United States District Court, W.D. Oklahoma
L. RUSSELL, UNITED STATES DISTRICT JUDGE
the Court are certain motions to dismiss (Doc. Nos. 20 and
47) filed by Defendants and Plaintiffs' responses
thereto. Upon consideration of the parties' submissions,
the Court finds as follows.
McDonald, Pack, Stover, and Carr, are all former employees of
Plaintiff Crescent Services, an indirect subsidiary of
Plaintiff Select Energy Services. Plaintiffs provide
“end-to-end water management solutions to oil and gas
producers in Oklahoma and other states.” (Amended
Complaint, ¶ 4). Plaintiffs allege that, in violation of
certain employment and confidentiality/non-solicitation
agreements, its former employees, Defendants McDonald, Pack,
Stover, and Carr, downloaded or otherwise obtained
confidential information, specifically certain of
Plaintiffs' trade secrets, and misappropriated those
trade secrets, specifically by providing them to their
current employer, Defendant Aquahawk, which is a subsidiary
of Defendant Mammoth. Defendants seeks dismissal of
Plaintiffs' federal Defend Trade Secrets Act
(“DTSA”) claims, asserting that the Court lacks
subject matter jurisdiction over this action because
Plaintiffs' DTSA cause of action is not sufficiently
pled, there are no additional federal claims, and the parties
are not diverse. Defendants additionally contend that certain
of Plaintiffs' state law claims are insufficiently pled,
and alternatively request that the Court decline to exercise
supplemental jurisdiction over the state law claims or
abstain from consideration thereof in light of pending
litigation between certain of these same parties in the
District Court of Oklahoma County related to the validity and
enforceability of employment agreements between the
individual Defendants and Plaintiffs or their predecessors.
rely on Rule 12(b)(1) for the instant motion, asserting a
lack of subject matter jurisdiction because Plaintiff's
DTSA claim is not sufficiently alleged in the Amended
Complaint. Different standards apply to a motion to dismiss
based on lack of subject matter jurisdiction under Rule
12(b)(1) and a motion to dismiss for failure to state a claim
under Rule 12(b)(6). Muscogee (Creek) Nation v.
Pruitt, 669 F.3d 1159, 1167 (10th Cir. 2012).
Although Defendants contend that Plaintiffs' only federal
claim is insufficiently pled, this alleged failure does not
deprive this Court of jurisdiction; rather, the motion should
be considered under Rule 12(b)(6).
... is not defeated ... by the possibility that the averments
might fail to state a cause of action on which petitioners
could actually recover. For it is well settled that the
failure to state a proper cause of action calls for a
judgment on the merits and not for a dismissal for want of
jurisdiction. Whether the complaint states a cause of action
on which relief could be granted is a question of law[, ] and
just as issues of fact[, ] it must be decided after[, ] and
not before[, ] the court has assumed jurisdiction over the
controversy. If the court does later exercise its
jurisdiction to determine that the allegations in the
complaint do not state a ground for relief, then dismissal of
the case would be on the merits, not for want of
Id. at 1167-68 (quoting Bell v. Hood, 327
U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946)).As stated by the
court in Harris v. Owens, 264 F.3d 1282, 1289
(10th Cir. 2001), “[i]f the federal claim is
not wholly frivolous, it suffices to establish federal
jurisdiction even if it ultimately is rejected on the
merits.” (citing Martinez v. United States Olympic
Comm., 802 F.2d 1275, 1280-81 (10th Cir.1986)).
Accordingly, a conclusion by the Court that Plaintiffs failed
to state a claim would not deprive the Court of subject
matter jurisdiction, and consideration of the instant motion
is governed entirely by the familiar standard applicable to
motions under Rule 12(b)(6) set forth in Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007) and Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009).
assessing whether a complaint “fails to state a claim
upon which relief may be granted, ” the Court must
determine whether the complaint contains “sufficient
factual matter, accepted as true, to ‘state a claim for
relief that is plausible on its face.' Iqbal,
556 U.S. at 678(quoting Twombly, 550 U.S. at 570).
The Court accepts the Plaintiffs' well-pled factual
allegations as true and views them in the light most
favorable to the Plaintiffs.United States v. Smith,
561 F.3d 1090, 1098 (10th Cir. 2009). The Court, however, is
not required to accept legal conclusions alleged in the
complaint as true. Iqbal, 556 U.S. at 678.
“Thus, mere ‘labels and conclusions' ... will
not suffice” to state a claim. Khalik v. United Air
Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (quoting
Twombly, 550 U.S. at 555).
the DTSA, “[a]n owner of a trade secret that is
misappropriated may bring a civil action ... if the trade
secret is related to a product or service used in, or
intended for use in, interstate or foreign commerce.”
