DAVID ALAN EZRA, District Judge.
On February 7, 2011, the Court heard Defendants Hawaiian Electric Company,
This case involves failed plans to create and construct a biodiesel production facility on Maui. (Third Amended Complaint ("TAC"), Doc. # 65.)
In 2006, BlueEarth Biofuels, LLC's ("BlueEarth"), Hawaiian Electric Company, Inc. ("HECO") and Maui Electric Company, Ltd. ("MECO") began talks to jointly and exclusively develop a local biodiesel production facility to replace their use of petroleum diesel for power production. (Id. ¶ 12; Doc. # 325, Ex. 166.) The new facility would produce biodiesel, which is derived from vegetable feedstock. (Id.)
On September 27, 2006, BlueEarth executed Mutual Non-Circumvention and Non-Disclosure Agreements ("NDAs") with both HECO and MECO. (TAC ¶¶ 14, 15.) These NDAs established, among other things, that: (1) confidential information given by one party to another would remain property of the originating party; (2) such confidential information would not be disclosed or used for any purpose by the receiving party, other than for evaluation of the Project; (3) any contacts would be exclusive and valuable contacts of the disclosing party; (4) the party receiving contacts would not enter into direct negotiations or transactions with contacts; and (5) neither party would solicit or accept any business from sources made available by one party to the other without the express written permission of the disclosing party. (Doc. # 269, Ex. A; id., Ex. B.)
After several months of negotiations, BlueEarth, HECO, and MECO signed a confidential Memorandum of Understanding (the "MOU") detailing the plan for the "evaluation, funding and development" of the large-scale biodiesel production facility to be developed by a newly formed limited liability company, originally termed "Newco," owned by the parties and located on MECO-owned land on Maui (the "Project"). (TAC ¶ 19; Doc. # 269, Ex. C.) Although the MOU was entered into between BlueEarth, HECO, and MECO, HECO's responsibilities in the MOU were expressly contemplated to be superceded by an unregulated subsidiary identified as "HUS" and were so designated by the MOU's terms. (Doc. # 269, Ex. C.) HUS was defined as "[b]oth HECO and the Unregulated Subsidiary[.]" (Id.)
Subsequent to the signing of the MOU, two companies were formed: (1) the parties created the entity identified in the MOU as "Newco" and named the company BlueEarth Maui Biodiesel LLC ("BEMB") (Doc. # 316, Ex. 111 at H091481); and (2) HECO created the unregulated subsidiary contemplated in the MOU as HUS and named it Uluwehiokama Biofuels Corp. ("UBC"). (Doc. # 316, Ex. 117). The parties negotiated, and on February 4, 2008 signed, an Operating Agreement and an Investment Agreement (collectively, the "BEMB Agreements") to govern the operation and ownership of BEMB as contemplated in the MOU. The BEMB agreements were entered into between BlueEarth, UBC and BEMB and were signed on February 4, 2008. (Doc. # 326, Exs. 102, 103.)
Sometime in 2007, BlueEarth began searching for potential fuel subcontractors who would manage and run logistics for a fuel terminal. (TAC ¶ 27.) The fuel terminal would be used to store and transfer the raw materials, such as palm oil, and fuel in connection with the Project. (Id. 27-28.) One of the subcontractors approached by BlueEarth was Aloha.
As the Project progressed, BlueEarth and HECO worked jointly to develop the Tolling Agreement and originally engaged in negotiations with Energy Capital Partners ("ECP") for this purpose.
Eventually, negotiations for the Project fell through and plans ceased. (Id. ¶ 39.) In early October 2008, BlueEarth filed the instant lawsuit in the Northern District of Texas, claiming that Defendants had violated the various NDAs and the Confidentiality
On November 1, 2010, BlueEarth filed its Third Amended Complaint ("Complaint"). (Doc. # 387.) The Complaint alleges the following eleven causes of action:
On June 29, 2009, Defendant Aloha filed a Motion to Dismiss (Doc. # 74) and HECO/MECO Defendants and Karl Stahlkopf filed a joint Motion to Dismiss Plaintiff's Second Amended Complaint (Doc. # 75). On October 7, 2009, this Court issued an order denying without prejudice Defendant Aloha's Motion to Dismiss and HECO/MECO Defendants and Karl Stahlkopf's joint Motion to Dismiss and directed the parties to submit proposed questions to be certified to the Supreme Court of Hawai'i. (Doc. # 168.)
