RICHARD J. LEON, United States District Judge.
Plaintiff Economic Research Services ("plaintiff" or "ERS") commenced the instant action against defendants Resolution Economics, LLC ("Resolution"), Paul White ("White"), and Ali Saad ("Saad") (collectively, "defendants") in August 2015. In its Verified Complaint
Plaintiff ERS provides economic research and statistical analysis for corporations and law firms in a variety of disciplines, including employment discrimination, fair lending, insurance coverage, and intellectual property. See Compl. ¶ 19. White began a twenty-two year stint at ERS in 1993, when he was hired as an Economist. Compl. 21, 25. He thereafter moved up the ranks, receiving a promotion to Vice President in 1998 before ultimately becoming a Managing Director of ERS's Labor and Employment ("L & E") Group in ERS's Washington, D.C. office in 2010. Compl. ¶¶ 21, 25. In that role, White provided economic research, statistical analysis, and expert services related to the field of labor and employment to ERS's clients. Compl. ¶¶ 1,3. White supervised the nine ERS employees in the L & E Group, interfaced directly with the clients, and was exposed to and had access to ERS's trade secrets and confidential and propriety information. Compl. ¶¶ 3, 27.
As a condition of his employment, White signed periodic contracts with ERS, including the 2015 Managing Directors' Compensation Plan consummated on June 29, 2015 (the "2015 Employment Agreement" or the "Agreement"). Compl. Ex. 3 [Dkt. # 1-3]; see Compl. ¶¶ 28-32; see also Compl. Ex. 1 [Dkt. # 1-1]; Compl. Ex. 2 [Dkt. # 1-2].
On July 6, 2015, shortly after signing the 2015 Employment Agreement, White resigned from his position at ERS and, effective July 17, 2015, left to manage ERS's competitor Resolution's nascent Washington, D.C. office. Compl. ¶¶ 38-39. ERS then spoke with Saad, an owner and managing director of Resolution, about potentially selling the remainder of ERS's Washington, D.C.-based L & E Group and its related infrastructure to Resolution. Compl. ¶¶ 14, 49. Plaintiff alleges that Saad initially expressed interest in an acquisition of the whole group but then stated that since ERS's employees were free to simply leave ERS and work elsewhere it did not make sense to do so. Compl. ¶ 50. Thereafter, on July 17, 2015, White's first day at Resolution, Resolution sent an "email blast" directly to ERS's clients announcing that White had joined Resolution as a Partner and inviting them to contact White at his new phone numbers or email address. Compl. ¶¶ 42, 46; Compl. Ex. 5 [Dkt. # 1-5]. ERS claims that White and Resolution's objective in sending the email announcement was to solicit ERS's clients, Compl. 45, and that White and Resolution then made additional attempts to win over ERS's clients by reaching out to them individually, Compl. ¶¶ 45-17. According to ERS, defendants' efforts were immediately successful, and ERS began to receive formal notices from its clients requesting that their files be transitioned to Resolution. See Compl. ¶ 46.
The exodus was not limited to ERS's clients. In the wake of White's resignation, several other members of ERS's Washington, D.C. L & E Group, all of whom had worked for White, quit their jobs at ERS
ERS commenced this suit on August 10, 2015, by filing a Complaint alleging breach of contract, numerous commercial torts, violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq, and violations of the District of Columbia's Uniform Trade Secrets Act, D.C. Code § 36-401, et seq.
"[Federal Rule of Civil Procedure] 8(a) sets out a minimum standard for the sufficiency of complaints ..." Brown v. Califano, 75 F.R.D. 497, 498 (D.D.C.1977). It requires "a short and plain statement of the claim" and is intended "to give fair notice of the claim being asserted so as to permit the adverse party the opportunity to file a responsive answer, prepare an adequate defense and determine whether the doctrine of res judicata is applicable." Id. It also "serves to sharpen the issues to be litigated and to confine discovery and the presentation of evidence at trial within reasonable bounds." Id. The rule "is by no means exacting," and it "accords the plaintiff wide latitude in framing his claims for relief." Id. at 499.
