Satcom Solution & Res. LLC v. Pope
| Decision Date | 17 April 2020 |
| Docket Number | Civil Case No. 19-cv-02104-CMA-GPG |
| Parties | SATCOM SOLUTION AND RESOURCES LLC, Plaintiff, v. FRED POPE, SATCOM RESOURCES LLC, and 6SOLE INC. Defendants. |
| Court | U.S. District Court — District of Colorado |
This matter comes before the Court on Fred Pope, Satcom Resources LLC (Satcom Resources), and 6Sole Inc.'s (6Sole) (collectively, Defendants) Motion to Dismiss the Complaint (D. 13)1, Plaintiff's response (D. 22), and Defendants' reply (D. 24). The motion has been referred to this Magistrate Judge for recommendation (D. 20).2 The Court has reviewed the pendingmotion, response, reply, and all attachments. The Court has also considered the entire case file, the applicable law, and is sufficiently advised in the premises. Oral argument is not necessary. This Magistrate Judge respectfully recommends that the motion be DENIED IN PART AND GRANTED IN PART for the reasons specifically set forth below.
The Court briefly summarizes the pertinent facts drawn from the Plaintiff's Complaint here and will elaborate as necessary in the analysis. (See D. 1). While the parties disagree as to many facts, the basic framework of this case is largely undisputed. For purposes of reviewing the Defendants' motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), this Court accepts "all well-pleaded factual allegations in the . . . complaint . . . as true and viewed in the light most favorable to the nonmoving party." Brown v. Montoya, 662 F.3d 1152, 1162 (10th Cir. 2011) (quoting Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir. 2006)); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Plaintiff Satcom Solution and Resources, LLC, is a Delaware limited liability company that operates an online marketplace for commercial satellite communications equipment and services in Colorado. (D. 1, pp. 1-2). Along with building and managing entire networks and assisting customers, Plaintiff also operates satcomresources.com, which contains resources for budgeting and designing satellite network solutions as well as a team of sales engineers who assist the customers from installation to commissioning of these networks. (Id., pp. 4-5). Plaintiff has over 20,000 systems deployed worldwide. (Id., p. 5).
Because Plaintiff has deployed so many systems, it has developed and maintained data regarding clients and vendors as well as specialized inventory and predictive ordering software. To protect and preserve its confidential information and trade secrets, Plaintiff uses or requires non-disclosure and confidentiality agreements, the return or restriction of access to all company property upon the termination of employment, as well as password protection and physical safeguards. (Id., pp. 13, 23). Moreover, Plaintiff does not share its customer and vendor information with the public. Plaintiff's website, however, does share product information, datasheets, product configurators, and engineering tools with the public. (Id., p. 4).
In January 2018, Pope contacted the President and CEO of Primrose Alloys, Inc. (Primrose), on behalf of Satcom Resources, LLC (Satcom Resources), a Delaware limited liability company, to discuss Primrose providing financing via asset and real estate purchases and forming a new entity, i.e., the Plaintiff. (Id., pp. 5-6). It is undisputed that Satcom Resources and Plaintiff entered into an Asset Purchase Agreement (APA). (D. 29, p. 5). Pursuant to the APA, Plaintiff agreed, among other things, to pay the purchase price of $1,121,551.36 in exchange for Satcom Resources' assets. (D. 1, p. 6). The APA was signed, and Pope executed a Continuing Guaranty agreement in March 2018. (Id., p. 37). On May 4, 2018, Pope created 6Sole LLC, a Colorado limited liability company and converted it to 6Sole Inc. (6Sole) in June 2019. (Id., p. 8; see also D. 26, p. 5).
While CEO of Plaintiff, Pope created an inventory management program called Magnetico. (D. 1, p. 8). During this time, Pope used Plaintiff's equipment and proprietary code to create a competing database called Magneteco and registered the copyright on the source code under 6Sole. (Id.). Furthermore, Pope saved the competing database called Magneteco to Plaintiff's servers. (Id., p. 9). Near the beginning of 2019, Plaintiff discovered that Satcom Resources over-valuedits existing inventory by approximately $90,407.02 from what was disclosed in the APA and that $152,471.23 worth of products were either missing or never existed. (Id., p. 9). Plaintiff further determined that Satcom Resources also withheld $87,862.90 in third-party payments sent to Pope rather than to Plaintiff. (Id.).