On September 14, 2009, BlueEarth filed a motion for a Temporary Restraining Order. (Doc. # 143.) On October 26, 2009, after significant briefing from both sides, this Court issued an order denying BlueEarth's motion. (Doc. # 188.) Subsequently, this Court certified questions regarding the scope of Hawaii Uniform Trade Secrets Act ("HUTSA") to the Supreme Court of Hawai'i. (Doc. # 191.) An Opinion of the Supreme Court answering the Certified Questions was returned on July 21, 2010. (Doc. # 301.) In response, Blue Earth requested permission to file its Third Amended Complaint, which was granted on October 27, 2010. (Doc. # 349.)
On May 18, 2010, BlueEarth filed a Motion for Partial Summary Judgment as to Counts 1-3 of the SAC against HECO and MECO ("MPSJ"). (Doc. # 268.) On May 19, 2010, Blue Earth filed a concise statement in support of its MPSJ. (Doc. # 269.) Also on May 19, 2010, BlueEarth filed additional exhibits to its concise statement in support. (Docs.## 271-274.) On August 2, 2010, HECO/MECO Defendants filed a Counter Motion for Partial Summary Judgment ("CMPSJ"). (Docs. ## 315 (redacted), 322 (sealed).) The same day, HECO/MECO Defendants filed a concise statement in support of their CMPSJ. (Docs. ## 316 (redacted), 323 (sealed).) On August 9, 2010, Aloha filed a Joinder in HECO/MECO Defendants' CMPSJ. (Doc. # 328.) On November 15, 2010, 2010 WL 4715717, the Court issued an Order Denying Plaintiff's Motion for
On November 1, 2010, BlueEarth filed its Third Amended Complaint. (Doc. # 387.) On November 15, 2010, Aloha and the HECO/MECO Defendants answered. (Doc. ##390, 391.) On November 15, 2010, the HECO/MECO Defendants also filed their instant Amended Motion to Dismiss the Fourth, Sixth, Seventh, Ninth, Tenth and Eleventh Causes of Action of Plaintiff's Third Amended Complaint ("Motion to Dismiss"). ("Mot. Dismiss," Doc. # 392.) Plaintiff filed its Opposition to the Motion to Dismiss on December 6, 2010. ("MD Opp'n," Doc. # 404.) On December 9, 2010, Aloha filed its instant Motion for Judgment on the Pleadings on Counts Six through Ten of the Third Amended Complaint ("Motion for Judgment"). ("Mot. J.," Doc. # 406.) On December 13, 2010, the HECO/MECO Defendants filed a Reply. ("MD Reply," Doc. # 409.) On January 4, 2011, Plaintiff filed its Opposition to the Motion for Judgment. ("MJ Opp'n," Doc. # 426.) On January 24, 2011, Aloha filed its reply. ("MJ Reply," Doc. # 462.)
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Rule") "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001). A complaint may be dismissed as a matter of law for two reasons: (1) lack of a cognizable legal theory or (2) insufficient facts alleged to support a cognizable theory. Id. (citing Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988)). Because a Rule 12(b)(6) motion to dismiss focuses on the sufficiency of a claim statement, review is generally limited to the face of the complaint. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir.2001) (citation omitted); Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir.1994) (citations omitted). The Court must accept all allegations of material fact as true and construe them in a light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001). The Court, however, need not accept as true conclusory allegations of law, unwarranted deductions of fact, and unreasonable inferences. Id.
As to a plaintiff's pleading burden, the Supreme Court has held that while a complaint "does not require `detailed factual allegations,' ... it demands 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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Thus, to survive a Rule 12(b)(6) motion to dismiss, a complaint must contain "enough facts to state a claim to relief that is plausible on its face." Id. at 570, 127 S.Ct. 1955. A claim is plausible on its face "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 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). If a court dismisses the complaint or portions thereof, it must consider whether to grant leave to amend. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir.2000) (finding that leave to amend should be granted "if it appears at all possible that the plaintiff can correct the defect" (quotations and citations omitted)).
