Smc Systems, Inc. v. Peg, Llc et al

MOTION to dismiss for failure to state a claim

M.D. Fla.June 7, 2017

1 UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION SMC SYSTEMS, INC., d/b/a SKYETEC Plaintiff, v. Case No. 3:17-cv-00584-MMH-PDB PEG LLC and SANDY R. GALLO, SR., Defendants. ___________________________/ DEFENDANTS’ PARTIAL MOTION TO DISMISS PLAINTIFF’S VERIFIED COMPLAINT Defendants, PEG LLC (“Defendant PEG”) and SANDY R. GALLO, SR. (“Defendant Gallo”) (“collectively, “Defendants”), by and through their undersigned attorneys, pursuant to Fed. R. Civ. P. 12(b)(6), file this Partial1 Motion to Dismiss the Verified Complaint of Plaintiff, SMC SYSTEMS, INC., d/b/a SKYTEC (“Plaintiff”). In support, Defendants state: BACKGROUND On May 15, 2017, Plaintiff filed a Verified Complaint for Injunctive and Other Relief (“Verified Complaint”) against Defendant Gallo, its former employee, and Defendant PEG, who currently employs Defendant Gallo. The Verified Complaint alleges eight (8) Counts for: (I) Injunctive Relief against Defendants Gallo and PEG for Violation of the Non-Compete2; (II) Misappropriation of Trade 1 Upon resolution of Defendants’ Partial Motion to Dismiss, Defendants will file an Answer and Affirmative Defenses to Plaintiff’s Verified Complaint or any Amended Complaint, as appropriate. 2 Attached to Plaintiff’s Verified Complaint are: (I) Confidentiality/Noncompetition Agreement (“Non-Compete Agreement”) between Plaintiff and Defendant Gallo dated June 2, 2014, attached as Exhibit “B”; and (II) Employee Intellectual Property Agreement (“IP Agreement”) between Plaintiff and Defendant Gallo dated June 2, 2014, attached as Exhibit “C.” Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 1 of 12 PageID 415 2 Secrets against Defendant Gallo; (III) Breach of Non-Compete against Defendant Gallo; (IV) Breach of IP Agreement against Defendant Gallo; (V) Tortious Interference with Contract against Defendant PEG; (VI) Tortious Interference with Business Relationships against Defendant PEG; (VII) Civil Conspiracy to Breach the Non-Compete and the IP Agreement Against Defendant Gallo and Defendant PEG; and (VIII) Misappropriation of Trade Secrets against Defendant PEG. Plaintiff’s claims in the Verified Complaint are primarily based on the Non-Compete Agreement and IP Agreement entered into between Plaintiff and Defendant Gallo on or about June 2, 2014. Specifically, Plaintiff alleges that Defendants, in connection with Defendant PEG’s employment of Defendant Gallo, breached the Non-Compete and IP Agreement, or otherwise engaged in tortious activities. However, Plaintiff’s Counts I, II, VI, VII, and VIII in the Verified Complaint fail to state a claim upon which relief may be granted because they rely on conclusions or a formulaic recitation of the elements of a cause of action, without any factual support. Accordingly, the following Counts of Plaintiff’s Verified Complaint must be dismissed Under Fed. R. Civ. P. 12(b)(6) for failure to state a claim: (I) Count I; (II) Count II; (III) Count VI; (IV) Count VII; and (V) Count VIII. DISCUSSION I. Legal Standard For A Motion To Dismiss Under Rule 12(b)(6) Fed. R. Civ. P. 12(b)(6) permits the Court to dismiss a complaint that fails to state a claim upon which relief may be granted. To survive a motion to dismiss, the Verified Complaint must contain sufficient factual matter, accepted as true, to “‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009), citing Bell Atl. Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 2 of 12 PageID 416 3 Corp. v. Twombly, 550 U.S. 544 (2008). The Verified Complaint must contain allegations addressed to each material element "necessary to sustain a recovery under some viable legal theory." Roe v. Aware Woman Ctr. for Choice, Inc., 253 F.3d 678, 684 (11th Cir. 2001). Under Fed. R. Civ. P. 8, Plaintiff’s Verified Complaint must contain “a short and plain statement” of the grounds for relief, and each allegation must be plead in a “simple, concise, and direct” manner. Fed. R. Civ. P. 8(a)(2), (d)(1). The Verified Complaint must give Defendants fair notice of the bases for relief and the grounds upon which the claim rests. Erickson v. Pardus, 551 U.S. 89, 93 (2007). A pleading that uses just labels and conclusions or a formulaic recitation of the elements of a cause of action will not meet the standard required of Rule 8(a)(2). Ashcroft v. Iqbal, 556 U.S. 662 (2009). Rather, to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. 