On May 22, 2019, Pope was terminated. (Id., pp. 9-10). After being notified of his termination, Pope logged into the Plaintiff's computer system, accessed Plaintiff's database, and downloaded Plaintiff's master customer and marketing distribution lists. (Id., p. 10). Thereafter, Plaintiff learned that Pope was operating a website (www.magneteco.com), which listed its intellectual property as owned by 6Sole LLC dba Magneteco. (Id., p. 10).
Plaintiff filed this action on July 22, 2019, against three named Defendants and twenty unknown Defendants. Between July 23 and July 25, 2019, Plaintiff served the three named Defendants. (D. 1). A Scheduling Conference was held on October 29, 2019. (D. 29, D. 30). On February 18, 2020, this Court granted the Defendants' Motion to Stay Initial Disclosures and Discovery Pending Resolution of Defendants' Motion to Dismiss. (D. 33). On April 14, 2020, Plaintiff voluntarily dismissed without prejudice Defendants Does 1-20. (D. 36, p. 1).
Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To state a claim that is plausible on its face, a complaint must "sufficiently allege[] facts supporting all the elements necessary to establishan entitlement to relief under the legal theory proposed." Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007).
A claim is not plausible on its face "if [the allegations] are so general that they encompass a wide swath of conduct, much of it innocent," and the plaintiff has failed to "nudge[ the] claims across the line from conceivable to plausible." Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 570). And a plaintiff may not rely on mere labels, conclusions, or formulaic recitation of the elements of a cause of action. Twombly, 550 U.S. at 555. During this stage of the litigation, the complaint does not need detailed factual allegations, but it must provide more in order to raise "a right to relief above the speculative level." Twombly, 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," the complaint has merely alleged but has failed to show "that the pleader is entitled to relief." Id. (citing FED. R. CIV. P. 8(a)(2)).
The Court has jurisdiction under 28 U.S.C. §§ 1331 and 1367. Plaintiff raises ten claims: (1) violation of 18 U.S.C. § 1836, et seq., by all Defendants for misappropriation of trade secrets; (2) violation of 18 U.S.C. § 2701, et seq., by Pope for obtaining, altering and preventing authorized access to wire or electronic communications; (3) violation of 18 U.S.C. § 1030, et seq., by Pope for computer fraud; (4) violation of Colorado Revised Statutes § 7-74-101, et. seq., by all Defendants for misappropriation of trade secrets; (5) violation of Colorado Revised Statutes §§ 18-4-408 and 18-4-405 by all Defendants for theft of trade secrets; (6) fraud by Pope and SatcomResources; (7) breach of fiduciary duty by Pope; (8) conversion by all Defendants; (9) breach of the APA by Pope and Satcom Resources; and (10) money due on guaranty by Pope. (D. 1).
Plaintiff alleges that all the Defendants violated the DTSA and the CUTSA, through Pope's actions, when Pope misappropriated Plaintiff's confidential information, proprietary database, computer source code, email lists, and client and vendor information. (D. 1, pp. 14-16; 22-25). Defendants argue that this cause of action should be dismissed for failure to state a claim because Plaintiff has not pleaded any facts demonstrating how Satcom Resources or 6Sole have allegedly "misappropriated" Plaintiff's trade secrets or client and vendor lists. (D. 13, pp. 2-3). Defendants further argue that Plaintiff's claims against Pope are conclusory and fail to properly allege what information constitutes a trade secret in its first cause of action. (Id., p. 3). Because the pleading requirements under the DTSA and CUTSA are substantially similar, this Court will address these claims concomitantly. See zvelo, Inc. v. Akamai Techs., Inc., No. 19-CV-00097-PAB-SKC, 2019 WL 4751809, at *2 (D. Colo. Sept. 30, 2019).
Under the DTSA, a plaintiff must establish: (1) "the existence of a trade secret that relates to a product or service used in, or intended for use in, interstate or foreign commerce;" (2) "the acquisition of the trade secret, or...
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