Rule 12(c) states, "[a]fter the pleadings are closed-but early enough not to delay
When Rule 12(c) is used to raise the defense of failure to state a claim upon which relief can be granted, the standard governing the Rule 12(c) motion for judgment on the pleadings is the same as that governing a Rule 12(b)(6) motion. See McGlinchy v. Shell Chemical Co., 845 F.2d 802, 810 (9th Cir.1988); Luzon v. Atlas Ins. Agency, Inc., 284 F.Supp.2d 1261, 1262 (D.Haw.2003). As a result, a motion for judgment on the pleadings for failure to state a claim may be granted "`only if it is clear that no relief could be granted under any set of facts that could be proven consistent with the allegations.'" McGlinchy, 845 F.2d at 810 (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)); see also Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir.1989) ("The principal difference between motions filed pursuant to Rule 12(b) and Rule 12(c) is the time of filing. Because the motions are functionally identical, the same standard of review applicable to a Rule 12(b) motion applies to its Rule 12(c) analog.").
Thus, "[a] judgment on the pleadings is properly granted when, taking all allegations in the pleading as true, the moving party is entitled to judgment as a matter of law." Enron Oil Trading & Transp. Co. v. Walbrook Ins. Co., 132 F.3d 526, 528 (9th Cir.1997) (citing McGann v. Ernst & Young, 102 F.3d 390, 392 (9th Cir.1996)). "Not only must the court accept all material allegations in the complaint as true, but the complaint must be construed, and all doubts resolved, in the light most favorable to the plaintiff." McGlinchy, 845 F.2d at 810.
As noted, to withstand a motion to dismiss, a plaintiff must 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 claim has "facial plausibility" if the plaintiff pleads facts that allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1940. Although the court must accept all well-pleaded factual allegations as true, "[t]hread-bare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Nor must the court "accept as true a legal conclusion couched as a factual allegation." Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).
A party may move for judgment on the pleadings after the pleadings are closed. Fed.R.Civ.P. 12(c). The pleadings are closed once a complaint and an answer have been filed, assuming that there is no counterclaim or cross-claim. Doe v. United States, 419 F.3d 1058, 1061 (9th Cir. 2005).
The HECO/MECO Defendants in their Motion to Dismiss argue that the Fourth, Sixth, Seventh, Ninth, Tenth and Eleventh Counts of the TAC are flawed.
Aloha argues it is entitled to Judgment as to Counts Six, Seven, Eight, Nine, and Ten.
As noted, Defendants argue that the vast majority of Plaintiff's claims are preempted by HUTSA.
Haw.Rev.Stat. § 482B-8. Faced with a split in state authority as to the scope of this preemption, and with no state court decision on point, this Court certified the following questions to the Supreme Court of Hawai'i on November 2, 2009:
(Doc. # 191, 12-13.) The Supreme Court responded on July 21, 2010. (Doc. # 301.)
In its decision, BlueEarth Biofuels v. Hawaiian Elec. Co., 123 Haw. 314, 235 P.3d 310 (Haw.2010), the Hawaii Supreme Court began with a review of the background behind the Uniform Trade Secrets Act ("UTSA") and HUTSA. Id. at 313. The court noted that the authors of the UTSA intended it to be "applied and construed to effectuate its general purpose to make uniform the law with respect to the
Id. (quoting and citing Hauck Mfg. Co. v. Astec Indus., Inc., 375 F.Supp.2d 649, 658 (E.D.Tenn.2004)).
The court began its analysis by noting it agreed with the court in Hauck that the phrase "based upon" implies that the UTSA's preemptive force reaches more than simply claims of or for appropriation of a trade secret. Id. at 315 (citing Hauck, 375 F.Supp.2d at 658). The court continued:
Id. This logic, the court held, rendered Plaintiff's argument untenable; the elements test "would allow a party to raise multiple different claims based on the same trade secret misappropriation injury." Id. Instead, the court decided that "an analysis of the plaintiff's allegations is necessary to determine whether a claim is based upon a misappropriation of a trade secret," but noted that "courts have differed on how the presence of facts relating to improper acquisition ... of trade secrets within non-UTSA claims affects preemption." Id. at 317-18. Ultimately the court decided that "the best approach to preemption, consistent with the goals of the UTSA and HUTSA is the `same proof' standard articulated in Hauck." Id. at 318. The court qualified its holding, however, by stating that "[t]o the extent ... that the claim is `based upon wrongful conduct[,] independent of the misappropriation of trade secrets[,]' it will not be preempted by the HUTSA." Id. (quoting Bliss Clearing Niagara, Inc. v. Midwest Brake Bond Co., 270 F.Supp.2d 943, 950 (W.D.Mich.2003)).
