendants engaged in short selling because volatility in the stock market is not unusual. Nor does the fact that Defendants had the potential to gain tremendous profit from their convertible preferred stock arrangement (e.g., SAC ¶ 108), by itself, warrant a reasonable inference that they engaged in a manipulative scheme. See ATSI, 493 F.3d at 106 (“ATSI and the defendants simply entered into mutually beneficial financing transactions.”). Plaintiff relies on allegations of past death spiral schemes perpetrated by some of the Defendants to suggest a pattern, or an intent on the part of the Defendants to break their promises not to sell short, but such allegations are similarly insufficient to demonstrate manipulative short selling or the requisite scienter with respect to Sedona stock. Like the SAC’s allegations in connection with Sedona, the allegations regarding past death spiral schemes consist solely of a listing of the time of investment in a particular company and the corresponding after-investment drop in stock price. (SAC ¶ 61.) *7 The SAC, like the complaint in ATSI, “fails to allege with particularity, what, if anything, the defendants did to cause the decline[s].” ATSI, 493 F.3d at 106; see also id. (“No inference of sabotage is available from the circumstance that some (or many) risky investments come to nothing.”). Therefore, the allegations fail sufficiently to state that the representations at issue were false when made, nor do they raise a strong inference of scienter. See ATSI, 493 F.3d at 105 (“While the failure to carry out a promise in connection with a securities transaction might constitute breach of contract, it does not constitute fraud unless, when the promise was made, the defendant secretly intended not to perform or knew that he could not perform.” (quotation and citation omitted)). In light of the foregoing, the First, Second, and Fifth Claims for Relief are dismissed as against Ladenburg, Boris, Vasinkevich, Tohn, Smith, Markham and Hassan. Second Claim for Relief As Asserted Against Frankel With respect to Frankel, the SAC proffers the following allegations in support of Plaintiff’s market manipulation claim. Frankel, a market maker had made only one Sedona trade on December 7, 2000, prior to Sedona’s announcement that day that it had entered into a customer service agreement with IBM. After the announcement, Frankel made 106 sale trades for 138,800 shares, the stock price fell, and Frankel then performed an “after- hours cleanup trade” by purchasing 155,000 shares. (SAC ¶ 169.) Similarly, on other days, Frankel sold shares during the day and, after the stock price dropped, purchased a similar volume of shares in an “after-hours cleanup trade purchase.” (Id. ¶ 170.) In the months of October to December 2000, Frankel’s trades accounted for about 30% of all the volume of Sedona’s shares. (Id. ¶ 173.) Plaintiff’s allegations concerning Frankel fail to explain with any particularity how Frankel’s actions deceived investors as to the intrinsic value of Sedona’s shares. The SAC lacks any explanation as to how Frankel’s ability to make a profit by selling high and buying low misled the market,11 nor do the facts suggest any conscious wrongdoing or recklessness that would give rise to a strong inference of scienter.12 The mere fact that Frankel effected such a large volume of trades in Sedona’s stock is also not indicative of anything manipulative. See ATSI, 493 F.3d at 105 (mere fact that Trimark was the principal market maker in ATSI’s stock is insufficient to plead manipulation with particularity, or to raise a strong inference of scienter). Accordingly, Plaintiff’s Second Claim for Relief is dismissed as against Frankel. Second Claim for Relief As Asserted Against Westminster and Pershing The SAC alleges that Westminster shared office space with Rhino, that it was an “active” broker-dealer for Rhino and other Defendants, and that it traded over 1,800,000 shares of Sedona stock as a non-reporting market maker. (SAC ¶ 174.) The SAC also asserts a belief that Westminster, with cooperation from its prime broker, Pershing, “illegally converted short positions into false long positions, disguised the delivery of conversion shares of Sedona to co-conspirators to cover illegal short positions, and knowingly participated in manipulating the stock of Sedona up or down.” (Id. ¶ 175.) With respect to Pershing, the SAC alleges that it was a “primary violator in the fraudulent scheme” because it had “access to confidential information of Westminster and Rhino, and the power to determining whether or not to clear their transactions.” (Id. ¶ 179.) The SAC alleges that “Pershing was more than the clearing agent for Westminster. It was a direct participant in the illegal scheme to artificially manipulate and decrease the market price of Sedona’s stock.” (Id .) The SAC adds that, when Rhino acted upon its conversion rights on behalf of Amro, Rhino directed Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 91 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 Sedona to remit the conversion shares to Pershing. (Id. ¶ 186-87.) *8 Plaintiff’s allegations that Westminster and Pershing “illegally converted short positions into false long positions” and committed other bad acts are wholly conclusory, and the few particularized allegations concerning Pershing fail to raise a strong inference of scienter. Pershing’s mere access to unspecified confidential information, and its pov/er to determine whether or not transactions could be cleared, fail to raise any inference that Pershing knowingly participated in Rhino’s short selling activities or had any intent to otherwise manipulate the market. Even if Pershing had power to determine whether or not a transaction should be cleared, the SAC is devoid of any allegations as to when or under what criteria Pershing would decide to clear a particular trade. The fact that Pershing held the remitted conversion shares on behalf of Rhino suggests no inference of conscious wrongdoing. Even taking these allegations together, the SAC fails to raise any inference of intent that is at least as compelling as competing, nonculpable inferences, such as the inference that Rhino itself misled Pershing into clearing trades it otherwise would not have. The allegations as to Westminster are similarly conclusory in nature (i.e., that it was an “active” broker-dealer for Rhino), and the allegations that it shared office space with Rhino and traded large volumes of Sedona stock fail to raise any strong suggestion of conscious wrongdoing or recklessness that would constitute a strong inference of scienter. For these reasons, the Second Claim for Relief is dismissed as against Defendants Westminster and Pershing. See ATSI, 493 F.3d at 105 (allegations that Trimark “knew or should have known of the manipulation” and that the plaintiff believed that Trimark “was a cooperating broker-dealer” were insufficient to explain manipulation or raise a strong inference of scienter). Fourth and Sixth Claims for Reliefthe Pennsylvania Act and Common Law Civil Conspiracy Claims Because Plaintiff has failed to plead a viable securities or common law fraud claim against Defendants Ladenburg, Boris, Vasinkevich, Tohn, Smith, Markham, Hassan, Westminster, Pershing or Frankel, Plaintiff has also failed to plead a violation of the Pennsylvania Act or a derivative conspiracy claim as to them, and accordingly the Moving Defendants’ motion to dismiss is granted as to the Fourth and Sixth Claims for Relief. Eighth Claim for Relief-the Section 20(a) Claim Only Andreas Badian, who is not a defendant in this case, and Rhino, the claims against which have been dismissed because of the releases, are alleged to have engaged in specific instances of short selling. (See, e.g., SAC ¶¶ 30, 164.)13 Even assuming arguendo that such allegations are sufficient to state a primary Section 10(b) violation, however, there are no allegations plausibly demonstrating that Ladenburg, Boris, Vasinkevich, Tohn, Smith, Markham, Hassan, Westminster, Pershing or Frankel controlled Rhino or Andreas Badian in any way. None of the tangential references to these Defendants’ associations or interactions with Rhino plausibly plead control and, for substantially the reasons discussed in connection with the First, Second and Fifth Claims for Relief, the SAC does not plausibly plead culpable participation on the part of these Defendants. Accordingly, Plaintiffs Eighth Claim for Relief is dismissed as against Defendants Ladenburg, Boris, Vasinkevich, Tohn, Smith, Markham, Hassan, Westminster, Pershing and Frankel. Third Claim for Relief-the Common Law Tortious Interference with Contract and Tortious Interference with Business Relations Claims *9 Following the Court’s dismissal without prejudice of Plaintiffs tortious interference with contract claims, Plaintiff added allegations in the SAC concerning a contract between Sedona and Sanchez Computer Associates (“Sanchez”) that was allegedly terminated as the result of Defendants’ actions. (SAC ¶¶ 141-143.) Even assuming arguendo that the termination of a contract qualifies as a “breach” under the law governing this tort, and even if the allegation that the Sanchez contract was terminated as a result of Defendants’ actions is taken as true, the SAC contains no allegations that would plausibly suggest that any Defendant specifically intended to cause Sanchez to terminate that contract. See Millar v. Ojima, 354 F.Supp.2d 220, 229-30 (E.D.N.Y.2005) (citation omitted) (elements include intentional procurement of breach). Accordingly, Plaintiff’s tortious interference with contract claims are dismissed. Plaintiff’s claim for tortious interference with business relations similarly fails. The SAC specifies the key business relationships alleged to have been hindered and alleges that some of the Defendants knew that Sedona’s prospective business customers were in the process of adopting Sedona’s software for their respective companies and that the adverse news about Sedona would cause these entities to hold off on purchasing Sedona’s software. (SAC ¶¶ 144-52.) However, while the SAC refers to Defendants’ knowledge of Sedona’s business Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 92 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 model generally, at no point does the SAC actually allege that Defendants knew about the specific business relationships identified in the SAC. See Sedona I, 2005 WL 1902780, at * 19 (plaintiff failed to identify the business relationships harmed and whether Defendants had knowledge of those relationships). Moreover, PlaintifFs generalized allegations of short selling with the intent to drive down Sedona’s stock price do not suffice to state plausibly that Defendants’ intent was to interfere with these particular business relationships. Therefore, Plaintiff’s tortious interference with business relations claims are dismissed. For the above reasons, the motions to dismiss are granted as to the Third Claim for Relief as asserted against the Moving Defendants. Seventh Claim for Relief as Against Markham-Breach of Contract Defendant Markham moves to dismiss Plaintiff’s breach of contract claim against it.14 Plaintiff’s breach of contract allegations as to Markham are found in Paragraphs 250, 251 and 253 of the SAC. In Paragraph 250 of the SAC, Plaintiff alleges that Markham agreed to fund “up to $50 Million, as is evidenced by the March 8, 2000 Ladenburg Letter,” and that Markham and other Defendants “herein failed to fully fund this contract.” The SAC earlier alleges that the March 8, 2000 Ladenburg Letter codified an agreement by Sedona to increase its shelf registration to $50 million, that Sedona did so in anticipation of the $50 million in investment promised by Ladenburg, and that Markham and other Defendants “never had any intention of funding any significant portion of this $50 Million.” (SAC ¶ 77.) It is, however, not at all clear from the SAC exactly what provision of what contract (i.e., the March 8, 2000 Ladenburg Letter itself or some previous oral agreement) Markham is alleged to have breached. If the promise at issue was to fund “up to $50 Million,” there are no allegations in the SAC as to why Markham’s purchase of Sedona stock (see SAC ¶ 78) did not fulfill its promise to fund “up to $50 Million.” If the allegedly breached provision was a promise to fund a “significant portion” of the $50 million (or a representation that Markham intended to fund such a portion), the SAC contains no allegation as to what a “significant portion” is or why Markham’s investment in Sedona did not satisfy the “significant portion” requirement, and if the provision at issue concerned Sedona’s commitment to increase its shelf registration to $50 million, it is not clear what Markham promised in exchange for Sedona’s commitment and how Markham broke that promise. Even under the more rel ax ed pleading standards of Rule 8, the complaint must still “allege the provisions of the contract upon which the claim is based[, and,] at a minimum, the terms of the contract, each element of the alleged breach and the resultant damages.” Sedona I, 2005 WL 1902780, at * 20 (citations and quotations omitted). Plaintiff’s vague and somewhat inconsistent pleadings fail to identify a contractual provision whose breach is also supported by allegations in the SAC and, as such, do not give Markham “fair notice of what plaintiff’s claim is and the grounds upon which it rests.” Id. (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 515, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002)). Accordingly, Plaintiff does not state a breach of contract claim premised on Paragraph 250 of the SAC. *10 Paragraph 253 of the SAC alleges that Markham breached the Convertible Preferred Stock and Warrants Purchase Agreement by “engaging in short-selling and failing to ensure that its trading was in compliance with state and federal laws, contrary to the terms of the agreement.” Although this allegation references a promise to not engage in short selling, there are no factual allegations in the SAC concerning Markham’s alleged short selling activity. The SAC’s bare reference to Markham’s “engaging” in short-selling is conclusory and amounts to nothing more than a recitation of the breach element in Plaintiff’s breach of contract claim. See Iqbal, 556 U.S. 662, at ----, 129 S.Ct. 1937, 173 L.Ed.2d 868, at ----, 2009 WL 1361536, at *14 (allegation that defendant was the “principal architect” of a policy that targeted Arab Muslim men, and allegation that another defendant was “instrumental” in its adoption and execution, were conclusory and nothing more than a formulaic recitation of the elements of a constitutional discrimination claim). Similarly, the assertion that Markham “failed to ensure that its trading was in compliance with state and federal laws,” is entirely conclusory and is not entitled to the presumption of truth at the Rule 12(b)(6) motion to dismiss stage. See id. Accordingly, Plaintiff fails to state a breach of contract claim as premised on Paragraph 253 of the SAC. Paragraph 251 of the SAC also attempts to implicate Markham in a host of other alleged breaches of various contracts, but it contains the same laundry list of alleged breaches (i.e., “Not being an accredited investor,” “Failing to obtain the best price for SEDONA stock”) with the same sweeping reference to unspecified “oral and written agreements” asserted in the FAC, that was specifically found by the Court in Sedona I to have failed in stating a breach of contract claim. (Compare SAC ¶ 251 with FAC ¶ 137.) Accordingly, Plaintiff’s breach of contract claim against Markham cannot be premised on Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 93 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 Paragraph 251 of the SAC. Because none of the breach of contract allegations as to Markham succeeds in stating a breach of contract claim under the relevant standards, Markham’s motion to dismiss is granted as to the breach of contract claim asserted against it. Motion to Compel Arbitration and Strike Jury Demand The Release Defendants move to compel arbitration or, in the alternative, to strike Plaintiff’s jury demand. However, the Release Defendants assert that they are requesting the Court to compel arbitration only if the Court would have denied their motion to dismiss. Because the Court has granted their motion to dismiss the SAC as to them, the Release Defendants’ motion to compel arbitration and to strike the jury demand is denied as moot. Order to Show Cause Defendants Aspen, Sims, Ultrafinanz AG, Dr. Batliner and Partner, Creon, Gassner, Dr. Herbert Batliner, and Rieden have not moved for dismissal of the SAC. However, the factual allegations asserted against them are at least as vague and attenuated as those asserted against the Defendants discussed in this decision. Therefore, the Court will enter a separate order directing Plaintiff to show cause why the Court should not dismiss Plaintiff’s claims against these Defendants for substantially the reasons articulated in this decision. Leave to Replead as to Ladenburg, Boris, Vasinkevich, Tohn and Smith *11 Plaintiff requests leave to replead, but only as to Ladenburg, Boris, Vasinkevich, Tohn and Smith.15 That application is granted. Because Plaintiff has not requested leave to replead as to the other Moving Defenda nts, the dismissal of Plaintiff’s claims as to Amro, Roseworth, Cambois, Rhino, Badian, Markham, Hassan, Frankel, Westminster and Pershing is with prejudice. CONCLUSION For the foregoing reasons, the Second Amended Complaint is dismissed in its entirety as against Defendants Boris, Vasinkevich, Tohn, Smith, Markham, Hassan, Amro, Roseworth, Cambois, Rhino, Badian, Westminster, Pershing and Frankel. Defendant Ladenburg’s motion to dismiss the First, Second, Third, Fourth, Fifth, Sixth and Eighth Claims for Relief as asserted against it is granted.16 The dismissal of Plaintiff’s claims as asserted against Ladenburg, Boris, Vasinkevich, Tohn and Smith is without prejudice, and the dismissal of all other claims is with prejudice. The motion to compel arbitration or, in the alternative, to strike the jury demand, is denied as moot. The Clerk of Court is respectfully requested to terminate Docket Entry Nos. 272, 274, 276, 278, 282, 285 and 288, and to terminate Defendants Boris, Vasinkevich, Tohn, Smith, Markham, Hassan, Amro, Roseworth, Cambois, Rhino, Badian, Westminster, Pershing and Frankel in connection with the caption of this case. Plaintiff is given 21 days from the date of this Opinion and Order to file and serve a Third Amended Complaint repleading those causes of action that are dismissed without prejudice. If no such timely amended pleading is served and filed with respect to a claim or cause of action, such claim or cause of action will be dismissed with prejudice and without further advance notice. SO ORDERED. All Citations Not Reported in F.Supp.2d, 2009 WL 1492196 Footnotes 1 The ECF system provides notice of the entry of this Order to each party that has both entered an appearance in this case and registered with ECF. The ECF-registered attorneys are responsible for providing notice to any co-counsel whose e-mail addresses are not reflected on the ECF docket for this case, and Plaintiffs counsel, upon receiving notice of this Order, is hereby ordered to f ax or otherwise deliver promptly a copy to all parties who are not represented by ECF-registered counsel. A certificate of such further service shall be filed within 5 days from the date hereof. Counsel who have not registered for ECF are ordered to register immediately as filing users in accordance with the Procedures for Electronic Case Filing. 2 The motion to dismiss filed by Pershing is docketed under Docket Entry No. 272. The motion to dismiss filed by Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 94 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 Westminster is docketed under Docket Entry No. 274. The motion to dismiss filed by Amro, Roseworth, Cambois, Badian and Rhino is docketed under Docket Entry No. 276, and their request to compel arbitration or, in the alternative, to strike Plaintiff’s jury demand is docketed under Docket Entry No. 278. The motion to dismiss filed by Frankel is docketed under Docket Entry No. 282. The motion to dismiss filed by Hassan and Markham is docketed under Docket Entry No. 285. The motion to dismiss filed by Tohn, Vasinkevich and Smith is docketed under Docket Entry No. 288. Ladenburg’s motion to dismiss was made by way of a brief, docketed under Docket Entry No. 317, submitted after ATSI was decided, and is directed only at the First, Second, Third, Fourth, Fifth, Sixth and Eighth Claims for Relief as asserted against Ladenburg (i.e., all the claims asserted against Ladenburg except for the Seventh Claim for Relief). 3 See SAC ¶¶ 276-77 (“SEDONA seeks rescission of the Releases as a result of the Released Parties’ failure to provide any consideration for the Releases. SEDONA seeks rescission of the Releases as a result of the Released Parties[’] fraudulent conduct.”). 4 See SAC at 83 (“Tenth Claim for Relief: Fraudulent Inducement in Procurement of Releases”). 5 The releases preclude the claim against Badian because they explicitly apply to the officers, directors, employees or agents of the signatories, and Plaintiff alleges that Badian acted on behalf of Rhino. 6 In light of the dismissal of all of Plaintiff’s claims against the Release Defendants, the remainder of the discussion of Plaintiff’s claims in this Opinion relates only to those claims as asserted against the other Defendants. 7 Plaintiff filed a memorandum of law in response, arguing that some of the Moving Defendants-Ladenburg, Vasinkevich and Tohn-are precluded from moving for dismissal of certain claims based on Tellabs and ATSI because they failed to move for dismissal of those claims in the first place, when the SAC was filed. (Opp’n at 4-5.) These Defendants, however, reasonably declined to repeat arguments seeking dismissal of certain claims which the Court had already considered and rejected in Sedona I and Sedona II. Defendants’ later request for relief was warranted and is appropriately considered in light of the intervening, controlling case law on which it is based. 8 The following allegation, set forth in Paragraph 172 of the SAC, is characteristic of the sort of conclusory allegations of manipulative activity found throughout the SAC: It is the belief of SEDONA that this pattern was due to the defendants herein (in addition to others) manipulating SEDONA stock by illegally selling short, failing to deliver securities of SEDONA, laddering the offer to prevent any upward momentum, illegally selling shares at the bid price as if they were actual “long” shares, not reporting large volumes of illegal stock trading outside of the marketplace, intimidating bonafide purchasers, engaging in other non-economically feasible transactions, in most cases, selling stock they did not own, entering into massive counterfeit sales and using multiple manipulation techniques to control the free market pricing of SEDONA’s stock. 9 Although Plaintiff does not raise its First and Fifth Claims for Relief against Hassan, Plaintiff’s failure to allege with specificity that Hassan engaged in short sales is relevant to the Court’s ruling, already discussed, that Plaintiff failed to plead its Second Claim for Relief as to Hassan with the requisite particularity. 10 Specific examples of short selling are provided with respect to Andreas Badian, who is not a defendant in this case, and Rhino, the claims against which have been dismissed because of the releases, by way of direct allegations as well as reliance upon quotations from an SEC complaint (e.g., SAC ¶¶ 30, 164), but there are no particularized allegations beyond the mere association of other Moving Defendants with Rhino that would suggest that any other Moving Defendant had any relevant knowledge or participated culpably in these transactions. 11 The SAC adds that Frankel’s “trading technique is described in the SEC Complaint.” (SAC ¶ 169.) The burden of pleading manipulation with particularity rests with Plaintiff, not with Defendants and not with the Court, and cannot be satisfied through generalized references to other litigants’ allegations. Cf. ATSI, 493 F.3d at 106 (“ATSI cannot sufficiently plead fraud by simply providing a method for the defendant to discover the underlying details. If ATSI had access to the details necessary to make these allegations, it must plead them and not just tell the defendants to go find them.”). 12 Even if the SAC intended to allege that Frankel itself aggressively sold stock short (and the SAC does not, as there are no specific allegations of Frankel’s borrowing of stock or the naked selling of stock it did not actually have), there is no allegation that Frankel promised Sedona or anyone that it would not sell Sedona’s stock short. See ATSI, 493 F.3d at 101 (“short selling-even in high volumes-is not, by itself, manipulative.”). Nor is there any particularized allegation that Frankel culpably participated in the short selling by Rhino or other parties. