TLX Incorporated v. JetBlue Airways Corporation

• Court: District Court, D. Arizona
• Decided: January 22, 2020
• Docket: 2:19-cv-04734
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 TLX Incorporated, No. CV-19-04734-PHX-SMB

10 Plaintiff, ORDER

11 v.

12 JetBlue Airways Corporation,

13 Defendant. 14 15 Pending before the Court are Defendant JetBlue Airways Corporation’s (“JetBlue”) 16 Motion to Dismiss Plaintiff’s Complaint, (Doc. 21, “Mot.”), and Plaintiff TLX 17 Incorporated’s (“TLX”) Motion for Leave to File Sur-Response to Defendant’s Motion to 18 Dismiss, (Doc. 30). Defendant requested oral argument on its Motion to Dismiss, but the 19 Court elects to resolve that Motion without it. See LRCiv 7.2(f). The Court has considered 20 the pleadings, (see Docs. 21, 25, 26, 30, 31, 32), and denies both Motions as explained 21 below. 22 I. BACKGROUND1 23 This case concerns purported violations relating to an “October 22, 2010 Mutual 24 Non-Disclosure Agreement” (“NDA”) executed between TLX and JetBlue. (See generally 25 Doc. 1, “Compl.” ¶¶ 4-22.) The parties executed the NDA before TLX bid in response to 26 JetBlue’s request for proposal (“RFP”) related to airline crew reservation needs. (Id. ¶¶ 14- 27 15.) Among other things, the NDA protects TLX’s software pertaining to an automated

