Mason v. AmTrust

• Court: Court of Appeals for the Second Circuit
• Decided: March 1, 2021
• Docket: 20-1256
• Status: Unpublished

Opinion

20-1256 Mason v. AmTrust

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not represented by counsel.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 1st day of March, two thousand twenty-one.

PRESENT: John M. Walker, Jr., Robert D. Sack, Steven J. Menashi, Circuit Judges. ____________________________________________

Eugene Mason,

Plaintiff-Appellant,

v. No. 20-1256

Amtrust Financial Services, Inc., David Lewis,

Defendants-Appellees.

____________________________________________ For Plaintiff-Appellant: Richard S. Meisner, Jardim, Meisner & Susser, P.C., Florham Park, NJ

For Defendants-Appellees: William E. Vita, Westerman, Ball, Ederer, Miller, Zucker & Sharfstein, LLP, Uniondale, NY

Appeal from a judgment of the United States District Court for the Southern

District of New York (Cote, J.).

Upon due consideration, it is hereby ORDERED, ADJUDGED, and

DECREED that the judgment of the district court is AFFIRMED.

Plaintiff-Appellant Eugene Mason appeals from the district court’s partial

dismissal of his amended complaint and from the district court’s order denying

his motion for a preliminary injunction, both entered on March 23, 2020. We affirm

the judgment of the district court denying the preliminary injunction and

dismissing Counts I and II of Mason’s amended complaint. We assume the parties’

familiarity with the underlying facts, procedural history, and arguments on

appeal.

2 BACKGROUND

A

Mason was formerly an employee of Defendant-Appellee AmTrust

Financial Services, Inc. Before he was employed with AmTrust, Mason collected,

compiled, and analyzed data relating to the pricing of professional liability

insurance for various classes and sub-lines of professional service firms. He

maintained the compiled data in a comprehensive multi-tabbed spreadsheet that

incorporates actuarial formulations, algorithms, calculations, and analytical

methods to generate data outputs that value professional liability insurance

premiums for the different categories of professional service firms (the “Pricing

Model”).

On September 27, 2013, AmTrust hired Mason as a senior vice president to

create and develop a professional liability insurance product line. While

interviewing for the position, Mason informed senior executives at AmTrust that

he had already built a model for pricing insurance premiums for numerous classes

of professionals. According to Mason, he reached a “meeting of the minds” with

AmTrust executives that AmTrust could use his Pricing Model on the condition

that Mason receive employment at the company. Mason alleges that this

3 understanding was so well-understood that there was “no need for a formal

written licensing agreement.” J. App’x 72. Mason further alleges that his

employment agreement with AmTrust “memorialized” these “terms of Mason’s

employment with AmTrust.” J. App’x 72. Yet there is no mention of the Pricing

Model, or any measures to protect any proprietary information contained in the

Pricing Model, in that agreement. Immediately after he was hired, Mason sent an

email from his personal email account to the personal email account of his new

supervisor, Defendant-Appellee David Lewis. Mason attached the Pricing Model

and wrote “Dave, Here’s my pricing tool.” J. App’x 73. In that email, Mason did

not indicate that the Pricing Model was confidential or proprietary or that its

contents were password protected.

Mason was employed at AmTrust until July 17, 2019. Mason alleges that

during this period he took steps to protect his Pricing Model and maintain

proprietary ownership over it: he referred to the Pricing Model as his personal and

proprietary property, particularly in management meetings; maintained that the

Pricing Model should not be stored on AmTrust’s central corporate operating

system; and insisted that internal AmTrust auditors and external third-party

4 vendors be denied access to the Pricing Model. However, the Pricing Model

remained accessible to AmTrust employees internally.