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.” Id. II. Plaintiff’s Claim for Injunctive Relief against Defendant PEG for Violation of the Non-Compete in Count I Fails because Defendant PEG is not a Party to the Non- Compete In Count I of the Verified Complaint, Plaintiff seeks injunctive relief against Defendants for violating the Non-Compete and IP Agreement. See Verified Complaint ¶ 55. Because Defendant PEG is not a party to either of those agreements, and is in no way bound by any of their restrictions, this Count must be dismissed as to Defendant PEG, with prejudice. See Exhibits B & C to the Verified Complaint. Pursuant to Florida law, “restrictive covenants are valid restraints of trade or commerce if they … set forth in a writing signed by the party against whom enforcement is sought.” See Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 3 of 12 PageID 417 4 Gray v. Prime Mgmt. Grp., Inc., 912 So. 2d 711, 712-13 (Fla. 4th DCA 2005)(citing Fla. Stat. § 542.335(1). Here, the copies of the Non-Compete and IP Agreement contracts attached to the Verified Complaint demonstrate that PEG is not a party to either of the agreements, and there is no writing signed by PEG. See Exhibits B & C to the Verified Complaint. The agreements attached as Exhibits to the Verified Complaint negate the conclusory allegations of the pleading.3 Accordingly, Plaintiff’s claim against Defendant PEG in Count I of the Verified Complaint must be dismissed, with prejudice. III. Plaintiff’s Claim for Misappropriation of Trade Secrets against Defendant Gallo in Count II Fails Because Plaintiff Failed to Properly Establish the Trade Secret(s) at Issue Plaintiff’s claim for misappropriation against Defendant Gallo in Count II must be dismissed because Plaintiff fails to describe any trade secret with “reasonable particularity” and also fails to allege actual misconduct. Claims alleging misappropriation of trade secrets in Florida are governed by Fla. Stat. § 688.002 (“Florida’s Uniform Trade Secrets Act” or “FUTSA”). “To state a claim under FUTSA, the plaintiff must allege that: (1) it possessed secret information and took reasonable steps to protect its secrecy; and (2) the secret information was misappropriated, either by one who knew or had reason to know that the secret was improperly obtained or by one who used improper means to obtain it.” Vacation Club Servs. v. Rodriguez, No. 6:10-cv-247-Orl-31GJK, 2010 U.S. 3 “It is the law in this Circuit that ‘when the exhibits contradict the general and conclusory allegations of the pleading, the exhibits govern.’” Crenshaw v. Lister, 556 F.3d 1283 (11th Cir. 2009)(quoting Griffin Industries, Inc. v. Irvin, 496 F.3d 1189, 1206 (11th Cir.2007)); Simmons v. Peavy-Welsh Lumber Co., 113 F.2d 812, 813 (5th Cir. 1940) ("Where there is a conflict between allegations in a pleading and exhibits thereto, it is well settled that the exhibits control."). Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 4 of 12 PageID 418 5 Dist. LEXIS 39572 at *6-7 (M.D. Fla. April 22, 2010)(citing Levenger Co. v. Feldman, 516 F. Supp. 2d 1272, 1287 (S.D. Fla. 2007)). For there to be actionable misappropriation, the party asserting trade secret protection bears the dual burden of describing the alleged trade secret information and also showing that it has taken reasonable steps to protect this secrecy. Levenger, 516 F. Supp. 2d, 1272 at 1286. The party asserting trade secret protection cannot simply claim a trade secret privilege; rather, the party must describe the allegedly misappropriated trade secrets with reasonable particularity. Id. In the instant case, Plaintiff’s claim for misappropriation of trade secrets in Count II must be dismissed because Plaintiff fails to allege any trade secret at issue with “reasonable particularity.” In Count II, Plaintiff pleads vague, conclusory allegations that Plaintiff has unidentified trade secrets. See Verified Complaint ¶¶ 70-79. Without any particularity, Plaintiff claims: “During the time Defendant Gallo was employed by [Plaintiff], Defendant Gallo was in a position to learn and did learn [Plaintiff’s] Confidential Information. [Plaintiff’s] Confidential Information is defined as trade secrets, as defined by Fla. Stat. § 688.002(4).” See Verified Complaint ¶ 70. Plaintiff asserts a similarly vague and conclusory allegation in attempting to show that it has taken reasonable steps to protect its insufficiently described trade secrets. Specifically, Plaintiff