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Blue Star Land Services LLC v. Coleman

United States District Court, W.D. Oklahoma

December 8, 2017




         Before the Court is Defendants' Motion to Dismiss, Doc. 34. Plaintiff Blue Star Land Services, LLC (“Blue Star”) filed its Complaint and Request for Seizure, Doc. 3, under the federal Defend Trade Secrets Act of 2016 (“DTSA”), Oklahoma's Uniform Trade Secrets Act (“UTSA”), and Oklahoma common law. Following an ex parte seizure (Doc. 10) of Defendants' electronic devices and Dropbox account containing potential trade secret information and a subsequent preliminary injunction (Doc. 25), Defendants filed this Motion. Considering Plaintiff's allegations in the light most favorable to it, the Court grants the Motion in part with respect to Defendant Johnson and denies it with respect to Defendants Coleman, Morris, and Rock Creek for the following reasons.

         I. Background

         According to Plaintiff's Complaint, this case concerns a contentious business split and the legitimacy of departing employees' competitive conduct through their departure. Defendants Theo Coleman and Jeffrey Morris were the only vice presidents of Blue Star, a “boutique, full services” firm that provides critical land and regulatory services for large oil and gas companies such as Devon Energy and Marathon Oil. Doc. 3, at 7 n.1. After five years as vice presidents, the two left Blue Star in April of 2017 to start a competing company, Rock Creek Land & Energy Company, LLC (“Rock Creek”).

         Blue Star possesses extensive confidential information that helps it compete against other outside brokers. It maintains rig schedules and section-township-range maps that details wide-ranging information about their clients' rigs, leases, and mineral findings. See Doc, 3-46, at 4-5. Blue Star's ownership reports, templates, and other work product allow it to more effectively structure drilling and leasing plans, advise companies, and advocate on their behalf before regulatory commissions. Id. at 5-13. More important, while Blue Star has a system for protecting its clients' confidential information and that of Blue Star itself, Defendants Coleman and Morris had near complete access to it all.

         Blue Star's founder and president, David Swafford, hired Defendants Coleman and Morris right out of college. See Doc. 3, at 9. They progressed through the company ladder before spending five years as vice presidents. Id. Plaintiff believes Defendants first plotted their exit in 2013, when Coleman created a spreadsheet outlining Blue Star's financial and operational information. See Doc. 3, at 10. In 2016, Coleman and Morris demanded equity positions with Blue Star, after which Swafford entered into profit-sharing agreements in October entitling Coleman and Morris to 5% each. Id. at 3; see Docs. 3-25, 3-26. Four months later, Plaintiff claims Coleman began downloading to his personal Dropbox[1]account confidential, proprietary, and trade-secret information that would soon help him launch a competing company. Doc. 3, at 3.

         Then in April of 2017, one of Blue Star's existing clients, LEFCO, approached Coleman and Morris about a new project. Id. at 11. Considering the opportunity as either leverage for more equity or business to start a competing company, Coleman continued to download more confidential information to his personal devices. Id. All told, this included over 20, 000 documents, one of which was a “highly confidential document” comprising all of the company's “IP addresses, user names, and passwords for authorized users across its entire electronic system.” Id. at 13. With most of Blue Star's recent work product allegedly in possession, Coleman and Morris demanded from Swafford majority ownership and control of the company. Id. at 13-14. Swafford declined and the parties agreed to part ways. Id.

         Defendants Coleman and Morris then faced a short timeline to build a staff and clientele to launch their new company, Rock Creek. Still employed by Blue Star, they first reached out to Defendant Johnson, “the next-highest-ranking individual[] at Blue Star.” Doc. 3, at 23. She responded that she needed “at least a couple weeks” to “make some $$” at Blue Star before leaving for Rock Creek. Id. at 15. Yet, when Johnson gave Swafford her two-week notice of resignation the following week, she allegedly misrepresented that she was leaving Blue Star to get engaged and move with her fiancé to South Carolina or Florida. Id. at 23. Nonetheless, Johnson stayed on and accessed her new Rock Creek email the following day from her Blue Star computer. Id. at 25. Next Coleman and Morris strategized how to approach the rest of Blue Star's staff, discussing the need for departing employees to tell Swafford that they approached Defendants initially, not vice versa. Id. at 16. Following various communication with Blue Star employees and independent contractors, Defendants Coleman and Morris now employ at least nine former Blue Star staffers at Rock Creek. Id. at 31.