On July 17, 2019, AmTrust terminated Mason’s employment. On July 19,

2019, Mason sent AmTrust a cease-and-desist letter demanding that AmTrust stop

using the Pricing Model. AmTrust responded to Mason’s letter by asserting that

AmTrust was not in possession of “any proprietary information or trade secret

belonging to Mr. Mason and protected by the Defend Trade Secrets Act.” J. App’x

124. AmTrust did not deny that it continued to use the Pricing Model.

B

Mason commenced this action against AmTrust and Lewis. He moved for a

preliminary injunction enjoining AmTrust from using the Pricing Model based on

allegations that AmTrust had misappropriated trade secrets in violation of the

Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836. On October 18, 2019, Mason

filed the operative amended complaint alleging misappropriation of trade secrets

under the DTSA as well as state-law claims for misappropriation of trade secrets,

unjust enrichment, and breach of implied license against Amtrust and Lewis, and

a claim for breach of contract only against AmTrust. He also filed an amended

motion for a preliminary injunction related to the alleged misappropriation of

5 trade secrets under the DTSA. Before this court, he characterizes his motion as

predicated on his DTSA claim and his claim under New York common law for

misappropriation of trade secrets and confidential information. Appellant’s Br. 5.

On November 7, 2019, AmTrust and Lewis moved to dismiss all of the

claims except for the claim for breach of contract. The district court stayed briefing

on Mason’s motion for a preliminary injunction pending resolution of the motion

to dismiss.

On March 23, 2020, the district court granted the defendants’ partial motion

to dismiss, dismissing all claims in the amended complaint except the single,

remaining breach-of-contract claim in Count V against AmTrust. Having

dismissed the DTSA claim and Mason’s state-law trade secrets claim on the merits,

the district court issued a separate order that same day denying Mason’s motion

for a preliminary injunction. Mason timely appealed to this court.

DISCUSSION

Mason appeals from the denial of his request for a preliminary injunction

seeking relief in connection with the amended complaint’s claim for

misappropriation of trade secrets under the DTSA. “A party seeking a preliminary

6 injunction must demonstrate: (1) a likelihood of success on the merits or

sufficiently serious questions going to the merits to make them a fair ground for

litigation and a balance of hardships tipping decidedly in the plaintiff’s favor; (2) a

likelihood of irreparable injury in the absence of an injunction; (3) that the balance

of hardships tips in the plaintiff’s favor; and (4) that the public interest would not

be disserved by the issuance of an injunction.” Benihana, Inc. v. Benihana of Tokyo,

LLC, 784 F.3d 887, 895 (2d Cir. 2015) (internal quotation marks and alteration

omitted). We review a grant or denial of a preliminary injunction for abuse of

discretion. Sunward Electronics, Inc. v. McDonald, 362 F.3d. 17, 24 (2d. Cir. 2004).

Because the district court dismissed the DTSA claim and Mason’s common-

law claim for misappropriation of trade secrets for failure to state a claim before

issuing the order denying Mason’s motion for a preliminary injunction, without

any further explanation, we assume that the injunction was denied because it was

not likely to succeed on the merits.

To succeed on a claim of misappropriation of trade secrets under the DTSA

and New York common law, the owner of the trade secret must take “reasonable

measures” to keep the proprietary information secret. See 18 U.S.C. § 1839(3);

Defiance Button Mach. Co. v. C & C Metal Prods. Corp., 759 F.2d 1053, 1063 (2d Cir.

7 1985). In denying Mason’s DTSA claim on the merits, the district court found that

Mason did not take such reasonable measures to protect the trade secret.

Specifically, the district court concluded that even if Mason had reached an

agreement with AmTrust that the use of the Pricing Model was conditioned on his

employment at AmTrust, “it was unreasonable for Mason not to have this

agreement described with particularity in his Employment Agreement or a stand-

alone licensing agreement.” J. App’x 153. Second, the district court noted that

Mason did not ask AmTrust to sign a nondisclosure agreement to prevent

AmTrust from sharing the Pricing Model with both internal auditors and external

third parties. Third, the court concluded that Mason was “careless” in emailing

the Pricing Model to Lewis, from his personal email account to Lewis’s personal

email account, without designating its contents confidential or proprietary.

J. App’x 153.

While Mason argues that the district court overlooked various measures

that he allegedly took to protect the Pricing Model—such as referring to the Pricing

Model as his personal and proprietary property, insisting that the Pricing Model

be kept off of AmTrust’s central operating system and servers, monitoring who

used the Pricing Model at AmTrust, and allowing third-parties to view only

8 “snapshots” of the Pricing Model’s output—the district court noted that none of

these measures would reasonably ensure that the Pricing Model would be

protected as a trade secret from AmTrust following, and even during, his

employment at the company.

