JOHN E. STEELE, District Judge.
This matter comes before the Court on review of defendants' Motion to Dismiss Third Amended Complaint (Doc. #42) filed on January 20, 2014. Plaintiff filed a Response (Doc. #46) on February 3, 2014, and defendants, with leave of the Court, filed a Reply (Doc. #49) on February 27, 2014. Also before the Court is defendant Michael Levy's Motion to Dismiss Third Amended Complaint for Lack of Personal Jurisdiction (Doc. #43) filed on January 20, 2014. Plaintiff filed a Response (Doc. #45) on February 3, 2014.
On May 7, 2013, plaintiff American Registry, LLC (plaintiff) filed a five-count Complaint against Yonah Hanaw (Hanaw), Michael Levy (Levy), Showmark Holdings, LLC (Showmark Holdings), and Showmark Media, LLC (Showmark Media). (Doc. #1.) In order to resolve jurisdictional deficiencies, plaintiff filed a Second Amended Complaint (Doc. #7) on May 22, 2013. Thereafter, Levy filed a motion to dismiss for lack of personal jurisdiction (Doc. #22), and the remaining defendants filed a motion to dismiss for failure to state a plausible claim (Doc. #23). On December 5, 2013, the Court dismissed the Second Amended Complaint as inadequately pled and provided plaintiff with an opportunity to amend. (Doc. #35.) Plaintiff filed a five-count Third Amended Complaint on December 19, 2013. In support thereof, plaintiff alleges as follows:
Plaintiff sells customized achievement recognition items, such as plaques, marquees, crystals, counter displays, and banners, throughout the United States. In connection with its business operations, plaintiff has developed and acquired an extensive list of trade secrets necessary to conduct its business operations, including, but not limited to, its business plan; customer lists; system architecture; financial data; profits and profit margins; statistical history with its customers and vendors; computer programs and software concerning its entire business operations; research and development information related to its customers and products offered for sale; information about its strategic partners and relationships with them; and data and information on its employees, independent contractors, and third party vendors (collectively, "Proprietary Information"). By utilizing this information, plaintiff is able to maintain a competitive advantage in the personal achievement recognition market.
Defendant Yonah Hanaw, a citizen and resident of Israel, worked as a sales agent and independent contractor for plaintiff from November 2003 until his termination on March 26, 2010. As a sales agent, Hanaw was required to sign a Sales Agent Program Agreement on November 1, 2009.
After his termination, Hanaw met with Michael Levy, also a citizen and resident of Israel, to discuss the formation and organization of a company that would sell customized achievement recognition items through an e-commerce website. On May 12, 2010, Hanaw and Levy formed Showmark Media, LLC, a Florida limited liability company, but dissolved it on July 19, 2010. After the dissolution of the Florida limited liability company, Hanaw and Levy formed Showmark Media, LLC, a Delaware limited liability company.
While working as an independent contractor for plaintiff, Hanaw became intimately familiar with, had access to, and acquired extensive knowledge of plaintiff's Proprietary Information, and was privy to plaintiff's business and marketing strategies and plans, costs, pricing, customer and supplier relationships, and financial strategies. Prior to his termination, Hanaw "physically thieved, copied, reproduced, replicated, converted, and misappropriated" as much of plaintiff's confidential and Proprietary Information as possible. (Doc. #36, ¶ 46.) Hanaw has utilized and disclosed plaintiff's Proprietary Information in the operation of Showmark Media. Specifically, Hanaw has used the Proprietary Information to emulate plaintiff's business model and to directly target plaintiff's customers.
The Third Amended Complaint sets forth the following five claims based on the alleged misappropriation of trade secrets: breach of contract against Hanaw only (Count I); violation of the Florida Uniform Trade Secrets Act (FUTSA) against all defendants (Count II); violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) against all defendants (Count III); and tortious interference with business relationships against all defendants (Counts IV and V). Levy seeks dismissal from this lawsuit on the grounds that plaintiff has failed to allege facts that establish personal jurisdiction. The remaining defendants contend that plaintiff's trade secret claim is barred by the statute of limitations and is inadequately pled. Defendants also assert that Counts III, IV, and V are preempted by the FUTSA.
The Court will first address defendants Hanaw, Showmark Media, and Showmark Holding's motion to dismiss.
Under Federal Rule of Civil Procedure 8(a)(2), a Complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This obligation "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."
In deciding a Rule 12(b)(6) motion to dismiss, the Court must accept all factual allegations in a complaint as true and take them in the light most favorable to plaintiff,
Defendants assert that plaintiff's claim for misappropriation of trade secrets is clearly barred by the three year statute of limitations. Under Florida law, an action for misappropriation of trade secrets "must be brought within 3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." Fla. Stat. § 688.007.
The statute of limitations is an affirmative defense, and the burden of proving an affirmative defense is on the defendant.
