ImageTrend, Inc. v. Locality Media, Inc.

• Decision Date: 22 November 2022
• Docket Number: 22-cv-0254 (WMW/DTS)
• Parties: ImageTrend, Inc., Plaintiff, v. Locality Media, Inc., et al., Defendants.
• Court: U.S. District Court — District of Minnesota

ImageTrend, Inc., Plaintiff,
v.
Locality Media, Inc., et al., Defendants.

No. 22-cv-0254 (WMW/DTS)

United States District Court, D. Minnesota

November 22, 2022

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

Wilhelmina M. Wright United States District Judge

This matter is before the Court on Defendants' April 23, 2022 motion to dismiss Plaintiff's amended complaint for lack of jurisdiction and failure to state a claim on which relief can be granted.^[1] (Dkt. 20.) For the reasons addressed below, Defendants' motion is granted in part and denied in part.

BACKGROUND

Plaintiff ImageTrend, Inc., is a Minnesota corporation that provides software used for data collection, resource management, reporting and analytics for public safety organizations nationwide. Defendant Locality Media, Inc., doing business as First Due (First Due), is a Delaware corporation, headquartered in New York, that provides software to fire departments. Defendant Richard French is a First Due employee.

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Defendants Richard Dutcher, Anne Hulsether, Victoria Koistinen and Nicholas Spring are First Due employees who formerly worked for ImageTrend.

ImageTrend alleges that two of its employees-namely, Elite Product Sales Executive Justin Dillard and Account Executive Joseph Robinson-resigned in January 2021 to work for First Due.^[2] Beginning in July 2021, Dillard began attempting to recruit other ImageTrend employees to work for First Due. Thereafter, First Due allegedly induced several former ImageTrend employees-including Dutcher, Hulsether, Koistinen and Spring-to steal ImageTrend's intellectual property both during and after their departure from ImageTrend.

ImageTrend executed a security scan of its network infrastructure in January 2022. During this investigation, ImageTrend learned that its Elite Platform-a cloud-based software platform for ImageTrend's customers-had been accessed by an IP address identical to an IP address consistently used by former ImageTrend employee Spring. In addition, ImageTrend discovered that this access to the Elite Platform occurred through an account created by an ImageTrend client-namely, the Staunton Fire Department in Staunton, Virginia. French, who began his employment with First Due in October 2021, also works for the Staunton Fire Department as an Elite System Administrator and, in that role, has access to ImageTrend's information. As part of its investigation, ImageTrend learned that the Elite Platform had been accessed via two Staunton Fire Department usernames on multiple occasions between October 2021 and January 2022.

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ImageTrend commenced this lawsuit in January 2022 and filed an amended complaint in April 2022. ImageTrend alleges that, as a result of the foregoing conduct, First Due gained illegal access to and acquired ImageTrend's confidential, nonpublic and proprietary information. Counts I and II allege that Defendants misappropriated ImageTrend's trade secrets in violation of state and federal law. Count III alleges that Dutcher, Hulsether and Koistinen breached their fiduciary duties to ImageTrend. Count IV alleges that First Due has been unjustly enriched. Count V alleges that Defendants engaged in a civil conspiracy to unlawfully solicit ImageTrend employees and misappropriate ImageTrend's trade secrets. Count VI alleges that Defendants engaged in civil theft of ImageTrend's personal property. Counts VII and VIII allege that First Due tortiously interfered with ImageTrend's contractual relations. And Count IX alleges that First Due and Hulsether engaged in corporate defamation. Defendants move to dismiss every count of ImageTrend's amended complaint.

ANALYSIS

A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A plaintiff need not prove his or her case at the pleading stage, nor do the pleadings require detailed factual allegations to survive a motion to dismiss. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); L.L. Nelson Enters., Inc. v. County of St. Louis, 673 F.3d 799, 805 (8th Cir. 2012) (observing that “specific facts are not necessary” and pleadings “need only give the [opposing party] fair notice of what the . . . claim is and the grounds upon which it rests” (internal quotation marks omitted)).

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To survive a motion to dismiss, a complaint must allege sufficient facts to state a facially plausible claim to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). Factual allegations that raise only a speculative right to relief are insufficient. Twombly, 550 U.S. at 555. A district court accepts as true all of the plaintiff's factual allegations and views them in the light most favorable to the plaintiff. Stodghill v. Wellston Sch. Dist., 512 F.3d 472, 476 (8th Cir. 2008). But legal conclusions couched as factual allegations are not accepted as true. Twombly, 550 U.S. at 555. And mere “labels and conclusions” or a “formulaic recitation of the elements of a cause of action” fail to state a claim for relief. Id.