The court next concluded that a noncontract civil claim that is based upon "confidential" information which does not rise to the level of a statutorily-defined trade secret was preempted. Id. at 319. The court reached this conclusion relying on Haw.Rev.Stat. § 1-24, which states that "[a]ll provisions of uniform acts adopted by the State shall be so interpreted and construed as to effectuate their general purpose to make uniform the laws of the states and territories which enact them." Haw. Rev. Stat. § 1-24. The court found the rule articulating that "noncontract claims based on information which does not rise to the level of a statutorily-defined trade secret are preempted under the UTSA ... comports with the HUTSA's goal of uniformity in the area of trade secret misappropriation." BlueEarth, 235 P.3d at 323. Finally, the court held that a preemption analysis is appropriate at the motion to dismiss stage of the proceedings. Id. at 324.
Id. at 324-25.
As noted, Count IV of the Complaint alleges a claim for Quantum Meruit/Unjust Enrichment against the HECO/ MECO Defendants.
(Id. ¶¶ 62-63.)
The HECO/MECO Defendants argue that this is nothing more than an alternative
(Id. 12-13; Doc. # 143, at 31.)
Plaintiff, as it must in light of the Hawaii Supreme Court's decision in BlueEarth, distances itself from this earlier representation.
(MD Opp'n MD at 7.) In so distancing, however, Plaintiff has run afoul of Twombly-Iqbal. The Court has scoured the Complaint and, aside from the allegedly misappropriated confidential information, Plaintiffs have not pled with sufficient specificity what other benefit or benefits it conferred to the HECO/MECO Defendants.
The United States Supreme Court has been clear, to withstand a motion to dismiss, a plaintiff must 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 claim has "facial plausibility" if the plaintiff pleads facts that allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1940. If this cause of action does not relate to the unlawful retention of trade secrets or confidential information, as Plaintiff represents, there are simply insufficient facts to state a claim for relief that is plausible on its face — Plaintiffs have not stated what precisely it conferred upon the HECO/MECO Defendants which they unlawfully retained. Twombly, 550 U.S. at 570, 127 S.Ct. 1955. Accordingly, the HECO/MECO Defendants' Motion to Dismiss with respect to this Count of the Complaint is
Count VI of the Complaint alleges an Unfair Method of Competition ("UMC") claim against the HECO/MECO Defendants as well as Aloha in violation of Hawaii Revised Statutes §§ 480-2, et seq. (TAC ¶¶ 69-76.) The HECO/MECO Defendants argue first that this Count, despite Plaintiff's revisions to its complaint, still incorporates "the same allegations of unauthorized use of confidential and proprietary
Plaintiff, as above, argues that its UMC claim is "rooted in the [Defendants'] unfair methods of competition, not misappropriation of trade secrets." (MD Opp'n at 7; MJ Opp'n at 7.) By way of example, Plaintiff points to paragraph 71 of the Complaint, which states:
(TAC ¶ 71.) The Court agrees with Plaintiff that it has sufficiently removed its reliance upon the misappropriation of confidential information to avoid preemption per the court's decision in BlueEarth, but also finds Plaintiff has failed to state a claim upon which relief can be granted.
Hawaii Revised Statute § 480-2 provides that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are unlawful." Haw.Rev.Stat. § 480-2(a). Because § 480-2(d) provides that "[n]o person other than a consumer, the attorney general or the director of the office of consumer protection may bring an action based upon unfair or deceptive acts or practices," id. § 480-2(d), Plaintiff must allege that Defendants engaged in an unfair method of competition, id. § 480-2(e) ("Any person may bring an action based on unfair methods of competition declared unlawful by this section.").