28 1 The Court accepts the Complaint’s well-pleaded allegations as true. See Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th Cir. 2010). 1 process of booking hotel accommodations and ground transportation for crew members 2 when airline carriers modify their flight schedules. (Id. ¶ 4.) 3 The Complaint alleges “JetBlue breached the NDA by turning TLX’s bid response 4 over to one of its direct competitors.” (Id. ¶ 25.) It further alleges JetBlue provided TLX’s 5 confidential information to a direct competitor “in order to allow [that] competitor an 6 (unfair) advantage during the JetBlue RFP process” and that “[t]hese actions also interfered 7 with TLX’s other current and potential client relationships.” (Id. ¶ 33.) Based on these 8 allegations, inter alia, TLX brings three claims: (1) breach of contract; (2) breach of the 9 implied covenant of good faith and fair dealing; and (3) unfair competition. (Id. ¶¶ 23-35.) 10 Defendant moves to dismiss each claim under Federal Rule of Civil Procedure 12(b)(6). 11 (Mot. at 1.) 12 II. LEGAL STANDARD 13 To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet 14 the requirements of Rule 8(a)(2). Fed. R. Civ. P. 12(b)(6). Rule 8(a)(2) requires a “short 15 and plain statement of the claim showing that the pleader is entitled to relief,” so that the 16 defendant has “fair notice of what the . . . claim is and the grounds upon which it rests.” 17 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 18 41, 47 (1957)). Dismissal under Rule 12(b)(6) “can be based on the lack of a cognizable 19 legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” 20 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that 21 sets forth a cognizable legal theory will survive a motion to dismiss if it contains sufficient 22 factual matter, which, if accepted as true, states a claim to relief that is “plausible on its 23 face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). 24 Facial plausibility exists if the pleader sets forth “factual content that allows the court to 25 draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. 26 “Threadbare recitals of the elements of a cause of action, supported by mere conclusory 27 statements, do not suffice.” Id. Plausibility does not equal “probability,” but requires “more 28 than a sheer possibility that a defendant has acted unlawfully.” Id. “Where a complaint 1 pleads facts that are ‘merely consistent’ with a defendant’s liability, it ‘stops short of the 2 line between possibility and plausibility of entitlement to relief.’” Id. (quoting Twombly, 3 550 U.S. at 557). 4 III. DISCUSSION A. The Complaint Adequately Alleges Breach of Contract and Breach 5 of the Implied Covenant of Good Faith and Fair Dealing Claims.2 6 A breach of contract claim under Arizona law requires that a plaintiff show (1) a 7 contract, (2) a breach, and (3) damages. Sonoran Res. LLC v. Oroco Res. Corp., No. CV- 8 13-01266-PHX-DGC, 2014 WL 2605363, at *2 (D. Ariz. June 11, 2014). Defendant argues 9 the Complaint inadequately alleges breach of contract or breach of the implied covenant of 10 good faith and fair dealing because it fails to allege the specific terms of the NDA that 11 Defendant violated. (Mot. at 3.) Defendant’s contention that the Complaint only “generally 12 alleges that Defendant ‘violated three sections of the NDA,’” however, ignores the fact that 13 Plaintiff attached the NDA to the Complaint, (see generally Compl. at 9-11), and the 14 Complaint itself references three specific sections of the NDA that JetBlue violated, (see 15 id. ¶¶ 16, 21, 23, 28). Consequently, Defendant’s first argument does not support dismissal 16 of either claim when considering the Complaint and its attachments in their entirety. 17 Defendant next argues both claims should be dismissed because the Complaint fails 18 to identify JetBlue’s alleged representative who disclosed Plaintiff’s protected information 19 to a direct competitor. (Mot. at 2.) Defendant argues this information is needed to determine 20 if all necessary parties have been joined, (id. at 3-4), but cites no case law for the 21 proposition that its employee or representative must be specifically named in the Complaint 22 rather than identified through discovery. The Court does not find this unsupported 23 argument persuasive either. 24 In its final challenge to each claim’s sufficiency, Defendant argues each should be 25 dismissed because the Complaint alleges only when Plaintiff discovered the breach, not 26 when it actually occurred. (Id. at 4.) In support, Defendant cites to how the Complaint 27 2 Defendant argues the breach of contract and breach of the implied covenant of good faith 28 and fair dealing claims should be dismissed for the same reasons. (See generally Mot. at 3- 4.) 1 alleges that “[o]n December 1, 2017, TLX discovered that JetBlue violated three sections 2 of the NDA.” (Id. (citing Compl. ¶ 21).) However, Defendant again cites no case law 3 requiring that Plaintiff identify the alleged breach’s specific date, especially in a situation 4 like here, where a party discovers the breach long after it occurred. The Court is satisfied 5 that Defendant has adequate notice of the claims against it, even without the specific date 6 of breach, because the day it occurred is limited to a sometime between when the parties 7 executed the NDA and when Plaintiff discovered it. See Twombly, 550 U.S. at 555. 