Under Rule 12(b)(6), meanwhile, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937,
In Count I, plaintiff alleges that White breached his contractual obligations under the 2015 Employment Agreement not to solicit ERS clients, not to solicit ERS employees, not to disclose ERS's propriety or confidential data, and not to take action that he knew or reasonably should have known, might directly injure ERS. Compl. 68-71. The 2015 Employment Agreement provided that it "shall be construed according to the laws of the State of Virginia," Compl. Ex. 3 § 3(f), and the parties assume Virginia law will apply to plaintiff's breach of contract claim. When determining which state law to apply, "the Court applies the District of Columbia's choice-of-law rules." Essroc Cement Corp. v. CTI/D.C., Inc., 740 F.Supp.2d 131, 141 (D.D.C.2010). Under those rules as applied by District of Columbia courts, "parties to a contract may specify the law they wish to govern, as part of their freedom to contract, as long as there is some reasonable relationship with the state specified." Id. As White is a resident of Virginia, the "`reasonable relationship' threshold" is satisfied, and the Court will apply Virginia law to plaintiff's breach of contract claim.
Under Virginia law, the elements of a breach of contract claim are: "(1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation." Filak v. George, 267 Va. 612, 594 S.E.2d 610, 614 (2004). Defendants argue plaintiff has failed to state a claim of breach of any of the provisions of the 2015 Employment Agreement. After careful evaluation of the parties' respective arguments, I deny defendants' Motion as it pertains to plaintiff's claims that White breached the non-solicitation of clients, non-solicitation of employees, and do no harm provisions of the Agreement.
I agree with defendants, however, that plaintiff failed to state a claim that White breached his obligation not to disclose ERS's confidential information. The
Compl. Ex. 3 § 3(i). As it failed to identify where the names and contact information of ERS's customers fit into this definition, plaintiff failed to state a plausible claim of breach of the non-disclosure obligation. Cf. Compel v. Citi Mortgage, Inc., Civ. No. 04-1377, 2005 WL 4904816, at *2 (E.D.Va. Feb. 23, 2005) (explaining that in order to state a claim of breach of contract, the plaintiff "must identify which provisions imposed the purportedly breached obligation" and that "[t]he absence of such detail prejudices defendant's understanding of the defenses available to it and how it should proceed"). Count I is therefore dismissed without prejudice with respect to plaintiff's claim that White breached a non-disclosure obligation of the Agreement.
Counts IV, V, and VI of the Complaint allege intentional interference with contractual and business relations. The elements of intentional/tortious interference with a contractual or business relationship under District of Columbia law
In Count V, plaintiff claims that all the defendants intentionally interfered with ERS's relationships with its customers and employees with which ERS had "an expectancy of [] continuing business relationship[s]" and a corresponding "probability of future economic benefit to ERS." Compl. ¶¶ 91-96. Defendants rightfully assert that plaintiff's conclusory allegations are insufficient to state a claim. Defs.' Mem. 18; Defs.' Reply 16. As to ERS's relationships with its clients or customers, the Complaint fails to identify the specific business relationships with which defendants are alleged to have interfered or to substantiate ERS's claim of an expectancy that those relationships would continue, and it therefore fails to plead the existence of valid business relationships with the requisite specificity.