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 95 of 134 Sedona Corp. v. Ladenburg Thalmann & Co., Inc., Not Reported in F.Supp.2d (2009) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 13 Rhino is also alleged to have sold shares of Sedona stock short on behalf of Amro, but there is no allegation that Amro was itself aware of, or authorized, such a sale. The SAC, in fact, explicitly attributes this short sale to Rhino employees. (SAC ¶ 164.) 14 The SAC asserts a breach of contract claim against Markham, Ladenburg, Aspen, Boris and some of the Release Defendants. The claim against Boris was dismissed with prejudice in Sedona II, and Plaintiff does not address in its opposition papers its apparently inadvertent inclusion of Boris in the SAC’s Seventh Claim for Relief. Ladenburg and Aspen do not move for dismissal of this claim as against them, and the claims against the Release Defendants were dismissed. Therefore, the Court need only address Markham in connection with this claim. 15 Plaintiff also requests leave to replead its Pennsylvania Act causes of action to include reference to another statutory provision, but that request is denied since the Fourth Claim for Relief has been dismissed on other grounds. 16 As noted above, Ladenburg does not move for dismissal of the Seventh Claim for Relief as asserted against it. End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 96 of 134 TAB L Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 97 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite Yellow Flag - Negative Treatment Disagreement Recognized by Dresser-Rand Co. v. Jones, E.D.Pa., July 23, 2013 2012 WL 4205476 Only the Westlaw citation is currently available. United States District Court, E.D. Pennsylvania. SYNTHES, INC., Synthes USA HQ, Inc., Synthes USA, LLC, Synthes USA Sales, LLC, and Synthes USA Products, LLC, Plaintiffs, v. EMERGE MEDICAL, INC., John P. Marotta, Zachary W. Stassen, Eric Brown, and Charles Q. Powell, Defendants. Civil Action No. 11-1566. | Sept. 19, 2012. Attorneys and Law Firms Anthony B. Haller, Kevin M. Passerini, Michael P. Broadhurst, Blank Rome LLP, Philadelphia, PA, Edward N. Cahn, Blank Rome, LLP, Allentown, PA, for Plaintiffs. David P. Helwig, Benjamin J. Tursi, Marks O’Neill O’Brien & Courtney PC, Elizabeth F. Lorell, Gordon & Rees LLP, Pittsburgh, PA, Anna M. Darpino, Anne R. Myers, Kaufman Dolowich Voluck & Gonzo LLP, Blue Bell, PA, Gary L. Lieber, Ford & Harrison LLP, Washington, DC, Matthew J. Rita, Ford & Harrison LLP, Denver, CO, for Defendants. MEMORANDUM BUCKWALTER, Senior District Judge. *1 Currently pending before the Court is the Motion to Dismiss of Defendant Charles Q. Powell. For the following reasons, the Motion is granted in part and denied in part. I. PERTINENT FACTUAL AND PROCEDURAL HISTORY1 A. General Information About Synthes and Its Efforts to Protect Confidential Information Plaintiff Synthes, Inc. (“Synthes”)2 is a worldwide leader in the medical device industry which markets and sells medical implant devices, including plates, screws, rods, biomaterials, instrumentation, and other devices for orthopedic surgery. (Am.Compl.¶ 24.) Its customers include hospitals, hospital employees and directors, and physicians together with their employees and staff nurses. (Id. ¶ 25.) Synthes markets and sells its products through a sales force comprised of Regional Sales Consultants and Associate Sales Consultants. (Id. ¶ 27.) These individuals report to Regional Managers, are assigned to specific territories within regions, and are generally paid on a commission basis. (Id.) The Regional Managers, in turn, are responsible for the maintenance and growth of sales in the territories within their regions, as well as the hiring, training, and management of Sales Consultants. (Id. ¶ 28.) They are often compensated based on sales within their regions and may also receive base compensation in addition to commissions. (Id.) Synthes Area Vice Presidents bear responsibility for the maintenance and growth of sales in their regions and areas and are charged with hiring and managing Regional Managers. (Id. ¶ 29.) Their compensation structure is similar to that of the Regional Managers. (Id.) Finally, the Vice President of Sales for Synthes’s Trauma Division oversees all of the divisions’ sales employees and sales activities. (Id. ¶ 30.) Because Synthes invests millions of dollars annually both to develop its technology, systems, products, and strategies and to educate and train its employees, it requires all employees to sign an Employee Innovation and Non-Disclosure Agreement (“Non-Disclosure Agreement”). (Id. ¶ 31.) In addition, employees hired in sales, marketing, and product development capacities must sign a Confidentiality, Non-Solicitation, and Non- Competition Agreement (“Non-Competition Agreement”). (Id. ¶ 32.) These Agreements, in part, protect against the disclosure of confidential information, prohibit solicitation of Synthes’s employees and Synthes’s existing or prospective customers, and prohibit activities during and after employment with or on behalf of any individual or entity that competes or intends to compete with Synthes, subject to geographic and temporal limitations. (Id. ¶¶ 31, 32.) In exchange for the employees’ execution of these Agreements, Synthes provides the employees with proprietary information, Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 98 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 customer relationships, and valuable training programs. (Id. ¶ 33.) Synthes takes other measures to protect these interests by requiring the return of various information upon the employees’ separation from Synthes’s employment. (Id. ¶¶ 34-36.) B. Defendant Charles Q. Powell’s Employment With Synthes *2 Defendant Charles Q. Powell applied to Synthes on March 11, 2004, without any background in the orthopedic medical industry. (Id. ¶ 91.) On March 18, 2004, Powell accepted Synthes’s offer of a position as a Territory Assistant in its Trauma division based in the Great Lakes West Territory in the area of Chicago, Illinois. (Id. ¶ 92.) Prior to commencing employment, Powell executed a Non-Competition Agreement on March 18, 2004, and a Non-Disclosure Agreement on March 14, 2004. (Id. ¶¶ 93-94.) Powell also reviewed Synthes’s Employee Policy Manual, Sales Policy Manual, Global Code of Business Ethics, IT Security Policy, and, subsequently, the amended Policy Manual. (Id. ¶ 95.) Synthes provided Powell with extensive training in the trauma aspects of the orthopedic industry and continued to provide such training on an ongoing basis. (Id. ¶ 96.) Over time, his responsibilities increased and he was promoted to Associate Sales Consultant in September 2004, and ultimately to Sales Consultant in June 2006. (Id. ¶ 97.) With each promotion, Powell executed additional Confidentiality, Non-Solicitation, and Non- Competition Agreements, the latest versions of which were signed on June 1, 2006. (Id. ¶ 97.) As a Sales Consultant in Colorado in the Denver East Territory and the Eastern Slope Territory, Powell reported directly to Defendant John P. Marotta, and he was highly successful and well-compensated. (Id. ¶¶ 99-100.) Throughout his tenure with Synthes, Powell was privy to valuable customers contacts, goodwill, and business information. (Id. ¶ 101.) Synthes also provided Powell with substantial, specialized training on the technical aspects of Synthes’s products and the medical procedures in which these products are used. (Id. ¶ 103.) Powell’s Non-Competition Agreement required that he not “disclose or communicate” Synthes’s confidential and proprietary information “to any competitor or other third party” at any time during or after leaving Synthes’s employ or to “use or refer to” such information “for any purpose ... except as necessary for [him] to properly perform services for Synthes during [his] employment.” (Id. ¶ 105.) In addition, Powell’s Non-Competition Agreement specifically (1) prohibited Powell from competing with Synthes for a period of one year following the termination of his employment with Synthes; (2) prohibited him from soliciting Synthes’s customers within his territory in Colorado and with whom he had worked for a period of one year following the termination of his employment with Synthes; and (3) mandated that Pennsylvania law govern the Agreement. (Id. ¶¶ 106-109.) In addition to the obligations in his Non-Disclosure and Non-Competition Agreements, Powell was obligated to reimburse Synthes for various tuition expenses it paid in connection with his executive MBA program. (Id. ¶ 114.) In the year preceding his resignation, Synthes paid Powell $34,598.75 for tuition expenses he incurred. (Id. ¶ 114.) Synthes’s policies provided that if Powell ceased employment with Synthes within one year of completion of the courses, he would have to reimburse Synthes for those tuition expenses paid within the last year. (Id.) To date, however, Powell has not paid Synthes for $16,485.05 of the costs. (Id.) *3 Defendant Powell resigned from Synthes on March 15, 2010, effective March 30, 2010, and informed Synthes’s Human Resources representatives that he had accepted employment in a sales capacity with Sonoma Orthopedics, which Plaintiff believes to be a portfolio company of a venture capital firm founded and managed by Defendant Zachary Stassen’s father. (Id. ¶ 116.) According to Plaintiff, Powell’s intent was ultimately to join a new company-Emerge-founded by his co- Defendants John Marotta, Eric Brown, and Zachary Stassen. (Id. ¶ 117-18.) C. The Alleged Conspiracy to Develop Emerge In the spring of 2009, Defendant John Marotta-at the time a Synthes employee-first conceived the idea for a new business. (Id. ¶ 125.) By the summer, Marotta, along with Defendants Eric Brown (also a then-Synthes employee) and Zachary Stassen were actively involved in the development of a new business model. (Id.) This model was not disclosed to Synthes. (Id.) The business targeted a specific sub-segment of Synthes’s business that included surgical screws, drill, bits, and guide wires. (Id. ¶ 126.) They believed they could eliminate the need to provide direct sales support in the operating room, thereby changing the general methods of delivery of products and services in an innovative manner. (Id.) According to Plaintiff, however, this business model was developed using knowledge, information, and resources obtained by Marotta and Brown in connection with their employment with Synthes. (Id.). At some point in the planning process, Brown proposed naming the new company “Emerge.” (Id.) Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 99 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 In the summer of 2009, Marotta reached out to an accounting and consulting firm regarding possible names for an “orthopedic and medical device and healthcare consultant” company and researched companies that design corporate logos. (Id. ¶ 128). Around the same time, Marotta and Brown facilitated a series of discussions and meetings between Stassen and a Synthes Sales Consultant in Texas in order to garner information about Synthes’s business methods. (Id. ¶ 129.) The Defendants then sought to raise money for this new company from potential investors. (Id. ¶ 130.) The business plan and a private placement memorandum were developed through January of 2010, and then used in January and February 2010 to solicit investors, including Synthes’s customers and employees. (Id. ¶ 131.) By December of 2009, Marotta began making filings with the United States Patent and Trademark Office (“PTO”) relating to the name and logo for Emerge. (Id. ¶ 134.) On January 13, 2010-three months before his resignation from Synthes-Marotta met with Venture Law Advisors, who then filed Emerge’s articles of incorporation with the Colorado Secretary of State. (Id. ¶ 136.) Around that time, Marotta e-mailed himself a copy of a Regional Manager Non-Competition Agreement saved under his name. (Id. ¶ 137.) Leading up to his resignation, Marotta also e- mailed confidential Synthes documents and information to his personal e-mail account. (Id. ¶ 138.) *4 On February 22, 2010, Mr. Stassen, then purporting to be Emerge’s Chief Operating Officer and a member of the board of directors, filed a Form Notice of Exempt Offering of Securities with the United States Securities Exchange Commission (“SEC”), indicating that Emerge intended to obtain $1.5 million in investment capital and already had obtained two investors for $200,000 just days before the filing. (Id. ¶ 139.) Synthes avers that Marotta and Stassen personally solicited Synthes’s employees and customers during late 2009 and early 2010 concerning, at a minimum, their willingness to invest in Emerge. (Id. ¶ 140.) Marotta also sought investments from customers in other territories. (Id. ¶ 142.) Around the same time, Marotta began discussions with Synthes employees who had knowledge of the Defendants’ plans and activities about employment opportunities outside of Synthes. (Id. ¶ 143.) By the time Marotta’s resignation was effective on April 15, 2010, Emerge was fully operational, and Marotta was involved in all aspects of the business. (Id. ¶ 147.) On June 23, 2010, Emerge Surgical, Inc. filed with the Colorado Secretary of State to change its name to Emerge Medical, Inc. (Id. ¶ 150.) Less than one month later, Marotta made a new trademark filing with the PTO for the name and logo of “Emerge Medical.” (Id. ¶ 151.) Beginning no later than the summer of 2010, Marotta, Stassen, Powell, and Emerge allegedly acquired and used Synthes’s confidential and proprietary information by directing and/or encouraging others to access Synthes’s computer systems. (Id. ¶ 152.) Further, Marotta and Powell failed to return all Synthes products in their possession at the time of their resignation, for the purpose of reverse engineering the drill bits, guide wires, and cannulated screws that they are now marketing to Synthes customers. (Id. ¶ 154.) Finally, Marotta, Stassen, Powell, and Emerge purportedly made deliberately false and misleading representations about Emerge’s products. (Id. ¶ 155.) D. Commencement of Litigation On March 4, 2011, Synthes initiated the current federal action against both John Marotta and Emerge Medical, Inc. Thereafter, on March 6, 2012, Plaintiff filed an Amended Counterclaim adding three new defendants and setting forth thirteen causes of action as follows: (1) breach of fiduciary duty and/or duty of loyalty against Marotta and Brown (id. ¶ ¶ 169-88); (2) breach of contract under the Non-Competition and Non-Disclosure Agreements against Marotta, Brown, and Powell (id. ¶¶ 189-214); (3) tortious interference with contract against all Defendants (id. ¶¶ 215-26); (4) aiding and abetting breach of fiduciary duty against Marotta, Brown, Stassen, and Emerge (id. ¶¶ 227-36); (5) misappropriation of trade secrets under Pennsylvania common law and the Pennsylvania Uniform Trade Secrets Act, 12 Pa.C.S. § 5302, et seq., against all Defendants (id. ¶¶ 237-49); (6) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, against all Defendants (id. ¶¶ 250-60); (7) conversion and replevin against all Defendants (id. ¶¶ 261-68); (8) false or deceptive advertising under the Lanham Act, 15 U.S.C. § 1125(a), against Defendants Marotta, Stassen, Powell, and Emerge (id. ¶¶ 269-81); (9) trespass to chattels against Defendants Marotta, Stassen, Powell, and Emerge (id. ¶¶ 282-86); (10) unfair competition against Defendants Marotta, Stassen, Powell, and Emerge (id. ¶¶ 287-97); (11) fraud against all Defendants (id. ¶¶ 298-302); (12) civil conspiracy against all Defendants (id. ¶¶ 303-09); and (13) breach of contract or, in the alternative, unjust enrichment against Powell. (Id. ¶¶ 310-16.) *5 On April 18, 2012, Defendant Charles Powell filed the instant Motion to Dismiss. Plaintiff responded on May 29, 2012, Defendant Powell submitted a Reply Brief on June 22, 2012, Plaintiff filed a Sur-reply Brief on July 2, 2012, Defendant Powell filed a Supplemental Reply Brief on Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 100 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 4 August 3, 2012, and Plaintiff filed a supplemental Sur- Reply brief on August 23, 2012, making this Motion ripe for judicial consideration. II. STANDARD OF REVIEW Under Rule 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff has not stated a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6); see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir.2005). In Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the United States Supreme Court recognized that “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555. Following these basic dictates, the Supreme Court, in Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), subsequently defined a two-pronged approach to a court’s review of a motion to dismiss. “First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678. Thus, although “Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era ... it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at 678-79. Second, the Supreme Court emphasized that “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679. “Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context- specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. A complaint does not show an entitlement to relief when the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct. Id.; see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232-34 (3d Cir.2008) (holding that: (1) factual allegations of complaint must provide notice to defendant; (2) complaint must allege facts suggestive of the proscribed conduct; and (3) the complaint’s “ ‘factual allegations must be enough to raise a right to relief above the speculative level.’ ” (quoting Twombly, 550 U.S. at 555)). Notwithstanding these new dictates, the basic tenets of the Rule 12(b)(6) standard of review have remained static. Spence v. Brownsville Area Sch. Dist., No. Civ.A.08-626, 2008 WL 2779079, at *2 (W.D.Pa. July 15, 2008). The general rules of pleading still require only a short and plain statement of the claim showing that the pleader is entitled to relief and need not contain detailed factual allegations. Phillips, 515 F.3d at 233. Further, the court must “accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff.” Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir.2006). Finally, the court must “determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Pinkerton v. Roche Holdings Ltd., 292 F.3d 361, 374 n. 7 (3d Cir.2002). III. DISCUSSION *6 Defendant Powell now sets forth several broad legal theories seeking dismissal of the majority of the claims against him. First, he asserts that the gist of the action doctrine bars Plaintiff’s claims for tortious interference with contract, conversion, unfair competition, and civil conspiracy.3 Second, he contends that Plaintiff fails to state a claim under the Computer Fraud and Abuse Act. Finally, he argues that many of the remaining counts of the Amended Complaint should be dismissed for failure to meet the pleading standards set forth under Iqbal and Twombly. The Court addresses each argument separately. A. Gist of the Action Doctrine As a general rule, Pennsylvania courts are cautious about permitting tort recovery on contractual breaches. Glazer v. Chandler, 414 Pa. 304, 200 A.2d 416, 418 (Pa.1964). In eToll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10 (Pa.Super.Ct.2002), the Pennsylvania Superior Court emphasized that the “gist of the action” doctrine “is designed to maintain the conceptual distinction between breach of contract claims and tort claims [by] preclud[ing] plaintiffs from recasting ordinary breach of contract claims into tort claims.”4 Id. at 14. The simple existence of a contractual relationship between two parties does not preclude one party from bringing a tort claim against the other. Smith v. Lincoln Benefit Life Co., No. Civ.A.08- 1324, 2009 WL 789900, at *20 (W.D.Pa. Mar. 23, 2009), aff’d, 2010 WL 3730196 (3d Cir. Sep.24, 2010); see also Bohler-Uddeholm Am., Inc. v. Ellwood Grp., Inc., 247 F.3d 79, 104 (3d Cir.2001). The doctrine, however, forecloses a party’s pursuit of a tort action for the mere breach of contractual duties, “ ‘without any separate or independent event giving rise to the tort.’ ” Smith, 2009 WL 789900, at *20 (quoting Air Prods. and Chems., Inc. v. Eaton Metal Prods. Co., 256 F.Supp.2d 329, 340 (E.D.Pa.2003)). “When a plaintiff alleges that the defendant committed a tort in the course of carrying out a contractual agreement, Pennsylvania courts examine the claim and determine Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 101 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 5 whether the ‘gist’ or gravamen of it sounds in contract or tort.” Sunquest Info. Sys., Inc. v. Dean Witter Reynolds, Inc., 40 F.Supp.2d 644, 651 (W.D.Pa.1999). To make this determination, the court must ascertain the source of the duties allegedly breached. Sunburst Paper, LLC v. Keating Fibre Int’l., No. Civ.A.06-3957, 2006 WL 3097771, at *2 (E.D.Pa. Oct.30, 2006). The doctrine bars tort claims: “(1) arising solely from a contract between the parties; (2) where the duties allegedly breached were created and grounded in the contract itself; (3) where the liability stems from a contract; or (4) where the tort claim essentially duplicates a breach of contract claim or the success of which is wholly dependent on the terms of a contract.” Id. (citing eToll, 811 A.2d at 19). “In other words, if the duties in question are intertwined with contractual obligations, the claim sounds in contract, but if the duties are collateral to the contract, the claim sounds in tort.” Id. Whether the gist of the action doctrine applies in any particular setting is a question of law. Alexander Mill Servs., LLC v. Bearing Distrib., Inc., No. Civ.A.06- 1116, 2007 WL 2907174, at *8 (W.D.Pa. Sept. 28, 2007). *7 In the present case, Plaintiff asserts a breach of contract claim against Defendant Powell as follows: 192. Powell ... [was] ... contractually prohibited from competing with Synthes during [his] employment and for a period of one year after terminating [his] employment with Synthes, and, separate from [his] non-competition obligations, [was] ... contractually prohibited from soliciting employees or customers during the term of [his] employment and for a period of one year after terminating [his] employment with Synthes. ... 201. Powell breached [his] contractual non- disclosure obligations with respect to Synthes’ confidential information by failing to return all confidential information and property to Synthes at the termination of [his] employment with Synthes, including the documents produced by Marotta, Stassen, Powell, and Emerge during discovery in this litigation. 202. Upon information and belief, ... Powell ha[s] further breached [his] contractual duties to Synthes by, directly or indirectly, providing Synthes’ sensitive, confidential, proprietary, or trade secret information to Emerge (including its current and former officers, directors, employees, and consultants), Stassen, and third parties, in violation of the confidentiality obligations in their Non- Competition and Non-Disclosure Agreements. 203. Upon information and belief, Powell breached his contractual non-competition and non-solicitation obligations to Synthes during the one-year period of time following the termination of his employment with Synthes, including during his employment with Sonoma Orthopedics, during which time he competed with Synthes and solicited customers from his former sales territories, and during his employment with Emerge, during which time he competed with Synthes and solicited customers from his former sales territories (whether for investment opportunities in Emerge, sales of Emerge products, or regarding Emerge’s business model). (Am.Compl.¶¶ 192, 201-03.) Defendant Powell now contends that, in light of these claims for breach of contract, Plaintiff’s related claims against him for tortious interference with contract, conversion, unfair competition, and civil conspiracy are barred by the gist of the action doctrine.5 The Court considers each claim individually. 