To state a claim for unfair competition a plaintiff must allege facts showing "(1) a violation of HRS chapter 480; (2) which causes an injury to the plaintiff's business or property; and (3) proof of the amount of damages." Davis v. Four Seasons Hotel Ltd., 122 Haw. 423, 228 P.3d 303, 315 (2010) (citing Hawaii Medical Ass'n v. Hawaii Medical Service Ass'n, Inc. (hereinafter "HMA"), 113 Haw. 77, 148 P.3d 1179, 1215 (2006)). Of particular import to the Davis court was the second element. Pursuant to that element, a plaintiff "may bring claims of unfair methods of competition based on conduct that would also support claims of unfair or deceptive acts or practice," provided the "nature of the competition" is sufficiently alleged in the complaint. Id. at 1215. "[T]he existence of the competition is what distinguishes a claim of unfair or deceptive acts or practices from a claim of unfair methods of competition." Davis, 228 P.3d at 317 n. 26 (quoting HMA, 148 P.3d at 1214). Accordingly, a plaintiff pursuing a UMC claim is required to allege how a defendant's "conduct will negatively affect competition in order to recover on an unfair methods of competition claim." Id. at 317-18.
Despite Plaintiff's protestations to the contrary, it has not sufficiently alleged the nature of the competition. In HMA, for instance, the Plaintiff successfully alleged the nature of the competition by asserting the following:
Davis, 228 P.3d at 316 n. 24 (citing and quoting HMA, 148 P.3d at 1214) (brackets in original) (emphasis omitted).
A review of Plaintiff's complaint reveals no similar allegation here. BlueEarth's complaint alleges:
(TAC ¶ 71.)
Assuming, for the moment, that these paragraphs suffice to show injury caused by the HECO/MECO Defendants and Aloha,
Accordingly, both Aloha's Motion for Judgment and the HECO/MECO Defendants' Motion to Dismiss are
The Seventh Cause of Action in the Complaint relates to tortious interference with existing contracts as to all Defendants. (TAC ¶¶ 77-84.) In its Motion to Dismiss, the HECO/MECO Defendants argue that this Count is preempted, barred by the Economic Loss Rule, and is inadequately pled. (Mot. D. at 13, 16-17, 20-24.) Aloha, in its Motion for Judgment, argues that this Count is preempted and fails to state a claim for relief. (Mot. J. at 2.)
To prevail on a claim for tortious interference with contractual relations, a Plaintiff must demonstrate:
Meridian Mortgage, Inc. v. First Hawaiian Bank, 109 Haw. 35, 122 P.3d 1133, 1142 (Haw.Ct.App.2005) (modification and emphasis omitted) (quoting Weinberg v. Mauch, 78 Haw. 40, 890 P.2d 277, 287 (1995)). To determine whether this claim is preempted the Court must determine whether the facts in the Complaint which establish tortious interference with existing contracts "also simultaneously establish a claim for misappropriation of trade secrets." BlueEarth 235 P.3d at 318.
(TAC ¶ 80.) The Complaint makes the same allegations with respect to MECO, arguing it induced HECO and Aloha to violate their NDAs and Confidentiality Agreement, and Aloha, arguing it induced HECO and MECO to violate their NDAs and Confidentiality Agreement. (TAC ¶¶ 81-82.) For its part, Plaintiff argues
This Count of the Complaint is grounded firmly in facts, which, if true, would "also simultaneously establish a claim for misappropriation of trade secrets." BlueEarth 235 P.3d at 318. Per the HUTSA, "[i]mproper means" is defined, in part, as "inducement of a breach of a duty to maintain secrecy." Haw.Rev. Stat. § 482B-2. "Misappropriation" means, in part:
Haw.Rev.Stat. § 482B-2 (emphasis added). To prevail on an intentional interference claim, Plaintiff would have to demonstrate that the Defendants induced the others to breach their Confidentiality Agreement or NDAs with the Plaintiff. Mauch, 890 P.2d at 287. Plaintiff has more than sufficiently alleged facts supporting this assertion. (See, e.g., TAC ¶ 79.) It is axiomatic, however, that a breach of these agreements necessarily involves the disclosure of confidential information. Thus, merely by alleging an induced breach of a Confidentiality Agreement or an NDA, Plaintiff has also alleged that each Defendant improperly acquired trade secret information from the others. Accordingly, and despite Plaintiff's claim to the contrary, these claims are sufficiently related to its allegation of trade secret misappropriation to warrant preemption. BlueEarth 235 P.3d at 318 ("[A] claim will be preempted when it necessarily rises or falls based on whether the defendant is found to have `misappropriated' a `trade secret' as those two terms are defined in the UTSA."); see also Thomas & Betts Corp. v. Panduit Corp., 108 F.Supp.2d 968, 974 (N.D.Ill.2000) (finding a tortious interference with a confidentiality agreement preempted by the Illinois Trade Secrets Act in applying the "same evidence" rule). Aloha's Motion for Judgment and the HECO/MECO Defendants' Motion to Dismiss are therefore
Count Eight alleges that Aloha tortuously interfered with the MOU. (TAC ¶¶ 85-89.) Aloha argues that the MOU cannot support a tortious interference claim. (MJ Reply at 13.) The Court agrees that this claim is not viable.
