Orbital Eng'g v. DVG Team, Inc.
| Decision Date | 28 April 2023 |
| Docket Number | 2:22-CV-185-JPK |
| Parties | ORBITAL ENGINEERING, INC., Plaintiff, v. DVG TEAM, INC. and ZACHARY TOPOLL, Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
This matter is before the Court on motions to dismiss filed by Defendants DVG Team, Inc. (“DVG”) [DE 8] and Zachary Topoll [DE 10]. Plaintiff Orbital Engineering, Inc. (“Orbital”) pleads several state-law claims and a claim under the federal Defend Trade Secrets Act, alleging that Topoll, its former employee, illegally brought Orbital's confidential information to DVG, a competitor firm. Defendants seek to dismiss the complaint in its entirety.
The parties consented to have the case assigned to a United States Magistrate Judge for all further proceedings. [DE 15]. Therefore, this Court has jurisdiction pursuant to 28 U.S.C § 636(c) to decide the motions. For the reasons discussed below, the Court denies Topoll's motion. DVG's motion is granted as to Count I and Count III, but denied as to Count IV.
On a motion to dismiss, the Court considers the facts in the light most favorable to the non-movant, Orbital, accepting all well-pleaded facts and drawing all plausible inferences in Orbital's favor. See Jackson v. Blitt & Gaines P.C., 833 F.3d 860, 862 (7th Cir. 2016).
The complaint alleges as follows: Orbital is a company that provides engineering, design, and construction services for public utilities, among other industries. [Compl. ¶ 13]. One of Orbital's largest customers is the Northern Indiana Public Service Company (“NIPSCO”).
Orbital designs and provides NIPSCO with recloser devices[1], known as Vipers. [Id. ¶¶ 2, 26-28]. Defendant Zachary Topoll was the manager responsible for every aspect of Orbital's work for NIPSCO. In December 2021, Topoll was organizing a project to install 60 Vipers for NIPSCO in and around Valparaiso Indiana, during 2022 and 2023. This was a continuation of Orbital's work for NIPSCO in previous years. [Id. ¶¶ 39, 44].
In his role, Topoll had access to a variety of information that Orbital considers to be confidential and/or trade secrets including pricing models and methods, techniques for cost estimates, billing rates, and proprietary software. Orbital's employee handbook “require[d] Topoll to safeguard [Orbital's] confidential information during and after his employment.” [Id. ¶¶ 35, 38].
Unknown to Orbital, Topoll was being recruited by DVG, a rival firm that wanted to compete with Orbital for its NIPSCO work. Topoll “knew everything about Orbital's work for NIPSCO, and he knew how to replicate those services, start-to-finish, on behalf of a competitor.” On April 18, 2022, Topoll announced that he was resigning from his position at Orbital. Despite “pointed questions from [Orbital's] leadership,” he did not tell Orbital that he intended to join a competitor. [Id. ¶¶ 42-43]. Orbital's management asked Topoll to help transition his responsibilities and train his replacement, and he agreed. In that role, Topoll continued to work on the Valparaiso Viper project until his employment ended on April 29, 2022. He retained access to Orbital's confidential information until his last day of employment, although Orbital would not have permitted that if it had known he was going to join a competitor. [Id. ¶¶ 49-50].
Several weeks after his resignation, Orbital learned that Topoll had accepted a position with DVG. Topoll accepted DVG's offer while he was still employed by Orbital, knowing that he would eventually pursue the Valparaiso Viper project on DVG's behalf. [Id. ¶¶ 55-56].
Before hiring Topoll, DVG did not market itself as providing the kind of “utility engineering” services that Orbital offered to NIPSCO, and did not have the expertise to provide those services. But after hiring Topoll, DVG “targeted” the Valparaiso Viper project using the confidential information that Topoll learned during his employment with Orbital. Topoll knew about Orbital's pricing and cost structures, as well as the resources needed to complete the work, and Topoll and DVG “exploited that information to present a proposal intended to undercut Orbital” by offering to complete the work more quickly. Ultimately, NIPSCO awarded DVG 40 percent of its work from the Valparaiso Viper project, “jump-start[ing] a practice that would have taken [DVG] a significant investment of time and resources to develop.” [Id. ¶¶ 58-65].