8 In conclusion, the Court disagrees with Defendant’s narrow reading of the 9 Complaint and likewise rejects its unsupported requests for additional, unnecessary factual 10 allegations at this stage. To the contrary, the Court finds both claims adequately alleged 11 when considering the Complaint and its attachments in their entirety. See Twombly, 550 12 U.S. at 555. Accordingly, Defendant’s Motion as it relates to the first two claims is denied. 13 B. The Unfair Competition Claim is Not Preempted by Arizona’s Uniform Trade Secrets Act. 14 Defendant next argues the unfair competition claim is preempted by Arizona’s 15 Uniform Trade Secrets Acts (AUTSA) because it is based on an alleged misappropriation 16 of trade secrets. (Mot. at 5 (citing Orca Commc'ns Unlimited, LLC v. Noder, 236 Ariz. 180, 17 181, 337 P.3d 545 (2014).) As a preliminary matter, Defendant correctly highlights that 18 the Arizona Supreme Court held that “Arizona's Uniform Trade Secrets Act (“AUTSA”), 19 A.R.S. §§ 44–401 to –407, creates an exclusive cause of action—and displaces conflicting 20 causes of action—for claims based on the misappropriation of trade secrets.” Orca, 236 21 Ariz. at 181 (emphasis added). However, the Arizona Supreme Court further held, in the 22 following sentence, that “AUTSA does not displace common-law claims based on alleged 23 misappropriation of confidential information that is not a trade secret.” Id. The Court finds 24 this second sentence particularly relevant here. 25 In other words, although the Complaint refers to Plaintiff’s trade secrets that 26 Defendant allegedly disclosed in violation of the NDA, it also mentions confidential 27 information. (See, e.g., Compl. ¶¶ 7, 8, 11, 12, 13, 18, 20.) Even further, the NDA provides 28 a nonexclusive list of protected materials that “includes, but is not limited to, trade secrets, 1 systems, software and hardware . . . .” (Id. ¶ 16) (emphasis added). Based on these 2 allegations and the NDA’s expansive scope of protection, it is unlikely that Plaintiff’s 3 unfair competition claim encompasses only trade secret misappropriations. Indeed, 4 Plaintiff even argues its unfair competition claim is not based on trade secrets, but on 5 JetBlue’s decision to give TLX’s direct competitor an unfair advantage by releasing TLX’s 6 confidential and proprietary bid to the direct competitor. (Doc. 25 at 2.) While AUTSA 7 would preempt Plaintiff’s unfair competition claim insofar as it is based solely on trade 8 secret misappropriation, the Plaintiff’s disclosed “bid” or other information at issue does 9 not appear to fall within AUTSA’s very specific definition of a “trade secret.” See Orca, 10 236 Ariz. at 182.3 Since this is the case, the unfair competition claim is not preempted. See 11 id. at 183; see also Joshua David Mellberg LLC v. Will, 96 F.Supp.3d 953, 963 (D. Ariz. 12 2015) (permitting plaintiffs to amend unfair competition claim to include misappropriation 13 of confidential information that is not a trade secret to avoid preemption by AUTSA). 14 Accordingly, the Court finds that the Complaint adequately alleges an unfair 15 competition claim that is not preempted by AUTSA because the claim, as currently alleged, 16 is not based on misappropriation of trade secrets. Orca, 236 Ariz. at 181. 17 C. Motion for Leave to File Sur-Response 18 Plaintiff requests leave to file a sur-response to Defendant’s Motion to Dismiss to 19 provide testimony by JetBlue’s in-house counsel that allegedly contradicts the Motion. 20 (Doc. 30 at 1.) However, even if Plaintiff’s claim were true, such information would not 21 help the Court decide Defendant’s Motion because it may not ordinarily consider evidence 22 outside the pleadings when ruling on a motion to dismiss. See United States v. Ritchie, 342 23 F.3d 903, 907 (9th Cir. 2003) (“When ruling on a Rule 12(b)(6) motion to dismiss, if a 24 district court considers evidence outside the pleadings, it must normally convert the 25 12(b)(6) motion into a Rule 56 motion for summary judgment and it must give the

26 3 Section 44-401 defines “trade secret” as “information, including a formula, pattern, compilation, program, device, method, technique or process that both: (a) [d]erives 27 independent economic value, actual or potential, from not being known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value 28 from its disclosure or use[] [and] (b) [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” A.R.S. § 44-401(4). 1 || nonmoving party an opportunity to respond.”’). Because the Court is unwilling to convert □□ the Motion at issue here into one for summary judgment, Plaintiffs request is denied. 3 IV. CONCLUSION 4 The Complaint alleges sufficient factual details to state a claim for breach of 5 || contract and breach of the implied covenant of good faith and fair dealing. Moreover, the 6 || Court finds that the unfair competition claim, as alleged, is not preempted by AUTSA. 7 Accordingly, 8 9 IT IS ORDERED denying Defendant’s Motion to Dismiss Plaintiff's Complaint, (Doc. 21), and Plaintiff's Motion for Leave to File Sur-Response to Defendant’s Motion to || Dismiss, (Doc. 30). 12 13 Dated this 22nd day of January 2020. 14 Se . ~P 15 SO 16 Gnted States District lodge 17 18 19 20 21 22 23 24 25 26 27 28

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