claims, without any factual support, that: “At all times, [Plaintiff] took reasonable steps to safeguard its trade secrets and Confidential Information.” See Verified Complaint ¶ 71. Plaintiff fails to demonstrate any steps it actually took to safeguard its alleged trade secrets. Similarly, as it concerns Defendant Gallo’s alleged misappropriation, Plaintiff offers no facts in support of such a claim. Instead, Plaintiff again offers a conclusory allegation that is not Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 5 of 12 PageID 419 6 supported by any facts: “Defendant Gallo misappropriated [Plaintiff’s unidentified] trade secrets and confidential information.” See Verified Complaint ¶ 74. In contrast with the vague allegations in the instant case, in Treco Int’l S.A. v. Kromka, 706 F. Supp. 2d 1283, 1286 (S.D. Fla. 2010), the court found that the plaintiff sufficiently stated a claim with reasonable particularity and survived a motion to dismiss when the plaintiff alleged that the trade secrets in question included: (1) confidential information on the development, structure and marketing of a specifically identified network (the “xMax network”); (2) the timing of the xMax network’s commercial deployment; (3) technical information about the feasibility of the xMax network obtained through a highly confidential and high-level due diligence report and through discussions with researcher and development and engineering personnel; (4) the Infrastructure Agreement - the defendant indicated that he was planning to disclose a confidential Infrastructure Agreement; and (5) the Townes letter - the defendant improperly discussed a Letter of Intent and then a deal fell through. The detailed allegations in Treco serve as a striking contrast to the vague and conclusory assertions Plaintiff set forth in the Verified Complaint. Because Plaintiff failed to properly assert a claim for misappropriation of trade secrets under Florida law by: (1) describing the alleged trade secrets with “reasonable particularity”; (2) explaining how its alleged trade secrets are not generally known to third parties; (3) identifying any reasonable steps taken to protect the alleged trade secrets; and (4) alleging any actual misconduct, the Court must dismiss Count II of the Verified Complaint. Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 6 of 12 PageID 420 7 IV. Plaintiff’s Claim for Tortious Interference with Business Relationships Against Defendant PEG in Count VI Fails Because Plaintiff Failed to Identify the Specific Business Relationships with Whom Defendant PEG Interfered Plaintiff’s claim for tortious interference with business relationships against Defendant PEG must be dismissed because Plaintiff failed to identify any specific business relationships with which Defendant PEG purportedly interfered. Under Florida law, “the elements of tortious interference with a business relationship are: (1) the existence of a business relationship that affords the plaintiff existing or prospective legal rights; (2) the defendant’s knowledge of the business relationship; (3) the defendant’s intentional and unjustified interference with the relationship; and (4) damage to the plaintiff.” Int’l Sales & Serv., Inc. v. Austral Insulated Prods., Inc., 262 F. 3d 1152, 1154 (11th Cir. 2001). The interference must be not only intentional and unjustified, but also direct. See Lawler v. Eugene Wuesthoff Mem’l Hosp. Ass’n, 497 So. 2d 1261 (Fla. 5th DCA 1986). “As a general rule, an action for tortious interference with a business relationship requires a business relationship evidenced by an actual and identifiable understanding or agreement which in all probability would have been completed if the defendant had not interfered.” Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d 812, 815 (Fla. 1994). See also E-Z Pack Mfg., LLC v. RDK Truck Sales & Servs., Inc., No. 8:10-cv-1870-T-27AEP, 2011 U.S. Dist. LEXIS 97274 at *24-25 (M.D. Fla. Aug. 10, 2011). Furthermore, a plaintiff must allege a business relationship with "identifiable customers" versus the "community at large." E-Z Pack, 2011 U.S. Dist. LEXIS 97274 at *24-25. Here, Plaintiff claims in conclusory fashion that: “This is an action for tortious interference with existing relationships.” See Verified Complaint ¶ 110. Plaintiff vaguely continues that it “had continuing business relationships with certain customers ‘and’ Defendant Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 7 of 12 PageID 