In its November Order, the Court determined that the BEMB agreements had "supersede[d] and rescind[ed] the MOU by operation of law" when the parties signed it on February 4, 2008. (Nov. Order at 5, 23.) The Complaint, however, alleges that Plaintiff did not introduce Aloha
Count IX of the Complaint alleges a Misappropriation of Trade Secrets against all Defendants in violation of the HUTSA. (TAC ¶¶ 90-93.) To prevail on a HUTSA claim, a plaintiff must establish that there exists a trade secret and a misappropriation of that trade secret. See Haw.Rev.Stat. § 482B-2; see also Dealertrack, Inc. v. Huber, 460 F.Supp.2d 1177, 1183 (C.D.Cal.2006); AccuImage Diagnostics Corp. v. Terarecon, Inc., 260 F.Supp.2d 941, 950 (N.D.Cal.2003). Both the HECO/MECO Defendants and Aloha here argue that Plaintiff has not plead with sufficient particularity what trade secrets or confidential information the Defendants have misappropriated. (Mot. Dismiss at 24-27; Mot. J. at 28-31.) The Court disagrees.
Haw.Rev.Stat. § 482B-2. Courts generally require sufficient pleading such that the other party is on notice of what it is alleged to have misappropriated. See MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 522 (9th Cir.1993) ("[A] plaintiff who seeks relief for misappropriation of trade secrets must identify the trade secrets and carry the burden of showing that they exist.") It is, however, generally agreed that "`trade secrets need not be disclosed in detail in a complaint alleging misappropriation....'" AutoMed Technologies,
Here the Complaint alleges:
(TAC ¶¶ 91-92.) Although not a model of specificity, the Court believes by alleging a contact list, the complaint suffices to put Defendants on notice of the subject matter of Plaintiff's claims.
As Plaintiff discusses, the Complaint illustrates that BlueEarth has a particularized knowledge of the biodiesel community, coupled with its list of relevant contacts within that community. (See Id.; MJ Opp'n at 20.) Indeed, the Court finds that the contact list here alleged is similar to a customer list, which courts generally find to be protected as a trade secret. See, e.g., MAI Systems Corp., 991 F.2d at 521 ("We agree that the [customer list] qualifies as a trade secret."); Radiator Exp. Warehouse, Inc. v. Shie, 708 F.Supp.2d 762, 767 (E.D.Wis.2010) (finding that a misappropriation of a customer list, among other allegations, sufficed to survive a motion to dismiss); Thermodyn Corp. v. 3M Co., 593 F.Supp.2d 972, 986 (N.D.Ohio 2008) ("Customer lists and pricing information can constitute trade secrets."). A customer list "has potential economic value because it allows a competitor ... to direct its sales efforts to those potential customers." MAI Systems Corp., 991 F.2d at 521. Similarly, the Court believes that the contact list as alleged has significant economic value because it allows a company or business that would otherwise not have this information gain a distinct advantage through familiarity with the business community.