1. Tortious Interference with Contract Pennsylvania courts, following the Restatement (Second) of Torts, define the tort of intentional interference with existing contractual relations as: One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss to the other from the third person’s failure to perform the contract. Binns v. Flaster Greenberg, P.C., 480 F.Supp.2d 773, 778 (E.D.Pa.2007) (quoting Adler, Barish, Daniels, Levin and Creskoff v. Epstein, 482 Pa. 416, 393 A.2d 1175, 1183 (Pa.1978)). In order to prevail on a claim for interference with contractual relations, the plaintiff must plead and prove four elements: (1) the existence of a contractual relation; (2) the defendant’s purpose or intent to harm the plaintiff by preventing the relation from occurring; (3) the absence of any privilege or justification on the part of the defendant; and (4) damages resulting from the defendant’s conduct. Gundlach v. Reinstein, 924 F.Supp. 684, 693 (E.D.Pa.1996). “A tortious interference with contract claim is barred by the gist of the action doctrine if it is not independent of a contract claim that is pled along with it.” Alpart v. Gen. Land Partners, Inc., 574 Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 102 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 6 F.Supp.2d 491, 505 (E.D.Pa.2008). In other words, a tortious interference with contract claim that coincides directly and solely with a contractual prohibition on the identical activity will fall within the gist of the action doctrine. See Brown & Brown v. Cola, 745 F.Supp.2d 588, 621-22 (E.D.Pa.2010) (holding that tortious interference claims against former employees of the plaintiff regarding alleged unlawful solicitation of both customers and employees were clearly subsumed by the breach of contract claims since the defendants’ employment contracts contained provisions prohibiting these actions). *8 In the present case, several contractual provisions in Powell’s Non-Competition Agreement are pertinent. First, the confidentiality provision of the Non- Competition Agreement states: At all times during and after my employment with Synthes, I will not disclose or communicate any of [Synthes’s confidential and proprietary information] to any competitor or other third party, or use or refer to any of this information for any purpose, or remove materials containing any of this information from Synthes’ premises, except as necessary for me to properly perform services for Synthes during my employment.... I also understand that these provisions apply to all information I may receive that is confidential or proprietary to any customer or other company who does business with Synthes. (Am. Compl., Ex. K., at 2.) In addition, the non- solicitation of customers and prospects provision states: I will not, for a period of one year after my employment with Synthes terminates for any reason, solicit or contact, directly or through others, for the purpose of competing or interfering with any part of Synthes’ business, (1) any customer of Synthes that I solicited at any time during the last three years of my employment; (2) any prospective customer of Synthes that received or requested a proposal or offer from me on behalf of Synthes at any time during the last three years of my employment; or (3) any customer or prospective customer of Synthes for which I had any responsibility, directly or indirectly, at any time during the last three years of my employment. (Id. at 3.) The non-solicitation or hiring of employees provision indicates: I will not, for a period of one year after my employment with Synthes terminates, directly or indirectly solicit any employee of Synthes to leave their employment with Synthes, offer any employee of Synthes employment elsewhere or hire any employee of Synthes to work elsewhere. (Id.) Finally, the non-competition provision provides, in pertinent part: I agree I will not, for a period of one year after my employment with Synthes terminates for any reason, work for (as an employee, consultant, contractor, agent or representative) any competitor of Synthes in the territory or territories that I am now, or have been responsible for at any time during the last year of my employment with Synthes. Competitors shall be deemed any persons or entities who now, or in the future, sell, or intend to sell, orthopedic, bone fixation, maxillofacial medical, endoscope and/or spinal implant device or instrumentation technologies, products, or services. (Id.) Separate and apart from the claims in Count II of the Amended Complaint that Powell breached some of these contractual provisions, Count III asserts a separate cause of action against Powell for tortious interference with contractual relations. Specifically, this Count alleges, in pertinent part: 219. At the time that Powell began working for Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 103 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 7 Emerge, and before, Synthes had existing contractual relationships with Powell, and Marotta, Stassen, and Emerge knew or should have known about those contractual relationships. *9 220. The Defendants have tortiously interfered with Synthes’ contractual relationships with Marotta, Brown, and Powell by causing Marotta, Brown, and Powell to breach their contractual obligations to Synthes. 221. The Defendants have tortiously interfered with Synthes’ contractual relationships with other current and former Synthes employees, contractual relationships that Defendants knew or should have know[n] about, including employees the Defendants solicited regarding, without limitation: • Investment in Emerge; • Employment opportunities with Emerge, Sonoma Orthopedics, or other companies affiliated with Split Rock Partners, LLC; • The unlawful acquisition of confidential information and trade secret information; • Access to Synthes’ customers; • The unlawful acquisition of Synthes product; and • The concealment of those employees’ activities on behalf of Emerge or of their knowledge of the Defendants’ activities. 222. The Defendants’ [sic] knew or should have known about Synthes’ contractual relationships with certain vendors, and the Defendants have tortiously interfered with Synthes’ contractual relationships with those vendors. 223. The Defendants’ [sic] knew or should have known about Synthes’ contractual relationships with its customers, including, without limitation, contractual relationships relating to sales, consignment, and inventory management systems, and the Defendants have tortiously interfered with Synthes relationships with its customers. (Am.Compl.¶¶ 219-23.) Defendant Powell now contends that because Plaintiff’s tortious interference claim is based upon the allegation that Powell, along with Marotta, Brown, and Stassen, solicited Synthes’s employees, customers, and vendors in order to compete with Synthes, this claim is nothing more than an effort to re-cast Plaintiff’s breach of contract claims into separate tort claims. In response, Plaintiff argues that Synthes’s tortious interference with contract claim against Powell addresses conduct outside the scope of Powell’s contractual obligations to Synthes. More precisely, according to Plaintiff, this claim alleges that Powell tortiously interfered with three separate sets of contracts: (1) Synthes’s contractual relationships with current and former Synthes employees; (2) Synthes’s contractual relationships with its vendors; and (3) Synthes’s contractual relationships with its customers outside his former sales territory. (Pl.’s Resp. Opp’n Powell Mot. Dismiss 8 (citing Am. Compl. ¶¶ 220-26, 152-53, 156- 59, 223, 283-84).) As such, Plaintiff avers that the tortious interference claim goes beyond the contractual prohibitions to challenge conduct that is unlawful only in tort. In light of these varied allegations of tortious interference, the Court must conduct a more individualized analysis of each specific claim. First, as to Powell’s alleged tortious interference with Synthes’s contractual relationships with current and former employees, the Amended Complaint asserts that Powell solicited such employees to invest in Emerge; accept employment elsewhere; provide confidential and trade secret information; provide access to Synthes’s customers; provide access to Synthes product; and conceal his activities on behalf of Emerge. (Id. ¶ 221.) The non-solicitation of employees provision in the Non-Competition Agreement, however, explicitly provides that Powell could not, within one year after my employment with Synthes, “directly or indirectly solicit any employee of Synthes to leave their employment with Synthes, offer any employee of Synthes employment elsewhere or hire any employee of Synthes to work elsewhere.” (Am. Compl., Ex. K at 3 (emphasis added).) As such, to the extent the tortious interference with employees claim alleges Powell’s improper solicitation of Synthes employees to leave Synthes and accept employment elsewhere, the alleged conduct falls squarely within the scope of this provision and must be dismissed under the gist of the action doctrine. To the extent the tortious interference with employees claim alleges activity beyond that-such as solicitation of employees for information, investment capital, or access to trade secrets-the cause of action falls outside the bounds of the Agreement and is not barred by the gist of the action doctrine. *10 Second, as to Powell’s alleged interference with Synthes’s contracts with its vendors, the Court does not deem this claim to be subsumed by the breach of contract claim. (Id. ¶ 222.) Notably, nothing within Powell’s Non- Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 104 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 8 Competition Agreement expressly precludes him from dealing with Synthes’s vendors. Moreover, while Defendant Powell suggests that this claim might be subsumed by the Agreement’s prohibition on use of confidential information, it is notable that vendor information is not included in the Agreement’s definition of “proprietary and confidential information.”6 Accordingly, this portion of Plaintiff’s tortious interference claim is not barred by the gist of the action doctrine. Third and finally, as to Powell’s alleged interference with Synthes’s contractual relationships with its customers, the analysis is slightly more complicated. The Amended Complaint alleges that Powell “knew or should have known about Synthes’ contractual relationships with its customers, including, without limitation, contractual relationships relating to sales, consignment, and inventory management systems, and the Defendants have tortiously interfered with Synthes relationships with its customers.” (Id. ¶ 223.) As set forth above, however, the non- solicitation of employees portion of the Non-Competition Agreement only precluded Powell from soliciting Synthes customers or prospective customers within three groups: (1) any customer of Synthes that Powell solicited at any time during the last three years of his employment; (2) any prospective customer of Synthes that received or requested a proposal or offer from Powell on behalf of Synthes at any time during the last three years of his employment; or (3) any customer or prospective customer of Synthes for which Powell had any responsibility, directly or indirectly, at any time during the last three years of his employment. (Id., Ex. K at 3.) Plaintiff now argues that its claim only contends that “Powell tortiously interfered with Synthes’ contractual relationships with its ... customers outside the restricted territory and with whom Powell had no prior working relationship.” (Pl.’s Mem. Opp’n Powell Mot. Dismiss 10.) Defendant Powell, on the other hand, asserts that “as support for the proposition that Powell interfered with Synthes’s customers outside of his former sales territory, Plaintiffs rely on allegations that its customers were directed to ‘reorder Synthes’ surgical drill bits’ from Emerge and this process was facilitated in part by Emerge’s use of Synthes’ part numbers.” (Def. Powell’s Reply Br. 7.) Because the confidentiality provision in Powell’s Non-Competition Agreement precluded him from disclosing or communicating any proprietary and confidential information to “any competitor or other third party,” (Am. Compl., Ex. K, at 2), Powell’s use of such information to solicit Synthes customers is “inextricably interwoven with the contractual duties at issue.” (Def. Powell’s Reply Br. 7.) *11 At this juncture of the litigation, the Court lacks sufficient information to decide whether the gist of the action doctrine applies. Certainly, to the extent Plaintiff alleges that (a) Powell interfered with Synthes’s contractual relationships with customers/prospective customers that Powell either solicited, serviced, or otherwise had contact with during his last three years of employment or (b) Powell improperly used Synthes confidential and proprietary information to interfere with Synthes’s customers’ contracts, that claim may be subsumed by the Non-Competition Agreement. To the extent, however, that Plaintiff challenges Powell’s solicitation of customers outside the categories defined in the Non-Competition Agreement, such a claim would be beyond the Non-Competition Agreement and, thus, would not be barred by the gist of the action doctrine.7 “ ‘Caution must be exercised in dismissing a tort action on a motion to dismiss because whether tort and contract claims are separate and distinct can be a factually intensive inquiry.’ ” Kimberton Healthcare Consulting, Inc. v. Primary PhysicianCare, Inc., No. Civ.A.11-4568, 2011 WL 6046923, at *8 (E.D.Pa. Dec.6, 2011) (quoting Haymond v. Lundy, Nos. Civ.A.99-5015, 99-5048, 2000 WL 804432, at *8 (E.D.Pa. June 22, 2000)). Indeed, “the application of the gist of the action doctrine depends on the facts of each particular case.” Sensus USA, Inc. v. Elliott Bay Eng’g, Inc., No. Civ.A.10-1363, 2011 WL 2650028, at *7 (W.D.Pa. July 6, 2011). Where, as here, the factual nature of the allegations is unclear, “this issue is best left for resolution on a post-amendment motion to dismiss or, even more appropriately, on a post-discovery motion for summary judgment.” Id. Heeding these cautionary words, the Court declines to rule on this portion of Defendant Powell’s Motion. In sum, the Court reaches a tripartite ruling on Plaintiff’s tortious interference claim. First, to the extent that the claim alleges that Powell interfered with Synthes’s contractual relationships with current and former Synthes employees by soliciting them to leave Synthes’s employment or accept employment elsewhere, Defendant Powell’s Motion to Dismiss is granted under the gist of the action doctrine. Second, Defendant Powell’s Motion is denied to the extent it seeks dismissal under the gist of the action doctrine of the portions of the tortious interference claim alleging both (a) solicitation of Synthes’s employees for information, investment, concealment, and access to trade secrets; and (b) interference with Synthes’s contractual relationships with its vendors. Finally, the Court finds the Motion premature with respect to whether the gist of the action doctrine bars Synthes’s claim that Powell tortiously interfered with Synthes’s relationships with its customers. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 105 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 9 2. Conversion Conversion is defined as “the deprivation of another’s right of property in, or use or possession of, a chattel, without the owner’s consent and without lawful justification.” Leonard A. Feinberg, Inc. v. Cent. Asia Capital Corp., Ltd., 974 F.Supp. 822, 844-45 (E.D.Pa.1997) (citation omitted). Although “[t]he mere existence of a contract between the parties does not automatically foreclose the parties from raising a tort action[,] ... a party cannot prevail on its action of conversion when the pleadings reveal merely a damage claim for breach of contract.” Neyer, Tiseo & Hindo, Ltd. v. Russell, No. Civ.A.92-2983, 1993 WL 53579, at *4 (E.D.Pa. Mar.2, 1993) (internal citations omitted). Courts have dismissed conversion claims under the gist of the action doctrine where the alleged entitlement to the chattel arises solely from the contract between the parties. Rahemtulla v. Hassam, 539 F.Supp.2d 755, 777 (M.D.Pa.2008) (citing Murphy v. Mid East Oil Co., No. Civ.A.06-1343, 2007 WL 527715, at *5-6 (W.D.Pa. Feb.14, 2007) (dismissing conversion claim because it was dependent on the defendant’s noncompliance with the terms of the agreements); Montgomery v. Fed. Ins. Co., 836 F.Supp. 292, 301-02 (E.D.Pa.1993) (dismissing conversion claim because of, inter alia, the “firmly accepted ... doctrine that an action for conversion will not lie where damages asserted are essentially damages for breach of contract”); Pittsburgh Constr. Co. v. Griffith, 834 A.2d 572, 584 (Pa.Super.Ct.2003) (stating that where success of the conversion claim “depend[s] entirely on the obligations as defined by the contract,” the “gist of the action” doctrine applies)). *12 Notably, however, “[w]hen a plaintiff has a property interest in the thing that is the subject of a [conversion] claim, the gist of the action doctrine does not bar recovery under a conversion theory even though the property may also be the subject of a contract.” Orthovita, Inc. v. Erbe, No. Civ.A.07-2395, 2008 WL 423446, at *6 (E.D.Pa. Feb.14, 2008) (citing Berger & Montague, P.C. v. Scott & Scott, LLC, 153 F.Supp.2d 750, 753-54 (E.D.Pa.2001). In Partners Coffee Company, LLC v. Oceana Services. & Products. Co., No. Civ.A.09-236, 2009 WL 4572911, at *6-7 (W.D.Pa. Dec.4, 2009), the court clarified the distinction between claims of conversion that are barred by the gist of the action doctrine and those that are not. Following an asset purchase agreement between two competing companies, the plaintiff came to believe that the defendant had intercepted and diverted payments due to plaintiff, contacted customers to compete for services, and surreptitiously installed a computer device which allowed him to log into plaintiff’s computer system and obtain confidential business information and trade secrets. Id. at *6. The court found that the first two parts of that conversion claim (diverting payments and contacting customers) were intertwined with the terms of the Asset Purchase Agreement since the contract defined which company owned these items. Id. It declined, however, to find that the third part of the conversion claim, i.e., that defendants improperly accessed the plaintiff’s computer system in order to gain confidential business information, “to be intertwined with any contract provision since it is understood in our society that businesses will not interfere with each other’s confidential information whether bound to each other by contract or not.” Id. at *7. In the case at bar, Defendant Powell asserts that Plaintiff’s conversion claim fails because Synthes has no express property interest in its customers and business beyond those articulated in the Confidentiality and Non- Disclosure Agreements. Moreover, Powell claims that its entitlement to confidential and proprietary information is subsumed by the Non-Disclosure Agreement, which states in pertinent part: I agree ... (a) to disclose and assign to SYNTHES as its exclusive property, all inventions and technical or business innovations including computer software developed or conceived by me solely or jointly with others on company time or my own time during the period of my employment, (1) that are along the lines of the businesses, work or investigations of SYNTHES or its affiliates, or (2) that result from or are suggested by any work which I may do for SYNTHES or (3) that are otherwise made through the use of SYNTHES time, facilities or materials. ... (d) upon any termination of my employment to deliver to SYNTHES promptly all items which belong to SYNTHES or which by their nature are for the use of SYNTHES employees only, including without limitation, all written and other materials which are of a secret or confidential[ ] nature relating to the business of the company or its affiliates. *13 (Am. Compl., Ex. J (footnote omitted).) As such, Powell now contends that the conduct allegedly constituting conversion clearly falls within this express language. This argument reads the conversion claim against Powell too broadly. Plaintiff’s Amended Complaint states as follows: Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 106 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 10 262. The Defendants have intentionally, willfully, and unlawfully taken, acquired, appropriated, kept, and used and have unlawfully exercised domain and control over, Synthes’ confidential proprietary business information, depriving Synthes of its right of property in, or use or possession of, such confidential and proprietary business information. 263. The Defendants have also intentionally, willfully, and unlawfully taken, acquired, appropriated, kept, used (and, in some instances, altered or destroyed), and have unlawfully exercised domain and control over, Synthes product, including, but not limited to, drill bits, cannulated and other screws, guide wires, external fixation components, implant and instrumentation sets and caddies, and other implants and instrumentation, depriving Synthes of its right of property in, or use, possession, or sale of, such product. (Am. Compl. ¶¶ 262-63 (emphasis added).) Thus, the conversion claim does not allege any taking of customers or business-only confidential and proprietary information.8 Moreover, as set forth above, societal norms, not the parties’ contracts, govern the ownership of such information and recognize that it belongs exclusively to Plaintiff. When, as here, a plaintiff has a property interest in the thing subject to the conversion claim, the gist of the action doctrine does not bar a tort theory of recovery, despite the fact that the property is also the subject of a separate contract. In other words, Defendant Powell’s duty not to take Plaintiff’s confidential and proprietary information stemmed not from any contractual obligation, but rather from social policy existing outside the terms of the contract. Accordingly, the Court shall not dismiss this claim on a gist of the action theory. 3. Unfair Competition “A claim of unfair competition under Pennsylvania law requires proof that the defendant has ‘passed off’ the goods of one manufacturer or vendor as those of another, thus creating confusion between his own goods, and those of the rival.” Scanvec Amiable, Ltd. v. Chang, 80 F. App’x 171, 180 (3d Cir.2003) (citations omitted). The doctrine of unfair competition, however, is not restricted to passing off goods. Granite State Ins. Co. v. Aamco Transmissions, Inc., 57 F.3d 316, 319 (3d Cir.1995). “Pennsylvania courts have recognized a cause of action for the common law tort of unfair competition where there is evidence of, among other things, trademark, trade name, and patent rights infringement, misrepresentation, tortious interference with contract, improper inducement of another’s employees, and unlawful use of confidential information.” Synthes (U.S.A.) v. Globus Med., Inc., No. Civ.A.04-1235, 2005 WL 2233441, at *8 (E.D.Pa. Sept. 14, 2005) (citations omitted). *14 In the present case, the unfair competition claim against Powell-which is also asserted against Defendants Marotta, Stassen, and Emerge-alleges that the Defendants have engaged in unfair competition by, in part, committing the following acts: engaging in a conspiracy to take or destroy integral parts of Synthes’s business and compete unfairly; violating contractual, common law, and statutory obligations owed to Synthes; misappropriating confidential, proprietary, and trade secret information; tortiously interfering with Synthes’s contractual relationships; wrongfully soliciting Synthes’s employees and customers; illicitly acquiring Synthes’s product to design, develop, and test products for Emerge; and engaging in a pattern of activity that evidences that they have enjoyed unlawful advantages in the competitive trauma market. (Am.Compl.¶ 288.) Defendant Powell now contends that each of these categories of alleged conduct are specifically addressed in the Non- Competition and Non-Solicitation Agreements and, thus, are barred by the gist of the action doctrine. As set forth above, however, the Court has found that Plaintiff’s tortious interference claims and conversion claims against Defendant Powell survive a gist of the action challenge. Such claims, therefore, can serve as a legal basis for the unfair competition claim. See Synthes, 2005 WL 2233441, at *8. To the extent the Amended Complaint recites a list of other conduct underlying the allegation of unfair competition, the Court need not dissect each individual contention. Rather, all that is required for Plaintiff to maintain this claim is “evidence of, among other things, trademark, trade name, and patent rights infringement, misrepresentation, tortious interference with contract, improper inducement of another’s employees, and unlawful use of confidential information.” Id. Because such conduct has been properly alleged, the unfair competition claim shall not be dismissed.9 4. Civil Conspiracy To make out a claim for common law civil conspiracy under Pennsylvania law, a plaintiff must allege: “(1) a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose; (2) an overt act done in pursuance of the common purpose; and (3) actual legal damage.” Chantilly Farms, Inc. v. W. Pikeland Twp., No. Civ.A.00-3903, 2001 WL 290645, at *12 (E.D.Pa. Mar.23, 2001) (quoting Smith v. Wagner, Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 107 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 11 403 Pa.Super. 