Unisource Worldwide, Inc. v. Swope

964 F. Supp. 2d 1050, 2013 WL 4029170, 2013 U.S. Dist. LEXIS 112623
CourtDistrict Court, D. Arizona
DecidedAugust 8, 2013
DocketNo. CV-12-02036-PHX-NVW
StatusPublished
Cited by9 cases

This text of 964 F. Supp. 2d 1050 (Unisource Worldwide, Inc. v. Swope) is published on Counsel Stack Legal Research, covering District Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Unisource Worldwide, Inc. v. Swope, 964 F. Supp. 2d 1050, 2013 WL 4029170, 2013 U.S. Dist. LEXIS 112623 (D. Ariz. 2013).

Opinion

[1054]*1054ORDER

NEIL V. WAKE, District Judge.

Before the Court are Defendants Chung, Newton, and Moore’s Motion for Judgment on the Pleadings on Counts One, Two, Three, Eleven, and Twelve of the Second Amended Complaint (“Defendants’ Motion”) (Doc. Ill), the Response, and the Reply. Defendants’ Motion will be granted in part and denied in part.

I. BACKGROUND

On September 25, 2012, Unisource Worldwide, Inc. (“Plaintiff’), a company involved in the marketing, selling, and distribution of packaging, paper, and facilities supplies products throughout the United States and in other countries, brought suit against Troy Swope, a former employee, alleging breach of contract and other transgressions. Plaintiffs Second Amended Complaint (Doc. 64) added a number of additional defendants to the action, among them Defendants Yoke Chung, Cary Newton, Jr., and Brandon Moore. All three are former employees of United Global Solutions (“UGS”), a single division of Uni-source Worldwide, Inc. engaged in the design, sourcing, sale, and distribution of environmentally friendly packaging material. (Doc. 64 ¶¶ 31, 52, 66, 80.) According to Plaintiff, Defendant Chung was the Director of Products and Material Engineering for UGS starting on February 21, 2010; he resigned on November 14, 2012. (Id. ¶¶ 52, 133, 135.) Defendant Newton was employed on November 3, 2010, as UGS’ Manager of Business Development— Technical Packaging, making him responsible for managing customer relationships. (Id. ¶¶ 66-67.) UGS terminated Newton’s employment on November 14, 2012. (Id. ¶ 137.) Finally, Defendant Moore began as a UGS Product Specialist II on October 4, 2009, and was, on August 15, 2011, promoted to the position of Creative Design Engineer II, making him the lead designer for customized packaging designed to fulfill particular customer needs. (Id. ¶¶ 80-82.) He resigned from UGS on November 12, 2012. (Id. ¶ 133-34.)

The allegations against Defendants Chung, Newton, and Moore are as follows: (1) breach of the non-competition covenant by Chung and Newton (Count 1); (2) breach of the non-solicitation of customers covenant by Chung and Newton (Count 2); (3) breach of the non-recruitment of employees covenant by Chung and Newton (Count 3); and, against all three Defendants, (4) breach of the return of property and information covenants (Count 4); (5) breach of the covenant of confidentiality (Count 5); (6) breach of the duty of loyalty and fiduciary duty (Count 7); (7) violation of the Arizona Trade Secrets Act, sections 44-401 to 44-407 of the Arizona Revised Statutes (Count 10); (8) tortious interference with contractual and business relations (Count 11); (9) civil conspiracy (Count 12); and (10) business defamation (Count 13). Defendants Chung, Newton, and Moore now seek a judgment on the pleadings at to Counts One, Two, Three, Eleven, and Twelve.

II. LEGAL STANDARD FOR JUDGMENT ON THE PLEADINGS

A motion for judgment on the pleadings made pursuant to Federal Rule of Civil Procedure 12(c) is evaluated under the same standard as a Rule 12(b)(6) motion to dismiss. Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). On a motion to dismiss under Rule 12(b)(6), and therefore on a motion under Rule 12(c), all allegations of material fact are assumed to be true and construed in the light most favorable to the non-moving party. See Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.2009). However, the principle that a court accepts as true all of [1055]*1055the allegations in a complaint does not apply to legal conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).. Judgment on the pleadings is appropriate when there are no issues of material fact and when, as' a result, the moving party is entitled to judgment as a matter of law. Gen. Conference Corp. of Seventh-Day Adventists v. Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir.1989).

III. CLAIMS POTENTIALLY FACING PREEMPTION

Count Eleven alleges against all Defendants tortious interference with contractual and business relations, and Count Twelve alleges against all Defendants a civil conspiracy. (Doc. 64 ¶¶ 212-28.) Defendants contend that these counts are preempted by the Arizona Uniform Trade Secrets Act (“AUTSA”), sections 44-401 through 44-407 of the Arizona Revised Statutes, and accordingly seek dismissal. Plaintiff asserts that the conduct alleged in Counts Eleven and Twelve goes beyond the scope of claims preempted by the AUTSA; Plaintiff also seeks leave to amend if the claims in the two. counts remain unclear.

A. Factual Overview

The factual allegations in Count Eleven include the following: (1) Defendants had knowledge of Plaintiffs customer and employee relationships; (2) Defendants solicited Plaintiffs customers to discontinue their business with Plaintiff and potentially to purchase the products and services that they had previously gotten from Plaintiff from a competitor; (3) Defendants sought to have Plaintiffs employees leave Plaintiff and work for a competitor; and (4) Defendants induced one another to violate their restrictive covenants and to disclose Plaintiffs confidential information and trade secrets. {Id. ¶¶ 213-21.) For Count Twelve, Plaintiff alleges that Defendants, among other things, conspired to delete, share, and/or misappropriate Plaintiffs confidential information and trade secrets, {Id. at ¶¶ 223-28.) In both counts, Plaintiff also incorporates by reference-all preceding allegations in the Second Amended Complaint. {Id. ¶¶ 212, 222.) Finally, Plaintiff separately alleges in Count Ten that Defendants’ actions violated the AUTSA because Defendants acquired Plaintiffs trade secrets by improper means and used or disclosed those trade secrets without consent. {Id. ¶¶ 206-11.)

B. Legal Background

The Arizona Uniform Trade Secrets Act (“AUTSA”) codifies the common-law protection of trade secrets and lays out the relief available for misappropriation of a trade secret. A.R.S. §§' 44-401 to 44-407. Under the statute, a ‘-‘trade secret” is information that:' (1) derives independent economic value from being not widely known and not easily determinable; and (2) is the subject of reasonable efforts to maintain its secrecy. Id. § 44-401(4). In broad terms, “misappropriation” is the acquisition of a trade secret by someone who knows that improper means were used to obtain the information, or the disclosure or use of a trade secret without the consent of its owner under certain circumstances. Id. § 44-401(2). Further, the AUTSA contains a preemption clause: “[T]his chapter displaces conflicting tort, restitutionary and other laws of this state providing civil remedies.for misappropriation of a trade secret.” Id. § 44-407.

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964 F. Supp. 2d 1050, 2013 WL 4029170, 2013 U.S. Dist. LEXIS 112623, Counsel Stack Legal Research, https://law.counselstack.com/opinion/unisource-worldwide-inc-v-swope-azd-2013.