Defendants move to dismiss ImageTrend's claims on several bases. The Court addresses each argument in turn.

I. Anti-SLAPP Statute

Defendants first argue that ImageTrend's claims are barred by New York's recently amended anti-strategic litigation against public participation (anti-SLAPP) statute. ImageTrend counters that New York's anti-SLAPP statute is inapplicable here.

As a threshold matter, the parties dispute whether Minnesota or New York law applies. “When deciding choice-of-law issues, the district court sitting in a diversity action generally applies the choice-of-law rules of the forum state.” Glob. Petromarine v. G.T. Sales & Mfg., Inc., 577 F.3d 839, 844 (8th Cir. 2009). Defendants do not thoroughly address the applicable choice-of-law analysis. But the Court need not resolve this issue. For the reasons addressed below, assuming without deciding that New York

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law applies, New York's anti-SLAPP statute does not warrant dismissal of ImageTrend's claims.

New York's anti-SLAPP statute provides that “[a] defendant in an action involving public petition and participation . . . may maintain an action, claim, cross claim or counterclaim to recover damages, including costs and attorney's fees, from any person who commenced or continued such action . . . without a substantial basis in fact and law.” N.Y. Civ. Rights Law § 70-a (emphasis added). “Anti-SLAPP laws are intended to deter actions filed to punish or harass a defendant for participating in public life.” Carroll v. Trump, 590 F.Supp.3d 575, 580 (S.D.N.Y. 2022). But New York's anti-SLAPP statute does not bar a plaintiff's claim. Id. at 582. Rather, the anti-SLAPP statute provides “the availability of monetary relief for the institution and continuation of baseless lawsuits in certain circumstances.” Id. Recent amendments to New York's anti-SLAPP statute “alter some New York procedures when applied to actions covered by the new law.” Id. But none of these amendments “creates a defense that would knock [a] plaintiff out of court if all the allegations of her complaint are true.” Id. “To put it another way, assuming that the facts are as plaintiff claims them to be, nothing in the anti-SLAPP law would defeat [a plaintiff's] complaint.” Id. (concluding that New York's anti-SLAPP statute does not create an affirmative defense).

Nothing in the anti-SLAPP statute displaces a cause of action or negates an essential element of ImageTrend's claims. Rather, the anti-SLAPP statute permits Defendants to seek damages from ImageTrend for commencing or maintaining a baseless

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lawsuit by asserting a counterclaim that Defendants would have the burden to prove. N.Y. Civ. Rights Law § 70-a. Moreover, on a motion to dismiss, the Court assumes that the facts alleged in ImageTrend's amended complaint are true. As such, New York's anti-SLAPP statute is not a basis for dismissing any of ImageTrend's claims.

For these reasons, the Court denies Defendants' motion to dismiss on this basis.

II. Misappropriation of Trade Secrets (Counts I and II)

Defendants next argue that ImageTrend fails to state a claim for misappropriation of trade secrets under state or federal law. Counts I and II of the amended complaint allege that Defendants misappropriated ImageTrend's trade secrets in violation of the Minnesota Uniform Trade Secrets Act (MUTSA) and the federal Defend Trade Secrets Act (DTSA), respectively.

Because MUTSA and DTSA are materially similar, courts analyze such claims together. See, e.g., Prime Therapeutics LLC v. Beatty, 354 F.Supp.3d 957, 967 (D. Minn. 2018). Both MUTSA and DTSA define a “trade secret” as information that “(1) is not generally known or readily ascertainable, (2) has value as a result of its secrecy, and (3) is the subject of reasonable efforts under the circumstances to protect its secrecy.” Wyeth v. Nat. Biologics, Inc., 395 F.3d 897, 899 (8th Cir. 2005) (citing Minn. Stat. § 325C.01, subdiv. 5); accord CPI Card Grp., Inc. v. Dwyer, 294 F.Supp.3d 791, 807 (D. Minn. 2018) (citing 18 U.S.C. § 1839(3)). “Misappropriation, in turn, is defined as the acquisition, disclosure, or use of another's trade secrets by improper means.” CPI Card Grp., 294 F.Supp.3d at 807-08 (internal quotation marks omitted) (citing Minn. Stat. § 325C.01, subdiv. 3; 18 U.S.C. § 1839(5)).

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MUTSA and DTSA define “improper means” as “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” Minn. Stat. § 325C.01, subdiv. 2; accord 18 U.S.C. § 1839(6). As such, to state a claim under MUTSA and DTSA, ImageTrend must allege facts that plausibly demonstrate that it has “trade secrets” and that Defendants “misappropriated” those trade secrets. Protege Biomedical, LLC v. Z-Medica, LLC, 394 F.Supp.3d 924, 938 (D. Minn. 2019).

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