178 F. Supp. 3d 390
E.D. La.2016Background
- FABI (First American Bankcard, Inc.) contracted with Smart Business Technology, Inc. (SBT) beginning in 2009 for software and services (FABICash, FABITrack) used by casinos; officers Serafín Fuente and Carlos Romero are named defendants.
- FABI alleges SBT failed to deliver promised products, provided inferior/unreliable systems, and concealed lack of system redundancy (single server vs. multiple) causing recurring failures 2010–2014 and lost customers.
- SBT was acquired by Powa in 2014; Powa later was dismissed for lack of personal jurisdiction.
- FABI sued under Louisiana law asserting claims for: LUTSA (trade secrets), fraudulent concealment, redhibition (defective sale), LUTPA (unfair trade practices), and conversion.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(6); the Court granted dismissal of the LUTSA claim with prejudice, denied dismissal of the other claims but required FABI to amend several claims with greater specificity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| LUTSA (trade secrets) | Defendants withheld source code, config tables, customer lists and financial records — misappropriation by withholding suffices | No allegation of improper acquisition, disclosure, or use; mere withholding does not show misappropriation | Dismissed with prejudice — withholding alone, without use/disclosure or improper acquisition, fails under LUTSA |
| Fraudulent concealment (fraud by omission) | Defendants concealed single-server architecture (2009–2014); parties had a relationship of trust so Defendants had duty to disclose | Louisiana law requires duty to speak; plaintiff failed to plead duty and fraud with particularity | Denied without prejudice; plaintiff must amend within 21 days to plead with particularity the duty to disclose and related facts |
| Redhibition (defective sale) | Software/devices are subject to redhibition; defects began 2010; prescription and waiver do not bar claim because defects were reported and repairs attempted | Contract not a sale, or claim is prescribed/waived by continued use and the 2012 agreement | Denied — question of whether contract is sale, plaintiff’s knowledge, repairs, and waiver present factual issues; leave to amend to add facts |
| LUTPA (unfair trade practices) | Defendants refused to cooperate during transition, threatened disabling systems, misrepresented materials, sought concessions, and withheld materials/trade secrets — caused ascertainable loss | LUTPA is narrow and cannot be used to bootstrap a breach of contract claim; allegations are mere restatement of contract claims | Denied — plaintiff has standing post-Cheramie; pleadings lack sufficient detail to show conduct rises to LUTPA but may be cured by amendment |
| Conversion (against officers) | Officers personally participated in withholding FABI’s customer data and account information | Corporate officers generally shielded from liability for corporate acts absent personal fraud or participation in wrongdoing | Denied — claim survives as pleaded against SBT, but FABI must plead specific facts showing Fuente and Romero personally participated in conversion |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standards and reasonable inference requirement)
- Reingold v. Swiftships, Inc., 126 F.3d 645 (5th Cir. 1997) (elements of a trade secret misappropriation claim under LUTSA)
- Omnitech Int’l v. Clorox Co., 11 F.3d 1316 (5th Cir. 1994) (misappropriation requires use/disclosure to gain an unfair advantage)
- Lormand v. U.S. Unwired, Inc., 565 F.3d 228 (5th Cir. 2009) (motions to dismiss viewed with disfavor)
- Tubos de Acero de Mex. S.A. v. Am. Int’l Inv. Corp., 292 F.3d 471 (5th Cir. 2002) (officer liability for corporate conversion when personally participating)
- Cheramie Servs., Inc. v. Shell Deepwater Prod., Inc., 35 So.3d 1053 (La. 2010) (LUTPA grants action to any person suffering ascertainable loss)