Source Production & Equipment Co., Inc. et al v. Schehr et al, No. 2:2016cv17528 - Document 53 (E.D. La. 2017)
Court Description: ORDER AND REASONS granting in part and denying in part 44 Motion to Dismiss for Failure to State a Claim; and 45 Motion to Dismiss for Failure to State a Claim. For the foregoing reasons, the Court GRANTS defendants' motions to dismiss w ith respect to plaintiffs' conversion claim against Isoflex USA, Isoflex Radioactive, and McKannay, as well as plaintiffs' conversion claim against Schehr to the extent plaintiffs seek to recover the value of their trade secrets. The Court otherwise DENIES defendants' motions to dismiss. The Court DISMISSES WITH PREJUDICE plaintiffs' conversion claim against Isoflex USA, Isoflex Radioactive, and McKannay, as well as plaintiffs' conversion claim against Schehr to the extent plaintiffs seek to recover the value of their trade secrets. Signed by Judge Sarah S. Vance on 8/29/2017. (cg)
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Source Production & Equipment Co., Inc. et al v. Schehr et al Doc. 53 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA SOURCE PRODUCTION & EQUIPMENT CO., INC., ET AL. VERSUS CIVIL ACTION NO. 16-17528 KEVIN J . SCHEHR, ISOFLEX USA, ISOFLEX RADIOACTIVE LLC, RICHARD H. MCKANNAY, J R., AND J OHN DOES 1-10 SECTION “R” (1) ORD ER AN D REASON S Before the Court are defendants’ m otions to dism iss 1 in part plaintiffs’ first amended com plaint. 2 For the following reasons, the Court grants in part and denies in part each m otion. I. BACKGROU N D Source Production & Equipm ent Co., Inc. (“SPEC”) and its affiliates bring this trade-secret m isappropriation and unfair com petition action against Kevin J . Schehr, Isoflex USA, Isoflex Radioactive LLC, and Richard McKannay, J r. 3 SPEC is a supplier of industrial and m edical radiography 1 2 3 R. Docs. 44, 45. R. Doc. 33. The am ended complaint also nam es 10 “J ohn Does” as defendants. 1 Dockets.Justia.com equipm ent and radioactive isotope materials. 4 Schehr is a form er executive officer at SPEC. According to the com plaint, Schehr began working for SPEC in 1995 and held various positions at the com pany until his term ination in J uly of 20 16. 5 Plaintiffs allege that over the course of his em ployment, Schehr signed several confidentiality agreements regarding SPEC’s trade secrets. 6 These trade secrets include technologies used to m anufacture containers for shipping radioactive m aterial. 7 According to the com plaint, Schehr unsuccessfully attem pted to acquire an ownership interest in SPEC in 20 12 and 20 14. 8 Plaintiffs further allege that Schehr’s resentment toward SPEC and its owner, Richard Dicharry, following these attem pts prom pted Schehr to engage in conduct intended to underm ine SPEC and benefit Schehr and others affiliated with Schehr. 9 To this end, Schehr allegedly m ade several m isrepresentations to Dicharry that he knew to be false, caused SPEC to default on the term s of a sale agreement, negotiated business contracts against Dicharry’s wishes, filed for and claimed ownership rights to patents developed using SPEC’s 4 5 6 7 8 9 R. Doc. 33 at 8 ¶ 19. Id. at 14 ¶ 34. Id. at 15-17 ¶¶ 37-45. Id. at 11-12 ¶¶ 30 -32. Id. at 17-18 ¶¶ 46-48. Id. at 18 ¶ 48. 2 resources, and provided false financial inform ation in order to inflate his personal bonuses, am ong several other alleged transgressions. 10 SPEC term inated Schehr’s em ploym ent on J uly 10 , 20 16. 11 Plaintiffs allege that after his term ination, Schehr did not im m ediately return his com pany-issued laptop, despite SPEC’s dem and that he do so. 12 Plaintiffs further allege that once the laptop was returned, a forensic analysis revealed that Schehr em ailed a num ber of SPEC’s confidential and proprietary files to his personal em ail accounts. 13 According to plaintiffs, the analysis also showed that m inutes after his term ination, Schehr attached two external hard drives to the laptop and subsequently deleted 5,0 86 files from the laptop. 14 Plaintiffs allege that Schehr continues to possess other storage m edia belonging to SPEC, including thum b drives and CDs. 15 Finally, plaintiffs allege that both before and after his term ination, Schehr conspired with Isoflex USA and McKannay, the m anaging director of Isoflex USA, to establish Isoflex Radioactive. Plaintiffs allege that in creating Isoflex Radioactive, defendants m isappropriated plaintiffs’ trade secrets and 10 11 12 13 14 15 Id. at 19-33 ¶¶ 50 -99. Id. at 33 ¶ 10 1. Id. at 36 ¶ 110 . Id. at 36 ¶ 111. Id. at 36-37 ¶¶ 111-113. Id. at 37 ¶ 115. 3 confidential information. 