Joshua David Mellberg LLC v. Will
2015 U.S. Dist. LEXIS 40498
| D. Ariz. | 2015Background
- Plaintiffs J.D. Mellberg Financial and its owner Joshua Mellberg (JDM) allege former employees and associates (Will, Fine, Godinez, Uretz and The Impact Partnership) stole and used JDM’s confidential marketing and sales "funnels," client/marketing data, training materials and related web content to compete.
- JDM filed an 11‑count First Amended Complaint asserting AUTSA (trade secrets), CFAA, unfair competition, breach of confidentiality agreements, breach of fiduciary duty, conversion/trespass, civil conspiracy, aiding and abetting, and unjust enrichment.
- Defendants moved under Rule 12(b)(6) to dismiss multiple counts (motions by Will & Fine; Impact Partnership; Godinez; Uretz). Magistrate Judge Pyle recommended partial grants and denials; District Judge Jorgenson reviewed objections de novo and adopted the R&R.
- Court allowed JDM to proceed on AUTSA claims against Will and Fine for alleged misappropriation (including alleged illicit downloading and use of web/training materials and proprietary spreadsheets) and on breach, fiduciary duty, conspiracy and aiding/abetting claims (as to certain defendants).
- Court dismissed several claims (unfair competition theories deemed novel, unjust enrichment, and several claims as to Impact Partnership, Godinez, and Uretz) mostly with leave to amend; some categories of unfair‑competition claims were dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether JDM pleaded protectable trade secrets under AUTSA | JDM: alleged detailed categories (PPC, email copy, landing‑page testing, call‑center metrics, training videos, proprietary spreadsheets), economic value, and reasonable secrecy measures | Defs: allegations are conclusory; some materials publicly accessible or general knowledge; insufficiently particularized; no plausible misappropriation | Court: pleadings sufficiently plausible as to trade secrets and misappropriation for Will and Fine; AUTSA claims survive as to them; dismissed as to Godinez and Uretz for lack of plausible misappropriation facts; Impact Partnership dismissed for failure to plead its knowledge/use |
| Whether confidentiality agreement is an unenforceable noncompete | JDM: agreement protects compilations/"know‑how" and excludes public info; valid confidentiality protection | Defs (Fine): definition overbroad (captures public or employee‑learned info) so functions as an invalid noncompete | Court: agreement not facially overbroad like Orca I; reads to cover recorded compilations (spreadsheets, etc.) and excludes public domain; breach claim against Fine may proceed |
| Scope and viability of common‑law unfair competition claim | JDM: unfair competition is flexible and can include misappropriation and other wrongful business acts (no need to allege public confusion if parties compete) | Defs: AUTSA preempts misappropriation‑based unfair competition; Arizona law focuses on public confusion or traditional theories; novel theories (computer fraud, trespass, conversion) should not be recognized | Court: AUTSA preempts unfair‑competition claims that are trade‑secret misappropriation; JDM may plead unfair competition limited to misappropriation of non‑trade‑secret confidential info (leave to amend); dismissed other novel theories (some with prejudice) |
| Pleading standard and relief for ancillary claims (civil conspiracy, aiding/abetting, unjust enrichment) | JDM: conspiracy/aiding claims supported by allegations of coordination, similar websites/AdWords purchases, data transfers and deletions; unjust enrichment based on wrongful benefit | Defs: many allegations speculative, on information and belief, or fail to show benefit or underlying tort as to some defendants | Court: conspiracy and aiding/abetting survive as to Will and Fine (sufficient factual nexus); dismissed as to Godinez, Uretz and Impact Partnership; unjust enrichment dismissed for failure to allege conferral of a benefit |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes plausibility pleading standard)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Orca Commc’ns Unlimited, LLC v. Noder, 337 P.3d 545 (Ariz. 2014) (AUTSA preempts trade‑secret misappropriation causes; non‑preempted common‑law claims may survive for confidential info that is not a trade secret)
- Orca Commc’ns Unlimited, LLC v. Noder, 314 P.3d 89 (Ariz. Ct. App. 2013) (confidentiality covenant can be an unenforceable noncompete if overbroad)
- Enterprise Leasing Co. of Phoenix v. Ehmke, 3 P.3d 1064 (Ariz. Ct. App. 2000) (trade‑secret protection can extend to compilations and market‑research style materials)
- SI Handling Sys., Inc. v. Heisley, 753 F.2d 1244 (3d Cir. 1985) ("know‑how" protects recorded compilations, not mere employee skill)
- Imax Corp. v. Cinema Tech., Inc., 152 F.3d 1161 (9th Cir. 1998) (trade secret pleadings must describe subject matter with sufficient particularity)
- Boice v. Stevenson, 187 P.2d 648 (Ariz. 1947) (historic statements about public‑confusion test in unfair competition)