Corporate Claims Mgmt., Inc. v. Shaiper (In re Patriot Nat'l Inc.)

• Decision Date: 08 August 2018
• Docket Number: Case No. 18-10189 (KG) (Jointly Administered),Adv. Pro. No. 18-50307 (KG)
• Citation: 592 B.R. 560
• Parties: IN RE: PATRIOT NATIONAL INC., et al., Debtors. Corporate Claims Management, Inc., Plaintiff, v. Michelle Shaiper and Brentwood Services Administrators, Inc., Defendants.
• Court: U.S. Bankruptcy Court — District of Delaware

592 B.R. 560

IN RE: PATRIOT NATIONAL INC., et al., Debtors.Corporate Claims Management, Inc., Plaintiff,

v.Michelle Shaiper and Brentwood Services Administrators, Inc., Defendants.

Case No. 18-10189 (KG) (Jointly Administered)

Adv. Pro. No. 18-50307 (KG)

United States Bankruptcy Court, D. Delaware.

Signed August 8, 2018

Brenna Anne Dolphin, Carl N. Kunz, III, Morris James LLP, Wilmington, DE, Gianfranco Finizio, David M. Posner, Kilpatrick Townsend & Stockton LLP, New York, NY, for Plaintiff.

Michael Joseph Joyce, O'Kelly Ernst & Joyce, LLC, Mark L. Desgrosseilliers, Ericka Fredricks Johnson, Womble Bond Dickinson (US) LLP, Wilmington, DE, Tim K. Garrett, Russell E. Stair, Bass, Berry & Sims PLC, Nashville, TN, for Defendants.

OPINION

KEVIN GROSS, U.S.B.J.

Corporate Claims Management, Inc. ("CCMI" or the "Company") brings this adversary proceeding against Michelle Shaiper ("Shaiper") and Brentwood Services Administrators, Inc. ("Brentwood") (collectively with Shaiper, the "Defendants"). In a thirteen count complaint (the "Complaint"), CCMI alleges that through use of the Company's trade secrets, confidential and proprietary information (collectively, the "Misappropriated Information"), Defendants stole customers and employees under a pre-meditated course of action involving Shaiper leaving CCMI to join Brentwood. CCMI states that such actions led to a breach of Shaiper's contracts with the Company, a misappropriation of trade secrets and several other tortious actions.

Defendants moved to dismiss the Complaint. They filed separate motions for judgment on the pleadings (the "Motion" or "Motions") pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, made applicable by Bankruptcy Rule 7012.

Facts ¹

CCMI provides the risk management community with custom-tailored, high-quality claims administrative services and risk management information systems designed to the unique specifications of each customer. Compl. ¶ 10. Brentwood is also a provider of insurance-related services and is in a field similar to CCMI. Compl. ¶ 35. CCMI places an emphasis as a company on its relationships with its customers and its dedication to, and development of, its employees. See Compl. ¶¶ 12-14. Shaiper worked for CCMI from April 1996 to December 2017, acting as Chief Operations Officer (COO) prior to her departure from the Company. Compl. ¶¶ 15, 17. Due to her position as COO, Shaiper had unique access to detailed information regarding CCMI's customer base and employees. Compl. ¶¶ 19-20.

In April 2015, Patriot National, Inc. ("Patriot" or the "Debtor") acquired CCMI. Compl. ¶ 11. As part of the acquisition, Shaiper executed an Employment Agreement {the "Employment Agreement") and a Confidentiality, Non-Interference, and Invention Assignment Agreement (the "Non-Interference Agreement"). Compl. ¶ 16. In the Non-Interference Agreement, Shaiper acknowledged that through her position as COO she would acquire confidential information, which could include trade secrets, and she agreed not to engage in any interfering activities during her employment.² Compl. ¶¶ 23-25.

More than three years later, on December 12, 2017, Shaiper received an employment offer from Brentwood. Comp. ¶ 32. After receiving the offer, and while still employed at CCMI, Shaiper held a meeting (the "Meeting") with several CCMI employees to discuss her future plans. Id. At that meeting, Shaiper allegedly stated the following:

[J]ust know that there is a bigger plan, and I would like to see everybody part of that plan. I'm not going to say too much more about what the plan is, but you're all in our plan...[t]here are people that are going to be here to continue to service our accounts until we figure out where we are all going to land together.

...

We have to try to keep our clients the best that we can, so we have to have some people that are going to move forward and try to retain those clients, maybe somewhere else, and people that stay here for a while and keep things alive and going until we can all be together as a team again. It just has to be somewhere else.

...

The idea is to get everybody to move over to where we're going, I don't know if that's [going to] happen, but I would say, get your resumes together because it'd be stupid not to.