For the purpose of denying a preliminary injunction, the record supports

the district court’s conclusions that Mason had little control over who used the

Pricing Model within AmTrust and that he did not legally protect this property by

executing a nondisclosure or licensing agreement or by stipulating in his

employment contract that the Pricing Model was his proprietary information.

Therefore, the district court did not abuse its discretion in holding that Mason was

unlikely to succeed on the merits of this claim because he had not taken reasonable

measures to protect his information.

Mason also appeals the district court’s dismissal of Counts I and II of his

amended complaint in his opening brief. We have jurisdiction to entertain appeals

“from all final decisions of the district courts.” 28 U.S.C. § 1291. It is well-settled

that “[a]n order that adjudicates fewer than all of the claims remaining in the

action, or adjudicates the rights and liabilities of fewer than all of the remaining

9 parties, is not a final order unless the court directs the entry of a final judgment as

to the dismissed claims or parties ‘upon an express determination that there is no

just reason for delay’” pursuant to Rule 54(b) of the Federal Rules of Procedure.

Citizens Accord, Inc. v. Town of Rochester, 235 F.3d 126, 128 (2d Cir. 2000). The partial

dismissal order did not adjudicate all remaining claims in this action. Mason did

not seek certification of the partial dismissal pursuant to Rule 54(b) nor is the

ruling otherwise appealable as an interlocutory order. See 28 U.S.C. §§ 1291, 1292.

Nevertheless, “[t]he doctrine of pendent appellate jurisdiction ‘allows us,

where we have jurisdiction over an interlocutory appeal of one ruling, to exercise

jurisdiction over other, otherwise unappealable interlocutory decisions, where

such rulings are inextricably intertwined with the order over which we properly

have appellate jurisdiction, or where review of such rulings is necessary to ensure

meaningful review of the appealable order.’” Atlantica Holdings v. Sovereign Wealth

Fund Samruk-Kazyna JSC, 813 F.3d 98, 116-117 (2d Cir. 2016) (quoting Myers v. Hertz

Corp., 624 F.3d 537, 552 (2d Cir. 2010)). “For two rulings to be inextricably

intertwined before us, the same specific question will underlie both the appealable

order and the non-appealable order, such that our resolution of the question will

10 necessarily resolve the appeals from both orders at once.” Myers, 624 F.3d at 553

(internal quotation marks and alterations omitted).

Because the district court’s denial of Mason’s motion for a preliminary

injunction was based solely on its resolution of the defendants’ motion to dismiss,

the dismissal of Counts I and II of Mason’s amended complaint presents “the same

specific question” at issue in the appealable preliminary injunction order: whether

Mason took “reasonable measures” to protect his confidential information.

Accordingly, we exercise pendent jurisdiction over the district court’s dismissal of

Counts I and II and review the district court’s dismissal order de novo, “accepting

all of the complaint’s factual allegations as true and drawing all reasonable

inferences in the plaintiff’s favor.” Yamashita v. Scholastic Inc., 936 F.3d 98, 103 (2d

Cir. 2019).

To prevail on a claim for misappropriation of trade secrets under the DTSA,

as alleged in Count I, and a claim for misappropriation of trade secrets and

confidential information under New York state law, as alleged in Count II, the

claimant must show that he took “reasonable measures to protect” his trade secret

or confidential information. See 18 U.S.C. § 1839(3); Defiance Button Mach. Co., 759

F.2d at 1063. As explained above, the district court correctly concluded that Mason

11 did not plausibly plead that he took reasonable measures to protect the Pricing

Model. As reflected in the amended complaint, Mason had little control over who

used the Pricing Model within AmTrust and he did not take measures to protect

the Pricing Model either by executing a nondisclosure or licensing agreement or

by stipulating in his employment contract that the Pricing Model was his

proprietary information. Although Mason emphasizes the handful of unilateral

measures he took to protect the Pricing Model, the district court did not err by

concluding that none of those measures would reasonably protect the

confidentiality of the Pricing Model. Therefore, we affirm the dismissal of Counts

I and II of the amended complaint.

* * *

For the foregoing reasons, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court