EI DuPont de Nemours and Co. v. KOLON INDUSTRIES

• Decision Date: 27 August 2009
• Docket Number: Civil Action No. 3:09cv58.
• Parties: E.I. DuPONT DE NEMOURS AND CO., Plaintiff, v. KOLON INDUSTRIES, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

688 F.Supp.2d 443

E.I. DuPONT DE NEMOURS AND CO., Plaintiff, v. KOLON INDUSTRIES, INC., et al., Defendants.

Civil Action No. 3:09cv58.

United States District Court, E.D. Virginia, Richmond Division.

August 27, 2009.

Rodney A. Satterwhite, Brian Charles Riopelle, Kristen Marie Calleja, McGuirewoods LLP, Richmond, VA, Kent Alan Gardiner, Crowell & Moring LLP, Washington, DC, for Plaintiff.

Dana Johannes Finberg, Rhodes Beahm Ritenour, Leclair Ryan PC, Richmond, VA, Scott Mitchell Flicker, Paul Hastings Janofsky & Walker LLP, Washington, DC, Victoria Anne Cundiff, Paul Hastings Janofsky & Walker LLP, New York, NY, for Defendants.

MEMORANDUM OPINION

ROBERT E. PAYNE, Senior District Judge.

This matter is before the Court on: (1) Kolon Industries, Inc.'s Motion to Dismiss (Docket No. 9); (2) DuPont's Motion to Dismiss Kolon's Counterclaim (Docket No. 27); and (3) the third-party Defendants' Motion to Dismiss Kolon's Third-Party Complaint (Docket No. 30). For the reasons set forth below, Kolon Industries, Inc.'s Motion to Dismiss will be denied, DuPont's Motion to Dismiss Kolon's Counterclaim will be granted, with Kolon afforded leave to amend the Counterclaim, and the third-party Defendants' Motion to Dismiss will be granted.

BACKGROUND

E.I. du Pont de Nemours and Co. ("DuPont") designs, manufactures, and sells KEVLAR aramid fiber, which is a high-strength fiber used in ballistics applications and protective apparel. Compl. at ¶ 2. According to the Complaint, "manufacturing aramid fiber is a highly complex and technical process. As a result, there are very few companies in the world who can manufacture a marketable aramid fiber product with market acceptable properties." Compl. at ¶ 11.

As a result of over 40 years of research and development, DuPont has allegedly developed the technology to produce the "highest quality" aramid fiber "more quickly and efficiently than any other manufacturer." See Compl. at ¶¶ 10-11. For over ten years, Kolon Industries, Inc. ("Kolon") has attempted to produce a market-acceptable aramid fiber, but has met with little commercial success. Within the past three years, however, Kolon's product offering has dramatically improved. Compl. at ¶ 4,

Due to its commercially valuable nature, DuPont "subjects the information relating to KEVLAR to . . . formidable physical security at its facilities," and it also implements significant computer network security measures. Compl. at ¶ 21. Moreover, DuPont requires all of its employees who have access to this information to sign confidentiality agreements upon their arrival at DuPont. These confidentiality agreements require employees to pledge that they will not "disclose or use at any time either during or subsequent to said employment, any secret or confidential information of Employer of which Employee becomes informed during said employment." Compl. at ¶ 13. Additionally, upon the termination of an employee's tenure at DuPont, DuPont requires all employees to sign an Employee Termination Statement, wherein they agree "not to use or divulge at any time any secret or confidential information of said Company, without Company's consent." Compl. at ¶ 18.

On February 3, 2009, after allegedly discovering that the Defendants had wrongfully obtained DuPont's trade secrets and confidential information, DuPont filed the pending action against Kolon and Kolon USA, Inc.¹ Specifically, DuPont has alleged that Kolon attempted to bypass the difficult research and development phase of designing and learning how to manufacture aramid fiber by enticing certain DuPont employees and consultants to divulge trade secret and confidential information about DuPont's manufacturing process and corporate strategy with respect to KEVLAR aramid fiber. Compl. at ¶¶ 46-50.

In support of this contention, DuPont has alleged that Kolon actively sought the assistance of a former DuPont employee, Michael Mitchell ("Mitchell"), to help with the product development and marketing of aramid fiber. Compl. at ¶ 27. While employed by DuPont, "Mitchell had access to confidential and trade secret information regarding the manufacture, marketing, and sale of KEVLAR aramid fiber, from its component parts and properties to the machinery settings used to meet the needs of individual customers." Compl. at ¶ 24. On February 6, 2006, Mitchell's employment with DuPont ended.