Count VI alleges that Saad and Resolution tortiously interfered with the provisions of White's 2015 Employment Agreement that prohibited White from soliciting ERS's clients and employees. Compl. ¶ 98. Defendants are correct, however, that Count VI and the paragraphs that precede it, see Compl. ¶ 97, lack sufficient allegations as to Saad's and Resolution's involvement in White's conduct. Indeed, they do not contain any allegations plausibly suggesting Saad or Resolution "induce[ed] or otherwise caus[ed]" White to breach his contractual obligations to ERS. Paul v. Howard University, 754 A.2d 297, 309 n. 23 (D.C.2000) (quoting Restatement (Second) of Torts § 766 (1979)). Plaintiff points to its allegation that Resolution sent out the email blast. Compl. 8, 42, 43. While it is possible that Saad and Resolution urged White to add ERS's clients to the email distribution list with the intent that White violate the non-solicitation or confidentiality provisions of his employment agreement with ERS, none of the factual assertions in the Complaint move such a claim "across the line from conceivable to plausible," Iqbal, 556 U.S. at 680, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). Plaintiff next cites its allegations that Saad eschewed the idea of acquiring the L & E Group through a transaction and stated "that ERS's employees [could] simply leave and work elsewhere," Compl. ¶ 50; see also Compl. ¶¶ 51-52. These allegations perhaps support an inference that Saad then influenced ERS employees to join Resolution. They do not, however, suggest that Saad or Resolution prompted, swayed, influenced, or motivated White to himself lobby ERS employees to defect.
Count VII alleges that defendants engaged in unfair competition by
Plaintiff does not argue that it has made allegations of one or more of the recognized acts listed above but instead maintains that defendants' alleged "corporate raid" of ERS constitutes unfair competition and relies on statements by courts in other jurisdictions that "systematically inducing employees to leave their present employment is actionable [unfair competition] when the purpose of such enticement is to cripple and destroy an integral part of a competitive business organization." Pl.'s Opp'n 28 (quoting Reading Rainbow, Inc. v. Fink, 833 A.2d 199, 212 (Pa.Super.Ct.2003)). To be sure, our Circuit Court made a similar — though not identical — observation about District of Columbia unfair competition law in 1978, stating that "engaging in activities designed solely to destroy a rival" is a form of unfair competition. Ray v. Proxmire, 581 F.2d 998, 1002 (D.C.Cir.1978). However, the Circuit Court provided the caveat that unfair competition is a "limited" tort given our society's encouragement of "aggressive economic competition." Id. at 1002. Even assuming Ray's recognition of plaintiff's theory is not dicta and remains good law, plaintiff's own Complaint acknowledges that Saad and Resolution were attempting to expand their business by entering the Washington, D.C. market and that White was selected to lead the launch of Resolution's Washington, D.C. office. Compl. 2, 4, 5, 49. With such acknowledgement of legitimate business motivations, plaintiff has not sufficiently alleged that defendants' sole aim was to dismantle ERS's L & E Group, and thus the Complaint fails to state a claim of unfair competition. See Scanwell Labs., Inc. v. Thomas, 521 F.2d 941, 949 (D.C.Cir.1975).
Plaintiff alleges in Count VIII that defendants violated the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030, by either obtaining — in the case of White — or directing ERS employees to obtain — in the case of all defendants — ERS's confidential information on its computers without access or in excess of authorized access. Compl. ¶¶ 107-09. The CFAA, which is intended "primarily to deter computer hacking," Lewis-Burke Assocs., LLC v. Widder, 725 F.Supp.2d 187, 194 (D.D.C. 2010), contains "a private cause of action for any person `suffering damage or loss' from a violation of the act." Roe v. Bernabei & Wachtel PLLC, 85 F.Supp.3d 89, 102 (D.D.C.2015) (quoting 18 U.S.C. § 1030(g)). Plaintiff argues that defendants violated 18 U.S.C. § 1030(a)(2)(c),
Defendants argue that plaintiff has failed to state a claim because plaintiff does not allege any defendant "accessed information without authorization or beyond their authorization." Defs.' Mem. 21. They point out that the Complaint concedes that White "had access to ERS trade secrets and confidential proprietary information" in the course of his employment with ERS. Compl. ¶ 27. Moreover, although the Complaint alleges that each of the defendants directed ERS L & E Group employees to "copy and remove ERS data" for defendants' benefit, it does not allege that in doing so any of those ERS employees retrieved data that they did not have permission or credentials to access. Compl. ¶ 109. Defendants rely on Roe, in which my colleague Judge Tanya Chutkan of our Court held that a person "exceeds authorized access" when he or she "accesses information on the computer that the person is not entitled to access." 85 F.Supp.3d at 102 (quoting LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1133 (9th Cir.2009)). Under this interpretation of the CFAA, an employee's misuse of data that he was authorized to access in the course of his employment is not actionable.
