Seneca Cos. v. Becker

• Decision Date: 17 September 2015
• Docket Number: No. 4:15–cv–00035–JEG,4:15–cv–00035–JEG
• Parties: Seneca Companies, Inc., Plaintiff, v. John Becker and Midway Industrial Supply, Inc., Defendants.
• Court: U.S. District Court — Southern District of Iowa

134 F.Supp.3d 1148

Seneca Companies, Inc., Plaintiff,

v.John Becker and Midway Industrial Supply, Inc., Defendants.

No. 4:15–cv–00035–JEG

United States District Court, S.D. Iowa, Central Division.

Signed September 17, 2015

Christine E. Bestor Townsend, Espnola F. Cartmill, Michael R. Reck, Belin McCormick, P.C., Des Moines, IA, for Plaintiff.

Bradley C. Obermeier, Duncan, Green, Brown & Langeness, PC, Des Moines, IA, David J. Goldstein, George R. Wood, Joseph D. Weiner, Littler Mendelson PC, Minneapolis, MN, for Defendants.

ORDER

JAMES E. GRITZNER

, Senior Judge, UNITED STATES DISTRICT COURT

This matter is before the Court on Motion by Defendant Midway Industrial Supply, Inc., (Midway) to dismiss the Amended Complaint by Plaintiff Seneca Companies, Inc., (Seneca) pursuant to Federal Rule of Civil Procedure 12(b)(6)

, or in the alternative, to transfer venue to the U.S. District Court for the District of Minnesota. Seneca resists Midway's Motion. The parties have not requested a hearing, and the Court finds a hearing is unnecessary. The Motion is fully submitted and ready for consideration.

I. FACTUAL AND PROCEDURAL BACKGROUND

Courts consider motions to dismiss "accepting the allegations contained in the complaint as true and drawing all reasonable inferences in favor of the nonmoving party." Cockram v. Genesco, Inc., 680 F.3d 1046, 1056 (8th Cir.2012)

(citation omitted).

Seneca is an Iowa corporation headquartered in Iowa that distributes and installs industrial paint finishing systems. Midway is one of Seneca's competitors. Defendant John Becker (Becker) is a resident of Minnesota and former sales representative for Seneca. Becker worked for Seneca from 2000 until his voluntary resignation on January 23, 2015, effective that day. While Seneca's employee, Becker had access to Seneca's confidential and proprietary business information. Seneca alleges that prior to his resignation, Becker forwarded a number of Seneca's customer emails and backorder lists to Becker's personal email account and downloaded Seneca's customer database, all without Seneca's permission. In January 2015, Becker forwarded to a Midway sales manager confidential Seneca information, which included quotes, estimates, and billing documents. Seneca further alleges that on January 25, 2015, after resigning, Becker attached a storage device to his Seneca-provided laptop and without authorization gained access to Seneca's files, including vendor files, a complete 2014 and 2015 quote history, and customer purchase history. On January 26, 2015, Becker began working for Midway, where he is still employed. Seneca alleges that because Becker and Midway acquired Seneca's business information without its consent, both Becker and Midway have an unfair business advantage and are in a position to solicit business away from Seneca.

Seneca filed a Complaint against Becker in this Court on February 2, 2014, alleging violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 (CFAA)

, misappropriation of trade secrets, and breach of the duties of loyalty and good faith, and requesting compensatory damages, punitive damages, and injunctive relief. On May 12, 2015, Seneca filed an Amended Complaint adding Midway as a Defendant on the claim alleging misappropriation of trade secrets against Midway.

Midway filed this motion to dismiss for failure to state a claim and alternative motion to transfer venue, arguing that Seneca has not stated an actionable claim for misappropriation of trade secrets under Iowa law, Seneca's claim against Midway is made in bad faith, Midway is entitled to attorneys' fees for Seneca's bad-faith claim, and this matter should be transferred to the District of Minnesota. Seneca resists.

II. DISCUSSION

A. Jurisdiction

Seneca is an Iowa corporation with its principal place of business in Polk County, Iowa. Becker is a resident of Farmington, Minnesota. Midway is a Wisconsin corporation with its principal place of business in Minneapolis, Minnesota. This Court has original jurisdiction over Seneca's CFAA claim against Becker pursuant to 28 U.S.C. § 1331

and has supplemental jurisdiction over Seneca's remaining state law claims against Becker and Midway pursuant to 28 U.S.C. § 1367.

