Afs Logistics, L.L.C. v. Christopher R. W. Cochran, Alessandro Rustioni, & Freightwise, L.L.C., 3:16-3139
| Decision Date | 31 July 2017 |
| Docket Number | No. 3:16-3139,3:16-3139 |
| Parties | AFS LOGISTICS, L.L.C. v. CHRISTOPHER R. W. COCHRAN, ALESSANDRO RUSTIONI, and FREIGHTWISE, L.L.C. |
| Court | U.S. District Court — Middle District of Tennessee |
Presently pending is Defendants' motion to dismiss Plaintiff's first amended complaint (Docket Entry No. ("DE") 29), to which Plaintiff has filed a response. DE 32. Defendants have also filed a subsequent reply to Plaintiff's response. DE 51. This action is before the undersigned for all further proceedings pursuant to the consent of the parties and referral of the District Judge in accordance with 28 U.S.C. § 636(c). DE 37.
For the reasons set forth below, Defendants' motion (DE 29) is GRANTED IN PART and DENIED IN PART.1
The first amended complaint contains the following allegations. Plaintiff AFS Logistics, L.L.C. ("AFS" or "Plaintiff") is a limited liability company, with its corporate headquarters located in Shreveport, Louisiana, that handles transportation cost management and cargo logistics. DE 27 at 1, ¶ 5. Defendant FreightWise, L.L.C. ("FreightWise") is a Nevada limitedliability company formed by Defendants Christopher Cochran ("Cochran") and Alessandro Rustioni ("Rustioni") (collectively referred to as "Defendants") in September of 2014 whose business also involves transportation cost management. Id. at 2, 4, ¶¶ 8, 21.2 Cochran and Rustioni are former AFS employees who started FreightWise while they were still employed by AFS. Id. at 3-4, ¶¶ 13-14, 19-20. Both Cochran and Rustioni served in "sales leadership positions" at AFS, which purportedly gave them access to Plaintiff's "confidential and proprietary information including sales methodology." Id. at 3, ¶¶ 13-16.3 Cochran and Rustioni resigned from their positions at AFS in October of 2015 and January of 2016, respectively. Id. at 4, ¶¶ 25-26.
Plaintiff alleges that while employed by AFS, Defendants Cochran and Rustioni conspired to utilize AFS's "time and resources to secretly organize" FreightWise, a company that competes directly with AFS. Id. at 3-4, ¶ 18. Plaintiff specifically alleges that Defendants improperly solicited one of AFS's major clients, identified as "Client X," and ultimately convinced this client to breach its contract with AFS "with the intent of initiating business" with FreightWise. Id. at 5, ¶¶ 29-31. Plaintiff claims that because of their leadership positions at AFS, Cochran and Rustioni were aware of the contracts that AFS had entered into "with a large portion, if not all, of its clients," and were thus able to "intentionally and maliciously interfere[]" with all such contracts. Id. at 5, ¶ 33. Plaintiff does not identify any other examples of suchconduct, but alleges generally that Defendants "continue to have in their possession resources and confidential and proprietary information" belonging to AFS and that Defendants continue to use such resources and information "to unfairly compete with Plaintiff ... in furtherance of Defendant FreightWise's business objectives." Id. at 4-5, ¶ 27.
Plaintiff asserts that Cochran and Rustioni began "acting ... for the benefit of Defendant FreightWise" at least 10 months prior to their respective resignations from AFS. Id. at 6, ¶ 38. AFS claims that it did not become aware of such action until September of 2016, nearly one year after Defendant Cochran's resignation. Id. at 6, ¶ 40.
Based on the foregoing allegations, Plaintiff filed an amended complaint that contained eight counts: (I) breach of duty of loyalty; (II) conversion; (III) intentional interference with business relations; (IV) tortious interference with contract; (V) violation of the Tennessee Uniform Trade Secrets Act ("TUTSA"); (VI) conspiracy; (VII) a claim for injunctive relief; and (VIII) a claim for punitive damages. Id. 6-14, ¶¶ 35-103.4 Defendant argues that each of these counts should be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) due to Plaintiff's failure to state a claim on which relief can be granted, or, alternatively, based on the preemption provision of the TUTSA, which is discussed in detail below.