316, 588 A.2d 1308, 1311-12 (Pa.Super.1991)). A plaintiff must also show that “the sole purpose of the conspiracy is to cause harm to the party who has been injured.” Becker v. Chicago Title Ins. Co., No. Civ.A.03-2292, 2004 WL 228672, at *13 (E.D.Pa. Feb.4, 2000) (citing Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466, 472 (Pa.1979)). Unlike a claim for unfair competition, a cause of action for civil conspiracy requires a distinct underlying tort as a predicate to liability. In re Orthopedic Bone Screw Prods. Liab. Litig., 193 F.3d 781, 789 (3d Cir.1999); Kist v. Fatula, No. Civ.A.06-67, 2007 WL 2404721, at *9 (W.D.Pa. Aug. 17, 2007). “Since liability for civil conspiracy depends on performance of some underlying tortious act, the conspiracy is not independently actionable; rather, it is a means of establishing vicarious liability for the underlying tort.” Boyanowski v. Capital Area Intermediate Unit, 215 F.3d 396, 407 (3d Cir.2000) (quotation omitted). Thus, “if the underlying tort is found not to exist, the related claim for civil conspiracy to commit that tort necessarily fails.” Kist, 2007 WL 2404721, at *9. *15 Defendant Powell assumes that each of the torts upon which Plaintiffs’ civil conspiracy claim could be based fails under the gist of the action doctrine, thus requiring the civil conspiracy claim to likewise fail. As explained in detail above, however, Plaintiff’s tortious interference and conversion claims survive a gist of the action challenge. As such, a civil conspiracy claim based on these underlying torts survives as well. B. Claims Under the Computer Fraud and Abuse Act Defendant Powell’s second broad challenge to the Amended Complaint focuses on Plaintiff’s claim of a violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030. To bring a claim pursuant to § 1030(a)(4) of the CFAA, a plaintiff must allege: (1) that the defendant has accessed a “protected computer”; (2) has done so without authorization or by exceeding such authorization as was granted; (3) has done so “knowingly” and with “intent to defraud”; and (4) as a result has “further[ed] the intended fraud and obtain [ed] anything of value.” 18 U.S.C. § 1030(a)(4). In the present matter, Plaintiff alleges that the computer systems used by Synthes employees were “protected computers” under the CFAA. (Am.Compl.¶ 252-53.)10 Beginning in the summer of 2010, after Powell and the other Defendants terminated their employment with Synthes, they “improperly and unlawfully acquired, used, and disclosed Synthes’ confidential, sensitive, proprietary, and trade secret information, including ... information they acquired by directing, inducing and encouraging others to access Synthes’ computer systems.” (Am.Compl.¶ 152.) Plaintiff goes on to allege that Defendants were not authorized to access or use Synthes computers for the purpose of misappropriating information, nor were they authorized to access the computer systems indirectly by inducing other Synthes employees to do so. (Id. ¶ 254.) By engaging in such wrongful actions, then, Plaintiff claims that Defendants “knowingly and wrongfully obtained information from the protected computers with the intent to defraud Synthes and to further their illicit conspiracy; used such protected computers for fraudulent purposes; misappropriated valuable information belonging to Synthes from the protected computers; and damaged the information stored on the protected computers.” (Id. ¶ 255.) Ultimately, Plaintiff claims damage to the protected computers and the information stored therein. (Id. ¶ 256.) Defendant Powell now contends that a claim against him under the CFAA cannot survive on several grounds. First, he avers that Plaintiff cannot establish that he either accessed a protected computer without authorization or exceeded authorized access during his employment. Second, he argues that Plaintiff cannot establish that the conduct upon which it predicates the CFAA claim involved “an interstate or foreign communication.” Finally, Powell asserts that Plaintiff has not alleged facts to support a finding that it suffered a “loss” for purposes of invoking the CFAA’s civil remedy. For clarity of discussion, the Court takes each argument individually. 1. Whether Plaintiff Has Established that Powell Either Accessed a Protected Computer Without Authorization or Exceeded Authorized Access *16 Under the CFAA, a plaintiff must show, among other things, that the defendant accessed the computer either “without authorization” or that he “exceeded authorized access.” An employee accesses a computer “without authorization” when he “ ‘has no rights, limited or otherwise, to access the computer in question.’ ” Grant Mfg. & Alloying, Inc. v. McIlvain, No. Civ.A. 10-1029, 2011 WL 4467767, at *7 (E.D.Pa. Sept.23, 2011) (quoting LVRC Holdings, LLC v. Brekka, 581 F.3d 1127, 1133 (9th Cir.2009)); see also Integrated Waste Solutions, Inc. v. Goverdhanam, No. 10-2155, 2010 WL 4910176, at *8 & n. 3 (E.D.Pa. Nov.30, 2010). Notably, the CFAA prohibits unauthorized access to information rather than unauthorized use of such information. 18 U.S.C. § 1030(a)(4). Although the Third Circuit has yet to address the meaning of “without authorized access,” courts in this district have held, in the employer-employee context, that Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 108 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 12 “an employee who may access a computer by the terms of his employment is ‘authorized’ to use that computer for purposes of [the] CFAA even if his purpose in doing so is to misuse or misappropriate the employer’s information.” Bro-Tech Corp. v. Thermax, Inc., 651 F.Supp.2d 378, 407 (E.D.Pa.2009); see also LVRC Holdings, 581 F.3d at 1133 (holding that “without authorization” means “without permission”).11 As noted, however, sections 1030(a)(2)(C) and (a)(4) are not limited to situations in which a defendant accesses a computer without authorization, but also permit liability where the defendant “exceeds authorized access.” The CFAA defines “exceeds authorized access” as accessing a computer “without authorization” and using “such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter.” Id. § 1030(e)(6). More succinctly stating the distinction between “unauthorized access” and “exceeds authorized access,” the Ninth Circuit has explained that “a person who ‘intentionally accesses a computer without authorization,’ ... accesses a computer without any permission at all, while a person who ‘exceeds authorized access,’ ... has permission to access the computer, but accesses information on the computer that the person is not entitled to access.” LVRC Holdings, 581 F.3d at 1133 “Whether an employee has exceeded authorized access depends on the computer access restrictions imposed by his employer.” Grant Mfg., 2011 WL 4467767, at *7. “Where an employer places limitations on the computer information an employee is entitled to obtain or alter or the manner in which the employee is entitled to obtain or alter such information, and notifies employees of such limitations, an employee who runs afoul of the limitations exceeds his authorized access under the CFAA.” Id. Importantly, the inquiry focuses not on the employee’s motivation in accessing the computer or information, but rather on whether the access to that information was authorized. See Brett Senior & Assoc., P.C. v. Fitzgerald, No. Civ.A.06-1412, 2007 WL 2043377, at *4 (E.D.Pa. July 13, 2007) (rejecting employer’s position that the employee’s access of the computer was unauthorized or exceeded authorized access because he eventually used the information in an improper manner, and concluding instead that the lawfulness of the employee’s entry into the computer system defeated the progress of the CFAA claim against him); Consulting Prof’l Res., Inc. v. Concise Techs. LLC, No. Civ.A.09-1201, 2010 WL 1337723, at *6 (W.D.Pa. Mar.9, 2010) (“While disloyal employee conduct might have a remedy in state law, the reach of the CFAA does not extend to instances where the employee was authorized to access the information he later utilized to the possible detriment of his former employer.”)). *17 Defendant Powell contends that Plaintiff has failed, in two respects, to allege facts sufficient to satisfy this element. First, he argues that Plaintiff neglects to establish that Defendant Powell ever “accessed” a computer or computer system since, after his employment ended, he never personally used Synthes’s computer systems.12 Second, he asserts that the Amended Complaint relies on Powell’s unauthorized use of information rather than computers. Neither argument withstands judicial review. First, the Court finds that the allegations of the Amended Complaint clearly allege set forth “access” within the meaning of the CFAA. As noted above, the Amended Complaint states that Defendant Powell “improperly and unlawfully acquired, used, and disclosed Synthes’ confidential, sensitive, proprietary, and trade secret information, including ... information they acquired by directing, inducing and encouraging others to access Synthes’ computer systems.” (Am. Compl. ¶ 152 (emphasis added).) Accordingly, his “access” was not personal, but rather it was carried out through others acting at his direction. While the Third Circuit has not addressed the meaning of the word “access” within the CFAA, our analysis is guided by several other considerations. Primarily, the plain language of the statute requires only “access”-no modifying term suggesting the need for “personal access” is included. Moreover, other courts have used the common meaning of the word “access” and defined it as “gaining admission to.” See WEC Carolina Energy Solutions LLC v. Miller, 687 F.3d 199, 204 (4th Cir.2012) (“Thus, we note at the outset that ‘access’ means ‘[t]o obtain, acquire,’ or ‘[t]o gain admission to.’ ”) (quoting Oxford English Dictionary (3d ed.2011; online version 2012)); Sw. Airlines Co. v. BoardFirst, L.L.C., No. Civ.A.06-891, 2007 WL 4823761, at *12 (N.D.Tex. Sept. 12, 2007) (utilizing the “dictionary definition” of “access” as “mean[ing] ‘to get at’ or ‘gain access to’ ”) (quoting Merriam-Webster’s Collegiate Dictionary (“Websters”) 6 (10th ed.1998)); Am. Online, Inc. v. Nat’l Health Care Disc., Inc.., 121 F.Supp.2d 1255, 1272 (N.D.Iowa 2000) (“As a noun, ‘access,’ in this context, means to exercise the freedom or ability to make use of something....”) (citing Websters 6). Finally, the purpose of the Act sheds some light on the term’s meaning. “ ‘At its core, the Act is intended to protect the “confidentiality, integrity, and security of computer data and networks” by prohibiting misuse of a computer and providing civil and criminal sanctions for knowing or intentional violations.’ ” Eagle v. Morgan, No. Civ.A.11-4303, 2011 WL 6739448, at *6 (E.D.Pa. Dec.22, 2011) (quotations omitted). Requiring personal access of a computer would, in some respects, hinder the intent of the act. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 109 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 13 Consistent with our interpretation, many courts have found that one’s act of inducing another to access a computer that he or she is otherwise not authorized to use constitutes “access” for purposes of CFAA liability. See, e.g., Se. Mech. Servs., Inc. v. Brody, No. Civ.A.08-1151, 2008 WL 4613046, at * 14 (M.D.Fl. Oct. 15, 2008) (noting that although the defendants may not have directly accessed the plaintiff’s computers, evidence that the defendants implicitly induced and/or encouraged others- even those authorized to do so-to access the computers and supply information to the defendants was sufficient to allege access; “[w]here a new employer seeks a competitive edge through the wrongful use of information from the former employer’s computer system, plaintiff will likely win on the merits of a CFAA claim.”); Binary Semantics, Ltd. v. Minitab, Inc., No. Civ.A.07-1750, 2008 WL 763575, at *15 (M.D.Pa. Mar. 20, 2008) (finding that where employee of plaintiff company acted at the direction of defendant company when she accessed plaintiff company’s protected computer to steal trade secrets and provide them to defendant company, the defendant company could be held liable for the CFAA violation); cf Shurgard Storage Ctrs., Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121, 1124-25 (W.D.Wash.2000) (holding that defendant violated CFAA because plaintiff’s employee acted as agent for defendant and sent emails to defendant containing trade secrets and proprietary information belonging to plaintiff). Reading the plain language of the statute in conjunction with the dictionary definition of “access,” the purpose of the CFAA, the persuasive reasoning in the aforementioned cases, and the absence of any contrary authority, the Court finds that the allegations asserting that Powell induced current Synthes employees13 to access the Synthes computer system and provide him with confidential and proprietary information sufficiently allege “access” for purposes of the CFAA.14 *18 Having found “access” by Powell, the Court must next address Powell’s second argument-whether the Amended Complaint properly alleges unauthorized access and use of a computer system and not just unauthorized use of information. On this point, several factually distinguishable cases provide an insightful contrast. First, in Brett Senior & Assoc., P.C. v. Fitzgerald, an employer filed an action against a former employee alleging that he had violated a confidentiality agreement when he accessed the employer’s computer system to transfer confidential files to a competing firm. 2007 WL 2043377, at *3. The court rejected the employer’s position that the employee’s improper use of information created CFAA liability in light of his lawful entry into the employer’s computer system. Id. at * 3. Similarly, in B & B Microscopes v. Armogida, 532 F.Supp.2d 744 (W.D.Pa.2007), the court rejected the employer’s contention that the defendant’s conduct in accessing a company laptop violated the CFAA. Id. at 758. It further denounced the persuasiveness of cases holding that an employee’s authorized access to a computer is withdrawn if that access is construed as a breach of duty of loyalty to the employer. Id. Finally, in Consulting Professional Resources, Inc. v. Concise Technologies LLC, the plaintiff, while admitting that the defendant had authorized access to the confidential information on the plaintiff’s computer, argued that the defendant’s eventual use of the information accessed violated her employment contract. Id. at *6. The court held that, “[w]hile disloyal employee conduct might have a remedy in state law, the reach of the CFAA does not extend to instances where the employee was authorized to access the information he later utilized to the possible detriment of his former employer.” Id. In the present case, had Synthes alleged that Powell lawfully accessed a computer during his employment but then misused that information against Synthes’s interests, Powell’s argument would have merit. The Amended Complaint, however, alleges that Powell, through current Synthes employees, “accessed” a computer system at a time when he was no longer employed by Synthes. Having already left Synthes’s employ, Powell was not authorized to access or use Synthes computers for the purpose of misappropriating information, nor was he authorized to access the computer systems indirectly by inducing other Synthes employees to do so.15 (Id. ¶ 254.); see generally SBM Site Servs., LLC v. Garrett, No. Civ.A. 10-385, 2012 WL 628619, at *5 (D.Colo. Feb. 27, 2012) (finding that defendant’s access to the laptop became unauthorized when his employment ended and the defendant company requested return of his laptop). Unlike in Brett Senior, B & B Microscopes, Inc., and Consulting Professional Resources, the present case does not involve a CFAA claim based on an employee’s use of information acquired during authorized computer access to benefit a future employer. Rather, it involves Powell’s unauthorized access to Synthes’s computer system to obtain information to benefit his future company. Such allegations, viewed under the standard set forth by Federal Rule of Civil Procedure 12(b)(6), are sufficient to establish that Powell gained unauthorized access to Synthes computers, thereby stating a claim under the CFAA.16 2. Whether the Conduct Upon Which the CFAA Claim is Predicated Involves “An Interstate or Foreign Communication” Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 110 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 14 *19 Defendant Powell next argues that Plaintiff’s CFAA claim must fail because Plaintiff cannot demonstrate that the conduct upon which they predicate their claim “involved an interstate or foreign communication.” As the CFAA claim is asserted under 18 U.S.C. § 1030(a)(2)(c), and because that statute requires such “interstate or foreign communication,” Powell contends that the CFAA claim must be dismissed. Powell’s argument, however, relies on an outdated version of the statute. Prior to 2008, the statute provided that it was a crime to “intentionally access[ ] a computer without authorization or exceed [ ] authorization, and thereby obtain[ ] ... (c) information from any protected computer if the conduct involved interstate or foreign communication[.]” 18 U.S.C. § 1030(a)(2)(c) (2002). In 2008, however, Congress amended the statute to strike the language “if the conduct involved interstate or foreign communication.” 18 U.S.C. § 1030(a)(2)(c) (2008). Because the conduct at issue occurred in 2010, the later version of the statute-which contains no requirement of interstate or foreign commerce-applies to this case.17 In any event, the Amended Complaint expressly alleges that “[t]he computer systems used by the Synthes employees from whom the Defendants’ obtained Synthes’ confidential, proprietary, and trade secret information ... are ‘protected computers,’ pursuant to 18 U.S.C. § 1030, in that they were computers that are and were used regularly and consistently by Synthes to conduct business and communicate both throughout the United States and internationally, and, thus, in and affecting interstate or foreign commerce or communication.” (Am.Compl.¶ 252.) Further, according to the Amended Complaint, Synthes’s global headquarters is in Pennsylvania, while Defendant Powell is a resident of Colorado, who was acting on behalf of Emerge, based in Colorado. (Id. ¶¶ 11, 14, 18.) The reasonable inference from these allegations is that Powell’s accessing of Synthes’s computer systems involved interstate communication. Therefore, the Court rejects this argument. 3. Whether Plaintiff Has Alleged Sufficient Facts to Support a Finding that It Suffered a “Loss” Relative to Invoking the CFAA’s Civil Remedy Defendant Powell’s final challenge to Synthes’s CFAA claim asserts that Plaintiff has failed to allege a compensable loss under the CFAA. Again, the Court finds that, under the Twombly/Iqbal standards, this argument has no merit. The CFAA provides that “[a]ny person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator.” 18 U.S.C. § 1030(g). The statute defines “loss” as “any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.” 18 U.S.C. § 1030(e)(11). Courts have held that, to fall within this definition, the alleged “loss” must be related to the impairment or damage to a computer or computer system. Fontana v. Corry, No. Civ.A.10-1685, 2011 WL 4473285, at *7 (W.D.Pa. Aug.30, 2011); see also Clinton Plumbing & Heating of Trenton, Inc. v. Ciaccio, No. Civ.A.09-2751, 2010 WL 4224473, *6 (E.D.Pa. Oct.22, 2010) (“Various courts have interpreted ‘loss’ to mean the remedial costs of investigating a computer for damage, remedying damage done, and costs incurred while the computer is inoperable.”)). Moreover, courts have found that lost revenue resulting from an interruption of service constitutes “loss” for purposes of the statute. Fontana, 2011 WL 4473285, at *7 (citing cases). On the other hand, a claim for future lost revenue due to the dissemination of trade secrets does not qualify as a “loss” under the CFAA. Id. at *8 (citing cases). Likewise, a “loss of assets, overdraft fees, returned check fees, late fees, reputational damages arising from a damaged credit score, and termination of certain contracts due to insufficient funds for payment” are insufficient to constitute loss. Clinton Plumbing, 2010 WL 4224473, at *7. *20 The Amended Complaint, in this case, alleges as follows: 256. The damage that the Defendants caused to the protected computers and the information stored therein resulted in, among other things, the impairment to the integrity, confidentiality, and availability of data, programs, systems, and information contained in the protected computers. 257. Based upon such wrongful actions, Synthes has incurred losses exceeding $5,000.00 in a one year period; the costs of responding to the wrongful actions of the Defendants, conducting damage assessments, identifying and tracing the information the Defendants have misappropriated, and restoring data, programs, systems, and information to the conditions in which they existed prior to the Defendants’ wrongful activity; lost revenue; and other consequential damages incurred by Synthes related thereto. (Am.Compl.¶¶ 256-57.) Admittedly, the allegations are somewhat vague and fail to precisely identify what Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 111 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 15 damage Synthes suffered to its computer system. See Sealord Holdings, Inc. v. Radler, No. Civ.A.11-6125, 2012 WL 707075, at *6 (E.D.Pa. Mar.6, 2012) (“We are of the opinion that while Sealord does aver general damage to its computers and interruption of service, such averments are not specific enough to satisfy the requirements of Twombly, 550 U.S. at 556, and Federal Rule of Civil Procedure 12(b)(6).”). Nonetheless, the Court finds that these allegations just skirt over the pleading lines defined by Twombly to place Defendant Powell on sufficient notice of the claims against him. Indeed, many of the losses identified in the Amended Complaint-such as costs of responding to the wrongful actions, conducting damage assessments, and restoring data and programs-fall precisely into categories of damages identified as cognizable by applicable jurisprudence. See Clinton Plumbing, 2010 WL 4224475, at *6. Discovery will ultimately bear out the substance and validity of such allegations. Accordingly, Defendant’s Motion on this ground will be denied. 4. Conclusion as to CFAA Claim In sum, the Court finds that Plaintiff has sufficiently pled a claim under the CFAA to survive Defendant Powell’s Motion to Dismiss. The allegations explicitly state that Defendant Powell accessed Plaintiff’s computer systems, through others, without authorization and that Synthes suffered a cognizable loss. Notably, this ruling does not, in any way, opine on the ultimate merit of this claim. Rather, it simply constitutes a determination that the CFAA claim should not be dismissed at this early stage of litigation. C. Pleading of the Remaining Counts of the Complaint Against Powell Via a final broad challenge to the Amended Complaint, Defendant Powell contends that many of the remaining causes of action against him have not been properly pled under the Twombly/ Iqbal standards and, thus, must be dismissed. The Court individually considers each count. 1. Breach of Contract Claim *21 Count II of the Amended Complaint alleges that Powell, along with the other Defendants, breached their obligations under the Non-Competition and Non- Disclosure Agreements. Defendant Powell now asserts that the choice of law provision in the Non-Competition Agreement is not applicable and that Colorado law should apply. In turn, Powell contends that, under Colorado law, the Non-Competition Agreement is void. To resolve this issue, the Court first engages in a choice of law analysis and then considers the validity of the Agreement under the applicable law. a. Choice of Law Defendant Powell’s Non-Competition Agreement contains an explicit choice of law provision mandating the application of Pennsylvania law to Synthes’s claims. (Am. Compl., Ex. K at 4.) “Pennsylvania courts generally honor the intent of the contracting parties and enforce choice of law provisions in contracts executed by them.” Kruzits v. Okuma Mach. Tool, Inc., 40 F.3d 52, 55 (3d Cir.1994). Nonetheless, Pennsylvania law has adopted section 187 of the Restatement (Second) of Conflict of Laws, which recognizes two circumstances in which choice-of-law provisions will not be enforced: (1) where “the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice,” or (2) where “application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue.” Gay v. CreditInform, 511 F.3d 369, 389-90 (3d Cir.2007) (quoting Restatement (Second) of Conflict of Laws § 187); see also Stone St. Servs., Inc. v. Daniels, No. Civ.A.00-1904, 2000 WL 1909373, at *4 (E.D.Pa. Dec.29, 2000) (“An express choice of law provision in a contract will be upheld so long as: (1) the contract bears a reasonable relationship to the state whose law is chosen to govern and (2) application of the chosen law does not violate a ‘strong public policy’ that would otherwise protect a party.”). Considering these two exceptions, the Court finds that neither applies in the present case. First, Pennsylvania has a substantial relationship to the parties, lending good reason for the parties’ choice of Pennsylvania law. The affiliated companies comprising Synthes are Pennsylvania corporations with their principal place of business in Pennsylvania. This point alone is sufficient to provide a basis for the parties’ choice of law. See Restatement (Second) of Conflict of Laws § 187, cmt. f (remarking that the law of the state selected in the contract has a substantial relationship to the parties or the contract where the selected state is the principal place of business for one of the parties). Additionally, although many of Synthes’s sales consultants, including Powell, conduct their operations in multiple states, Pennsylvania remains the center of Synthes’s corporate work. As such, Synthes has an interest in maintaining uniformity in dealings with its employees who are scattered throughout the various states.18 Accordingly, the Court finds no reason to Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 112 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 16 disregard the forum selection clause under the first exception. *22 The second exception to the enforcement of forum selection clauses-violation of the public policy of another state-mandates a more complex analysis. “Colorado law embodies a strong public policy which disfavors covenants not to compete, protecting employees ‘from non-competition clauses except in carefully defined circumstances.’ ” Nutting v. RAM Sw., Inc., 106 F.Supp.2d 1121, 1124 (D.Colo.2000) (quoting Colorado Accounting Machs., Inc. v. Mergenthaler, 44 Colo.App. 155, 609 P.2d 1125, 1126 (Colo.1980)). This public policy is embodied in Colo.Rev.Stat. § 8-2-113, which limits non-competition agreements, as follows: (2) Any covenant not to compete which restricts the right of any person to receive compensation for performance of skilled or unskilled labor for any employer shall be void, but this subsection (2) shall not apply to: (a) Any contract for the purchase and sale of a business or the assets of a business; (b) Any contract for the protection of trade secrets; (c) Any contractual provision providing for recovery of the expense of educating and training an employee who has served an employer for a period of less than two years; (d) Executive and management personnel and officers and employees who constitute professional staff to executive and management personnel. Colo.Rev.Stat. § 8-2-113. “Colorado courts have consistently recognized the policy of voiding noncompetition agreements, except in the circumstances set out in § 8-2-113(2).” Am. Express Fin. Advisors, Inc. v. Topel, 38 F.Supp.2d 1233, 1238 (D.Colo.1999). “To be enforced, such agreements must fall into one of the statutory exceptions and meet the common law rule of reasonableness.” Id. The sole statutory exception potentially applicable here is that set forth in Section 8-2-112(2)(b)-the trade secret exception. “ ‘For a covenant not to compete to fit within the trade secret exception to § 8-2-113(2), the purpose of the covenant must be the protection of trade secrets, and the covenant must be reasonably limited in scope to the protection of those trade secrets.’ ” Harvey Barnett, Inc. v. Shidler, 338 F.3d 1125, 1133 (10th Cir.2003) (quoting Gold Messenger, Inc. v. McGuay, 937 P.2d 907, 910 (Colo.Ct.App.1997)). Thus, the company seeking to enforce the agreement “must show that it possesses trade secrets that are worth protecting and that [the employee] had access to these secrets.” Doubleclick Inc. v. Paikin, 402 F.Supp.2d 1251, 1257 (D.Colo.2005). “What constitutes a ‘trade secret’ is a question of fact for the trial court.” Porter Indus., Inc. v. Higgins, 680 P.2d 1339, 1341 (Colo.App.1984). Colorado courts facing factual situations analogous to the one before us have repeatedly found covenants not to compete to involve trade secrets where the agreements themselves indicate that the purpose of the covenant is to protect such secrets. For example, in Gold Messenger, Inc. v. McGuay, the plaintiff was a corporation that developed a comprehensive system for setting up and operating an advertising circular business. Id. at 908. The defendant franchisee purchased a franchise from the plaintiff and, under the franchise agreement, received plaintiff’s operations and procedures manual. Id. at 908- 09. The agreement contained a covenant not to compete which provided that, at the termination of the franchise, the franchisee may not compete directly or indirectly with Gold Messenger for three years and within fifty miles of Gold Messenger franchise territories. Id. at 909. Subsequently, after the franchisee failed to pay royalties required under the agreement, the plaintiff terminated the franchise agreement. Id. The court found that it was “evident from the preamble to the franchise agreement that the agreement was entered into with the express purpose of protecting trade secrets.” Id. at 910. In pertinent part, that preamble provided: *23 WHEREAS, Franchisor is the owner of certain techniques, know-how, trade secrets and procedures (the Know-How) which are used in connection with Franchisor’s Controlled Circulation Advertising Publication business and Franchisor’s Franchisees; and WHEREAS, Franchisor [has] developed a unique system for operating [the] business, including business forms, bookkeeping and accounting materials and techniques, management and control systems, and, in general, a style, system, technique and method of business operation ... WHEREAS, Franchisee recognizes that it does not currently have the expertise contained in the developments as stated above and desires to use those developments pursuant to a franchise agreement ... WHEREAS, [Franchisee] has a full and adequate opportunity to be thoroughly advised of the terms and conditions of this Franchise Agreement by counsel of its own choosing; and Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 113 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 17 WHEREAS, the parties wish to enter in the following terms and conditions of this Franchise Agreement. Id. Reading that preamble in conjunction with the covenant not to compete, the court found that the covenant precluded the franchisee from using the confidential information contained in the manual to compete unfairly against franchisor or other franchisees. Id. at 911. “Thus, by both its purpose and its scope, the covenant [was], in essence, for the protection of trade secrets.” Id. at 911. Similarly, in Haggard v. Synthes Spine, the plaintiff was a sales consultant for Synthes Spine in Colorado, Southern Wyoming, and Western Nebraska. No. Civ.A.09-721, 2009 WL 1655030, at *1 (D. Colo. June 12, 2009). As part of his employment, he signed a “Confidentiality, Non-Solicitation and Non-Competition Agreement,” as well as an “Employee Innovation and Non-Disclosure Agreement” substantially similar in nature to the Agreements signed by Defendant Powell. Id. Synthes terminated the plaintiff after learning that the plaintiff was running an unrelated cigar business when he should have been working for Synthes. Id. On at least one occasion prior to his termination, and on multiple occasions after his termination, Plaintiff talked with senior level managers for a competitor of Defendant, Globus Medical, Inc. (“Globus”). Id. They discussed the possibility of Plaintiff working for Globus in largely the same capacity that he worked for Defendant, i.e., as a sales consultant headquartered in Northern Colorado. Id. Defendant claimed that these discussions were part of a grand scheme by Globus to steal employees, customers, and trade secrets from the defendant. Id. The plaintiff, however, brought suit seeking a declaration that the non- competition agreements were unenforceable. Id. Applying Colorado law, the court held that the non-competition agreements fell within the trade secret exception, since they sought to protect defendant Synthes’s information, including: (1) customer and prospect identities, including their specific requirements, addresses, and telephone contacts; (2) prices, renewal dates, and other detailed terms of customer and supplier contracts; (3) pricing policies, logistics methods, marketing and sales strategies, product know-how, product technologies, and product development strategies; (4) physical security systems, access control systems and network designs; (5) employment and payroll records; (6) forecasts, budgets and other non-public financial information, product information, and product know-how; and (7) expansion plans, management policies, and other business strategies.19 Id. at *8. *24 Finally, in Am. Express Fin. Advisors, Inc. v. Topel, 38 F.Supp.2d 1233 (D.Colo.1999), a Colorado court considered whether a choice of law provision specifying application of Minnesota law in a covenant not to compete should be enforced. Id. at 1238. In that case, the plaintiff, a Colorado resident, had worked as a financial planner for plaintiff pursuant to a Planner Agreement. Id. at 1236-37. Pursuant to the Planner Agreement, defendant received training and purported confidential trade secret information, comprised of customer identities, addresses, financial holdings, investment objectives, and buying preferences. Id. at 1237. The Planner Agreement prohibited him, for a period of one year after resigning from plaintiff, from soliciting or selling investments and financial services, directly or indirectly, to those customers in the territory he served or learned about through his affiliation with plaintiff. Id. Despite the fact that the Agreement specified the application of Minnesota law to disputes between the parties, the defendant argued that Colorado law should apply because “the application of Minnesota law would violate the strong public policy of this State to void noncompetition agreements.” Id. at 1238. The court, considering the Restatement (Second) of Conflict of Laws § 187-the same provision incorporated by Pennsylvania law-found “good reason for the parties’ choice of Minnesota law.” Id. It remarked that the plaintiff’s principal place of business was in Minnesota and that “[t]his fact alone provides a sufficient basis for the parties’ choice of law.” Id. Further, it noted that “application of Minnesota law would not be contrary to a fundamental policy of Colorado.” Id. It explained that “[plaintiff’s] post-termination covenants are concerned with providing protection for its interests in its confidential and trade secret customer information. Colorado specifically enforces contracts for the protection of trade secrets ... Therefore, there is no conflict with Colorado law.” Id. at 1238-39. In the present case, the Court likewise finds that-at least at this preliminary stage of proceedings-application of Pennsylvania law to the Agreements at issue would not violate the fundamental public policy of Colorado. The Confidentiality, Non-Solicitation, and Non-Competition Agreement signed by Powell stated, in pertinent part: I acknowledge that: ... Synthes is in a highly competitive industry; ... [D]uring my employment with Synthes, I will have access to, receive, learn develop and/or conceive technical customer, prospect, financial or other information that is proprietary and confidential to Synthes; ... this information must be kept in strict confident to protect Synthes’ Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 114 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 18 business and maintain its competitive position in the marketplace, and this information would be useful to Synthes’ existing and potential competitors for indefinite periods of time; ... Synthes would be irreparably harmed by my subsequent employment by a competitor of Synthes, due to the likelihood or possibility that there would be inadvertent or other disclosures ofSynthes’ proprietary and confidential information or that there would be improper or inappropriate interference with its valuable customer relationships[.] *25 (Am. Compl., Ex. K at 1 (emphasis added).) As in Gold Messenger, this preamble-entitled “Acknowledgments”-makes it evident that the agreement was entered into with the express purpose of protecting trade secrets. Thereafter, as in Haggard and American Express, the “Confidentiality” portion of the Agreement goes on to specifically identify the proprietary and confidential information sought to be protected, including: (1) the identity of customers and prospects, their specific requirements, and the names, addresses and telephone numbers of individual contacts; (2) prices, renewal dates and other detailed terms of customer and supplier contracts and proposals; (3) pricing policies, methods of delivering services and products, marketing and sales strategies, product know- how, product technology and product development strategies; (4) physical security systems, access control systems, network and other equipment designs; (5) employment and payroll records; (6) forecasts, budgets and other non-public financial information; (7) product performance information, product technical information and product know- how; and (8) expansion plans, management policies and other business strategies and policies. (Id. at 2.) This information mirrors the information explicitly recognized as “trade secrets” in the Haggard agreement. Reading the “Acknowledgments” and “Confidentiality” sections in conjunction with the ensuing “non-solicitation” and “non-competition” provisions of the Agreement, it is abundantly obvious that the Non- Competition Agreement is not, as Defendant Powell presumes, designed to “hinder former employees’ ability to compete with their former employer.”20 (Def. Powell’s Reply Br. 4.) Rather, it is precisely for the protection of Synthes’s trade secrets. Accordingly, this Court finds that Colorado law would deem Powell’s Non-Competition Agreement covered by the trade secret exception. As noted above, the second exception to the policy of enforcing choice of law provisions requires that application of the law of the chosen state “would be contrary” to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue. Because Colorado specifically enforces non-competition contracts designed for the protection of trade secrets, and because Powell’s Non-Competition Agreement is concerned precisely with the protection of such trade secrets, Pennsylvania law is not contrary to a fundamental policy of Colorado. Accordingly, the Court will enforce the choice of law provision in the Agreement and apply Pennsylvania law to the current dispute. b. Whether the Agreement is Enforceable Under Pennsylvania Law Having concluded that the choice of law clause in the Agreement is enforceable and that Pennsylvania law applies, the Court must now determine whether the Non- Competition Agreement as a whole is valid. “Covenants not to compete are generally disfavored under Pennsylvania law as against public policy, but they may be enforceable when they are ancillary to an employment relationship or to a sale of a business.” Darius Int’l, Inc. v. Young, No. Civ.A.05-6184, 2008 WL 1820945, at *36-37 (E.D.Pa. Apr.23, 2008) (citing Jacobson & Co. v. Int’l Envtl. Corp., 427 Pa. 439, 235 A.2d 612 (Pa.1967)). Stated more specifically, “[a] non-competition agreement is enforceable if it is (1) related to either a contract for the sale of goodwill or other subject property or to a contract for employment; (2) supported by adequate consideration; (3) reasonably necessary to protect a legitimate business interest; and (4) reasonably limited in both time and territory.” Id. (citing Piercing Pagoda, Inc. v. Hoffner, 465 Pa. 500, 351 A.2d 207, 210-11 (Pa.1976)). “In evaluating whether the covenant is reasonably necessary and reasonably limited, the Court considers whether the agreement’s breadth is reasonable as to (1) geographical Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 115 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 19 scope, (2) duration, and (3) types of activities embraced; and whether the purchaser’s need for protection is outweighed by the hardship imposed on the seller or by the public interest.” Darius, 2008 WL 1820945, at *37. *26 In the present case, the parties do not dispute that the Non-Competition Agreement at issue was related to a contract for employment and supported by adequate consideration. Moreover, the Agreement itself recognizes that it was designed to protect Synthes’s legitimate business interest in the protection of its confidential and proprietary information. Finally, Defendant Powell offers no argument-let alone any supporting authority-to suggest that the Agreement is unreasonable in either time or geographic scope. Indeed, the provision only restricts Powell from competing in the region for which he was responsible during his last year at Synthes for a period of one year. Pennsylvania courts have routinely enforced covenants in similar or greater temporal scope. Maaco Franchising, Inc. v. Augustin, No. Civ.A.09-4548, 2010 WL 1644278, at *3 (E.D.Pa. Apr.20, 2010) (one year); Intermetro Indus. Corp. v. Kent, No. Civ.A.07-0075, 2007 WL 1140637, at *7 (M.D.Pa. Apr. 17, 2007) (one year); Admiral Servs., Inc. v. Drebit, No. Civ.A.95-1086, 1995 WL 134812, at *6 (E.D.Pa. Mar.28, 1995) (two years); Piercing Pagoda, 465 Pa. 500, 351 A.2d 207, 212-13 (three years). Absent any glaringly overbroad provisions in the Agreement, the Court finds, for purposes of the Motion to Dismiss, that the Agreement is valid and enforceable under Pennsylvania law. 2. Misappropriation Claim The Pennsylvania Uniform Trade Secrets Act (“PUTSA”), 12 Pa.C.S. § 5301, et seq. “creates a statutory cause of action for injunctive relief, compensatory damages and exemplary damages for the actual loss caused by misappropriation of trade secrets and the unjust enrichment caused by such misappropriation.” Youtie v. Macy’s Retail Holding, Inc., 626 F.Supp.2d 511, 522 (E.D.Pa.2009). Under PUTSA, a person has misappropriated a trade secret “when he acquires knowledge of another’s trade secret in circumstances giving rise to a duty to maintain its confidentiality and then discloses or uses that trade secret without the other’s consent.” Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102, 110 (3d Cir.2010) (citing 12 Pa. Cons.Stat. § 5302). Defendant Powell seeks dismissal of Plaintiff’s misappropriation claim against him on two grounds. First, Plaintiff allegedly fails to identify trade secrets sufficient to satisfy federal pleading standards. Second, Plaintiff purportedly fails to describe Powell’s alleged use of a valid trade secret. The Court separately considers each allegation. a. Whether Plaintiff Has Identified Trade Secrets PUTSA defines a “trade secret” as: Information, including a formula, drawing, pattern, compilation including a costumer list, program, device, method, technique or process that: (1)[d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. (2)[i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy. *27 12 Pa. Cons.Stat. § 5302. Pennsylvania courts look to a series of factors to determine whether information is protected as a trade secret.21 Whether information rises to the level of a trade secret under PUTSA is a question of fact not appropriate for resolution on a motion to dismiss. Council for Educ. Travel, USA v. Czopek, No. Civ.A.11- 672, 2011 WL 3882474, at *5 (M.D.Pa. Sept. 2, 2011); Bro-Tech Corp. v. Thermax, Inc., 651 F.Supp.2d 378, 410 (E.D.Pa.2009). As such, courts within the Third Circuit have not required a party alleging misappropriation to describe trade secrets with particularity in order to survive a motion to dismiss. See, e.g., Reckitt Benckiser Inc., et al., v. Tris Pharma, Inc., et al., No. Civ.A.09-3125, 2011 WL 773034 (3d Cir. Feb. 28, 2011) (“[A] claim of misappropriation of trade secret ‘does not require specific pleading of the precise information that constitutes the trade secret in order to survive a motion to dismiss.’ ”) (interpreting New Jersey law) (internal citations omitted); Czopek, 2011 WL 3882474, at *4; Center Pointe Sleep Assocs., LLC v. Panian, No. Civ.A.08-1168, 2009 WL 789979, at *3 (W.D.Pa. Mar.18, 2009) (finding that a general description of the trade secrets at issue was sufficient and that the exact trade secret in question need not be pleaded with particularity); Ideal Aerosmith, Inc. v. Acutronic USA, Inc., No. Civ.A.07-1029, 2007 WL 4394447, at *8 (W.D.Pa. Dec.13, 2007) (finding complaint sufficient where it described the alleged trade secrets as “information concerning the development, marketing and sale of Ideal’s Aero 4000 motion controller, customer communications and other Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 116 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 20 property”); Pennfield Precision, Inc. v. EF Precision, Inc., No. Civ.A.00-280, 2000 WL 1201381, at *4 (E.D.Pa. Aug.15, 2000) (“[C]ourts are in general agreement that trade secrets need not be disclosed in detail in a complaint alleging misappropriation for the simple reason that such a requirement would result in public disclosure of the purported trade secret.”) (quotations omitted). In the present case, Plaintiff has adequately pled the existence of trade secrets. In particular, the Amended Complaint contains the following allegations: 98. As a Sales Consultant in Colorado in the Denver East Territory and the Eastern Slope Territory (i.e., in the area of Vail, Colorado), Powell had direct and primary contact with Synthes’ customers and became intimately familiar with Synthes’ customers’ preferences, needs, priorities, purchasing and ordering histories, decision-making personnel, and practices as well as additional sensitive and confidential information concerning his territory and Synthes’ business practices and strategies. ... 101. Throughout his employment with Synthes as a Territory Assistant, Associate Sale Consultant, and ultimately Sales Consultant, Synthes entrusted Powell with its most valuable customer contacts, goodwill, and business information. Synthes also assigned and introduced Powell to existing and prospective customers in those territories. Synthes provided Powell with direct access to Synthes’ valuable business relationships. In his roles, Powell had access to and used Synthes products and equipment as well as Synthes’ sensitive, confidential, proprietary, and trade secret information, all of which he would not have obtained access to but for his working for Synthes in that capacity. *28 102. The confidential, sensitive, proprietary, and trade secret information Synthes entrusted to Powell included, without limitation, information about Synthes’ customers, business activities, and strategies as well as information regarding Synthes’ product development plans, pipeline, and launches; technology and product performance; expansion plans; pricing; competitive terms; contract and sales administration; compensation and personnel; and other sensitive information related to Synthes’ business. 103. Synthes also provided Powell with substantial, specialized training on the technical aspects of Synthes’ products and the medical procedures in which these products are used as well as on techniques for educating operating room personnel and surgeons so that Powell could be an effective resource to those surgeon customers during medical procedures concerning the use of existing and new implants and instrumentation. During these training sessions, Powell also received sensitive information regarding Synthes’ contract and sales administration, personnel, and other departments. Synthes provided Powell with such training on an ongoing basis throughout his tenure with Synthes. (Am.Compl.¶¶ 98, 101-03.) At the pleading stage of litigation, such allegations are more than sufficient to survive a Motion to Dismiss. Whether such information ultimately constitutes trade secrets remains a factual question for resolution following the close of discovery. b. Whether Plaintiff Has Sufficiently Alleged Use In an alternate challenge, Defendant Powell asserts that the Amended Complaint is devoid of facts to establish that Powell “used” any alleged trade secret. Rather, according to Powell, the allegations of “use” are nothing more than “a collection of threadbare recitations of the legal elements of the claim.” (Powell’s Mem. Supp. Mot Dismiss 37.) Under PUTSA, “misappropriation” is defined to include: (1) 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; or (2) disclosure or use of a trade secret of another without express or implied consent by a person who: (I) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was: (A) derived from or through a person who had utilized improper means to acquire it; (B) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (C) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 117 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 21 (iii) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake. 12 Pa. Cons.Stat. § 5302. Thus, misappropriation is not, as Defendant Powell presumes, limited to “use,” but rather includes misappropriation by both acquisition and disclosure. To establish misappropriation by acquisition under the PUTSA, defendants must establish “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.” 