Orbital alleges it sustained thousands of dollars in damages from the work it lost to DVG. Orbital brings claims for breach of fiduciary duty against both defendants (Count I); tortious interference with business relations against Topoll (Count II); aiding and abetting breach of fiduciary duty against DVG (Count III); and trade secret misappropriation, under the Defend Trade Secrets Act, against both defendants (Count IV). Defendants move to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6).
Dismissal under Rule 12(b)(6) is required if the complaint fails to describe a claim that is plausible on its face. Sharp Elecs. Corp. v. Metro. Life Ins. Co., 578 F.3d 505, 510 (7th Cir. 2009) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)). While a complaint does not need detailed factual allegations, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). The Seventh Circuit has described the standard for dismissal under Rule 12(b)(6) as follows:
First, a plaintiff must provide notice to defendants of her claims. Second, courts must accept a plaintiff's factual allegations as true, but some factual allegations will be so sketchy or implausible that they fail to provide sufficient notice to defendants of the plaintiff's claim. Third, in considering the plaintiff's factual allegations, courts should not accept as adequate abstract recitations of the elements of a cause of action or conclusory legal statements.
Because the parties' arguments overlap as to certain counts, the Court considers the counts in order, rather than separately addressing each defendant's motion.
Orbital brings a claim of breach of fiduciary duty under Indiana law. Generally, to prevail on a breach of fiduciary duty claim, a plaintiff must prove the existence of a fiduciary duty, a breach of the duty, and harm to the plaintiff caused by the breach. Franciscan All., Inc. v. Padgett, 180 N.E.3d 944, 951-52 (Ind.Ct.App. 2021). The parties agree that Topoll[2] owed Orbital a fiduciary duty of loyalty during his employment. See Kopka, Landau & Pinkus v. Hansen, 874 N.E.2d 1065, 1070 (Ind.Ct.App. 2007). In general terms, this duty precludes the employee from “engaging in conduct dealing with the subject matter of the agency for his own benefit or in derogation of the interests of his [employer].” Prudential Ins. Co. of Am. v. Crouch, 606 F.Supp. 464, 471 (S.D. Ind. 1985), aff'd, 796 F.2d 477 (7th Cir. 1986). The duty becomes more complicated when an employee leaves, or plans to leave, for a competitor:
Prior to his termination, an employee must refrain from actively and directly competing with his employer for customers and employees and must continue to exert his best efforts on behalf of his employer. An employee may make arrangements to compete with his employer, such as investments or the purchase of a rival corporation or equipment. However, the employee cannot properly use confidential information specific to his employer's business before the employee leaves his employ. These rules balance the concern for the integrity of the employment relationship against the privilege of employees to prepare to compete against their employers without fear of breaching their fiduciary duty.
SJS Refractory Co., LLC v. Empire Refractory Sales, Inc., 952 N.E.2d 758, 768 (Ind.Ct.App. 2011) (citing Kopka, Landau & Pinkus, 874 N.E.2d at 1070-71) (citations omitted)); see also Burns-Kish Funeral Homes, Inc. v. Kish Funeral Homes, LLC, 889 N.E.2d 15, 23-24 (Ind.Ct.App. 2008) ().
While the parties do not address this, case law suggests[3] that a breach of fiduciary duty claim cannot center on an allegation that the employee misappropriated trade secrets or confidential information because that claim would be preempted by the Indiana Uniform Trade Secrets Act (“IUTSA”). See HDNet LLC v. N. Am. Boxing Council, 972 N.E.2d 920, 924 (Ind.Ct.App. 2012); Ind. Code § 24-2-3. IUTSA “displaces all conflicting law of this state pertaining to the misappropriation of trade secrets, except contract law and criminal law.” § 24-2-3-1(c). The statute “abolishes all free-standing alternative causes of action for theft or misuse of confidential, proprietary, or otherwise secret information falling short of trade secret status (e.g. idea misappropriation, information piracy, theft or commercial information).” HDNet LLC, 972 N.E.2d 920, 924 (Ind.Ct.App. 2012) (quotation omitted); see Hartford Steam Boiler Inspection & Ins. Co. v. Campbell, No. 420CV00117SEBDML, 2021 WL 1225951, at *10 (S.D. Ind. Mar. 31, 2021) (...
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