421 8 PEG knew of these continuing business relationships.” See Verified Complaint ¶¶ 111-112. Not one of these relationships are identified. As it concerns alleged interference, Plaintiff’s pleading is similarly vague and conclusory: “Defendant PEG intentionally and unjustifiably interfered with these business relationships by assenting to and allowing Defendant Gallo to solicit said customers in violation of the Non-Compete and the IP Agreement.” See Verified Complaint ¶ 114. Plaintiff failed to identify a protectable relationship with any customer with which Defendant PEG supposedly interfered, or which Defendant Gallo is allegedly soliciting. Plaintiff also failed to plead facts to support the proposition that such unidentified customers had a business relationship with Plaintiff, or would have continued their business relationship with Plaintiff, absent the alleged interference. In essence, Count VI amounts to nothing more than a recitation that Plaintiff has a protectable relationship with the community at large. These allegations are insufficient to support a viable cause of action for tortious interference. Accordingly, because there is no identifiable understanding or agreement between Plaintiff and any customer identified in the Verified Complaint, the Court must dismiss Count VI of the Verified Complaint. V. Plaintiff’s Claim for Civil Conspiracy to Breach the Non-Compete and the IP Agreement Against Defendant Gallo and Defendant PEG Fails Pursuant to the Intra-Corporate Conspiracy Doctrine Plaintiff’s claim for a civil conspiracy by Defendant Gallo and Defendant PEG to breach the Non-Compete and IP Agreement is barred by the “Intra-Corporate Conspiracy Doctrine.” Under the “Intra-Corporate Conspiracy Doctrine,” “neither an agent nor an employee can conspire with his or her corporate principal or employer.” Richard Bertram, Inc. v. Sterling Bank & Trust, 820 So. 2d 963, 966 (Fla. 4th DCA 2002) (quoting Lipsig v. Ramlawi, 760 So. 2d 170, Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 8 of 12 PageID 422 9 180 (Fla. 3d DCA 2000)); McAndrew v. Lockheed Martin Corp., 206 F. 3d 1031, 1036 (11th Cir. 2000) (en banc). “This doctrine stems from basic agency principles that ‘attribute the acts of agents of a corporation to the corporation, so that all of their acts are considered to be those of a single legal actor.’” Dickerson v. Alachua Cty. Comm'n, 200 F. 3d 761, 767 (11th Cir. 2000) (quoting Dussouy v. Gulf Coast Inv. Corp., 660 F. 2d 594, 603 (5th Cir. 1981)). See also Cedar Hills Props. Corp. v. E. Fed. Corp., 575 So. 2d 673, 676 (Fla. 1st DCA 1991) (“Since a corporation is a legal entity which can only act through its agents, officers and employees, a corporation cannot conspire with its own agents unless the agent has a personal stake in the activities that are separate and distinct from the corporation's interest.”). An exception to this doctrine exists where the employee has a "personal stake in the activities separate from the principal’s interest,” See Richard Bertram, 820 So. 2d 963 at 966. In construing this exception, the employee must have “acted ‘in their personal interests, wholly and separately from the corporation.’” Microsoft Corp. v. Big Boy Distr. LLC, 589 F. Supp. 2d 1308, 1323 (S.D. Fla. 2008) (quoting Bhatia v. Yale Univ., No. 3:06cv1769, 2007 WL 2904205 (D. Conn. Sept. 30, 2007)). “Thus, a ‘personal stake’ must be more than just personal animosity on the part of the agent.” Mancinelli v. Cloud Computing Concepts, LLC, No. 4D15-4249, 2017 WL 1278074 at *1 (Fla. 4th DCA April 5, 2017)(citing On-Site Dev. Corp. v. Riley, 564 So. 2d 201, 204 (Fla. 5th DCA 1990)). “Moreover, the benefit to the agent must be more than ‘incidental’ to the benefit to the principal.” Id. (citing HRCC, Ltd. v. Hard Rock Café Int'l (USA), Inc., No. 6:14-cv-2004-Orl-40KRS, 2016 WL 6603792, at *5 (M.D. Fla. Sept. 13, 2016)). Here, Plaintiff alleges that “Defendant PEG aided and abetted [Defendant] Gallo’s breach of the IP Agreement by receiving [Plaintiff’s] confidential information from [Defendant Gallo] and using such confidential information in the conduct of [Defendant PEG’s] business through, Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 9 of 12 PageID 423 10 among other things, misappropriation of [Plaintiff’s] trade secrets.” See Verified Complaint ¶123 (emphasis added). The entirety of allegations in Count VII of Verified Complaint, however, cite to actions taken by Defendants in furtherence