12 Pa. Cons.Stat. § 5302(1). PUTSA defines “improper means” as “[i]nclud[ing], but [ ]not limited to, theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means.” Id.; see also Youtie v. Macy’s Retail Holding, Inc., 653 F.Supp.2d 612, 624 (E.D.Pa.2009). To establish misappropriation by disclosure under the PUTSA, defendants must establish that plaintiff disclosed their trade secret without express or implied consent and either (1) used improper means to acquire knowledge of the trade secret; (2) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was either derived from a person utilizing improper means to acquire it, acquired under circumstances giving rise to a duty to maintain its secrecy, or derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy; or (3) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake. Youtie, 653 F.Supp.2d at 625 (citing 12 Pa. Cons.Stat. § 5302). *29 The Amended Complaint in the case before the Court adequately pleads that Powell was involved in misappropriation through acquisition, use, and disclosure, as follows: • Beginning no later than the summer of 2010, Marotta, Stassen, Powell, and Emerge improperly and unlawfully acquired, used, and disclosed Synthes’ confidential, sensitive, proprietary, and trade secret information, including, upon information and belief, information they acquired by directing, inducing, and encouraging others to access Synthes’ computer systems. (Am.Compl.¶ 152.) • Upon information and belief, the Defendants improperly and unlawfully acquired, used, and disclosed confidential and proprietary business information obtained and misappropriated from Synthes to help them develop and implement Emerge’s business model, to identify and/or design, develop, test, and manufacture products competitive with certain of Synthes’ products, to manage inventory and purchase orders, to develop Emerge’s marketing efforts to customers, and to otherwise effectuate their scheme to compete wrongfully with Synthes. (Am.Compl.¶ 241.) • Defendants knew, before and at the time of their acquisition, use, and/or disclosure of it, that this information constitutes “trade secret” information under Pennsylvania law because: (I) the information derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) it is reasonable for Synthes to maintain the secrecy of such information. (Id. ¶ 242.) • The Defendants’ acquisition, use, and disclosure of such information have given Emerge an unfair and wrongful advantage. (Id. ¶ 244.) Considered collectively, these allegations make clear that Defendant Powell, among others, wrongfully acquired Synthes’s trade secrets, disclosed them to the competing company Emerge, and then wrongfully used them to help develop Emerge’s business model. Such proprietary information was not merely the product of Powell’s own aptitude, skill, or subjective ability, but rather specific trade secrets about Synthes strategies, business models, and business activities. Accordingly, the Court finds that such pleading is more than sufficient to place Powell on notice of the basis of the misappropriation claim against him.22 3. Conversion Defendant Powell next challenges Plaintiff’s conversion claim. In particular, he asserts that Plaintiff fails to include any factual allegations to make it plausible that Powell converted Synthes’s confidential business information or product. Moreover, he contends that Plaintiff fails to provide facts to support a claim that Powell converted “models, plans, strategies, names, logos, and slogans and all implants, instrumentation, and intellectual property associated with them and with any other products developed or marketed by Emerge.”23 (Am.Compl.¶ 265.) *30 “[U]nder Pennsylvania law, conversion is the ‘deprivation of another’s right of property, or use or possession of a chattel, or other interference therewith, without the owner’s consent and without legal justification.’ ” Universal Premium Acceptance Corp. v. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 118 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 22 York Bank & Trust Co., 69 F.3d 695, 704 (3d Cir.1995) (quoting Cenna v. United States, 402 F.2d 168, 170 (3d Cir.1968)); See also Epstein v. Saul Ewing, LLP, 7 A.3d 303, 314 (Pa.Super.Ct.2010). “A conversion can occur in several ways: 1) acquiring possession of property with the intent to assert a right to it adverse to the owner; 2) transferring the property and therefore depriving the owner of control; 3) unreasonably withholding possession of the property from the one who has the right to it; and 4) misusing or seriously damaging the property in defiance of the owner’s rights.” Fenton v. Balick, 821 F.Supp.2d 755, 760 (E.D.Pa.2011) (citing Fort Wash. Res., Inc. v. Tannen, 846 F.Supp. 354, 361 (E.D.Pa.1994)) (further citations omitted). “Where one lawfully comes into possession of a chattel, a conversion occurs if a demand for the chattel is made by the rightful owner and the other party refuses to deliver.” Prudential Ins. Co. of Am. v. Stella, 994 F.Supp. 318, 323 (E.D.Pa.1998) (dealing with a termination of an employee and the continued possession of confidential documents which allegedly were the sole property of the employer). Contrary to Defendant Powell’s argument, the Court finds that Synthes has indeed adequately pled a conversion claim against Powell. First, Synthes has properly alleged that it had an express property interest in its confidential proprietary information.24 See Brown & Brown, Inc. v. Cola, 745 F.Supp.2d 588, 623 (E.D.Pa.2010) (finding that confidential information acquired or compiled by a corporation in the course and conduct of its business is a species of property to which the corporation has the exclusive right and benefit) (quotations omitted). Second, the Amended Complaint alleges that all Defendants, including Powell, acquired the property, thereby depriving Synthes of control over it.25 Next, Synthes has alleged an improper and unreasonable withholding of possession of the property.26 Finally, the Amended Complaint indicates that the information was misused in defiance of the owner’s rights.27 Because such allegations put Defendant Powell on notice of the precise conversion allegations against him, this portion of the Motion to Dismiss must be denied. 4. Lanham Act Claim Plaintiff’s Lanham Act claim alleges that Synthes and Emerge are competitors in the orthopedic trauma medical device industry. (Am.Compl.¶ 271.) In an effort to bolster Emerge’s competitive status, Defendants, including Powell, purportedly made statements concerning the nature, characteristics, qualities, and origin of certain of Emerge’s goods that are competitive with Synthes’s products, including statements that Emerge’s products are “identical,” of “statistical equivalence,” or made in the same location as Synthes’s products. (Id. ¶ 274.) Moreover, they have represented that the FDA has made a determination that Emerge’s drill bits and guide wires are substantially equivalent to Synthes’s drill bits and guide wires. (Id. ¶¶ 272, 274.) According to Plaintiff, these statements are literally false, or, alternatively, are materially deceptive and misleading to Synthes’s customers. (Id. ¶¶ 273, 277.) As a result, Plaintiff brings a claim pursuant to the Lanham Act, 15 U.S.C. § 1125(a)(1) (B), for making false and disparaging remarks about Synthes’s products and services and making misleading statements about the quality of its own goods and services. *31 Under 15 U.S.C. § 1125(a)(1)(B): (1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which- (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. 15 U.S.C.A. § 1125(a)(1). Subsection (a)(1)(B) specifically requires that the misleading representations appear in “commercial advertising or promotion.” Without contesting any of the other Lanham Act elements, Defendant Powell now argues that Plaintiff has failed to properly allege that he disseminated any allegedly misleading representations to the purchasing public, in satisfaction of the “commercial advertising and promotion” component of the claim. A threshold inquiry in addressing whether an alleged false statement is actionable under 15 U.S.C. § 1125(a)(1)(B) is determining if the statement was disseminated “commercial advertising or promotion.” Synygy, Inc. v. Scott-Levin, 51 F.Supp.2d 570, 576 (E.D.Pa.1999) (quoting 15 U.S.C. § 1125(a)(1) (B)). Although neither Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 119 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 23 the Lanham Act itself nor the Third Circuit has defined “commercial advertising or promotion,” “the touchstone of whether a defendant’s actions may be considered ‘commercial advertising or promotion’ under the Lanham Act is that the contested representations are part of an organized campaign to penetrate the relevant market.” Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 57 (2d Cir.2002). Courts have generally “developed a four element test to define these terms in accordance with the Act’s language and congressional intent.” Premier Comp Solutions, LLC v. Penn Nat’l Ins. Co., No. Civ.A.07-1764, 2012 WL 1038818, at *7-8 (W.D.Pa. Mar.28, 2012) (citing cases). “Commercial advertising or promotion for purposes of the Lanham Act consists of (1) commercial speech; (2) by a defendant in commercial competition with the plaintiff; (3) designed to influence customers to buy the defendant’s products; (4) that is sufficiently disseminated to the relevant purchasing public to constitute advertising or promotion within the industry.” Id. (quoting Synygy, Inc., 51 F.Supp.2d at 576). Notably, neither private statements to competitors nor isolated statements to potential customers constitute sufficient dissemination to be defined as advertising within the meaning of the Lanham Act. Pitney Bowes, Inc. v. ITS Mailing Sys., Inc., No. Civ.A.09-5024, 2010 WL 1005146, at *5 (E.D.Pa. Mar. 17, 2010). “[I]t is well- settled that the challenged statements, at the very least, must be ‘widely disseminated’ and ‘part of an organized campaign to penetrate the relevant market.’ ” Bracco Diagnostics, Inc. v. Amersham Health, Inc., 627 F.Supp.2d 384, 460-61 (D.N.J.2009) (citing Fashion Boutique, 314 F.3d at 56-57). *32 Nonetheless, “[t]he form of the statements is not dispositive, and courts find statements to be commercial speech even where promulgated outside the traditional advertising campaign.” Accenture Global Servs. GMBH v. Guidewire Software, Inc., 581 F.Supp.2d 654, 667 (D.Del.2008). As more succinctly stated by the Tenth Circuit: the representations need not be made in a classic advertising campaign, but may consist instead of more informal types of promotion.... Furthermore, we assume, arguendo, that the extent of distribution necessary to constitute commercial advertising or promotion in a particular case may be an elastic factor, so that a relatively modest amount of activity may be sufficient in the context of a particular case.... Nevertheless, these terms by their plain, everyday meaning connote some level of public dissemination of information. Sports Unlimited, Inc. v. Lankford Enters., Inc., 275 F.3d 996, 1004-05 (10th Cir.2002) (internal quotations and citations omitted) (emphasis in original). “To pass the pleading threshold in a Lanham Act § 43(a)(1)(B) case, a plaintiff at the very least must identify some medium or means through which the defendant disseminated information to a particular class of consumers.” MMM Healthcare, Inc. v. MCS Health Mgmt. Options, 818 F.Supp.2d 439, 450-51 (D.P.R.2011). In this case, the Amended Complaint contains the following allegations regarding commercial advertising and promotion: 155. In addition to using Synthes’ confidential information during the design of Emerge’s product, Marotta, Stassen, Powell, and Emerge have also engaged in unlawful conduct through the marketing and sale of Emerge product, including making representations about Emerge’s products that are literally false and deliberately misleading. 156. In November of 2010, for example, labels bearing Emerge’s name and logo that directed Synthes customers to reorder Synthes’ surgical drill bits from Emerge appeared in a Synthes Inventory Management System (“SIMS”) cabinet in an account in Marotta’s former territory in Arizona as well as on product sealed in Synthes packaging. To facilitate this process and to convince customers that Emerge’s products are “identical” to and fully interchangeable with Synthes’ products (as Defendants falsely represent), Emerge was also using Synthes’ part numbers, differentiating them only by appending the suffix “.EM” and commingling Emerge products with Synthes products in Synthes’ inventory systems and surgical sets. 157. Since that time, Emerge’s labels have begun to appear in additional SIMS and sets stored at other of Synthes’ customers’ facilities, and Emerge has obtained clearance from the FDA for a “Cannulated Screw Fixation System” that is purportedly “substantially equivalent” to Synthes’ cannulated screw system. 158. Emerge is now selling cannulated screws and guide wires in addition to the surgical drill bits they began to implement in November of 2010, and Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 120 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 24 numerous Synthes customers in Marotta’s former region and territory, and throughout the country, are now buying the types of products they previously purchased from Synthes directly from Emerge, resulting in a direct and substantial loss of business to Synthes. *33 159. Indeed, upon information and belief, a system of hospitals that was one of Emerge’s first customers directed all of the facilities within its system to switch from Synthes to Emerge. Such an outcome is precisely the outcome Marotta, Stassen, Powell, and Emerge hoped for when they first targeted the system, knowing that sales at a beta site could lead to sales throughout the entire health system, including sales to Synthes’ customers in Marotta’s former sales region and territory. ... 272. Marotta, Stassen, Powell, and Emerge have made unambiguous descriptions or representations, regarding specific, material characteristics of Emerge’s competitive product offerings to Synthes’ customers in connection with the commercial advertising, marketing, distribution, sale, and implementation of those products that are literally false, either explicitly or by necessary implication. 273. Additionally, Marotta, Stassen, Powell, and Emerge have made descriptions or representations regarding material characteristics of Emerge’s competitive product offerings to Synthes customers in connection with the commercial advertising, marketing, distribution, sale, and implementation of those products that are materially deceptive and misleading, explicitly or by necessary implication, and that mislead and/or confused Synthes’ customers and caused those customers to convert their business to Emerge. 274. The statements made by Marotta, Stassen, Powell, and Emerge concern the nature, characteristics, qualities, and origin of certain of Emerge’s goods that are competitive with Synthes’ products, including, but not limited to, statements that Emerge’s products are “identical,” of “statistical equivalence,” or made in the same location as Synthes’ products, and statements that the FDA has made a determination that Emerge’s drill bits and guide wires are substantially equivalent to Synthes’ drill bits and guide wires. (Am.Compl.¶¶ 155-59,272-74.)28 At first blush-and taken in isolation-these allegations appear to identify only sporadic instances of dissemination, in lieu of the requisite public dissemination of the purportedly false advertising. Upon closer reading, however, the reasonable inferences from these allegations, however, suggest that they merely exemplify a broad and widespread dissemination of the statements to the relevant purchasing public, such that they constitute advertising or promotion within the industry. See Artz v. Cont’l Cas. Co., 720 F.Supp.2d 706, 709 (E.D.Pa.2010) (noting that plaintiff must be given every favorable inference from allegations in the complaint). In other words, the representations identified by Plaintiff appear to be mere examples of a larger marketing campaign targeting doctors and hospitals. See Bracco Diagnostics, 627 F.Supp.2d at 461 (noting that although advertising is generally understood as widespread communication through print or broadcast media, promotion may take other forms such as displays at trade shows and sale presentations to buyers) (citations omitted). A requirement that Plaintiff describe in detail the precise scope of Emerge’s advertising campaign would far exceed the pleading mandates under the Federal Rules of Civil Procedure and the Twombly/Iqbal standards.29 As such, the Court finds, for purposes of the present motion, that the alleged false statements by Defendants were part of a large scale marketing plan to penetrate the relevant market or disseminate a message to potential customers. Defendants will have the opportunity to test the truth of such allegations at the close of discovery. *34 In an alternate but related argument, Defendant Powell contends that, as an individual corporate employee, he cannot be held independently liable under the Lanham Act for Emerge Corporation’s alleged “widespread campaign to penetrate the relevant market.” (Def. Powell’s Reply Br. 12 (quoting Plaintiff’s Resp. Opp’n Mot. Dismiss 35).) To that end, he attempts to distinguish all of the cases cited by Plaintiff on the grounds that they involved claims against corporate entities, not individual defendants such as Powell. This argument is without merit. “A corporate officer is individually liable for the torts he personally commits and cannot shield himself behind a corporation when he is an actual participant in the tort.” Donsco, Inc. v. Casper Corp., 587 F.2d 602, 606 (3d Cir.1978). “[T]he joint tortfeasor principles for corporate officers established by the Third Circuit in Donsco, Inc., 587 F.2d at 606, appears to be clearly applicable to Lanham Act claims.” Max Daetwyler Corp. v. Input Graphics, Inc., 541 F.Supp. 115, 116-17 (E.D.Pa.1982). Since Plaintiff’s Amended Complaint asserts that Powell was, to a large extent, personally involved in the “widespread campaign” Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 121 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 25 of false advertising, he may be named as a defendant in the Lanham Act claim. In sum, the Court declines to dismiss the Lanham Act claim against Defendant Powell. Accordingly, this portion of the Motion is denied. 5. Trespass to Chattels Claim The next claim subject to challenge by Powell’s Motion to Dismiss is Count IX of the Amended Complaint, alleging trespass to chattels. Pennsylvania law defines trespass to chattels as the act of intentionally “(a) dispossessing another of their chattel, or (b) using or intermeddling with chattel in the possession of another.” Healthcare Advocates, Inc. v. Harding, Earley, Follmert & Frailey, 497 F.Supp.2d 627, 650 (E.D.Pa. July 20, 2007) (citing Pestco, Inc. v. Assoc. Prods., Inc., 880 A.2d 700, 708 (Pa.Super.Ct.2005)); see also Restatement (Second) of Torts ¶ 217. The Restatement (Second) of Torts defines a person who is “in possession of a chattel” as “one who has physical control of the chattel with the intent to exercise such control on his own behalf, or on behalf of another.” Restatement (Second) of Torts § 216. The Amended Complaint sets forth the following allegations with respect to the trespass to chattels claim: 156. In November of 2010, for example, labels bearing Emerge’s name and logo that directed Synthes customers to reorder Synthes’ surgical drill bits from Emerge appeared in a Synthes Inventory Management System (“SIMS”) cabinet in an account in Marotta’s former territory in Arizona as well as on product sealed in Synthes packaging. To facilitate this process and to convince customers that Emerge’s products are “identical” to and fully interchangeable with Synthes’ products (as Defendants falsely represent), Emerge was also using Synthes’ part numbers, differentiating them only by appending the suffix “.EM” and commingling Emerge products with Synthes products in Synthes’ inventory systems and surgical sets. *35 157. Since that time, Emerge’s labels have begun to appear in additional SIMS and sets stored at other of Synthes’ customers’ facilities, and Emerge has obtained clearance from the FDA for a “Cannulated Screw Fixation System” that is purportedly “substantially equivalent” to Synthes’ cannulated screw system. ... 283. The conduct set forth above also establishes Marotta’s, Stassen’s, Powell’s, and Emerge’s liability for trespass as to their conduct related to the use and labeling of Synthes’ SIMS and sets and the labeling of any Synthes inventory provided to Synthes’ customers on consignment. This conduct constitutes an unlawful use of and intermeddling with Synthes’ property and an interference with Synthes’ use and enjoyment of its property. 284. Marotta’s, Stassen’s, Powell’s, and Emerge’s conduct with respect to the use and labeling of Synthes’ SIMS and sets and the labeling of any Synthes inventory provided to Synthes’ customers on consignment constitutes tortious interference with Synthes’ contractual relationships with its customers for the sale, consignment, and storage of product, and it also, or in the alternative, constitutes the tort of trespass to chattels under Pennsylvania law to the extent the inventory was loaned or consigned, and, therefore, owned by Synthes at the time, and to the extent the SIMS were fully or partially owned by Synthes at the time. 285. Marotta, Stassen, Powell, and Emerge have acted intentionally, willfully, and unlawfully in using and labeling Synthes-owned SIMS and sets and in labeling inventory Synthes has provided to its customers on a consignment basis, and they have encouraged others to do so, without any right or privilege to do so and without Synthes’ consent. 286. Marotta’s, Stassen’s, Powell’s, and Emerge’s conduct has directly caused Synthes harm, and Synthes has been and will continue to be damaged by the Defendants’ conduct. (Am.Compl.¶¶ 156-57, 283-85.) Defendant Powell now asserts that the allegations do not set forth a plausible claim of trespass to chattels, as Synthes has failed to allege facts to support a critical component of the claim-that it was the “possessor” of the chattels at issue. Rather, according to Powell, the allegations tend to reflect that the chattels were in the possession of Synthes’s customers and were physically located at the customers’ medical facilities. He goes on to assert that “Plaintiff[’]s allegations are based on the mere possibility that the property was owned by Synthes at the time of the alleged trespass.” (Def. Powell’s Mem. Supp. Mot. Dismiss 43.) In response, Plaintiff contends that the comments to Restatement (Second) of Torts § 216 negate Powell’s argument. Specifically, these comments state: Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 122 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 26 c. Cases arise in which one who has been in possession of a chattel temporarily relinquishes physical control of it, without abandoning the chattel. In such a case, so long as no other person has obtained possession by acquiring physical control over the chattel with the intention of exercising such control on his own behalf, or on behalf of another, the law protects the property interest by attributing the possession to the original possessor. It is not within the scope of the Restatement of this Subject to state what constitutes an abandonment of the chattel. *36 ... d. Situations may also arise in which one person, without having the actual physical control of the chattel, has the right to immediate physical control of it as against all others. In such a case, so long as the possession of the chattel has not been acquired by any other person, the law protects the property interest by attributing possession to the one who thus has the right to it. Likewise, even where another has physical control of the chattel, the person with the right to it will be treated as in possession, if the person with the actual physical control or custody does not have the intent stated in this Section. Restatement (Second) of Torts § 216, cmts. c & d (emphasis added). According to these comments, it is not necessary that one be in actual physical control of the property to be the “possessor.” Therefore, Plaintiff argues that despite not having actual physical control of the property at issue-the SIMS cabinets, implant sets, and inventory on consignment with the customer and stored at customers’ facilities-it had “possession” of those items since the customers did not have the intent to exercise control of those items until they were to be used in surgery. (Pl.’s Resp. Opp’n Powell Mot. Dismiss 40.) Moreover, Synthes asserts that trespass is alleged only “to the extent the inventory was loaned or consigned, and therefore, owned by Synthes at the time, and to the extent the SIMS were fully or partially owned by Synthes at the time.” (Id. at 40-41 (quoting Am. Compl. ¶ 284).) Thus, not every instance of Powell’s use or labeling of Synthes’s SIMS sets or inventory constituted trespass to chattels because Synthes did not retain ownership of the property in every situation. Rather, its ownership rights varied from customer to customer depending on the parties’ contracts. (Id. at 41.) While Plaintiff’s argument stands on somewhat tenuous grounds, the Court nonetheless deems it sufficient to survive Rule 12(b)(6) scrutiny. Plaintiff has alleged that many of its SIMS were still fully or partially owned by Synthes at the time of the alleged interference and that they were only loaned or on consignment with Synthes customers. Taking these assertions as true, Plaintiff’s right to relief on the trespass to chattels claim has been raised above the speculative level. To the extent discovery reveals that Synthes owned none of the property at issue at the time of the alleged trespass, Defendants may seek summary judgment on this claim. 