16 This m isappropriation, according to plaintiffs, will allow Isoflex Radioactive to compete with plaintiffs in the m arket for radioactive m aterials. 17 In their am ended com plaint, plaintiffs assert against all defendants claim s for violations of the federal Defend Trade Secrets Act (“DTSA”), the Louisiana Uniform Trade Secrets Act (“LUTSA”), and the Louisiana Unfair Trade Practices Act (“LUTPA”), as well as for conversion. 18 Against Schehr individually, plaintiffs assert claim s for violation of the Com puter Fraud and Abuse Act (“CFAA”), breach of legal duty, breach of contract, and fraud. 19 Isoflex USA, Isoflex Radioactive, and McKannay now m ove to dism iss plaintiffs’ DTSA, LUTSA, conversion, and LUTPA claim s. 20 Schehr also m oves to dism iss plaintiffs’ conversion claim . 21 Plaintiffs filed a consolidated response in opposition, 22 and defendants filed replies. 23 16 17 18 19 20 21 22 23 Id. at 2-3 ¶¶ 2-3. Id. at 25 ¶ 69, 45 ¶ 143. Id. at 43-50 ¶¶ 136-166, 56-57 ¶¶ 187-194, 59-60 ¶¶ 20 1-20 7. Id. at 50 -59 ¶¶ 167-186, 195-20 0 . R. Docs. 44, 45. R. Doc. 44. R. Doc. 46. R. Docs. 49, 52. 4 II. LEGAL STAN D ARD To survive a Rule 12(b)(6) m otion to dism iss, plaintiffs m ust plead enough facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 0 9) (quoting Bell Atlantic Corp. v. Tw om bly , 550 U.S. 544, 547 (20 0 7)). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the m isconduct alleged.” Id. at 678. A court m ust accept all well-pleaded facts as true and m ust draw all reasonable inferences in favor of the plaintiff. Lorm and v. U.S. Unw ired, Inc., 565 F.3d 228, 239, 244 (5th Cir. 20 0 9). But the Court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678. A legally sufficient com plaint m ust establish m ore than a “sheer possibility” that plaintiffs’ claim is true. Id. It need not contain detailed factual allegations, but it must go beyond labels, legal conclusions, or form ulaic recitations of the elements of a cause of action. Tw om bly , 550 U.S. at 555. In other words, the face of the com plaint m ust contain enough factual m atter to raise a reasonable expectation that discovery will reveal evidence of each elem ent of the plaintiffs’ claim. Lorm and, 565 F.3d at 257. If there are insufficient factual allegations to raise a right to relief above the speculative level, Tw om bly , 550 U.S. at 555, or if it is apparent from the face 5 of the com plaint that there is an insuperable bar to relief, Jones v. Bock, 549 U.S. 199, 215 (20 0 7); Carbe v. Lappin, 492 F.3d 325, 328 n.9 (5th Cir. 20 0 7), the claim m ust be dism issed. III. D ISCU SSION A. Failu re to State D TSA an d LU TSA Claim s 1. DTSA Isoflex USA, Isoflex Radioactive, and McKannay first argue that the am ended com plaint fails to allege sufficient claim s under the DTSA and LUTSA. To state a claim under the DTSA, a plaintiff m ust allege (1) the existence of a trade secret; (2) m isappropriation of the trade secret by another; and (3) the trade secret’s relation to a good or service used or intended for use in interstate or foreign com m erce. 18 U.S.C. § 1836(b)(1); see also RealPage, Inc. v. Enter. Risk Control, LLC, No. 16-737, 20 17 WL 3313729, at *9 (E.D. Tex. Aug. 3, 20 17). The DTSA came into effect on May 11, 20 16. See Defend Trade Secrets Act of 20 16, Pub. L. No. 114-153, § 2(e), 130 Stat. 376, 381-82. Thus, plaintiffs’ DTSA claim covers only m isappropriation that occurred after that date. The DTSA’s recent effective date also means that few courts have applied the statute to trade secrets claim s. But the definitional sections of 6 the DTSA and Uniform Trade Secrets Act (“UTSA”) are very sim ilar. Com pare 18 U.S.C. §§ 1836, 1839, w ith Uniform Trade Secrets Act § 1 (am ended 1985). Moreover, both the House and Senate com m ittee reports suggest that the DTSA largely conforms with state trade secrets law. See H. Rep. No. 114-529, at 14 (20 16) (noting that the DTSA “is not intended to alter the balance of current trade secret law or alter specific court decisions” on m isappropriation); S. Rep. No. 114-220 , at 10 (20 16) (sam e). Thus, existing state law on trade secrets informs the Court’s application of the DTSA. As a threshold m atter, plaintiffs m ust allege the existence of a trade secret. A “trade secret” under the DTSA includes scientific and technical inform ation that “the owner thereof has taken reasonable m easures to keep . . . secret” and “derives independent econom ic value . . . from not being generally known to, and not being readily ascertainable through proper m eans by, another person who can obtain econom ic value from the disclosure or use of the inform ation.” 