Aloha argues that "BlueEarth does not explain how Aloha misappropriated the contact lists and know-how or distinguish Aloha's acts from the alleged misappropriation by the other Defendants." (Mot. J. at 30.) Further, according to Aloha, "BlueEarth [does not] explain how the alleged misappropriation is ongoing and will continue in the future." (Id.) Paragraph 42 of the Complaint, however, alleges that "Aloha solicited business from BlueEarth's clients, used BlueEarth's proprietary information to solicit proposed funding, interfered with its contracts, breached its nondisclosure with BlueEarth, and disparaged BlueEarth." (TAC ¶ 42.) This is certainly more than sufficient to demonstrate how Aloha "misappropriated the contact lists." (Mot. J. at 30.) Further, Aloha's reliance on Knights Armament Co. v. Optical Systems Tech., Inc., 568 F.Supp.2d 1369 (M.D.Fl.2008), for support of this proposition is misplaced. There the plaintiff alleged that the defendant had access to trade secrets, but did not allege how they were used. That is not so here.
Count Ten of the complaint alleges conversion against all of the Defendants. (TAC ¶¶ 94-95.) Common law conversion "`is any distinct act of dominion wrongfully exerted over another's personal property.'" Pourny v. Maui Police Dept., 127 F.Supp.2d 1129, 1146 (D.Haw.2000) (quoting Tsuru v. Bayer, 25 Haw. 693, 696 (Haw.Terr.1920)); Sung v. Hamilton, 710 F.Supp.2d 1036, 1043 (D.Haw.2010) (same). In Hawaii, Conversion has four distinct elements: "(1) [a] taking from the owner without his consent; (2) an unwarranted assumption of ownership; (3) an illegal use or abuse of the chattel; and (4) a wrongful detention after demand." Tsuru v. Bayer, 25 Haw. at 696; see also Pourny, 127 F.Supp.2d at 1146 (same).
Both Aloha and the HECO/MECO Defendants argue that this claim is preempted. (Mot. J at 2; Mot. Dismiss at 13.) Additionally Aloha argues that Plaintiff has alleged insufficient facts to sustain the claim. (Mot. J. at 26-28.) The HECO/ MECO Defendants argue that the claim is also barred by the Economic Loss Rule. (Mot. Dismiss at 16-17.) Plaintiff argues that the Complaint makes clear that the allegations are not based upon the misappropriation of trade secrets or other confidential information but instead the conversion of substantial monetary and non-monetary investments in the project. (MD Opp'n at 10.) Further, according to Plaintiff, it has sufficiently pled facts in support of conversion. (MJ Opp'n at 23.)
(TAC ¶ 95.) In it's Opposition to Aloha's Motion for Judgment, Plaintiff also points to other parts of its complaint which further identifies its investment. (MJ Opp'n at 22-23.) Specifically:
(TAC ¶¶ 25, 39, 42.)
First, to the extent that Plaintiff relies on Aloha's solicitation of business from BlueEarth's clients by using its confidential proprietary information to establish conversion, it is preempted by the HUTSA. (Id. ¶ 42.) As with the tortious interference Counts of the Complaint, the Court finds that alleging Aloha's converted
The Court finds the remaining allegations insufficient to sustain the tort of conversion. Plaintiff cites to no caselaw, nor can the court find any, in support of the proposition that person's time can be considered chattel. Indeed, at least one court in Illinois has found to the contrary. See Stonecrafters, Inc. v. Foxfire Printing & Packaging, Inc., 633 F.Supp.2d 610, 613 n. 1 (N.D.Ill.2009) ("[U]nder the theory of conversion ... a person's time is not a chattel over which plaintiff had the immediate and unconditional right to possess.") In any event the Plaintiff has not sufficiently demonstrated that any of its "chattel" was taken without its consent. See Tsuru, 25 Haw. at 696 (finding one element of conversion is "[a] taking from the owner without his consent"); Hamilton, 710 F.Supp.2d at 1043 (same); Pourny, 127 F.Supp.2d at 1146 (granting summary judgment where a Plaintiff did not show that Defendant "took chattel from Plaintiff without his consent"). Instead, it seems that the Complaint specifically alleges that Plaintiff consented to invest both time and money into the Project Agreement. (See TAC ¶ 25) ("In consideration of the promises and representations in the NDAs and the Project Agreement, BlueEarth expended over $1,200,000.00 in developing the Project." (emphasis added)). Accordingly the HECO/MECO Defendants' Motion to Dismiss and Aloha's Motion for Judgment are
The final Count of the Complaint alleges a breach of fiduciary duty against the HECO/MECO Defendants. (TAC ¶¶ 96-101.) Specifically the Complaint states:
(TAC ¶¶ 97-98.)
