L–3 Commc'ns Corp. v. Jaxon Eng'g & Maint., Inc.

CourtUnited States District Courts. 10th Circuit. United States District Court of Colorado
Citation863 F.Supp.2d 1066
Decision Date27 March 2012
Docket NumberCivil Action No. 10–cv–02868–MSK–KMT.
PartiesL–3 COMMUNICATIONS CORPORATION; and L–3 Services, Inc., Plaintiffs, v. JAXON ENGINEERING & MAINTENANCE, INC.; Joni Ann White; Randall K. White; Scott White; Susan Rettig; Charles Rettig; James Youngman; Jerry Lubell; Kelly Rice; John McClure; and John Does 1–25, Defendants.

863 F.Supp.2d 1066

L–3 COMMUNICATIONS CORPORATION; and L–3 Services, Inc., Plaintiffs,
v.
JAXON ENGINEERING & MAINTENANCE, INC.; Joni Ann White; Randall K. White; Scott White; Susan Rettig; Charles Rettig; James Youngman; Jerry Lubell; Kelly Rice; John McClure; and John Does 1–25, Defendants.

Civil Action No. 10–cv–02868–MSK–KMT.

United States District Court,
D. Colorado.

March 27, 2012.


[863 F.Supp.2d 1072]


Benjamin G. Chew, Rory Edward Adams, Patton Boggs, LLP, Washington, DC, Karen Lisa Solomon Weiss, Steven Leon Levitt, Steven L. Levitt & Associates, P.C., Williston Park, NY, Suzanne Maureen Parker, Parker Intellectual Property Law, P.C., Annapolis, MD, Thomas Francis Daley, L–3 Communications Corporation, Bristol, PA, for Plaintiff.

Charles Edward Swanson, Daniel Edward Johnson, Jennette C. Roberts, Steven Michael Masiello, Timothy Ryan Odil, McKenna Long & Aldridge, LLP, Denver, CO, Lora Ann Brzezynski, McKenna Long & Aldridge, LLP, Washington, DC, for Defendant.


OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

MARCIA S. KRIEGER, District Judge.

THIS MATTER comes before the Court pursuant to the Defendants' Motion to Dismiss (# 47), the Plaintiffs' response (# 50), and the Defendants' reply (# 55); and the Defendants Objections (# 83) to the Magistrate Judge's July 18, 2011 Minute Order (# 70) and ensuing Protective Order (# 82) granting the Plaintiffs' Motion for Entry of a Protective Order (# 62), the Plaintiffs' response (# 84), and the Defendants' reply (# 88).

FACTS

Although the Amended Complaint (# 33) contains some 400 allegations spread over 87 pages, the underlying allegations can be simplified. The Plaintiffs (collectively, “L3”) are engaged in the business or providing machinery and services designed to test the protective measures found in electronic equipment against damage from electromagnetic pulses. L3 alleges that, over the years, its employees—including some of the individual Defendants herein who were formerly employed by L3—invented new testing equipment, improved on existing equipment, and otherwise devised new and more effective ways of conducting such testing. L3 alleges that each of these inventions or improvements, along with other general business information such as customer lists and pricing data, constitute trade secrets belonging to L3. It contends that each L3 employee, including the individual Defendants herein, contractually agree to maintain the confidentiality of L3's trade secret information.

[863 F.Supp.2d 1073]

L3 contends that in or about 2007, Defendant Randall White, an L3 employee, devised a plan to leave L3 and create a competing business entity. While still employed by L3, Mr. White allegedly met with L3's major customers to convince them to support his new, competing business, and he began using L3's internal acquisitions systems to purchase equipment that would later be diverted to the new business. In May 2008, Mr. White and his wife, Defendant Joni White (who was not an L3 employee), incorporated Defendant Jaxon Engineering and Maintenance, Inc. (“Jaxon”). Thereafter, Mr. White and certain L3 employees, named as Defendants here, continued to acquire equipment through L3 with the intention of later transferring it to Jaxon, and/or acquired other items of L3's trade secret information in order to give Jaxon access to that material.

In July 2009, although it was not yet operational, Jaxon succeeded in obtaining certain testing contracts from Serco, one of L3's major clients. L3 contends that these contracts were awarded as the result of collusion between Mr. White and Donald Eich, a Serco representative with whom Mr. White had worked closely while employed at L3. According to L3, Mr. White and Mr. Eich conspired to ensure that the contracts that were awarded to Jaxon were either drafted in such a way that L3 would be unable to meaningfully compete for them, or that L3 simply was not notified about the opportunity to bid. Jaxon's bids were prepared by Mr. White and relied heavily on L3's trade secret information. The Amended Complaint alleges that Jaxon continues to compete with L3 by improperly using L3's trade secret information.