         Plaintiff also alleges that Defendants poached various Blue Star clients. Coleman incorporated Rock Creek on April 21st, 2017, two days before accessing existing Blue Star contracts with LEFCO and Black Hawk to substitute the party name as “Rock Creek.” Id. at 17-19. Then on the 24th, Morris and Coleman submitted their resignation letters, to be effective on the 28th. Id. at 19; Docs. 3-30, 3-33. Morris proceeded to research how to delete email records, which Plaintiff believes was intended to “delete evidence of their disloyal actions.” Doc. 3, at 19. Coleman began emailing clients to inform them of their departure and competing venture. Id. at 20. Similarly, Morris gave clients alternative Blue Star contacts for future projects, but only connected these “clients with alternative Blue Star employees who Morris knew or believed already had plans to go to Rock Creek following Morris and Coleman's exit.” Id. at 20-21. Later, Morris searched, “is it ethical to delete work emails” and made various attempts to delete Blue Star emails. Id. at 21-22. The next morning, when Swafford learned of another employee's defection to Rock Creek, he requested that Coleman and Morris leave Blue Star “ASAP.” Id. at 23. Shortly after, Coleman informed a coworker that Rock Creek was taking Blue Star's existing “Merge Project” for LEFCO. Id. at 24. Additionally, Defendants allegedly interfered with existing and prospective Blue Star contracts with Southwest Energy Partners, Double Eagle, and Luxe. Id. at 37.

         On August 29th, 2017, following an extensive audit by forensic investigator Ernst & Young (“EY”) of Defendants' old Blue Star computers and accounts, Plaintiff filed their Complaint, Doc. 3, alleging:

(1) Violation of the federal Defend Trade Secrets Act, 18 U.S.C. § 1836, et seq. (all Defendants);
(2) Violation of Oklahoma's Uniform Trade Secrets Act, 78 Okla. Stat. §§ 85-94 (all Defendants);
(3) Breach of fiduciary duty (Coleman and Morris);
(4) Breach of the duty of loyalty (Coleman, Morris, and Johnson); and
(5) Tortious interference with existing contract and prospective economic advantage (all Defendants)

         II. Motion to Dismiss Standard

         A complaint may be dismissed upon a motion for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.'” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). “The pleading standard Rule 8 announces does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. at 678 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Dismissal is proper “if, viewing the well-pleaded factual allegations in the complaint as true and in the light most favorable to the non-moving party, the complaint does not contain ‘enough facts to state a claim to relief that is plausible on its face.'” Macarthur v. San Juan County, 497 F.3d 1057, 1064 (10th Cir. 2007) (quoting Twombly, 550 U.S. at 547); see Iqbal, 556 U.S. at 676-80. The plaintiff cannot merely give “labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555. Such conclusory allegations are not entitled to the court's presumption for the plaintiff. Instead, the plaintiff must plead facts that at least makes the claims plausible and raise the “right of relief above the speculative level.” Id. at 558.

         III. Trade Secrets Misappropriation Claims

         Plaintiff brings trade secrets claims against all Defendants under both the federal DTSA and Oklahoma's UTSA. Before assessing the merits, the Court must first dispose of Plaintiff's threshold “law of the case” argument. Plaintiff claims that the “law of the case” doctrine precludes the Court from considering Defendants' Motion with regard to Plaintiff's misappropriation claims because the Court's earlier ex parte seizure order necessarily held that the Complaint satisfied a standard beyond Rule 12(b)(6)'s plausibility requirements. See Doc. 10. Granted, the Court found “extraordinary circumstances” justifying an ex parte seizure and that “it clearly appears from specific facts” that Plaintiff satisfied the DTSA's eight ex parte seizure order requirements. 18 U.S.C. § 1836(b)(2)(A)(i)-(ii). However, an ex parte order, without the presence of opposing counsel's advocacy, does not constitute law of the case. Law of the case “has a narrower meaning in connection with the duty of a judge to adhere to a ruling previously made in the case by another judge of the same court. . . . [It] requires that the order of the first judge, unless merely a formal or an ex parte order, shall not be vacated or nullified by a later judge of the same court.” Munro v. Post, 102 F.2d 686, 688 (2d Cir. 1939) (emphasis added); see also In re Ford Motor Co., 591 F.3d 406, 414 (5th Cir. 2009) (“By not having expert testimony, and by relying on ex parte orders obtained without the presence of opposing counsel, the MDL court again erred.”); Platten v. HG Bermuda Exempted Ltd., 437 F.3d 118, 130 (1st Cir. 2006). Clearly, the “law of the case” doctrine is not applicable here. Therefore, the Court must proceed to an independent 12(b)(6) review of Plaintiff's Complaint.

         A. Federal Trade Secrets Claim

         Plaintiff plausibly pleads a violation of the federal DTSA against Defendants Coleman, Morris, and Rock Creek. The law provides a private cause of action against those who have misappropriated trade secrets related to a product or service intended for interstate commerce. See 18 U.S.C. § 1836(b)(1). The term “trade secret” includes:

all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if-
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information

18 U.S.C. § 1839(3). “Misappropriation” in this context includes “acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means.” 18 U.S.C. § 1839(5). The DTSA further defines “improper means” as “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage.” 18 U.S.C. § 1839(6)(A). Thus, to show a DTSA violation, Plaintiff must plausibly plead (1) trade matter, (2) reasonable secrecy, (3) independent economic value ...

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