Compl. ¶ 33. Shortly after the Meeting, Shaiper tendered her resignation. Compl. ¶ 34. CCMI ultimately terminated Shaiper for cause on December 29, 2017,³ and she began work at Brentwood in January 2018.⁴ Id.

Since Shaiper's departure, Brentwood has allegedly solicited and hired thirty CCMI employees, representing more than half of CCMI's workforce. Compl. ¶ 37. Employees have continued to leave CCMI for Brentwood, taking CCMI customer information with them, as recently as March 15, 2018. Compl. ¶ 42. Brentwood has also allegedly acquired fifteen CCMI customers, representing an aggregate annual revenue of approximately $3.4 million, nearly half of CCMI's annual revenue. Compl. ¶ 40.

On January 30, 2018, CCMI, along with the Debtor, filed a Chapter 11 petition (the "Petition"). See In re Patriot National Inc. , No. 18-10189 (KG) D.I. 1 (Bankr. D. Del. Jan. 30, 2018). CCMI initiated this adversary proceeding by filing the Complaint on March 23, 2018. See CCMI v. Shaiper , No. 18-50307 (KG), D.I. 1 (Bankr. D. Del. March 23, 2018).

Jurisdiction

The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334. Venue in the District of Delaware is proper pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core proceeding under 28 U.S.C. § 157(b) arising under the Bankruptcy Code.

Legal Standard

While Defendants seek judgment on the pleadings pursuant to Federal Rule of Civil Procedure Rule 12(c), the Court will analyze the Motions under Federal Rule of Civil Procedure 12(b)(6), made applicable by Bankruptcy Rule 7012(b). See In re Fedders , 422 B.R. 5, 9-10 (Bankr. D. Del. 2010) ("The standard for a Rule 12(c) motion is the same as the standard for a Rule 12(b)(6) motion."). Rule 12(b)(6) provides for dismissal if a complaint fails to state a claim upon which relief can be granted, and is associated with Federal Rule of Civil Procedure 8(a)(2), made applicable by Bankruptcy Rule 7008, which states that a complaint fails unless it contains "a short and plain statement of the claim showing that the pleader is entitled to relief." The Supreme Court observed that "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Papasan v. Allain , 478 U.S. 265, 285, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ). The Twombly standard is one of plausibility and not probability "[and] simply calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of" the necessary element. Id. at 556, 127 S.Ct. 1955. In analyzing a complaint, the court will determine if a plaintiff has "nudged [their] claims across the line from conceivable to plausible." Id. at 570, 127 S.Ct. 1955.

The Supreme Court further addressed the Rule 8(a)(2) pleading standard in its Iqbal decision. See Ashcroft v. Iqbal , 556 U.S. 662, 677-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Under Iqbal , the Supreme Court affirmed that the Twombly standard applies to all civil suits in federal courts and further identified that "a court must accept as true all of the allegations contained in the complaint," and "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 678, 129 S.Ct. 1937. The Third Circuit in applying the Iqbal standard stated a two-part test:

First, the factual and legal elements of a claim should be separated. The [court] must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a [court] must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief.

Fowler v. UPMC Shadyside , 578 F.3d 203, 210-11 (3d. Cir. 2009). With these principles in mind, the Court will proceed with its analysis of the Motion.

Discussion

The Complaint raises three separate categories of claims: (1) claims grounded in bankruptcy law; (2) claims grounded in trade secret law; and (3) claims grounded in state tort law. The Court will address each category of claim in turn.

I. Bankruptcy Claims

A. Count One – Violation of the Automatic Stay

Section 362(a)(3) of the Bankruptcy Code provides that "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate" constitutes a willful violation of the automatic stay. "A violation of [ Section] 362(a)(3)...requires both (1) a post-petition act and (2) property of the estate." Pardo v. Nylcare Health Plans, Inc. (In re APF Co.) , 274 B.R. 408, 416 (Bankr. D. Del. 2001). Should a violation occur, Section 362(k)(1) subjects violators to liability for "actual damages, including costs and attorneys' fees, and, in appropriate circumstances ... punitive damages."

CCMI alleges that Defendants violated the automatic stay by obtaining, maintaining and continually using CCMI's Misappropriated Information. CCMI states that the Misappropriated Information constitutes property of the estate and Defendants have continued to use the Misappropriated Information to their benefit despite the invocation of the automatic stay on the bankruptcy filing date of January 30, 2018. The Court finds the Complaint sufficiently alleges claims under Section 362(a)(3) and (k).

The Complaint states in pertinent part that since leaving CCMI for Brentwood, "Shaiper continues to use [the Misappropriated Information] at Brentwood in direct violation of the...