In Count IX, plaintiff alleges that defendants misappropriated ERS's trade secrets, "including information related to ERS's customers, as well as proprietary formulas, software code and databases used for performing expert economist services and calculations for its clients" in violation of the District of Columbia Uniform Trade Secrets Act ("DCUTSA"), D.C. Code § 36-401, et seq. Compl. 113. The elements of a DCUTSA claim are: "(1) the existence of a trade secret; and (2) acquisition of the trade secret by improper means, or improper use or disclosure by one under a duty not to disclose." DSMC, Inc. v. Convera Corp., 479 F.Supp.2d 68, 77 (D.D.C.2007). To qualify as a trade secret, "(1) the information must be secret; (2) its value must derive from its secrecy; and (3) its owner must use reasonable efforts to safeguard its secrecy." Id. at 78. Although the question of whether a piece of information is a trade secret is typically a question of fact, information is not a
Count X alleges that White violated the fiduciary duty he owed to ERS as its managing director by "taking steps to raid ERS's business for the benefit of a competitor of ERS, including providing the competitor with confidential client information and assisting in the solicitation of ERS's employees and clients."
Defendants argue that the Complaint fails to state a claim of breach of fiduciary duty because it does not adequately allege White took any specific action while still employed at ERS. Defs.' Mem. 25-26. Instead, defendants state, the only concrete actions set forth in the Complaint which could support Count X were taken after White's departure from ERS or at an unidentifiable time. In response, plaintiff cites its allegation that White accessed ERS's confidential information while still employed at ERS as supporting its claim of breach of fiduciary duty. Pl.'s Opp'n 31 (citing Compl. ¶ 107). Curiously, elsewhere in the Complaint, plaintiff claims that White did not disclose ERS's confidential information to Resolution until immediately after resigning from ERS. Compl. ¶ 135. As the breach of fiduciary duty claim is premised on White's provision of the information to Resolution, the contradictory allegations of the Complaint do not state a plausible claim that White breached his fiduciary duty in this respect. And as to Count X's allegation that White assisted in the solicitation of ERS employees while he himself was still at ERS, I note that White's last day at ERS was July 17, 2015,
In Count XI, plaintiff claims White defrauded ERS when he negotiated and entered into the 2015 Employment Agreement by failing to disclose that he intended to leave ERS and take ERS's clients and employees with him. Compl. ¶ 125. In the District of Columbia, the elements of a fraud claim are "(1) a false representation (2) in reference to material fact, (3) made with knowledge of its falsity, (4) with the intent to deceive, and (5) action is taken in reliance upon the representation." Saucier v. Countrywide Home Loans, 64 A.3d 428, 438 (D.C.2013). "A false representation may be either an affirmative misrepresentation or a failure to disclose a material fact when a duty to disclose that fact has arisen." Id. (quoting Rothenberg v. Aero Mayflower Transit Co., Inc., 495 F.Supp. 399 (D.D.C.1980)). "[T]he general rule is that one party to a transaction has no duty of disclosure to the other unless (1) the party is a fiduciary of the other, or (2) the party knows that the other is acting unaware of a material fact that is unobservable or undiscoverable by an ordinarily prudent person upon reasonable inspection." Sandza v. Barclays Bank PLC, 151 F.Supp.3d 94, 107 (D.D.C.2015) (citing Sununu v. Philippine Airlines, Inc., 792 F.Supp.2d 39, 51 (D.D.C.2011)).
