Joshua David Mellberg LLC v. Will
4:14-cv-02025
| D. Ariz. | Feb 9, 2015Background
- JDM sued former employees and related defendants for multiple claims including AUTSA misappropriation, unfair competition, breach of contract, unjust enrichment, and conspiracy.
- Motions to dismiss were filed by Will & Fine, the Impact Partnership, Godinez, and Uretz; argued at oral argument November 13, 2014.
- JDM alleges the defendants misappropriated trade secrets via both misappropriation of confidential information and destruction of data, with some defendants allegedly using or assisting in a competing venture.
- Key issues center on whether AUTSA claim is pled adequately, whether unfair competition is pre-empted by AUTSA, and whether breach of confidentiality agreements and related claims survive.
- The magistrate recommends partial grant/partial denial of motions: AUTSA claims sustained against certain defendants; others dismissed with leave to amend; several related claims dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| AUTSA sufficiency against moving defendants | JDM pleads protectable trade secrets and misappropriation | Defendants contend lack of protectable trade secrets and improper misappropriation | AUTSA claim survives against Will and Fine; Godinez/Uretz/Impact Partnership dismissed for failure to state a claim |
| Unfair competition pre-emption and public confusion | Unfair competition not fully pre-empted and may rest on competitive conduct | AUTSA pre-empts misappropriation-based unfair competition; no public confusion pleaded | Unfair competition claim dismissed for failure to state a claim; some theories pre-empted while others require amendment |
| Breach of contract (confidentiality agreements) against Fine and Godinez | Defendants breached confidentiality by misusing information and copying programs | Arguments about breadth and enforceability of confidentiality provisions | Breach of contract claim against Godinez dismissed; breach claim against Fine survives to amend |
| Conspiracy and aiding-and-abetting among moving defendants | Allegations show conspiratorial effort to misuse trade secrets | Conspiracy claims lack underpinning by all co-defendants and rest on conjecture | Conspiracy and aiding-and-abetting survive against Will and Fine; dismissed as to Godinez, Uretz, and Impact Partnership with leave to amend |
Key Cases Cited
- Calisi v. Unified Financial Servs., LLC, 232 Ariz. 103, 302 P.3d 628 (Ariz. App. 2013) (trade secrets require protecting information and reasonable secrecy measures)
- Imax Corp. v. Cinema Tech., Inc., 152 F.3d 1161 (9th Cir. 1998) (trade secrets require particularity to distinguish from general knowledge)
- Prudential Ins. Co. v. Pochiro, 153 Ariz. 368, 736 P.2d 1180 (Ariz. App. 1987) (customer lists and confidential data may constitute trade secrets)
- Mascari v. Amex Distributing Co., Inc., 150 Ariz. 510, 724 P.2d 596 (Ariz. 1986) (protects confidential information beyond general knowledge)
- Ehmke v. Enterprise Leasing Co. of Phoenix, 197 Ariz. 144, 3 P.3d 1064 (Ariz. App. 2000) (trade secret protection extends to market research and internal records)
- Orca Comm’c’ns Unlimited, LLC v. Noder (Orca II), 337 P.3d 545 (Arizona Supreme Court 2014) (AUTSA pre-emption and confidential info considerations clarified)
- Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401 (9th Cir. 1992) (unfair competition analysis requires competitive conduct or likely public confusion)
- Boice v. Stevenson, 187 P.2d 648 (Ariz. 1947) (unfair competition concepts and public-confusion framework)
- Fairway Constructors, Inc. v. Ahern, 970 P.2d 954 (Ariz. App. 1998) (misappropriation-based unfair competition and pre-emption considerations)