18 U.S.C. § 1839(3). The Court finds that plaintiffs have alleged sufficient facts to show the existence of trade secrets. In their am ended complaint, plaintiffs list a num ber of technologies associated with containers for shipping radioactive m aterials. 24 24 These technologies include how to produce specialized R. Doc. 33 at 11-12 ¶¶ 30 -32. 7 insulation m aterial, dim ensional tolerances for com ponents of plaintiffs’ shipping containers, and methods and processes for producing a selenium alloy. 25 As m anufacturing processes, these technologies are subject to trade secret protection. See Phillips v. Frey , 20 F.3d 623, 628 (5th Cir. 1994) (noting that under Texas law, a “m ethod of m anufacturing” is a trade secret if it “give[s] the owner a com petitive advantage”). Plaintiffs further assert that they keep these technologies secret by securing their physical facilities and lim iting access to their electronic data. 26 These policies are reasonable m easures to m aintain secrecy. See Reingold v. Sw iftships, Inc., 126 F.3d 645, 650 (5th Cir. 1997) (holding that plaintiff reasonably m aintained secrecy of ship m old by lim iting its disclosure to third parties). Finally, plaintiffs assert that m aintaining the secrecy of these technologies affords them a com petitive advantage. 27 By m isappropriating these technologies, defendants allegedly will be able to com pete with plaintiffs without investing the tim e and resources required to develop the technologies independently. 28 The secrecy of plaintiffs’ technologies therefore has independent econom ic value. See id. (holding that ship m old’s secrecy had independent econom ic 25 26 27 28 Id. at Id. at Id. at Id. at 11-12 ¶¶ 30 -32. 13 ¶ 33. 13 ¶ 32. 13 ¶ 32, 25 ¶ 69, 45 ¶ 143. 8 value because of the tim e and resources plaintiff expended in constructing it). The Court further finds that plaintiffs’ trade secrets are related to products used in foreign comm erce. Specifically, plaintiffs allege that they use their trade secrets to supply radiography equipm ent and radioactive m aterials to customers around the world. 29 Plaintiffs m ust also allege some form of m isappropriation. The statute defines “m isappropriation” as: (A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by im proper means; or (B) disclosure or use of a trade secret of another without express or im plied consent by a person who— (i) used im proper m eans to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was— (I) derived from or through a person who had used im proper means to acquire the trade secret; (II) acquired under circum stances giving rise to a duty to m aintain the secrecy of the trade secret or lim it the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to m aintain the 29 Id. at 8 ¶ 21. 9 secrecy of the trade secret or lim it the use of the trade secret; or (iii) before a m aterial change of the position of the person, knew or had reason to know that— (I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or m istake[.] 18 U.S.C. § 1839(5). The statute further defines im proper means as including “breach or inducem ent of a breach of a duty to m aintain secrecy.” Id. § 1839(6)(A). Defendants first contend that plaintiffs allege only use of trade secrets, not acquisition of trade secrets by im proper means. 30 But the am ended com plaint clearly alleges that Isoflex USA, Isoflex Radioactive, and McKannay both acquired and used plaintiffs’ trade secrets. 31 Thus, plaintiffs m ay sufficiently plead a DTSA claim by alleging plausible facts in support of either the defendants’ acquisition or their use of trade secrets. Defendants next contend that plaintiffs’ vague and conclusory allegations do not suffice to show either wrongful acquisition or use. 32 Plaintiffs’ sole allegation relating to defendants’ use of the trade secrets is that Isoflex USA and Isoflex Radioactive have used these trade secrets to 30 31 32 R. Doc. 45-1 at 4-5. R. Doc. 33 at 45-46 ¶ 146. R. Doc. 44-1 at 9; R. Doc. 45-1 at 6. 10 com pete unfairly against plaintiffs. 