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Wilcox Industries Corp. v. Mark Hansen

May 7, 2012

WILCOX INDUSTRIES CORP.
v.
MARK HANSEN, ADVANCED LIFE SUPPORT TECHNOLOGIES, INC.



The opinion of the court was delivered by: Paul Barbadoro United States District Judge

Opinion No. 2012 DNH 092

MEMORANDUM AND ORDER

Wilcox Industries Corporation ("Wilcox") filed a complaint against Mark Hansen and Advanced Life Support Technologies, Inc. ("ALST"), alleging misappropriation of trade secrets and unfair competition, among other state law claims. Defendants move to dismiss all claims for failure to state a claim upon which relief may be granted. Alternatively, they have filed a motion for a more definite statement of claims. For the reasons provided below, I grant in part and deny in part the motion to dismiss and deny the motion for a more definite statement.

I. BACKGROUND

Wilcox manufactures military equipment, including a self-contained breathing apparatus that can be used in hazardous or contaminated environments. The device was initially called the SCOUT, and is now called the PATRIOT. Wilcox is currently working on developing the next-generation PATRIOT.

Hansen served as a consultant to Wilcox from 2003 until 2005, when Wilcox hired him as a full-time employee. He continued to work at Wilcox until June 2007, when he left the company to work as President of ALST, a company he founded in 2006.

During his tenure at Wilcox, Hansen was a member of the design teams that created the SCOUT/PATRIOT life support device. He had access to confidential information regarding Wilcox's advanced life support technology, including technical information relating to the development of the next-generation PATRIOT product. To protect the confidentiality of Wilcox's proprietary information, Wilcox and Hansen entered into a Nondisclosure and Nonsolicitation Agreement ("NDA") in 2003, whereby Hansen agreed to hold and maintain Wilcox's "confidential information" in the strictest confidence for the sole and exclusive benefit of Wilcox. The NDA defines confidential information to include all trade secrets, proprietary information, inventions, discoveries, methods, formulas, and the like. The NDA stipulates that the parties' obligations under the agreement survive termination of the business relationship.

At the same time, Hansen entered into a Royalty Agreement with Wilcox, under which he agreed to assign to Wilcox "all right[s], title, and interest in and to intellectual property, including rights under patent and copyright law, relating to the SCOUT or any products developed or relating to the SCOUT." Compl. ¶ 17, Doc. No. 1. In exchange, Wilcox agreed to pay Hansen a royalty amount based on the net billings for sales of the SCOUT and related accessories.

In August 2004, Hansen and several other Wilcox employees were named as inventors on a patent application for Wilcox's self-contained breathing apparatus technology that would later be used to create the SCOUT/PATRIOT. Several months later, Hansen entered into an Assignment Agreement with Wilcox, in which he assigned to it the full and exclusive rights, title, and interest to the patent application for the SCOUT technology. Much of the technology encompassed in the device is contained in Wilcox's published patent. That patent, however, does not disclose proprietary technical information about Wilcox's next-generation PATRIOT product.

Shortly after Hansen left Wilcox in 2006 to become the President of ALST, Wilcox and ALST entered into a consulting agreement. ALST agreed to serve as a consultant for Wilcox in the design and manufacture of its respirator systems and to provide training and support for those systems to Wilcox's customers. Hansen was the sole representative of ALST who thereafter provided consulting services to Wilcox. He traveled with Wilcox's employees to various customer locations throughout the world to market Wilcox's current PATRIOT product and to train customers on how to use the device. While serving as a representative of Wilcox in his consulting role, Hansen simultaneously marketed his own competing products and company to Wilcox's customers.

During the consulting relationship, Hansen also participated in meetings and communications that made him privy to confidential proprietary information regarding the development of Wilcox's next-generation PATRIOT device. Through those activities, Hansen and ALST were entrusted with trade secrets regarding the device, as well as confidential information about Wilcox's customers.

When the consulting relationship ended in February 2009, Hansen and ALST began to capitalize on the know-how they acquired while working with Wilcox. In spite of his obligations under the NDA, Hansen incorporated Wilcox's confidential and trade secret information pertaining to its next-generation life support device into ALST's competing product known as the SHIELD. In developing that product, Hansen also used the same technology that he had assigned to Wilcox in the Royalty Agreement, although he continued to receive royalties.

Hansen and ALST then began soliciting Wilcox's existing and prospective customers to purchase ALST's competing product using the confidential customer information and contacts that Wilcox had entrusted to them. In one instance, ALST entered into a contract to sell SHIELD units to the Los Angeles County Sheriff's Department. Hansen was aware that Wilcox was marketing its own PATRIOT product to this prospective customer. A final agreement was essentially in place between Wilcox and the Sheriff's Department when the contract was awarded instead to ALST.