18 U.S.C. § 1836(b)(1). Generally speaking, a trade
secret is information that derives economic value from not
being generally known that is subject to reasonable measures
of secrecy by it owners. See 18 U.S.C. §
1839(3). The statute identifies some examples, provided they
meet the above criteria:
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 . . . .
Id. The Act permits an owner to recover for the
“misappropriation” of a trade secret, which
includes both acquisition, disclosure, and use of such. 18
U.S.C. §§ 1839(5).
Amended Complaint treats the Defendants as both individuals
and collective entities. That is, certain allegations are
levied against the four individual former employees, who are
also referenced throughout the Amended Complaint collectively
as “Former Employees.” Similarly, the two
corporate Defendants are often referenced as a single entity
and are also subject to allegations with the individuals as a
collective entity known as the “Mammoth Group.”
Of course, for an individual former employee to be liable
under the DTSA, Plaintiffs must allege sufficient facts
against that employee individually and the same holds true
for a corporate Defendant. Much like in the context of
litigation under 42 U.S.C. § 1983 where there are
multiple Defendants, “it is particularly important . .
. that the complaint make clear exactly who is alleged to
have done what to whom.” Robbins v. Oklahoma,
519 F.3d 1242, 1250 (10th Cir. 2008). Here it is important
that Plaintiffs plead, with regard to each Defendant, that
the Defendant misappropriated a trade secret. As the court
noted in a case involving a single former employee and a
number of allegedly misappropriated trade secrets:
Upon review of the allegations made in support of the trade
secrets claims, the court has determined that there are
allegations which satisfy each of the elements of the claims
challenged by the Defendants. What is not clear, however, is
whether the allegations for each element apply consistently
to the same categories of trade secrets.
Southern Field Maintenance & Fabrication LLC v.
Killough, No. 2:18-cv-581-GMB, 2018 WL 4701782 (M.D.
Ala. October. 1, 2018). The Court has combed through the
Amended Complaint and the parties' briefs on the motion
to dismiss and concludes that Plaintiffs have sufficiently
alleged at least one claim for misappropriation against each
of the four individual Defendants and the corporate
Defendants. Certain of Plaintiffs' alleged trade secrets
claims, however, are insufficiently pled and therefore cannot
survive the instant motion.
order to plead a claim for violation of the DTSA, a plaintiff
must allege that it lawfully owned information of independent
economic value that it took reasonable measures to keep
secret, and that the defendant under consideration either
acquired, disclosed, or used, improperly. 18 U.S.C. §
1839; See Southern Field Maintenance &
Fabrication, 2018 WL 4701782 at *2. Defendants contend
that Plaintiffs fail to sufficiently allege trade secrets,
reasonable measures to keep such secrets, and
misappropriation of any trade secret. Defendants also
challenge Plaintiffs' standing to seek relief under the
DTSA with regard to rig schedules, because those schedules
belong to Plaintiffs' clients.
do not argue ownership of the rig schedules. Rather, they
assert that “[t]he trade matter misappropriated is the
compilation of the information which was acquired over time
and through the expenditure of a significant amount of labor,
skill and money by the S e l e c t P a r t i e s . ” (D
o c . N o . 4 9, p . 5) . A l t h o u g h 1 8 U.S. C . §
1 8 3 6 (b)(1) includes compilations in the definition of
trade secret, Plaintiffs' explanation does not establish
how a rig schedule, one of the items in Plaintiffs'
litany of allegedly misappropriated trade secrets, could
support their DTSA claim, when only owners of trade secrets
may seek relief under the Act. The Court finds that
Plaintiffs' allegations related to rig schedules are
insufficient to establish that Plaintiffs were the owners of
such so as to permit trade secret protection.The Court finds
herein that Plaintiff's allegations that one or more
Defendants misappropriated rig schedules fails to state a
claim, because Plaintiffs have not alleged that they owned
the schedules or any information therein, which was provided
by Crescent's clients. See e.g. Amended Complaint,
For a complaint alleging violation of the DTSA to survive a
motion to dismiss under Rule 12(b)(6), a plaintiff must
identify the purported trade secrets, but it may do so
generally to avoid publicly disclosing the information in its
court filings. See Mission Measurement Corp. v.
Blackbaud, Inc., 216 F.Supp.3d 915, 920-21 (N.D. Ill.