After reviewing the allegations in the Third Amended Complaint, the Court is unable to determine when the alleged misappropriation was discovered or should have been discovered by the exercise of reasonable diligence. Because it is not clear on the face of the complaint that plaintiff's claim for misappropriation of trade secrets is time-barred, defendants' motion to dismiss Count II as untimely is denied.
In order to state a plausible claim for misappropriation of trade secrets under the FUTSA, Fla. Stat. § 688.001 et seq., plaintiff must allege that (1) it possessed secret information and took reasonable steps to protect its secrecy and (2) the secret it possessed 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.
In order to state a plausible claim under the FUTSA, a plaintiff need only identify the alleged trade secrets with reasonable particularity.
Here, plaintiff replaced the long and broad list of alleged trade secrets found in the Second Amended Complaint with ten specific categories of trade secrets. (Doc. #36, ¶ 22.) Defendants concede that, in certain circumstances, information contained in some of the ten categories may constitute a trade secret, but argue that some of the categories should be dismissed as vague. The Court disagrees. After thoroughly reviewing the allegations identifying the purported trade secrets in the Third Amended Complaint, the Court finds that plaintiff has described the alleged trade secrets with reasonable particularity; thus, dismissal for failure to identify the alleged trade secrets is not warranted.
Defendants also assert that plaintiff has failed to provide any factual allegations showing that the alleged misappropriation is plausible. The FUTSA defines misappropriation as the:
Fla. Stat. § 688.002(2).
Here, plaintiff alleges that Hanaw acquired its Proprietary Information through the use of improper means. Specifically, plaintiff alleges that Hanaw, prior to having his sales agency relationship terminated, physically thieved, copied, reproduced, replicated, converted, and misappropriated American Registry's Proprietary Information. (Doc. #36, ¶ 62.) Plaintiff further alleges that Hanaw used the stolen Proprietary Information without plaintiff's consent in order to emulate plaintiff's business model and to directly target plaintiff's customers. (
As to the remaining defendants, plaintiff alleges that Levy, Showmark Holdings, and Showmark Media acquired the stolen Proprietary Information from Hanaw when they knew, or had reason to know, that it was stolen and that Hanaw had a duty to preserve the secrecy of the information. (
Defendants assert that these allegations should be disregarded because they are conclusory in nature. The Court finds that these allegations contain enough factual matter which plausibly suggest that Levy, Showmark Holdings, and Showmark Media have misappropriated plaintiff's trade secrets in violation of the FUTSA. Accordingly, defendants' motion to dismiss Count II of the Third Amended Complaint is denied.
Defendants Hanaw, Showmark Media, and Showmark Holdings contend that the remaining claims in the Third Amended Complaint are prohibited by the preemption provision of the FUTSA. The FUTSA displaces "conflicting tort, restitutory, and other law of this state providing civil remedies for misappropriation of a trade secret." Fla. Stat. § 688.008(1). The FUTSA, however, does not preempt contractual remedies or "[o]ther civil remedies that are not based upon misappropriation of a trade secret." Fla. Stat. § 688.008(2)(a)-(b). "Thus, FUTSA preempts all claims, other than claims ex contractu, based on misappropriation of trade secrets."
Plaintiff does not dispute that the FUTSA displaces other tort and statutory claims to the extent those claims are based solely on the misappropriation of trade secrets. Plaintiff argues, however, that a claim based upon the misappropriation of information that does not rise to the level of statutorily-defined "trade secret" should not be preempted. In effect, plaintiff contends that it has pled its claims in the alternative.
A majority of jurisdictions considering this issue have rejected plaintiff's argument. "[T]he UTSA's preemption provision has generally been interpreted to abolish all free-standing alternative causes of action for theft or misuse of confidential, proprietary, or otherwise secret information falling short of trade secret status (e.g., idea misappropriation, information piracy, theft of commercial information, etc.)."
The primary criticism of the majority's interpretation of the UTSA's preemption provision "is that it would permit a plaintiff's claim to be preempted by a statute that grants him no cause of action."
In light of the mandate that the FUTSA "be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this act among states enacting it," Fla. Stat. § 688.009, this Court will follow the majority's interpretation of the UTSA's preemption provision. Therefore, the Court finds that the FUTSA preempts all non-contract claims based on the misappropriation of confidential and/or commercially valuable information even if the information does not constitute a trade secret under the FUTSA. The Court must review the underlying factual allegations in each of the remaining claims to determine if they are based on the misappropriation of information, and therefore displaced by the FUTSA.
Count III of the Second Amended Complaint alleges a violation of the FDUTPA and is predicated on the use of plaintiff's Proprietary Information.