6. Civil Conspiracy Claim To state a cause of action for civil conspiracy, the plaintiff must demonstrate: “(1) a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by unlawful means or for an unlawful purpose; (2) an overt act done in pursuance of the common purpose; and (3) actual legal damage.” Gen. Refractories Co. v. Fireman’s Fund Ins. Co., 337 F.3d 297, 313 (3d Cir.2003) (citation and internal quotations omitted). An “ ‘actionable civil conspiracy must be based on an existing independent wrong or tort that would constitute a valid cause of action if committed by one actor.’ ” Levin v. Upper Makefield Twp., 90 F. App’x 653, 667 (3d Cir.2004) (citing In re Orthopedic Bone Screw Prods. Liab. Litig., 193 F.3d 781, 789 (3d Cir.1999)). Ultimately, “only a finding that the underlying tort has occurred will support a claim for civil conspiracy.” Alpart v. Gen. Land Partners, Inc., 574 F.Supp.2d 491, 506 (E.D.Pa.2008) (quotation omitted). *37 Importantly, “[p]roof of malice, i.e., an intent to injure, is essential in proof of a conspiracy.” Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466, 472 (Pa.1979). “Malice requires ... that the sole purpose of the conspiracy was to injure the plaintiff,” and that this intent was without justification. Doltz v. Harris & Assoc., 280 F.Supp.2d 377, 389 (E.D.Pa.2003) (emphasis added). As malice can only be found when the sole purpose of the conspiracy is to injure the plaintiff, a showing that a person acted for professional reasons, and not solely to injure the plaintiff, negates a finding of malice. See Bro- Tech Corp. v. Thermax, Inc., 651 F.Supp.2d 378, 419 (E.D.Pa.2009); Thompson Coal Co., 412 A.2d at 472 (noting that the intent to injure must be without justification, which cannot exist when an act is merely done “with the intention of causing temporal harm, without reference to one’s own lawful gain, or the lawful enjoyment of one’s own rights”) (quoting Rosenblum v. Rosenblum, 320 Pa. 103, 181 A. 583, 585 (Pa.1935)). The civil conspiracy count incorporates all of the other allegations of the Amended Complaint and then alleges as follows: 304. The Defendants’ conduct set forth above Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 123 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 27 establishes a civil conspiracy among them to develop and operate a company that would wrongfully compete with Synthes. 305. The Defendants’ conspiracy has, at all times, involved a combination of two or more persons acting with a common purpose to do an unlawful act or to do a lawful act by an unlawful means or for an unlawful purpose. 306. This combination of the Defendants has, at all times, specifically intended to injure Synthes. 307. The actions of this combination of Defendants, including the overt actions set forth in Paragraphs 1- 302 above, were taken in pursuance and furtherance of the conspiracy’s common purpose to found, develop, and operate a business that unlawfully competes with Synthes. 308. Synthes has suffered, and will continue to suffer, substantial and irreparable damage as a result of the Defendants’ conspiracy and tortious conduct. (Am.Compl.¶¶ 304-08.) Defendant Powell now argues that this claim fails because Plaintiff has not alleged a sole intent to injure on the part of Defendant Powell or any other Defendant. Rather, the allegations of the Amended Complaint reflect that Defendants were operating Emerge as a competitive, for-profit business, and that they actions they took were for the purpose of expanding that business, not solely for injuring Plaintiff. On this point, the Court must agree with Defendant Powell. The Amended Complaint specifically alleges that the common purpose of the conspiracy was to “found, develop, and operate a business that unlawfully competes with Synthes.” (Id. ¶ 307, 181 A. 583.) Although cursorily alleging that “[t]his combination of the Defendants has, at all times, specifically intended to injure Synthes,” the intent of the particular Defendants is not equivalent to an allegation that the basis for their conspiracy was to injure. Indeed, a careful reading of the allegations discussing the foundation of the conspiracy reveals that it was intended to develop a new company which would provide financial benefit to those participating, but the actions taken in furtherance of that conspiracy were purportedly unlawful and had the incidental effects of competitively injuring Synthes. (Id. ¶¶ 124-68.) Moreover, other portions of the Amended Complaint expressly acknowledge that the Defendants misappropriated information “to help them develop and implement Emerge’s business model, to identify and/or design, develop, test, and manufacture products competitive with certain of Synthes’ products, to manage inventory and purchase orders, to develop Emerge’s marketing efforts to customers, and to otherwise effectuate their scheme to compete wrongfully with Synthes.” (Id. ¶ 241, 181 A. 583.) The fact that it may have been necessary to deceive Plaintiff or to otherwise willfully and maliciously commit various torts against Plaintiff30 in order to carry out this scheme does not equate to an allegation that the conspiracy was formed with the sole intent to injure Plaintiff. See Spitzer v. Abdelhak, No. Civ.A.98-6475, 1999 WL 1204352, at *9 (E.D.Pa. Dec.15, 1999) (“As Plaintiffs have stated elsewhere, the Defendant’s purpose of the conspiracy was to benefit themselves personally and professionally. The fact that it may have been necessary to deceive Plaintiffs in order to carry out their scheme in no way indicates that they acted with malice solely to injure Plaintiffs.”). In other words, according to Plaintiff’s own allegations, the Defendants’ alleged improper actions were taken for the purpose of economically benefitting them in their new endeavor, but had the side effect of affecting Synthes’s operations and profitability. At no point in the Amended Complaint does Plaintiff expressly state that any purpose of the conspiracy-let alone the sole purpose-was to injure Synthes.31 Accordingly, this claim, as alleged against Defendant Powell, shall be dismissed.32 IV. CONCLUSION *38 In light of the foregoing, the Court finds that Defendant Powell’s Motion to Dismiss should be granted in part in denied in part. First, to the extent the tortious interference with contract claim (Count III) alleges that Defendant Powell improperly solicited Synthes employees to leave Synthes and accept employment elsewhere, that claim is barred by the gist of the action doctrine and must be dismissed. The remainder of the tortious interference claim, however, remains unaffected by the gist of the action doctrine. Second, Plaintiffs’ civil conspiracy claim (Count XII) fails because the Amended Complaint does not-and at this juncture cannot- plausibly allege that the sole purpose of the conspiracy was to injure Plaintiffs. Finally, with respect to the remainder of claims in the Amended Complaint, the Court finds that Plaintiffs’ allegations are sufficiently specific to allow the Court to infer more than the mere possibility of misconduct. As these claims survive Rule 12(b)(6) scrutiny, the Motion to Dismiss them shall be denied. An appropriate order follows. All Citations Not Reported in F.Supp.2d, 2012 WL 4205476 Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 124 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 28 Footnotes 1 The factual background is taken directly from Plaintiff’s Amended Complaint, as required at this stage of the proceedings. Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir.1991). The Third Circuit Court of Appeals has explained that “in deciding motions to dismiss pursuant to Rule 12(b)(6), courts generally may not consider matters extraneous to the pleadings unless it is a matter of public record or is ‘integral to or explicitly relied upon in the complaint.’ ” In re Burlington Coat Factory § Litig., 114 F.3d 1410, 1426 (3d Cir.1997) (citation omitted). As such, to the extent Defendant Powell references facts from his Declaration, attached as Exhibit A to his Motion, the Court disregards them. In addition, the Court does not consider the exhibits attached to Plaintiff’s Sur-reply Brief. 2 Plaintiffs actually include the affiliated companies of Synthes, Inc., Synthes USA HQ, Inc., Synthes USA, LLC, Synthes USA Sales, LLC, and Synthes USA Products, LLC. For ease of discussion, the court refers to Plaintiffs in the singular as either “Synthes” or “Plaintiff.” 3 Defendant Powell also argues that the fraud claim against him should be dismissed both because Plaintiff has failed to satisfy the pleading standards of Federal Rule of Civil Procedure 9(b) and because it is barred by the gist of the action doctrine. In response, Plaintiff notes that the fraud claim relates only to the conduct by Defendants Marotta, Stassen, Brown, and Emerge. (Pl.’s Resp. Opp’n Powell Mot. Dismiss 3 n. 2.) In an effort to “remove any confusion,” Synthes agrees to the dismissal of this claim as to Defendant Powell. (Id.) Accordingly, the Court dismisses this claim without prejudice and need not address Powell’s substantive arguments regarding this claim. 4 Although the Pennsylvania Supreme Court has not explicitly adopted the gist of the action doctrine, both the Pennsylvania Superior Court and multiple United States District Courts have predicted that it will. Woods v. ERA Med LLC, No. Civ.A.08-2495, 2009 WL 141854, at *6 n. 11 (E.D.Pa. Jan.21, 2009) (citing cases). 5 Plaintiff argues that dismissal under the gist of the action doctrine is premature because the validity and scope of the contracts are in dispute. He reasons that, throughout the litigation, Emerge-Powell’s co-Defendant who is represented by the same counsel-has contended that the scope of the agreements at issue is limited and confers upon Synthes only certain narrow rights. (Pl.’s Resp. Opp’n Powell Mot. Dismiss 6.) Defendant Marotta has made similar assertions. (Id. at 6, n. 7.) Because several Defendants have disputed the scope and enforceability of the contracts at issue in the litigation, Plaintiff contends that the Court should not dismiss any tort claim using the gist of the action doctrine. (Id. (citing Premier Payments Online, Inc. v. Payment Systems Worldwide, 848 F.Supp.2d 513 (E.D.Pa.2012)). This argument is mistaken on several grounds. First, Plaintiff does not contend that Powell himself has challenged the scope and enforceability of the contracts. Rather, this argument has been raised only by Powell’s co-Defendants. Moreover, and more importantly, the case cited by Plaintiff is inapposite. In Premier Payments, a question arose not as to the scope and enforceability of a valid contract, but whether a valid contract existed in the first place. Id. at 529. Similarly, the cases referenced in Premier Payments also involved questions as to the actual existence of a contract. See Hart v. Univ. of Scranton, 838 F.Supp.2d 324, 329 (M.D.Pa. Dec.16, 2011) (declining to apply gist of the action doctrine where the “very existence of the contract” was “unsettled”); M.H. Rydek Elec., LLC v. Zober Indus., Inc., No. Civ.A.07-3885, 2007 WL 3407130, at *2 (E.D.Pa. Nov.15, 2007) (noting that “many courts [ ] have been reluctant to apply the gist of the action doctrine to dismiss tort claims where the existence of a contract is still in question”) (collecting cases). In the present case, however, no party questions the existence of the pertinent contracts, only the scope and the extent of enforceability of such contracts. Indeed, this Court has previously dismissed tort claims under the gist of the action doctrine even where the scope and validity of the contractual provisions at issue were in question. See Brown & Brown v. Cola, 745 F.Supp.2d 588, 619-25 (E.D.Pa.2010) (dismissing misappropriation, conversion, and breach of fiduciary duty claims under gist of the action doctrine even where scope and validity of non-competition provision in an employment agreement was in dispute). In a related argument, Plaintiff also contends that this Court should not dismiss the tort claims under the gist of the action doctrine because Federal Rule of Civil Procedure 8(d) allows a plaintiff to plead alternative theories of liability. This contention, however, is simply a linguistic re-working of its previous argument. Had Synthes pled facts in its Amended Complaint suggesting a dispute as to whether the contracts at issue existed, such alternative pleading would have been plausible. Absent such allegations, however, the gist of the action doctrine may be applied at the motion to dismiss stage. See Bengal Converting Servs., Inc. v. Dual Printing, Inc., No. Civ.A.11-6375, 2012 WL 831965, at *4 (E.D.Pa. Mar.13, 2012) (holding that “[w]hile litigants are indeed permitted to plead causes of action in the alternative they still must plead facts that support the alternative pleading”; thus, where plaintiff did not plead facts suggesting a dispute over the existence of the contract, the gist of the action doctrine could apply to bar claims). 6 According to the Agreement, proprietary and confidential information includes: Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 125 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 29 (1) the identity of customers and prospects, their specific requirements, and the names, addresses and telephone numbers of individual contacts; (2) prices, renewal dates and other detailed terms of customer and supplier contracts and proposals; (3) pricing policies, methods of delivering services and products, marketing and sales strategies, product know-how, product technology and product development strategies; (4) physical security systems, access control systems, network and other equipment designs; (5) employment and payroll records; (6) forecasts, budgets and other non-public financial information; (7) product performance information, product technical information and product know-how; and (8) expansion plans, management policies and other business strategies and polices. (Am. Compl., Ex. K at 2.) 7 Defendant Powell cites to Partners Coffee Co., LLC v. Oceana Servs. & Prods. Co., No. Civ.A.09-236, 2009 WL 4572911, at *8 (W.D.Pa. Dec.4, 2009) in support of the proposition that the tortious interference with customer relationships claim is subsumed by the confidentiality portion of the Non-Competition Agreement. Absent discovery in this case, the Court cannot determine whether Partners Coffee is relevant. 8 By way of its Response Brief, Plaintiff clarifies that its conversion claim against Powell is based solely on Powell’s unlawful exercise of domain and control over Synthes’s confidential proprietary business information and its product. (Pl.’s Resp. Opp’n Powell Mot. Dismiss 12.) Any additional allegations in that count referencing a failure to assign Emerge to Synthes-including all business models, plans, strategies, names, logos, and slogans, and/or other instrumentation and implants-are asserted only against Defendants Marotta and Brown. (Id. at 12, n. 10.) 9 Defendant Powell engages in an extensive discussion of the allegation within the unfair competition claim that he violated his duty not to compete. Specifically, he cites Chemtech International, Inc. v. Chemical Injection Technologies, Inc., 170 F. App’x 805 (3d Cir.2006) for the proposition that because only a contract can confer a duty not to compete, an unfair competition allegation based on improper competition is barred by the gist of the action doctrine. A plain reading of the present unfair competition claim, however, reveals that it does not rely on any alleged violation of the non-compete clause. As noted above, the tortious interference, passing off, and conversion allegations alone are sufficient to sustain an unfair competition claim. 10 Specifically, Plaintiff asserts that authorization to those computers was limited by electronic barriers and passwords as well as Synthes’s written employment, ethics, and computer usage and IT security policies and agreement, and that access to those computers was strictly limited to use for Synthes’s business. (Am.Compl.¶¶ 252-53.) 11 The First and Seventh Circuits, along with a number of district courts, have concluded that, under agency law principles, an employee can “exceed authorized access” within the meaning of the CFAA by using confidential information the employee is authorized to access “in a manner inconsistent with the duty of loyalty to the employer.” Bro-Tech Corp., 651 F.Supp.2d at 406 (citing Int’l Airport Ctrs., LLC v. Citrin, 440 F.3d 418, 420-21 (7th Cir.2006); Shurgard Storage Ctrs., Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121, 1125 (W.D.Wash.2000)). Using this logic, some courts have found that the agency relationship (and therefore the rights of access) terminate when the employee “acquires adverse interests ... to the principal.” Int’l Airport Ctrs., 440 F.3d at 421. We decline to apply this view based on the weight of contrary authority from within the Court’s own Circuit. 12 The Amended Complaint-read in conjunction with Plaintiff’s current briefing-clearly reveals that the temporal scope of the CFAA claim against Defendant Powell is from the summer of 2010 forward. Indeed, paragraph 152 states, “[b] eginning no later than the summer of 2010, Marotta, Stassen, Powell, and Emerge improperly and unlawfully acquired, used, and disclosed Synthes’ confidential, sensitive, proprietary, and trade secret information, including, upon information and belief, information they acquired by directing, inducing, and encouraging others to access Synthes’ computer systems.” (Am. Compl. ¶ 152 (emphasis added).) Plaintiff’s Memorandum in Opposition to the Motion to Dismiss clarifies that “from the face of the Amended Complaint, Synthes’ CFAA claim is not based on conduct during Powell’s employment. Rather, Synthes’ CFAA claim focuses on Powell’s and Marotta’s unlawful accessing of Synthes’ data after their employment, including by inducing then current Synthes employees to funnel to them Synthes’ confidential information to which they would not otherwise have had access.” (Pl’s Resp. Opp’n Mot. Dismiss 17.) Accordingly, the Court finds that the CFAA allegations against Defendant Powell are restricted to his actions occurring from the summer of 2010 forward. 13 While Plaintiff challenges the fact that the third-party employees that allegedly accessed the computers on behalf of Powell are not identified, the Court does not find that such level of specificity is required at this early stage of litigation, prior to the completion of discovery. 14 Defendant Powell cites Integrated Waste, 2010 WL 4910176 for the proposition that the failure of the Amended Complaint to allege that Powell personally accessed Synthes’s protected computers when he was not authorized to so Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 126 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 30 is fatal to the CFAA claim. (Def. Powell’s Reply Br. 9.) Integrated Waste, however, does not impose any such requirement of personal access. Rather, the decision held that where “the Amended Complaint allege[d] only that Defendants induced Plaintiff by fraudulent means to provide them with access to confidential information, which Defendants then misappropriated for their own purposes,” the plaintiff had failed to state a claim under the CFAA. Id. at *8 (emphasis added). The present case alleges that Defendant Powell actually obtained unauthorized access to the computers by inducing current Synthes employees to do so on his behalf. Nor does this Court’s decision in Eagle v. Morgan, supra, support the notion that personal access to a computer is required. In Eagle, the plaintiff and counterclaim-defendant, Linda Eagle, had never “accessed” a “protected computer,” either personally or through inducement of another. 2011 WL 6739448, at *8. Rather, by misrepresenting that she still worked with her former employer, she convinced AT & T representatives to access her former employer’s AT & T account and move her business telephone number under her name. Id. at *8. Thus, that case involved access to an account as opposed to access to a “computer system.” 15 Defendant Powell argues that “had Plaintiffs actually intended for [the Amended Complaint’s allegations] to pertain to Defendants’ post-employment authorization-as they now contend-then Plaintiffs’ interpretation of this allegation implies that Defendants were authorized to access Synthes’ computer systems after their employment ended for other purposes.” (Def. Powell’s Reply Br. 9.) The Court disagrees. The allegation that “Defendants were not authorized to access or use Synthes’ computer systems for the purpose of misappropriating Synthes’ confidential, proprietary, and trade secret information” (Am.Compl.¶ 254) means precisely what it says. It does not suggest that the converse must be true-i.e., that Defendants were authorized to access the computer systems for other purposes. 16 By way of a Supplemental Sur-reply Brief (“Supp.Sur-reply”), Plaintiff argues that the recent Fourth Circuit decision in WEC Carolina Energy Solutions, LLC v. Miller, 687 F.3d 199 (4th Cir.2012) strictly interpreted the CFAA and limited its terms’ application “to situations where an individual accesses a computer or information on a computer without permission.” Id. at 203. It declined to extend the CFAA to “the improper use of information validly accessed.” Id. at 204. This case is inapposite. In WEC Carolina, the defendant, before resigning, acted at his subsequent employer’s direction to download proprietary information for the benefit of his subsequent employer. Id. at 202. Thus, the defendant had authorization to access the computer and the information, but subsequently used that information for an improper purpose. In the present case, Defendant Powell allegedly accessed Synthes’s computer system at a time when he did not have authorization to do so. This critical distinction makes WEC Carolina uninstructive here. 17 Powell’s reliance on Patrick Peterson Custom Homes, Inc. v. Bach, 586 F.Supp.2d 1026, 1034 (N.D.Ill.2008) is unpersuasive. That matter involved conduct occurring in 2006 and 2007, meaning that the pre-amendment version of the CFAA applied and an allegation of interstate or foreign commerce was required. Id. at 1030, 1032. 18 Defendant Powell cites to the Tenth Circuit case of King v. PA Consulting Group, Inc., 485 F.3d 577 (10th Cir.2007), to support its argument that Colorado is a substantially closer connection to the dispute at issue than Pennsylvania. This argument is flawed on several grounds. First and foremost, choice of law provisions are not disregarded merely because one state has a “closer connection” than another. Rather, they are disregarded where the chosen state has “no substantial relationship” to the parties or the dispute. Restatement (Second) of Torts § 187. Moreover, in King, the chosen state’s sole connection to the dispute was that it was the employing company’s state of incorporation and the company maintained a human resources office there. It was, however, headquartered in Washington, D.C. Id. at 586. The former employee lived and worked in Colorado and the contract was signed there. Id. at 585-86. By contrast, in this case, Synthes is actually headquartered in Pennsylvania. 19 Although the court in that case found that the choice of law provision calling for the application of Pennsylvania law was not enforceable because of the strong public policy interest of Colorado, this Court finds that analysis inapplicable to the present case. The Haggard court issued that opinion in the context of a preliminary injunction and, perhaps in an abundance of caution, found that the “distinctions between Colorado and Pennsylvania law regarding the burden of enforceability are critical and they reflect that application of Pennsylvania law in this case may violate the fundamental public policy of Colorado.” Haggard, 2009 WL 1655030, at *4 (emphasis added). The correct analysis, however, is whether “application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue.” Restatement (Second) of Conflict of Laws § 187 (emphasis added). Because this Court does not find that application of Pennsylvania law “would be contrary” to a fundamental policy of Colorado-in light of the application of the trade secret exception-there is no basis to disregard the forum selection clause. 