Within a matter of weeks, Mitchell was invited to meet with the President of Kolon USA, Inc. in New York to discuss the possibility of assisting Kolon with the development of Kolon's aramid-fiber product. Compl. at ¶ 25. Two weeks after this meeting, Mitchell was contacted by another high-level technical manager with Kolon, and Mitchell was then asked a number of technical questions concerning his knowledge of DuPont's aramid-fiber manufacturing process. See Compl. at ¶ 26. After these conversations Mitchell was dispatched to Korea where he met with a number of Kolon officials. While in Korea, Mitchell was again asked "many specific questions about DuPont's technology, and specifically about DuPont's method of operation in certain areas of the aramid-fiber process." Corapl. at ¶ 29.

After Mitchell returned from Korea, Kolon engaged him to sell and market its aramid-fiber product in the United States. To perform these services, Mitchell formed Aramid Fiber Systems, LLC, which contracted directly with Kolon to market aramid fiber in the United States. Once employed by Kolon, Mitchell was allegedly pressured by various Kolon executives to disclose specific details about DuPont's aramid-fiber technology. See Compl. ¶¶ 29, 31-34. This pressure was successful, and Kolon was able to extract confidential information and trade secrets from Mitchell concerning the technical specifications of KEVLAR aramid fiber. Compl. at ¶ 34. This disclosure allegedly occurred in violation of the confidentiality agreement and the Employee Termination Statement, both of which were signed by Mitchell while at DuPont. See Compl. at ¶¶ 13, 18.

In addition, DuPont alleges that Kolon made a "concerted effort to recruit other current and former DuPont employees who possess information about its aramid fiber manufacturing process." Compl. at ¶ 43. And, Kolon further instructed Mitchell to recruit a technical consultant to assist Kolon in solving its manufacturing issues. See Compl. at ¶ 46.

Kolon also solicited DuPont's long-standing customers and made certain representations to those customers indicating that Kolon could imitate DuPont's high-quality product. Compl. at ¶ 37. Specifically, Kolon notified these customers that former DuPont employees had assisted Kolon in making dramatic improvements to its technology. Compl. at ¶ 39. Moreover, Kolon advised potential customers that it could undercut DuPont's pricing because of its knowledge of DuPont's rebate practices. Compl. at ¶ 37.

Succinctly stated, DuPont alleges that Kolon "used DuPont's confidential information and trade secrets to compete with DuPont . . . and to improve its process for producing aramid fiber, with a resulting increase in range of products, production, and quality." Compl. at ¶¶ 35, 36. Accordingly, DuPont filed the pending Complaint, which asserts six counts against Kolon: (1) a violation of the Virginia Uniform Trade Secrets Act, Va.Code § 59.1-341; (2) Conspiracy to Injure Another in Trade, Business or Reputation, Va.Code § 18.2-499 et seq. ("Statutory Conspiracy"); (3) Tortious Interference With a Contract; (4) Tortious Interference With a Business Expectancy; (5) Conversion; and (6) Civil Conspiracy.²

On April 20, 2009, Kolon filed a Counterclaim against DuPont pursuant to the Sherman Act Section 2 and Clayton Act Section 16 for monopolization and attempted monopolization of the para-aramid fiber market. See Defs' Answer at 35. Kolon also filed a Third-Party Complaint against Mitchell and Aramid Fiber Systems, LLC asserting two counts: (1) Breach of Contract; and (2) Contribution.

Kolon has now filed a Motion to Dismiss Counts Two through Six of DuPont's Complaint, contending that these claims are preempted by the Virginia Uniform Trade Secrets Act. DuPont filed a Motion to Dismiss Kolon's Counterclaim, and Mitchell and Aramid Fiber Systems, LLC filed a Motion to Dismiss Kolon's Third-Party Complaint, seeking to dismiss the claims against them, or, in the alternative, to stay or sever the Third-Party Complaint. These motions have been fully briefed and are now ripe for decision.

DISCUSSION

I. The Applicable Legal Standard

A motion to dismiss under Fed.R.Civ.P. 12(b)(6) seeks to test the legal sufficiency of the factual allegations made in the Complaint. Under Fed.R.Civ.P. 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Id. As the Supreme Court held in Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the pleading standard that Rule 8(a) announces does not require "detailed factual allegations," but it demands more than an unadorned accusation. Id. at 555, 127 S.Ct. 1955. A pleading that offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Id. Nor does a complaint suffice if it tenders only "naked assertions" devoid of "further factual enhancement." Id. at 557, 127 S.Ct. 1955.

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted by the court as true, to "state a claim to relief that is plausible on its face." Id. at 570, 127 S.Ct. 1955. A claim has facial "plausibility" when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556, 127 S.Ct. 1955. 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. Where a complaint pleads facts that are ...