Plaintiff sets forth two separate counts for tortious interference with business relations in the Third Amended Complaint. Count IV alleges that "[t]he Defendants intentionally and unjustifiably interfered with Customer Relationships by wrongfully converting the Proprietary Information, converting customers and soliciting AMERICAN REGISTRY's customers." (Doc. #7, ¶ 79.) Even if the Court were to assume that the conclusory allegations state a plausible claim, dismissal would still be warranted because the claim is premised solely on the use of plaintiff's Proprietary Information. Absent the wrongful conversion of plaintiff's Proprietary Information, there is nothing to suggest that the conversion and solicitation of American Registry's customers is tortious.
Count V alleges Levy, Showmark Holdings, and Showmark Media intentionally and unjustifiably interfered with the relationship between American Registry and Hanaw by inducing Hanaw to breach the confidentiality provision of the Sales Agent Program Agreement. The only way for plaintiff to prevail on this claim is to prove misappropriation of trade secrets or other confidential information.
In conclusion, the Court finds that Counts III, IV, and V are preempted or displaced by the FUTSA and will be dismissed as such. The Court will now address Levy's motion to dismiss for lack of personal jurisdiction.
A court is obligated to dismiss an action against a defendant over which it has no personal jurisdiction.
The reach of Florida's long-arm statute is a question of Florida law and federal courts must construe it as would the Florida Supreme Court.
Under Florida law, "[a] plaintiff seeking the exercise of personal jurisdiction over a nonresident defendant bears the initial burden of alleging in the complaint sufficient facts to make out a prima facie case of jurisdiction."
In this mater, Levy has failed to submit an affidavit or any other evidence challenging the jurisdictional allegations; therefore, the Court's analysis is limited to the sufficiency of the allegations.
Florida's long-arm statute provides for specific and general jurisdiction. In this case, plaintiff relies solely on specific jurisdiction. "Specific jurisdiction refers to `jurisdiction over causes of action arising from or related to a defendant's actions within the forum.'"
A defendant "submits himself or herself . . . to the jurisdiction of the courts of this state for any cause of action arising from" defendant's activities "[o]perating, conducting, engaging in, or carrying on a business or business venture in this state or having an office or agency in this state." Fla. Stat. § 48.193(1)(a)(1). In order to establish that a defendant is "carrying on a business" for the purpose of the long arm statute, the activities must be considered collectively and "show a general course of business activity in the State for pecuniary benefit."
Here, plaintiff alleges that Levy, a citizen and resident of Israel, is subject to personal jurisdiction in Florida because he participated in the formation and organization of Showmark Media. (Doc. #36, ¶¶ 5, 7.) Showmark Media was originally formed as a Florida limited liability company on May 12, 2010, and was subsequently dissolved on July 19, 2010. (
Plaintiff also alleges that Levy and Showmark Media "conduct business within this judicial district." (Doc. #36, ¶ 7.) This allegation is conclusory and cannot serve as the basis for personal jurisdiction.
Section 48.193(1)(a)(2) provides for jurisdiction over a defendant who "committ[s] a tortious act within this state." Fla. Stat. § 48.193(1)(a)(2). Plaintiff attempts to invoke this provision of the long-arm statute by alleging that Levy misappropriated plaintiff's Proprietary Information with the intent to financially injure plaintiff in Florida. (Doc. #36, ¶¶ 7, 69, 71.) Levy argues that the misappropriation of trade secrets is not a tortious act within the state where the improper disclosure or use occurs outside of Florida. To support his contention, Levy cites to
In
The Florida appellate court determined that the acts of the defendant did not result in a tortious act in Florida because the distribution of the confidential information occurred in Nevada and Arizona.
Levy's reliance on
In order to determine whether the Due Process Clause permits the exercise of personal jurisdiction over a defendant who satisfies the long-arm statute, the court must consider two things. First, the court must determine whether the defendant has purposefully established such constitutionally significant contact with the state of Florida that he could have reasonably anticipated that he might be sued here in connection with those activities. If the defendant has done so, the court must determine whether the forum's interest in the dispute and the plaintiff's interest in obtaining relief are outweighed by the burden of the defendant having to defend himself in a Florida court.
Levy argues that personal jurisdiction cannot be exercised because plaintiff has failed to allege that Levy has any contacts with Florida. The Court disagrees. As discussed above, plaintiff has alleged that Levy used the misappropriated information in the formation of Showmark Media in Florida and, more importantly, plaintiff has alleged that Levy's use and disclosure of the Proprietary Information was done with the intent to financially injure plaintiff in Florida. The Court finds this to be sufficient.
Because Levy does not argue that the exercise of jurisdiction over him would not comport with fair play and substantial justice, the Court declines to address the issue. In conclusion, the Court finds that plaintiff has pled a prima facie case for personal jurisdiction; therefore, Levy's motion to dismiss for lack of personal jurisdiction is denied.
Accordingly, it is now
1. Defendants' Motion to Dismiss Third Amended Complaint (Doc. #42) is
2. Defendant Michael Levy's Motion to Dismiss Third Amended Complaint for Lack of Personal Jurisdiction (Doc. #43) is