20 In his Reply Brief, Powell argues that because neither the non-solicitation provisions nor the non-competition provision in the Agreement contain a specific reference to the Plaintiff’s alleged confidential information, the primary purpose of those provisions is not to protect confidential information. The Court must disagree. The Agreement is a total of four pages long, the first two pages of which discuss the purpose of the Agreement and the confidential information sought Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 127 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 31 to be protected. After defining Synthes’s business interests in protecting its confidential and proprietary information, the last sentence of the “Acknowledgements” section states “the restrictions in this agreement are reasonable and necessary to protect Synthes’ legitimate business interests.” (Am.Compl., Ex. K.) Reading the Agreement as a whole- in lieu of Defendant Powell’s proposal to read provisions in isolation-the Court finds that the primary and express purpose of the Agreement and provisions contained therein is to protect Plaintiff’s trade secrets. See Williams v. Metzler, 132 F.3d 937, 947 (3d Cir.1997) (“In the process of defining the objective intent of the parties, a court must examine the entire agreement.”). 21 These factors include: (1) the extent to which the information is known outside of the company’s business; (2) the extent to which the information is known by employees and others involved in the company’s business; (3) the extent of the measures taken by the company to guard the secrecy of the information; (4) the value of the information to the company and its competitors; (5) the amount of effort or money the company spent in developing the information; and (6) the ease or difficulty with which the information could be acquired or duplicated legitimately by others. Bimbo Bakeries, 613 F.3d at 109. 22 Defendant Powell cites to Air Prods. & Chems, Inc. v. Johnson, 296 Pa.Super. 405, 442 A.2d 1114 (Pa.Super.Ct.1982) for the proposition that “general, public disclosure of a trade secret, by a party seeking to protect its interests results in an abandonment of that trade secret.” Id. at 1128. “Similarly, the act of making trade secrets available to the public by incorporating those secrets into the design of a product risks public disclosure because, without engaging in any improprietous act, the trade secret may be copied.” Id. According to Powell, any act by Powell of taking a Synthes product in his possession at the time of resignation and using it to reverse engineer various drill bits, guide wires, and cannulated screws cannot be misappropriation since those products were released to the public, thereby disclosing the trade secrets. Plaintiff’s misappropriation claim against Powell, however, does not rely on any alleged taking of Synthes products for reverse engineering purposes. Rather it focuses on Powell’s taking and use of protectable trade secret information about Synthes’s customers, business activities, and strategies as well as information regarding Synthes’s product development plans, pipeline, and launches; technology and product performance; expansion plans; pricing; competitive terms; contract and sales administration; compensation and personnel; and other sensitive information related to Synthes’s business. (Am.Compl.¶ 102.) 23 Powell argues that Plaintiff concedes to dismissal with prejudice of the conversion claim to the extent it alleges that “Defendants” failed to assign Emerge and/or its property. Plaintiff, however, has made clear that Powell’s unlawful exercise of domain and control over Synthes’s confidential and proprietary business information and products acts as the basis for its conversion claim. It does not contend that Powell failed to assign Emerge to Synthes based on the provisions of his Non-Disclosure Agreement. (Pl.’s Resp. Opp’n Powell Mot. to Dismiss 31 n. 25.) By merely clarifying the contours of its conversion claim, Plaintiff does not concede to dismissal with prejudice of that claim either as against Powell or against any other Defendant. For future purposes, however, Plaintiff’s conversion claim against Powell is restricted to an allegation that he converted Plaintiff’s confidential and proprietary business information. 24 (See Am. Compl. ¶ 101 (“The confidential, sensitive, proprietary, and trade secret information Synthes entrusted to Powell included, without limitation, information about Synthes’ customers, business activities, and strategies as well as information regarding Synthes’ product development plans, pipeline, and launches; technology and product performance; expansion plans; pricing; competitive terms; contract and sales administration; compensation and personnel; and other sensitive information related to Synthes’ business.”); id. ¶ 103 (“Synthes also provided Powell with substantial, specialized training on the technical aspects of Synthes’ products and the medical procedures in which these products are used as well as on techniques for educating operating room personnel and surgeons so that Powell could be an effective resource to those surgeon customers during medical procedures concerning the use of existing and new implants and instrumentation. During these training sessions, Powell also received sensitive information regarding Synthes’ contract and sales administration, personnel, and other departments. Synthes provided Powell with such training on an ongoing basis throughout his tenure with Synthes.”).) 25 (See Am. Compl. ¶ 152 (“Beginning no later than the summer of 2010, Marotta, Stassen, Powell, and Emerge improperly and unlawfully acquired, used, and disclosed Synthes’ confidential, sensitive, proprietary, and trade secret information, including, upon information and belief, information they acquired by directing, inducing, and encouraging others to access Synthes’ computer systems.”); id. ¶ 241 (“Upon information and belief, the Defendants improperly and unlawfully acquired, used, and disclosed confidential and proprietary business information obtained and misappropriated from Synthes to help them develop and implement Emerge’s business model, to identify and/or design, develop, test, and manufacture products competitive with certain of Synthes’ products, to manage inventory and purchase orders, to develop Emerge’s marketing efforts to customers, and to otherwise effectuate their scheme to Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 128 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 32 compete wrongfully with Synthes.”).) 26 (See Am. Compl. ¶ 242 (“Defendants knew, before and at the time of their acquisition, use, and/or disclosure of it, that this information constitutes ‘trade secret’ information under Pennsylvania law because: (i) the information derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) it is reasonable for Synthes to maintain the secrecy of such information.”); id. ¶ 246 (“The Defendants knew or had reason to know that they acquired, used, or disclosed Synthes’ trade secret information through improper means, and knew or had reason to know that Marotta, Stassen, Powell, and other current and former Synthes employees or other third parties from whom any of them obtained information had duties and obligations to Synthes to maintain the secrecy of and to limit the disclosure and use of Synthes’ confidential and proprietary business information.”) 27 (See Am. Compl. ¶ 244 (“The Defendants’ acquisition, use, and disclosure of such information have given Emerge an unfair and wrongful advantage.”); id. ¶ (“The Defendants’ acquisition, use, and disclosure of Synthes’ trade secret information have been willful and malicious and intended to harm Synthes, and the Defendants’ conducts also threatens to recur. Emerge and its Board of Directors have permitted Marotta, Stassen, and Powell to engage in this tortious conduct, and by refusing to terminate them, have permitted the continuation of this tortious conduct.”).) 28 Plaintiff’s Response Brief also references an e-mail to a customer, a video broadcast distributed by a well-known publisher in the orthopedics industry, and a PowerPoint presentation made to a health system. (Pl.’s Resp. Opp’n Powell Mot. Dismiss, Exs. 2-4.) Because Rule 12(b)(6) motions to dismiss must be decided on the basis of the pleadings, the Court does not consider this outside evidence in ruling on the present Motion. 29 Indeed, the Court finds inapposite the cases either upon which Defendant Powell relies or which the Court has independently found to support the notion that cases showing only isolated instances of false advertising do not reflect commercial advertising or promotion. Unlike this matter, all of those cases were decided either after a preliminary injunction hearing, or on a summary judgment motion following discovery. Proctor & Gamble Pharms. v. Hoffmann- LaRoche Inc., No. Civ.A.06-0034, 2006 WL 2588002, at *32 (S.D.N.Y. Sep. 6, 2006) (preliminary injunction hearing); Fashion Boutique, 314 F.3d at 58 (summary judgment); Auto-Chlor Sys. of Minn., Inc. v. JohnsonDiversey, 328 F.Supp.2d 980, 1019-20 (D.Minn.2004) (summary judgment); Optimum Techs., Inc. v. Home Depot, Inc., No. Civ.A.04-3260, 2005 WL 3307508 (N.D.Ga. Dec.2, 2005) (summary judgment). 30 As Plaintiff points out, several other allegations pertaining to other causes of action in the Amended Complaint state that Defendants’ actions were “willful and wanton,” “knowing,” “intentional,” “wrongful,” and done with the “intent to defraud.” (Am.Compl.¶¶ 255, 262-63, 285.) These allegations do not demonstrate an intent to harm. Morilus v. Countrywide Home Loans, Inc., 651 F.Supp.2d 292, 313 (E.D.Pa.2008) (“Bald assertions that certain actions were malicious are insufficient; it must be alleged that the ‘sole purpose of the conspiracy was to injure the Plaintiffs.’ ”) (quotations omitted). Although Plaintiff includes allegations within its tortious interference and misrepresentation claims that those torts were “intended to harm” or “intended to injure” Synthes, (Am.Compl.¶¶ 225, 278), such allegations neither imply that the sole purpose of the conspiracy was to injure, nor do they negate Plaintiff’s concessions that the conspiracy was, at heart, designed to economically and commercially benefit Defendants. 31 The Court finds the cases cited by Plaintiff on this point unconvincing. First, Plaintiff references EXL Labs., LLC v. Egolf, No. Civ.A.10-6282, 2011 WL 880453 (E.D.Pa. Mar.11, 2011). In that matter, the civil conspiracy cause of action portion of the complaint only alleged that the defendants sought to create another business entity through their conspiracy. Id. at * 10. The complaint, however, alleged that the defendants misappropriated trade secrets-the tort underlying the conspiracy-for the purpose of interfering with the plaintiff’s existing and potential contracts and that such actions were taken with the intent to harm the plaintiff. Id. The court rejected the defendant’s argument that plaintiff had failed to allege that the “sole purpose” of the conspiracy was to injure. Id. Second, Plaintiff relies on RDK Truck Sales & Serv. Inc. v. Mack Trucks, Inc., No. Civ.A.04-4007, 2009 WL 1441578 (E.D.Pa. May 19, 2009), wherein the defendant sought to dismiss the civil conspiracy claim against it on the ground that intent to injure was not the sole basis of the conspiracy. Id. at *33. The court found, however, that “[plaintiff] is not alleging that the legitimate business actions of [defendants] form the basis of its civil conspiracy claim. Instead, it is the improper actions of [defendants] that-while economically beneficial to them-form the basis of Mack’s civil conspiracy claim.” Id. It went on to note that plaintiff’s allegations could lead a reasonable fact-finder to infer that plaintiff’s injuries “were not simply an incidental side-effect of otherwise legitimate business interests, but rather the fruits of an unlawful conspiracy.” Id. The present matter, however, is distinguishable. In the foregoing cases, the complaints contained at least some allegations that the purpose of the conspiracy was to injure the plaintiff. A thorough review of the present case, on the other hand, reveals no such allegation to indicate that Defendants acted with the sole intent to injure Plaintiff, with economic benefit being only an incidental side effect. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 129 of 134 Synthes, Inc. v. Emerge Medical, Inc., Not Reported in F.Supp.2d (2012) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 33 32 Via a footnote in its Response in Opposition, Plaintiff requests leave to amend to include the language that it was Defendants’ “sole” intent to injure Synthes. Because Plaintiff has already alleged that the purpose of the conspiracy was to further Defendants’ new business, however, Plaintiffs could not now truthfully allege that the sole purpose of the conspiracy was to harm Synthes. Accordingly, leave to amend is denied as futile. End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 130 of 134 TAB M Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 131 of 134 U.S. Bank Nat. Ass’n v. Parker, Not Reported in F.Supp.2d (2010) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 1 KeyCite history available 2010 WL 2735661 Only the Westlaw citation is currently available. United States District Court, E.D. Missouri, Eastern Division. U.S. BANK NATIONAL ASSOCIATION, Plaintiff, v. Mary L. PARKER, Defendant. No. 4:09CV1755 HEA. | July 9, 2010. Attorneys and Law Firms Mary M. Bonacorsi, Thompson Coburn, LLP, St. Louis, MO, for Plaintiff. Gary M. Smith, Neal F. Perryman, Lewis Rice, St. Louis, MO, for Defendant. OPINION, MEMORANDUM AND ORDER HENRY EDWARD AUTREY, District Judge. *1 This matter is before the Court on Defendant’s Motion to Dismiss Plaintiffs’ Petition, [Doc. No. 9]. Plaintiff opposes the Motion. For the reasons set forth below, the Motion is granted. Facts and Background Plaintiffs brought this action against Defendant, a former employee, for breach of contract, (Count I); tortious interference with business expectancy, (Count II); and misappropriation of trade secrets, (Count III). Plaintiff’s petition alleges the following: Defendant was a Wealth Management Advisor in the Private Client Reserve and Asset Management group of Defendant from November 16, 1987 until April, 2009. While employed with Plaintiff, Defendant entered into a Confidentiality and Non-Solicitation Agreement with Plaintiff. As part of the Agreement, Defendant agreed for a period of one year following her separation from employment with Plaintiff not to contact Plaintiff’s clients to solicit their business for any other entity, not to use Plaintiff’s confidential information for such purposes, and to immediately return to Plaintiff all confidential information concerning Plaintiff’s clients and business. Defendant is now employed at Northern Trust. Plaintiff alleges that since Defendant’s employment with Northern Trust, and in direct violation of the Agreement, Defendant, both directly and through others, has contacted a number of clients in an attempt to induce them to end their relationship with Plaintiff and do business with her at Northern Trust. Plaintiff alleges “on information and belief” that Defendant failed to return to Plaintiff all confidential information, including information about Plaintiff’s clients and their accounts, and has maintained such confidential information in written form and/or on her personal computers, cell phones or other electronic information storage devices. Plaintiff claims that contrary to the terms of the Agreement, Defendant has used such confidential information for the purpose of soliciting Plaintiff’s clients for Northern Trust. In support of its claims, Plaintiff alleges that: Prior to departure from U.S. Bank, Parker asked one or more U.S. Bank employees how she could transition her clients from U.S. Bank to a new employer. She was advised that she was bound by the terms of the Agreement and that the Agreement prohibited such contacts with U.S. Bank clients. Upon information and belief, within a short time after beginning work for Northern Trust, Parker contacted several clients with whom she had established relationships in the course of her employment with U.S. Bank for the purpose of inducing such clients to transfer their accounts to Northern Trust. On information and belief, Parker used confidential and personal information of these clients of U.S. Bank relating to their investments in making these contacts. Further, on information and belief, Parker created and maintained separate files containing U.S. Bank customer information, either in written form or on her personal cell phone or other electronic information storage device, which she brought with her to Northern Trust. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 132 of 134 U.S. Bank Nat. Ass’n v. Parker, Not Reported in F.Supp.2d (2010) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 2 *2 On information and belief, Parker has continued to contact and solicit U.S. Bank clients, directly and indirectly, to move their business from U.S. Bank to Northern Trust. Some of the clients solicited by Parker have moved their accounts and others have reported Parkers’ contacts and solicitation to U.S. Bank, choosing to remain with the institution and account managers at U.S. Bank who have served them well over the years. Beginning before or shortly after April 26, 2009, Parker breached her obligations under the Agreement by directly or indirectly soliciting U.S. Bank’s clients for the purpose of providing banking, investment or financial services and products in a manner that would benefit Parker and Northern Trust in direct competition with U.S. Bank. Parker retained, duplicated, and used U.S. Bank’s Confidential Information, including but not limited to customer names, addresses, telephone numbers and private account information, for the purposes of soliciting, influencing or encouraging U.S. Bank’s clients to do business with Parker after she left the employment of U.S. Bank and joined Northern Trust. Defendant moves for dismissal for failure to state a cause of action. Discussion When ruling on a motion to dismiss for failure to state a claim, the Court must take as true the alleged facts and determine whether they are sufficient to raise more than a speculative right to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Court does not, however, accept as true any allegation that is a legal conclusion. Ashcroft v. Iqbal, --- U.S. ----, ---- - ----, 129 S.Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009). The complaint must have “ ‘a short and plain statement of the claim showing that the [plaintiff] is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ “ Twombly, 550 U.S. at 555 (quoting Fed.R.Civ.P. 8(a)(2)) and then Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), abrogated by Twombly, supra); see also Gregory v. Dillard’s Inc., 565 F.3d 464, 473 (8th Cir.) (en banc), cert. denied, --- U.S. ----, 130 S.Ct. 628, --- L.Ed.2d - --- (2009). While detailed factual allegations are not necessary, a complaint that contains “labels and conclusions,” and “a formulaic recitation of the elements of a cause of action” is not sufficient. Twombly, 550 U.S. at 555; accord Iqbal, 129 S.Ct. at 1949. The complaint must set forth “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; accord Iqbal, 129 S.Ct. at 1949; C.N. v. Willmar Pub. Sch., Indep. Sch. Dist. No. 347, 591 F.3d 624, 629-30 (8th Cir.2010); Zutz v. Nelson, 601 F.3d 842, 848 (8th Cir.2010); Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir.2009). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. If the claims are only conceivable, not plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570; accord Iqbal, 129 S.Ct. at 1950. In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), “the complaint should be read as a whole, not parsed piece by piece to determine whether each allegation, in isolation, is plausible.” Braden, 588 F.3d at 594. The issue in considering such a motion is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence in support of the claim. See Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). Breach of Contract (Count I) *3 Plaintiffs allegations are premised “on information and belief.” While Plaintiff sets forth the necessary elements of its claims, there are no supporting factual allegations showing it is entitled to the relief it seeks. Plaintiff believes Defendant has retained confidential information and believes she has used the information to solicit, directly or indirectly its clients. Although Count I may include reference to all of the general elements of a breach of contract claim, it fails to allege sufficient facts respecting those elements to establish the grounds on which the claim rests. Plaintiff simply alleges that beginning before April 26, 2009, Defendant breached her obligations under the Agreement by directly or indirectly soliciting Plaintiff’s clients for the purpose of providing banking, investment or financial services and products in a manner that would benefit Defendant and Northern Trust in direct competition with Plaintiff, and that she retained, duplicated, and used Plaintiff’s confidential information, including, but not limited to customer names, addresses, telephone numbers and private account information for the purposes of soliciting influencing or encouraging Plaintiff’s customers to do business with her after she left the employment of Plaintiff. These vague, albeit intriguing, references are not sufficient factual allegations to meet the Twombly standard. While Plaintiff is not required to plead detailed Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 133 of 134 U.S. Bank Nat. Ass’n v. Parker, Not Reported in F.Supp.2d (2010) © 2017 Thomson Reuters. No claim to original U.S. Government Works. 3 facts to state a breach of contract claim, it must plead sufficient facts concerning the contacts with clients regarding solicitation. Defendant should not be compelled to discern from Plaintiff’s information and belief the meaning of direct and indirect solicitation on Plaintiff’s information and belief; Defendant must be given sufficient notice of the basis for this claim; information and belief is simply too speculative to do so. Tortious Interference with Business Expectancy (Count II) Defendant moves to dismiss Count II asserting that Plaintiff fails to allege sufficient facts to state claims for tortious interference with a business expectancy, but rather merely asserts legal conclusions tracking the elements of the prima facie cases. To state a claim for intentional interference with a business expectancy under Missouri law, a plaintiff must establish (1) a contract or valid business relationship or expectancy; (2) defendant’s knowledge of the contract, relationship or expectancy; (3) intentional interference by the defendant inducing or causing a breach of the contract, relationship or expectancy; (4) absence of justification; and (5) damages resulting from defendant’s conduct. Healthcare Services of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 614 (Mo.2006); Pony Computer, Inc. v. Equus Computer Sys. of Missouri, Inc., 162 F.3d 991, 998 (8th Cir.1998) (citing Rice v. Hodapp, 919 S.W.2d 240, 245 (Mo.1996) (en banc)); see also Community Title Co. v. Roosevelt Fed. Sav. and Loan Ass’n, 796 S.W.2d 369, 372 (Mo.1990) (en banc). *4 Once again, Plaintiff pleads on information and belief that Defendant interfered with its relationships with its clients by directly or indirectly attempting to induce clients to sever their relationships with Plaintiff. Defendant cannot ascertain from these allegations whether Plaintiff is attempting to claim that Defendant has “directly and/or indirectly” contacted all of Plaintiff’s clients, only those with whom Defendant formerly had dealings, or certain clients. While it is not necessary to specifically list the clients with whom Plaintiff believes Defendant had contact, the scope of the alleged interference must give Defendant some perimeters within which to formulate a response. The allegations contained in the Petition are simply too broad and conclusory to notify Defendant of the claims she must defend. Misappropriation of Trade Secrets (Count III) Plaintiff claims that Defendant misappropriated Plaintiff’s trade secrets. Plaintiff’s allegations are once again speculative with regard to Defendant’s actions. Plaintiff speculates that Defendant kept information and used the information to directly or indirectly solicit Plaintiff’s clients to transfer their accounts. Such speculation cannot withstand challenge. While Plaintiff may have a confidential and proprietary interest in its customer’s information, merely “believing” Defendant kept the information and believing she used that information is insufficient to state a claim beyond the speculative level. Conclusion In sum, the Petition fails to plausibly allege the claims for which Plaintiff seeks relief. Accordingly, IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss, [Doc. No. 9], is GRANTED. IT IS FURTHER ORDERED that Plaintiff may file a motion to amend within 14 days from the date of this Opinion, Memorandum and Order for the Court’s consideration. All Citations Not Reported in F.Supp.2d, 2010 WL 2735661 End of Document © 2017 Thomson Reuters. No claim to original U.S. Government Works. Case 1:16-cv-02523-CCC Document 18-1 Filed 02/27/17 Page 134 of 134
