Pre-Paid Legal Services, Inc. v. Cahill

171 F. Supp. 3d 1219, 2016 WL 1056571, 2016 U.S. Dist. LEXIS 33753
CourtDistrict Court, E.D. Oklahoma
DecidedMarch 16, 2016
DocketCase No. 12-CV-346-JHP
StatusPublished
Cited by2 cases

This text of 171 F. Supp. 3d 1219 (Pre-Paid Legal Services, Inc. v. Cahill) is published on Counsel Stack Legal Research, covering District Court, E.D. Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pre-Paid Legal Services, Inc. v. Cahill, 171 F. Supp. 3d 1219, 2016 WL 1056571, 2016 U.S. Dist. LEXIS 33753 (E.D. Okla. 2016).

Opinion

OPINION AND ORDER

James H. Payne, United States District Judge, Eastern District of Oklahoma

Before the Court are Defendant’s Motion to Dismiss or For Judgment as a Matter of Law (Doc. No. 77) and Plaintiffs Response in Opposition (Doc. No. 81). After consideration of the briefs, and for the reasons stated below, Defendant’s Motion to Dismiss or For Judgment as a Matter of Law is DENIED.

BACKGROUND

Plaintiff Pre-Paid Legal Services, Inc., now known as LegalShield,1 sells legal service contracts (“memberships”), which independent sales associates sell through a “network marketing” system. (Doc. No. 2-1 (Petition), ¶ 3). Associates receive commissions both on the memberships they sell and on memberships sold by the “down-line” associates they recruit. (Id. ¶ 5). The names and identities of LegalShield’s sales associates, and those in the downline of the network marketing system, are treated as confidential and proprietary trade secrets by LegalShield. (Id. ¶¶ 5-6). LegalShield associates agree in writing to maintain the confidentiality of this information and to use such information only for LegalShield business, both during the associate’s relationship with LegalShield and after departure. (Id. ¶ 6).

According to the Petition, Defendant Todd Cahill (“Cahill”) became a LegalSh-ield associate in 2004. (Id. ¶ 7). Cahill was promoted to Regional Manager in 2008, and by 2011, he had risen to the position of Regional Vice-President of Illinois. (Id. ¶¶ 9-10). In his 2004 Associate Agreement, Cahill agreed that the identity of associates in his downline is “confidential, proprietary information that belongs to [LegalShield],” and he agreed not to “proselytize, recruit or solicit in any manner any [LegalShield] Associate ... into [1222]*1222any other company or organization” during the term of his Associate Agreement and for two years thereafter. (Id. ¶ 8; Doc. No. 77-1 (blank Associate Agreement), ¶¶ 8, 20). In 2008, Cahill signed a Regional Manager Agreement, in which Cahill again acknowledged his access ,to and obligation to maintain confidentiality of LegalShield trade secrets, and in which he agreed not to solicit any sales associate to another company for at least two years after termination of the agreement. (Doc. No. 2-1, ¶ 9). In 2011, Cahill signed a Regional Vice-President Agreement, in which he again confirmed and agreed that the identity of LegalShield’s sales" associates was a trade secret and promised he would not solicit any sales associates to join another company for at least two years after termination of his relationship with LegalShield. (Id. ¶ 10).

In August 2012, Cahill left LegalShield and joined Nerium International (“Neri-um”). As he prepared to leave LegalShield, Cahill allegedly contacted his downline associates to solicit them to join Nerium. (Id. ¶¶ 13-16). At a meeting of Cahill’s downline associates on August 9, 2012, which Cahill organized under false pretenses of conducting LegalShield business, he allegedly urged the associates to e-mail him or look at his Facebook page to find out where he was going. (Id. ¶ 13). He also allegedly made disparaging and untrue statements about LegalShield at the meeting to lure them away from LegalShield to another company. (Id.). Immediately prior to that meeting, Cahill also allegedly “targeted and solicited” another LegalShield Regional Manager to join Nerium and disparaged LegalShield, its management, and its compensation plan. (Id. ¶ 14). Cahill also allegedly posted information about Nerium on a Facebook group site established for the leaders in Cahill’s LegalShield organization, with knowledge that the members of that group were LegalShield associates and with the intent that those associates join Nerium. (Id. ¶ 16).

LegalShield filed this action against Ca-hill in the District Court of Pontotoc County on August 14, 2012, asserting claims for breach of contract, misappropriation of trade secrets, and tortious interference with contract or business relations. (See Doc. No. 2-1). While the case was pending in state court, LegalShield obtained a Temporary Restraining Order that prohibited Cahill from (1) contacting LegalShield associates to directly or indirectly solicit or encourage them to join Cahill in a new company or leave LegalShield for the eventual purpose of joining a new organization or (2) using trade secret information of LegalShield for any other purpose. (See Doc. No. 8-1).

Cahill then removed the action to this Court based on diversity jurisdiction. (Doc. No. 2). LegalShield sought a preliminary injunction from this Court, which the Court referred to Magistrate Judge Steven Shreder. On January 22, 2013, Magistrate Shreder issued a Report and Recommendation (“R & R”), which recommended that a preliminary injunction should issue barring Cahill “from initiating contact with [LegalShield] sales associates in an effort to solicit them to join Nerium.” (Doc. No. 31, at 15). The Magistrate did not recommend an injunction should issue prohibiting Cahill from using LegalShield’s trade secrets, because the Magistrate found Le-galShield did not have evidence that Cahill was in possession of LegalShield’s trade secrets at that time. (Id. at 10). The Magistrate further recommended that Cahill’s unopposed Motion to Stay Pending Arbitration be granted. This Court affirmed and adopted the R & R on February 12, [1223]*12232013. (Doc. No. 32). The parties then initiated arbitration proceedings. However, Cahill failed to pay his share of the arbitration fees, resulting in termination of the arbitration proceedings. (See Doc. Nos. 33, 45). LegalShield then moved to lift the stay in this case, which this Court granted over Cahill’s opposition. (Doc. No. 47). Ca-hill appealed the order lifting the stay of proceedings to the Tenth Circuit, and on May 26, 2015, the Tenth Circuit affirmed the Court’s order. (Doc. No. 71). On July 22, 2015, the Court lifted the stay. (Doc. No. 74).

On July 24, 2015, Cahill moved to dismiss the Petition pursuant to Federal Rule of Civil Procedure 12(b)(6) or 12(c). (Doc. No. 77).2 LegalShield filed a response in opposition on August 7, 2015. (Doc. No. 81). Cahill did not file a reply brief, but on August 28, 2015, he filed an Answer to the Petition and Counterclaims. (Doc. No. 88). On September 18, 2015, LegalShield filed an Answer to the Counterclaims. (Doc. No. 91).

DISCUSSION

In considering a Rule 12(b)(6) motion, the court must accept all well-pleaded allegations of the complaint as true, and must construe them in the light most favorable to the plaintiff. See Anderson v. Merrill Lynch Pierce Fenner & Smith, Inc., 521 F.3d 1278, 1284 (10th Cir.2008). To withstand a motion to dismiss, a complaint must contain enough allegations of fact “to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The plaintiff bears the burden to frame “a complaint with enough factual matter (taken as true) to suggest” that he or she is entitled to relief. Twombly, 550 U.S. at 556, 127 S.Ct. 1955.

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Bluebook (online)
171 F. Supp. 3d 1219, 2016 WL 1056571, 2016 U.S. Dist. LEXIS 33753, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pre-paid-legal-services-inc-v-cahill-oked-2016.