B. Procedural Posture

In the filed memoranda supporting and opposing the instant motion to dismiss, both parties have presented the Court with matters outside the pleadings. On a motion to dismiss pursuant to Rule 12(b)(6)

, a court cannot generally consider matters outside of the pleadings unless the court converts the motion into a motion for summary judgment pursuant to Rule 56. Fed.R.Civ.P. 12(d). However, on Rule 12(b)(6) motions, "courts are not strictly limited to the four corners of complaints." Dittmer Props., L.P. v. F.D.I.C., 708 F.3d 1011, 1021 (8th Cir.2013). As the Eighth Circuit has noted,

[w]hile courts primarily consider the allegations in the complaint in determining whether to grant a Rule 12(b)(6)

motion, courts additionally consider matters incorporated by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint whose authenticity is unquestioned; without converting the motion into one for summary judgment.

Id. at 1021

(quoting Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928, 931 n. 3 (8th Cir.2012) (internal quotation marks and citation omitted)). Here, the authenticity of documents outside the complaint (for example, Becker's email to Midway's sales manager and attachments) is not questioned. The Court declines to consider matters outside of the pleadings that are not embraced necessarily by the complaint and therefore does not convert the present motion to dismiss into a motion for summary judgment. Skyberg v. United Food and Commercial Workers Int'l Union, 5 F.3d 297, 302 n. 2 (8th Cir.1993) (noting that a motion to dismiss is not automatically converted into a motion for summary judgment "where the district court's order makes clear that the judge ruled only on the motion to dismiss") (citing E.E.O.C. v. Reno, 758 F.2d 581, 583 n. 6 (11th Cir.1985) ).

C. Rule 12(b)(6)

Motion

1. Standard for the Motion to Dismiss

Federal Rule of Civil Procedure 8(a)(2)

requires a complaint to contain a "short and plain statement of the claim showing that the pleader is entitled to relief." "In ruling on a motion to dismiss ... courts ‘must take all of the factual allegations in the complaint as true,’ but ‘are not bound to accept as true a legal conclusion couched as a factual allegation.’ " Wood v. Moss, ––– U.S. ––––, 134 S.Ct. 2056, 2065 n. 5, 188 L.Ed.2d 1039 (2014) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). "[D]etailed factual allegations" are not required, but the "plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (alteration in original). "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.’ " Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. 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. A complaint that offers " ‘naked assertion[s]’ devoid of ‘further factual enhancement’ " is not sufficient. Id. (alteration in original) (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955 ).

On a motion to dismiss for failure to state a claim, the question for the Court is not whether the Plaintiff will ultimately prevail, but whether the complaint is "sufficient to cross the federal court's threshold." Skinner v. Switzer, 562 U.S. 521, 530, 131 S.Ct. 1289, 179 L.Ed.2d 233 (2011)

(citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) ; Swierkiewicz v. Sorema N. A., 534 U.S. 506, 514, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) ). While Twombly's plausibility standard is not a " ‘probability requirement, ... it asks for more than a sheer possibility that the defendant has acted unlawfully." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955 ). The Court must be mindful that "a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts alleged is improbable, and ‘that a recovery is very remote and unlikely.’ " Twombly, 550 U.S. at 556, 127 S.Ct. 1955 (quoting Scheuer, 416 U.S. at 236, 94 S.Ct. 1683 ). Further, a court must "review the plausibility of the plaintiff's claim as a whole, not the plausibility of each individual allegation." Whitney v. Guys, Inc., 700 F.3d 1118, 1128 (8th Cir.2012) (citation and internal quotation marks omitted). "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, 129 S.Ct. 1937.

2. Misappropriation of Trade Secrets

A misappropriation of trade secrets claim may be established under either the Iowa Uniform Trade Secrets Act (IUTSA) or Iowa common law. See 205 Corp. v. Brandow, 517 N.W.2d 548, 552 (Iowa 1994)

("[IUTSA] has not preempted all tort theories involving trade secrets."). "The elements of a claim of misappropriation of trade secret under the Iowa Uniform Trade Secrets Act and Iowa common law are practically indistinguishable." Titan Int'l , Inc. v. Bridgestone Firestone N. Am. Tire, LLC, 752 F.Supp.2d 1032, 1039 (S.D.Iowa 2010) (citing Cemen Tech, Inc. v. Three D Indus., 753 N.W.2d 1, 7 (Iowa 2008) ). The elements of a common law claim for misappropriation of trade secrets are "(1) existence...