420 F.Supp.3d 1163
D. Colo.2019Background
- DTC Energy Group is an oil-and-gas staffing/consulting firm that alleges proprietary materials (reformatted Candidate Folders/resumes, a Candidate Database, and a proprietary Profit Calculator) are trade secrets.
- Key personnel: Adam Hirschfeld (DTC business development, later left), Katie Stromstad (HR), Joseph Galban (accountant); defendants include Craig Hirschfeld, Joseph Johnson, Ross Rhinehart, Ally Consulting, LLC (aka Wyodak), and parent Ally Energy Services, Inc. (AES).
- DTC alleges that beginning in 2015 Adam conspired with others to build Ally as a competitor by misappropriating DTC customers and materials: using DTC onboarding forms, emailing the Profit Calculator to Rhinehart, Galban providing documents, and Adam taking a DTC laptop/flash drives with confidential files.
- Procedural posture: DTC sued (DTSA, CUTSA, breach of contract, breach of loyalty, unjust enrichment, tortious interference, civil theft, conversion, civil conspiracy, RICO, CFAA conspiracy, etc.); preliminary injunction was denied and affirmed on appeal; DTC filed a Second Amended Complaint and defendants moved to dismiss.
- Ruling: Court dismissed all claims against AES for lack of specific allegations; dismissed many claims against individual defendants (including Stromstad’s loyalty and trade-secret claims, much of the claims against Craig Hirschfeld and Johnson); allowed certain claims to proceed (notably conspiracy and some claims against Rhinehart for receiving trade secrets/civil theft), and dismissed RICO and CFAA-conspiracy claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| AES independent liability | AES is sued collectively with Ally; its ownership and involvement make it liable | AES is a non-operating holding company; complaint fails to plead AES-specific conduct | Dismissed: complaint fails to allege AES’s independent involvement; all claims against AES dismissed with prejudice |
| Breach of duty of loyalty (Stromstad) | Stromstad aided solicitation and sent onboarding paperwork for Ally while employed by DTC | She was a low-discretion HR employee acting at Adam’s direction, not an agent with fiduciary authority | Dismissed: facts insufficient to show she acted as agent or solicited clients in a manner breaching loyalty |
| DTSA / CUTSA misappropriation (Stromstad) | She used customer lists/reformatted resumes and onboarding materials to solicit on Ally’s behalf | Her role was limited to sending onboarding paperwork; no allegation she acquired/used trade secrets | Dismissed: complaint fails to plausibly allege Stromstad acquired, used, or disclosed trade secrets |
| DTSA / CUTSA misappropriation (Craig Hirschfeld & Johnson) | They were principals/owners who sanctioned or participated in stealing trade secrets | Must plead officer participation/control/approval of the tort — mere knowledge or intent to compete insufficient | Dismissed: complaint lacks allegations that they directed, controlled, approved, or personally acquired/used trade secrets |
| DTSA / CUTSA misappropriation (Rhinehart) | Rhinehart obtained confidential financial documents and the Profit Calculator from Galban/Adam | He argues insufficient involvement or dominion; factual disputes | Survived: complaint sufficiently alleges Rhinehart acquired trade secrets and had reason to know they were improperly disclosed |
| Unjust enrichment (Hirschfeld, Johnson, Rhinehart) | Defendants received payments/commissions at DTC’s expense from poached business | Plaintiffs must show benefit received personally at plaintiff’s expense | Dismissed: allegations show benefit to Ally, not specific personal benefit to individuals; claim fails against the individuals |
| Tortious interference with contract (Craig Hirschfeld & Johnson) | They induced Adam to breach his employment contract | No factual allegations that they induced Adam rather than joined an existing plan | Dismissed: complaint fails to plausibly allege inducement by Craig or Johnson |
| Civil theft (Stromstad / Hirschfeld / Rhinehart) | Theft of confidential information, fraudulent housing scheme, and receipt of stolen Profit Calculator | Defendants dispute taking DTC property or specificity of fraud; Rule 9(b) applies to fraud allegations | Stromstad & Hirschfeld: dismissed (insufficient factual particularity and no direct theft from DTC). Rhinehart: survived as to receiving confidential documents and Profit Calculator |
| Conversion (Rhinehart) | Rhinehart exercised dominion over DTC files on laptop/flash drives | No plausible allegation Rhinehart had dominion or refused return; laptop custody disputed | Dismissed: no plausible allegation Rhinehart exercised control or refused return of property |
| Civil conspiracy (individual defendants) | Defendants agreed and acted in concert to create a clone company and misappropriate DTC’s business/materials | Some allegations are conclusory, but there are specific concerted acts | Survived (in part): complaint alleges meeting of the minds and overt acts sufficient at pleading stage; claim not preempted to the extent it rests on non-trade-secret theories |
| RICO (individual defendants) | Pattern of racketeering (mail/wire fraud, theft of trade secrets) directed at DTC | Complaint targets a single victim; fails continuity and fails to plead predicate acts with particularity | Dismissed: fails to allege continuity and specific predicate acts; RICO claim dismissed |
| CFAA conspiracy (individual defendants) | Defendants knew of and encouraged Adam’s unauthorized post-resignation access to DTC laptop | Conspiracy allegation is conclusory and lacks overt-act/interdependence allegations | Dismissed: complaint fails to plead an agreement, overt acts, or interdependence sufficient for a CFAA conspiracy claim |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for federal pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions vs. well-pleaded facts in pleadings)
- Khalik v. United Air Lines, 671 F.3d 1188 (10th Cir. 2012) (Twombly/Iqbal application in Tenth Circuit)
- Jet Courier Serv., Inc. v. Mulei, 771 P.2d 486 (Colo. 1989) (employee duty of loyalty test)
- Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823 (10th Cir. 1993) (elements of trade-secret misappropriation under CUTSA)
- H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989) (RICO continuity and pattern requirements)
- SIL-FLO, Inc. v. SFHC, Inc., 917 F.2d 1507 (10th Cir. 1990) (single-target scheme rarely satisfies RICO continuity)
- Van Rees v. Unleaded Software, Inc., 373 P.3d 603 (Colo. 2016) (civil theft statute requires specific intent to permanently deprive owner)