Review of a motion to dismiss for failure to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6) requires the court to "construe the complaint in the lightmost favorable to the plaintiff and accept all factual allegations as true." Laborers' Local 265 Pension Fund v. iShares Trust, 769 F.3d 399, 403 (6th Cir. 2014), cert. denied, 135 S. Ct. 1500, 191 L. Ed. 2d 452 (2015) (internal citation omitted). The court is not required, however, to accept as true any proffered legal conclusions. Merritt v. Mountain Laurel Chalets, Inc., 96 F. Supp. 3d 801, 811 (E.D. Tenn. 2015) (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932, 92 L. Ed. 2d 209 (1986)). In order to survive a motion to dismiss, the complaint in question must provide the grounds for the entitlement to relief that is sought, which "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957)); see also Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d. 868 (2009). The factual allegations contained in the complaint must be enough to demonstrate a plausible right to relief. Twombly, 550 U.S. at 555-61; Schneid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436-37 (6th Cir. 1988). Merely positing a theory of legal liability that is unsupported by specific factual allegations does not state a claim for relief that survives a motion to dismiss. Iqbal, 556 U.S. at 678-79.
For purposes of clarity, the Court will address each count alleged in the amended complaint separately. The Court begins with Count V, alleged violation of TUTSA, in light of its bearing on several of the remaining counts.
Plaintiff alleges that Defendants violated the TUTSA by misappropriating information from AFS's confidential client database to "obtain[] an unfair advantage when soliciting Plaintiff's existing clients." DE 27 at 10, ¶ 71. Plaintiff claims that Defendants further violated the TUTSA by improperly accessing a confidential "formula" that Plaintiff uses to establish benchmark market prices, calculate new prices, and establish "unique client pricing structures." Id. at 9-10, ¶ 66, 71. Plaintiff claims that both its database and formula represent trade secrets under the TUTSA. Id. at 10, ¶ 70.
Defendants argue, however, that such information does not represent a trade secret because Plaintiff has not alleged facts sufficient to identify the database and formula as trade secrets. DE 30 at 17. Defendants maintain that Plaintiff has failed to allege how or when Defendants improperly obtained information from the database and formula, and note that Plaintiff has failed to reveal the actual identity of "Client X," thus preventing Defendants from knowing "what they allegedly misappropriated or why Plaintiff believes they did so." Id. Defendants argue that Plaintiff has thus failed to sufficiently state a claim under Rule 8(a) of the Federal Rules of Civil Procedure.
The TUTSA defines a "trade secret" as follows:
Tenn. Code Ann. § 47-25-1702(4). The Sixth Circuit has identified several factors to consider in determining whether something constitutes a "trade secret" under this definition, including "the extent of public knowledge; measures taken to guard its secrecy; the value of the information both to the business and to its competitors; money that was spent to develop the information; and the ease or difficulty with which it could be acquired by outsiders." PartyLite Gifts, Inc. v. Swiss Colony Occasions, 246 F. App'x 969, 973 (6th Cir. 2007) (citing Wright Med. Tech., Inc. v. Grisoni, 135 S.W.3d 561, 589 (Tenn.Ct.App. 2001)). The Tennessee Court of Appeals has further described a trade secret as "any secret formula, process, pattern, device or compilation of information that is used in one's business and which gives him an opportunity to obtain an advantage over competitors who do not use it." Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 645 (Tenn. Ct. App. 1999) (internal citations and quotations omitted).
To establish a TUTSA violation, Plaintiff must also demonstrate that Defendants engaged in misappropriation of the alleged trade secret. "Misappropriation is defined in relevant part as either "acquisition ... by a person who knows or has reason to know that the trade secret was acquired by improper means," or disclosure without consent of a trade secret by a person who knows or has reason to know that it was "[a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use." Beijing Fito Med. Co., Ltd. v. Wright Med. Tech., Inc., No. 215-cv-02258-JPM-TMP, 2016 WL 502109, at *5 (W.D. Tenn. Feb. 8, 2016) (citing Tenn. Code Ann. § 47-25-1702(2)). "Improper means" includes "theft, bribery, misrepresentation,breach or inducement of a breach of a duty to maintain secrecy or limit use, or espionage through electronic or other means ...." Id. (citing Tenn. Code Ann. § 47-25-1702(1)).
In the amended complaint, Plaintiff states that its database and formula are not generally known by the public, are not readily ascertainable, and derive independent...
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