Plaintiff argues White had a duty to disclose, given his status as an officer of ERS. Defendants maintain that the very terms of the 2015 Employment Agreement, which the Court notes are cited in the Complaint, make it apparent that ERS was on notice of the potential that White could leave his job and would desire some option to work with ERS employees and clients when and if he did. Defs.' Mem. 28. I agree. The Complaint's acknowledgment that a precise topic of ERS and White's negotiations was the terms for White's interaction with ERS employees and clients in the event of his departure from ERS contradicts plaintiff's claim that it would not have entered into the 2015 Employment Agreement had it known that very eventuality would materialize. Thus, Count XI, as written, does not state a plausible claim that ERS relied on a false impression that White was staying at ERS or that he would not hope to work with ERS clients and employees if he moved on from ERS. It is therefore dismissed without prejudice.
Count XII makes a related claim that White violated an implied covenant of good faith and fair dealing by entering into the 2015 Employment Agreement, then promptly resigning from ERS, and "thereafter immediately disclosing ERS's confidential information and soliciting ERS's employees and clients for the benefit of a competitor." Compl. ¶¶ 133, 135. Generally, "[i]n Virginia, every contract contains an implied covenant of good faith and fair dealing which is breached when a party exercises contractual discretion in bad faith." Harmon v. Dyncorp Int'l, Inc., Civ. No. 13-1597, 2015 WL 518594, at *13 (E.D.Va. Feb. 6, 2015) (internal quotation marks, citations, and alteration omitted). As defendants argue, however, an exception applies to employment contracts. See, e.g, id. ("Virginia law `does not recognize a cause of action for breach of an implied covenant of good faith
As the at-will employment agreement between White and ERS did not contain an implied covenant of good faith and fair dealing that gives rise to a cause of action, plaintiff did not, and cannot, state a claim by alleging White violated such a duty by resigning from ERS.
Three counts in plaintiff's Complaint identify theories of liability and a remedy as opposed to actionable legal claims. In Count II, plaintiff alleges that defendants engaged in a conspiracy "by agreeing with each other to wrongfully and tortiously seize and pirate the business identity, technical expertise, employees and clients of [ERS's] L & E Group." Compl. ¶ 76. District of Columbia "law does not provide an independent cause of action for conspiracy; instead, it is a means for establishing vicarious liability for an underlying tort." Kenley v. District of Columbia, 83 F.Supp.3d 20, 40 (D.D.C.2015) (internal quotation marks and alterations omitted). "To the extent, therefore, that Plaintiff seeks to hold Defendants liable for `conspiracy' independent of any other tort," Count II fails to state a claim as a matter of law and is dismissed with prejudice. Id. Moreover, insofar as plaintiff is attempting to state derivative claims that defendants are vicariously liable as co-conspirators for one another's underlying torts,
Similar analysis applies to Count III, in which plaintiff claims Saad and Resolution aided and abetted White, because "[a]ccording to the District of Columbia Court of Appeals, to which this Court looks on issues of District of Columbia law, the tort of aiding and abetting is not recognized under District Law." 3M Co. v. Boulter, 842 F.Supp.2d 85, 119 (D.D.C.2012) (citing Flax v. Schertler, 935 A.2d 1091, 1108 n.15 (D.C.2007)). Instead, aiding and abetting is at most a means of establishing vicarious liability.
In Count XIII, entitled "Accounting," plaintiff demands an order "[c]ompelling Defendants to provide Plaintiff with an accounting of all revenues and profits they have received from or in connection
For all of the foregoing reasons, the Court GRANTS defendants' Motion to Dismiss, with prejudice, as to Counts II and III, to the extent they are standalone claims of conspiracy and aiding and abetting, Count XII, and Count XIII. Further, the Court GRANTS defendants' Motion to Dismiss, without prejudice, as to Count I, with respect to plaintiff's claims that White breached a non-disclosure obligation of the Agreement, Counts II and III, to the extent they allege vicarious liability for other underlying torts, Counts IV, V, VI, VII, VIII, IX, X, and XI. Finally, the Court DENIES defendants' Motion as to Count I, with respect to plaintiff's claims that White breached the non-solicitation of clients, non-solicitation of employees, and do no harm provisions of the 2015 Employment Agreement. Plaintiff will hopefully exercise more careful judgment as this case continues to move forward in the future. An Order consistent with this decision accompanies this Memorandum Opinion.