Defendants also solicited Wilcox's customers by offering to service the PATRIOT products that had been previously purchased from Wilcox. Because Hansen is not a certified technician of Wilcox's products, any service work he performs on those products voids the warranty that Wilcox offers to its customers. While marketing their own products, Hansen and ALST also made "harmful false statements about Wilcox and its technology" to Wilcox's customers. Comp. ¶ 67, Doc. No. 1.

II. STANDARD OF REVIEW

To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must make factual allegations sufficient to state a claim to relief that is plausible on its face. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). A claim is facially plausible when it pleads "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (citations omitted).

In deciding a motion to dismiss, I must employ a two-pronged approach. See Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011). First, I must screen the complaint for statements that "merely offer legal conclusions couched as fact or threadbare recitals of the elements of a cause of action." Id. (citations, internal quotation marks, and alterations omitted). A claim consisting of little more than "allegations that merely parrot the elements of the cause of action" may be dismissed. Id. Second, I must credit as true all non-conclusory factual allegations and the reasonable inferences drawn from those allegations, and then determine if the claim is plausible. Id. The plausibility requirement "simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence" of illegal conduct. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). The "make-or-break standard" is that those allegations and inferences, taken as true, "must state a plausible, not a merely conceivable, case for relief." Sepulveda-Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010); see Twombly, 550 U.S. at 555 ("Factual allegations must be enough to raise a right to relief above the speculative level . . . ." (citation omitted)).

III. ANALYSIS

Wilcox alleges the following claims against both defendants: (1) misappropriation of trade secrets in violation of New Hampshire's version of the Uniform Trade Secrets Act; (2) common-law unfair competition; (3) unfair competition in violation of the New Hampshire Consumer Protection Act; and (4) intentional interference with contractual relations. Wilcox asserts four additional claims against Hansen: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) breach of fiduciary duty; and (4) unjust enrichment. Defendants move to dismiss all claims for failure to state a claim upon which relief can be granted. They argue that the common-law and statutory unfair competition, intentional interference with contractual relations, unjust enrichment, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing claims are all preempted by the New Hampshire Uniform Trade Secrets Act ("NHUTSA"). In addition, they contend that all claims are insufficiently pled. I discuss the preemption argument and the sufficiency of pleadings in turn.*fn1

A. Preemption by NHUTSA

Defendants argue that the NHUTSA preempts Wilcox's tort claims. The NHUTSA "displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret." N.H. Rev. Stat. Ann. § 350-B:7, I. The only exceptions to this provision are claims for contractual remedies, criminal remedies, and "[o]ther civil remedies that are not based on misappropriation of a trade secret." Id. § 350-B:7, II.

The preemption provision was designed to "preserve a single tort action under state law for misappropriation of a trade secret as defined in the statute and thus to eliminate other tort causes of action founded on allegations of misappropriation of information that may not meet the statutory standard for a trade secret." Mortgage Specialists, Inc. v. Davey, 153 N.H 764, 776 (2006) (internal quotation marks omitted). In essence, the NHUTSA classifies information either as a protected trade secret, as defined in the statute, or as unprotected general knowledge. Id. at 777. Claims based on unauthorized use of confidential information are preempted even if the information at issue is not a trade secret. Id.

The preemption provision applies when a claim is "based solely on, or to the extent that it is based on, the allegations or the factual showings of unauthorized use of information or misappropriation of a trade secret." Id. at 778 (internal quotation marks, alterations, and ellipses omitted). Thus, the facts alleged in support of a claim, rather than the label attached to it, determine whether that claim is preempted. Id. A claim survives to the extent that it alleges wrongful conduct independent of any alleged unauthorized use of information, provided that the independent allegations are sufficient to plead all elements of the claim. See id.

Here, Wilcox contends that defendants misappropriated confidential and trade secret information related to its next-generation PATRIOT device and its customers. To the extent that Wilcox relies on the same factual allegations for its remaining tort claims, those claims are preempted by the NHUTSA. Wilcox, however, makes further factual allegations that are not related to unauthorized use of information, namely that: (1) defendants marketed ALST and its competing SHIELD product to Wilcox's customers while ALST was acting as a consultant to promote Wilcox's PATRIOT device; (2) after the consulting relationship ended, defendants made "harmful false statements" about Wilcox and its technology to Wilcox's customers; and (3) defendants solicited Wilcox's customers by offering to service Wilcox's ...


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