of Defendant PEG’s business. Accordingly, the Court must dismiss Count VII of the Verified Complaint against both Defendants as barred by the “Intra-Corporate Conspiracy Doctrine.” VI. Plaintiff’s Claim for Misappropriation of Trade Secrets against Defendant PEG in Count VIII Fails Because Plaintiff Failed to Properly Establish the Trade Secret(s) at Issue Plaintiff’s claim for misappropriation against Defendant PEG in Count VIII fails for the same reasons Plaintiff’s claim against Defendant Gallo in Count II fails. As in Count II, Plaintiff fails to describe any trade secrets with “reasonable particularity” and also fails to allege actual misconduct. In Count VIII, Plaintiff offers vague, conclusory allegations that it has unidentified trade secrets. Specifically, without any particularity, Plaintiff claims: “During the time Defendant Gallo was employed by [Plaintiff], Defendant Gallo was in a position to learn and did learn [Plaintiff’s] Confidential Information. [Plaintiff’s] Confidential Information is defined as trade secrets, as defined by Fla. Stat. § 688.002(4).” See Verified Complaint ¶ 128. Plaintiff offers a similarly vague and conclusory allegation in Count VIII in attempting to show it has taken reasonable steps to protect its insufficiently described trade secrets. See Verified Complaint ¶¶ 128-139. Specifically, Plaintiff claims, without any factual support, that: “At all times, [Plaintiff] took reasonable steps to safeguard its trade secrets and Confidential Information.” See Verified Complaint ¶ 129. Similarly, as it concerns Defendants’ alleged misappropriation, in Count VIII Plaintiff offers no facts in support of such a claim. Instead, Plaintiff again offers vague and conclusory allegations that: “Defendant Gallo misappropriated Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 10 of 12 PageID 424 11 [Plaintiff’s] trade secrets and confidential information.” See Verified Complaint ¶ 132. Without support, Plaintiff further claims that “Defendant PEG then appropriated, for its own use, Confidential Information acquired by Defendant Gallo from [Plaintiff]. Defendant PEG used the information for its own purpose to the prejudice of [Plaintiff].” See Verified Complaint ¶ 133. Because Plaintiff failed to properly assert a claim for misappropriation of trade secrets under Florida law by: (1) describing the alleged trade secrets with “reasonable particularity”; (2) explaining how its alleged trade secrets are not generally known to third parties; (3) identifying any reasonable steps taken to protect the alleged trade secrets; and (4) alleging any actual misconduct, the Court must dismiss Count VIII of the Verified Complaint. CONCLUSION Counts I, II, VI, VII, and VIII of Plaintiff’s Verified Complaint assert nothing more than conclusions or formulaic recitations of the elements of a cause of action, without any factual support. As a consequence, Counts I, II, VI, VII and VIII of Plaintiff’s Verified Complaint must be dismissed. WHEREFORE, Defendants, PEG LLC and Sandy R. Gallo, Sr. respectfully request that the Court: (A) DISMISS the following Counts of Plaintiff’s Verified Complaint: (I) Count I; (II) Count II; (III) Count VI; (IV) Count VII; and (V) Count VIII; (B) AWARD Defendants reasonable attorneys’ fees and costs incurred in responding to the Verified Complaint; and (C) GRANT Defendants such other relief as the Court deems appropriate. Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 11 of 12 PageID 425 12 Dated this 7th day of June, 2017. JACKSON LEWIS P.C. 501 Riverside Avenue, Suite 902 Jacksonville, FL 32202 Telephone: (904) 638-2655 Facsimile: (904) 638-2656 By: /s/ Richard N. Margulies Richard N. Margulies Florida Bar No. 0607487 margulir@jacksonlewis.com Sean P. Walsh Florida Bar No. 0113162 sean.walsh@jacksonlewis.com Attorneys for Defendants CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 7th day of June, 2017, the foregoing was electronically filed with the Court by using the CM/ECF system, which serves electronic notification on the following counsel of record: Charles B. Jimerson, Esq. Brandon C. Meadows, Esq. Jimerson & Cobb, P.A. One Independent Drive, Suite 1400 Jacksonville, FL 32202 (904) 389-0050 Telephone (904) 212-1269 Facsimile cjimerson@jimersoncobb.com bmeadows@jimersoncobb.com fileclerk@jimersoncobb.com Attorneys for Plaintiff /s/Richard N. Margulies Attorney 4829-8597-1786, v. 2 Case 3:17-cv-00584-MMH-PDB Document 13 Filed 06/07/17 Page 12 of 12 PageID 426