The HECO/MECO Defendants do not dispute they owed Plaintiff a fiduciary duty. Instead, they here contend that this claim is preempted by HUTSA, (Mot. Dismiss at 14), and that it is barred by the economic loss rule (id. at 16.) The Court is not persuaded.
The HECO/MECO Defendants makes much of the fact that each Count of the Complaint incorporates its earlier paragraphs and argues that each Count, including this one, "incorporat[es] and rel[ies] on allegations that HECO and MECO disclosed BlueEarth's Confidential Information to third parties" (MD Reply at 1-2.) The Court disagrees. To the extent this
Here, Plaintiff has sufficiently alleged a breach of fiduciary duty independent of any claim that the HECO/MECO Defendants misappropriated a trade secret. Plaintiff alleges that they were engaged in a "joint venture to develop the project and therefore had a fiduciary relationship." (TAC ¶ 97) Further, according to Plaintiff, the HECO/MECO Defendants "breached their fiduciary duties owed to BlueEarth ... by depriving BlueEarth of participation in the Project." (Id. ¶ 98.) This allegation is entirely distinct from Plaintiff's claim that the HECO/MECO Defendants misappropriated their trade secrets. In other words, this claim is not dependent upon the proof necessary to establish Plaintiff's misappropriation claim. Cf. BlueEarth, 235 P.3d at 318 ("[I]f proof of a non-UTSA claim would also simultaneously establish a claim for misappropriation of trade secrets, it is preempted irrespective of whatever surplus elements or proof were necessary to establish it.") Indeed, assuming the HECO/MECO Defendants did not disclose any confidential information, they could still be liable for breach of fiduciary duty merely by cooperating and working with Aloha to the exclusivity of Plaintiff. Thus, this claim is based upon alleged wrongful conduct independent of the misappropriation of trade secrets and is not preempted.
The Court is also not persuaded by the HECO/MECO Defendants' reliance on the economic loss rule. The economic loss rule in Hawaii is codified at Hawaii Revised Statute § 663-1.2, which provides that "[n]o person may recover damages, including punitive damages, in tort for a breach of contract in the absence of conduct that ... [v]iolated a duty that is independently recognized by principles of tort law." Haw.Rev.Stat. § 663-1.2. Broadly speaking, the economic loss rule is designed to maintain a distinction between damage remedies for breach of contract and for tort. Ass'n of Apartment Owners of Newtown Meadows v. Venture 15, Inc., 115 Haw. 232, 167 P.3d 225, 284 (2007).
Here, there is no question that a breach of fiduciary duty claim sounds in tort. See TSA Intern. Ltd. v. Shimizu Corp., 92 Haw. 243, 990 P.2d 713, 734 (Haw.1999). The parties primarily debate whether the economic loss rule should apply outside the context of negligence and strict liability.
According to the Complaint, Plaintiff and the HECO/MECO Defendants were engaged in a joint venture to develop the project. (TAC ¶ 97.) "A joint venture is a mutual undertaking by two or more persons to carry out a single business enterprise for profit." Shinn v. Edwin Yee, Ltd., 57 Haw. 215, 553 P.2d 733, 737 (1976). Companies can also form a joint venture. See Fujimoto v. Au, 95 Haw. 116, 19 P.3d 699, 728 (2001) (finding that two corporations were engaged in a joint venture with one another when (1) it was recited in their agreement and (3) they shared a common goal). While a joint venture is a contractual relationship, Shinn, 553 P.2d at 737, it is also closely akin to a partnership. Dang v. F and S Land Development Corp., 62 Haw. 583, 618 P.2d 276, 280 (1980). Accordingly, "the rules governing the creation and existence of partnerships are generally applicable to joint ventures." Id. (quotations and citations omitted). Partners in a joint venture therefore have a statutory duty of loyalty and good faith to refrain from self-dealing. See Haw.Rev.Stat. § 425-123. Thus, the Court believes that the breach of a fiduciary duty in this context is not barred by the economic loss rule because the duty arises not only from the contract but also from partnership principles codified by Hawai'i statute. The Court therefore
For the reasons stated above, the Court:
IT IS SO ORDERED.