Much like the answer to a law school examination, L3's 24–claim Amended Complaint asserts a wide variety of legal theories for recovery on these facts: (i) violation of the Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1961 et seq., in that Jaxon (and its participation with certain individual Defendants) constitutes an “enterprise,” in furtherance of which the various Defendants have engaged in a pattern of predicate criminal offenses of mail and wire fraud; (ii) conspiracy to violate RICO, based on essentially the same facts; (iii) violation of the Colorado Organized Crime Control Act (“COCCA”), C.R.S. § 18–17–101 et seq.; and (iv) conspiracy to violate COCCA, all based on essentially the same facts as the RICO claim(s); (v) and (vi) patent infringement, apparently asserted only against Jaxon, on the grounds that Jaxon is infringing upon two patents owned by L3; (vii) violation of the Colorado Uniform Trade Secrets Act, C.R.S. § 7–74–101 et seq., against all Defendants; (viii)-(xi) common-law breach of contract claims against the individual Defendants, with each separate claim relating to different contracts that each individual Defendant entered into with L3; (xii) common-law conversion against all Defendants, insofar as each Defendant allegedly converted non-trade secret physical property belonging to L3; (xiii) a claim sounding in false advertising, in violation of the Lanham Act, 15 U.S.C. § 1125(a), against all Defendants insofar as the Defendants solicited contracts from Serco and others by representing that Jaxon was capable of legally providing the testing services it was bidding for when, in fact, it was unable to do so without improperly employing L3's trade secrets; (xiv) a common-law claim for tortious interference with prospective business advantage against all Defendants, insofar as the Defendants improperly solicited contracts from Serco that would otherwise have been awarded to L3; (xv) a common-law claim for breach of fiduciary duty against those Defendants who were formerly employed by L3; (xvi)

[863 F.Supp.2d 1074]

a replevin claim that L3 has since agreed to withdraw; (xvii) a common-law claim for unjust enrichment against all Defendants; (xviii) a claim for common-law conspiracy against all Defendants; (xix) a claim for civil theft in violation of C.R.S. § 18–4–405 against those Defendants who were formerly employed by L3, of somewhat uncertain provenance—it is not clear whether L3 is alleging that the material stolen are the physical goods and trade secret materials, or whether the stolen material is “compensation” that the Defendants received from L3 while they simultaneously conspired to develop and stock Jaxon, or whether the civil theft claim is premised on both theories; (xx)–(xxiv) common-law fraud claims against each of the former L3 employee Defendants, on the grounds that representations made by these Defendants to L3 in their employee timesheets and records showing work on L3's behalf were false; (xxv) violation of the Sherman Antitrust Act, 15 U.S.C. § 1 et seq., against Randall White, Joni White, Scott White, Susan Retting, and Jaxon, insofar as these Defendants conspired with Mr. Eich to rig bidding on Serco contracts such that Jaxon would receive the contracts even where L3 submitted a lower-cost bid; and (xxvi) statutory unfair competition under C.R.S. § 18–4–405 against Jaxon, based on essentially the same facts as the Lanham Act claim previously described.

The Defendants move (# 47) to dismiss the Amended Complaint or, in the alternative, for a more definite statement. Rather than to summarize the arguments contained in the Defendants' 53–page motion and 34–page supporting brief in this portion of the Order, the Court will defer the discussion of the issues raised by the Defendants to the appropriate portions of the analysis.

Notwithstanding the pending Motion to Dismiss, the parties proceeded to commence discovery. On July 1, 2011, L3 moved (# 62) for a protective order, explaining that both sides were unwilling to produce business, technical, financial, and trade secret discovery, among other things, without the safety of a protective order that would prevent undue dissemination of such material. The motion recited that the parties had generally agreed upon a protective order containing two tiers of confidentiality—a tier for simple “confidential” information and a second tier that would be designated “attorneys' eyes only”—but the parties could not agree as to whether certain categories of individuals would be given access to one or both tiers. As relevant here, the parties agreed that each side would appoint one “Technical Advisor” that would be granted access to certain material for the purpose of providing interpretation and advice to counsel. However, the Defendants objected to two aspects of this proposal: (i) that the Technical Advisors would be granted access to material designated as “attorneys' eyes only,” and (ii) the fact that L3 intended to designate Charles Crain, a current employee of L3, as its advisor, rather than a disinterested non-employee. L3's motion sought resolution of whether Mr. Crain could serve as L3's Technical Advisor and, if so, whether Mr. Crain would be given access to “attorneys' eyes only” material.

The Court referred L3's motion to the Magistrate Judge and on July 18, 2011, following a hearing, the Magistrate Judge entered a Minute Order (# 70) granting, in part, L3's motion. Specifically, the Magistrate Judge ruled that Mr. Crain would be permitted, as L3's Technical Advisor, to view “attorneys' eyes only” material, but that his access to such material would be limited to “any successful bids made by Defendants prior to November 23, 2010, the date this matter was filed.” As directed by the Magistrate...

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