2016) (holding that a complaint was well-pleaded when it
identified the purported trade secrets as including
“business models, ... business plans, and product
development plans”). Here, Wells Lamont alleges that
Mendoza was exposed to confidential information such as
“customer account information, product summaries,
pricing sheets, product prototypes, product designs, and
detailed sales reports, ” FAC ¶ 25, and that he
took “substantial amounts” of this information
with him to Radians once he resigned from Wells Lamont,
Id. ¶ 27. These allegations are sufficient to
state a DTSA claim. E.g., SleekEZ, LLC v. Horton, CV
16-09-BLG-SPW-TJC, 2017 WL 190695, at *4 (D. Mont. Apr. 21,
2017) (holding that the allegations were adequate when the
complaint generally described the information as its
“industry contacts and customers[ ] and its marketing
and business strategies”); Aggreko, LLC v.
Barreto, No. 1:16-CV-353, 2017 WL 963170, at *2 (D. N.D.
Mar. 13, 2017) (holding that a complaint's allegations
were adequate when they described the trade secrets as
“including customer lists and information regarding
[the plaintiff's] operations, customers, business
proposals, pricing strategy, client preference and history,
and proprietary pricing models”)
Wells Lamont Indus. Grp. LLC v. Richard Mendoza &
Radians, Inc., No. 17 C 1136, 2017 WL 3235682, at *3
(N.D. Ill. July 31, 2017).
In this case, Plaintiff alleges Defendant “accessed
CLS' proprietary and confidential electronic data”
including Plaintiff's [ ] financial statements, customer
lists, and sales records, which are kept on Plaintiff's
“secure and protected computer system.” R. Doc.
98 at ¶ 98. Moreover, Plaintiff alleges it
“maintains its Confidential Information as confidential
within CLS and does not share this information outside of
CLS, ” R. Doc. 98 at ¶ 38, which Plaintiff alleges
makes the information “highly valuable.”
Id. at ¶ 39. Finally, Plaintiff alleges it
“derives a competitive advantage and independent
economic value, both actual and potential, from the
Confidential Information, because the Confidential
Information is not generally known to the public or to others
who can obtain economic value from its disclosure or
use.” The Court finds Plaintiff has sufficiently
alleged the existence of a trade secret.
Complete Logistical Services, LLC v. Ruth, 350
F.Supp.3d 512, 519 (E.D.La. 2018); see also
Inmar, Inc. v. Vargas, No. 18-cv-2306, 2018 WL 6716701,
at *3 (N.D. Ill.Dec. 21, 2018)(finding allegations that
former employee misappropriated business development plans
for existing clients, Plaintiffs' pricing and marketing
strategies, lead sources, client lists, position in the
market, and research dossiers sufficient to avoid dismissal).
A robust consensus of district courts within the Third
Circuit have held that a party alleging misappropriation in
violation of PUTSA need not describe trade secrets with
particularity to survive Rule 12 scrutiny. Certainteed
Ceilings Corp. v. Aiken, No. 14-3925, 2015 WL 410029, at
*5 (E.D. Pa. Jan. 29, 2015); Mattern & Assocs., LLC
v. Latham & Watkins LLP, No. 13-6592, 2014 WL
4804068, at *3 (E.D. Pa. Sept. 26, 2014); Synthes, Inc.
v. Emerge Med., Inc., No. 11-1566, 2012 WL 4205476, at
*27 (E.D. Pa. Sept. 19, 2012) (collecting cases). . . . In
the two years since the DTSA's enactment, district courts
across the country have applied a similar standard to federal
misappropriation claims at the Rule 12 stage. See, e.g.,
Alta Devices, Inc. v. LG Elecs., Inc., No. 18-CV-404,
2018 WL 5045429, at *8 (N.D. Cal. Oct. 17, 2018); S.
Field Maint. & Fabrication LLC v. Killough, No.
2:18-CV-581, 2018 WL 4701782, at *3-4 (M.D. Ala. Oct. 1,
2018) (citing Wells Lamont Indus. Grp. LLC v. Richard
Mendoza & Radians, Inc., No. 17-1136, 2017 WL
3235682, at *3 (N.D. Ill. July 31, 2017)); see also Chubb
Ina Holdings Inc. v. Chang, No. 16-2354, 2017 WL 499682,
at *10 (D.N.J. Feb. 7, 2017).
Magnesita Refractories Co. v. Tianjin New Century
Refractories Co., No. 1:17-CV-1587, 2019 WL 1003623, at
*9 (M.D. Pa. Feb. 28, 2019). Additionally, “the
question of whether certain information constitutes a trade
secret ordinarily is best ‘resolved by a fact
finder[.]'” Learning Curve Toys, Inc. v.
PlayWood Toys, Inc., 342 F.3d 714, 723 (7th Cir. 2003)
(quoting Lear Siegler, Inc. v. Ark-Ell Springs,
Inc., 569 F.2d 286, 289 (5th ...