33 This conclusory allegation is no m ore than a form ulaic recitation of an elem ent of plaintiffs’ DTSA claim . See Tw om bly , 550 U.S. at 555. Accordingly, plaintiffs have failed to allege sufficient facts in support of defendants’ use of trade secrets. Nevertheless, the Court finds that plaintiffs have alleged sufficient facts to support a plausible claim of m isappropriation by wrongful acquisition. The essence of plaintiffs’ wrongful acquisition allegation is that Schehr im properly conveyed trade secrets to SPEC’s com petitors, which accepted these secrets knowing that Schehr is a form er employee of SPEC. Courts have found that com petitors’ acquisition of trade secrets in sim ilar factual scenarios constitutes m isappropriation. See, e.g., In re TXCO Res., Inc., 475 B.R. 781, 818-20 (Bankr. W.D. Tex. 20 12) (finding that defendant im properly discovered trade secrets by accepting com petitor’s confidential inform ation from an individual it knew to be com petitor’s former em ployee); Uncle B’s Bakery , Inc. v. O’Rourke, 920 F. Supp. 140 5, 1429, 1441 (N.D. Iowa 1996) (enjoining defendant from acquiring com petitor’s trade secrets from com petitor’s form er employee); PepsiCo, Inc. v. Redm ond, No. 94-6838, 1996 WL 3965, at *1 (N.D. Ill. J an. 2, 1996) (same). Likewise, the 33 R. Doc. 33 at 39-40 ¶ 124. 11 Restatem ent (Third) of Unfair Com petition illustrates acquisition by im proper means using the following facts: A, a large m anufacturing com pany, em ploys B as an engineer. Angered by a term ination of the em ployment, B m akes unauthorized photocopies of engineering drawings depicting trade secrets used in the m achines that m anufacture A’s m ost successful product. B offers to provide the photocopies to C, a com peting m anufacturer. C accepts the photocopies from B with knowledge that B is a form er employee of A. C has acquired A’s trade secrets by improper m eans. Restatem ent (Third) of Unfair Com petition § 43 cm t. B, illus. 4 (Am . Law. Inst. 1995). The Court therefore finds that defendants’ conduct, as alleged by plaintiffs, qualifies as m isappropriation by acquisition under the DTSA. Furtherm ore, ample factual content in the am ended com plaint supports plaintiffs’ m isappropriation allegation. Plaintiffs assert that Schehr copied trade secrets from his com pany-issued laptop onto external hard drives shortly after his term ination. 34 They also allege that Schehr em ailed confidential and proprietary files on SPEC’s com puter network to his personal em ail account. 35 According to plaintiffs, a forensic analysis conducted after Schehr’s term ination supports these assertions. 36 34 35 36 Id. at 37 ¶ 114. Id. at 36 ¶ 111. Id. 12 Plaintiffs further allege that Isoflex USA em ployed or engaged Schehr following Schehr’s term ination. 37 Schehr then allegedly conspired with Isoflex USA and McKannay to form Isoflex Radioactive. 38 Through Isoflex Radioactive, defendants allegedly plan to com pete with plaintiffs by building shipping containers for radioactive m aterials using plaintiffs’ technology. 39 According to plaintiffs, Isoflex Radioactive has even advertised itself as “a m anufacturer and supplier of radiographic NDT equipm ent and replacement sources.”40 In response to these allegations, Isoflex USA and McKannay insist that they have neither em ployed nor engaged Schehr. 41 At the m otion to dism iss stage, however, the Court m ust accept plaintiffs’ allegations as true. See Lorm and, 565 F.3d at 244. Moreover, plaintiffs present several facts connecting Schehr with Isoflex USA and McKannay: Schehr talked with McKannay in person in J une 20 16 shortly before his term ination; Schehr called McKanny shortly after Schehr’s term ination; and Schehr has an Isoflex em ail address. 42 37 38 39 40 41 42 Id. at 2 ¶ 1. Id. at 2 ¶ 1. Id. at 25 ¶ 69, 45 ¶ 143. Id. at 39 ¶ 123. R. Doc. 45-1 at 6. R. Doc. 33 at 27 ¶ 75, 35 ¶ 10 8, 39 ¶ 123. 13 Isoflex USA and McKannay next argue that even if they did em ploy Schehr, plaintiffs’ claim would still fail. 43 Defendants cite Bay co Products, Inc. v. Ly nch, 10 -1820 , 20 11 WL 160 2571, at *5 (N.D. Tex. Apr. 28, 20 11), where the plaintiff m erely alleged “that a form er employee entered the em ploym ent of a com petitor.” The court held that under Texas law, this fact “does not of itself support a plausible claim that the em ployee shared proprietary information.” Id. Here, plaintiffs allege m ore than Schehr’s em ploym ent by Isoflex USA; plaintiffs allege a concerted attem pt to com pete with plaintiffs using plaintiffs’ own trade secrets. Taken together, the facts alleged in the am ended complaint allow the Court to draw the reasonable inference that Isoflex USA, Isoflex Radioactive, and McKannay acquired trade secrets that they knew or had reason to know were “acquired by im proper m eans.” 18 U.S.C. § 1839(5)(A); Iqbal, 556 U.S. at 678. Accordingly, plaintiffs allege a plausible claim for trade secret m isappropriation under the DTSA. 2. LUTSA LUTSA provides for injunctive relief against “[a]ctual or threatened m isappropriation” of trade secrets. La. Rev. Stat. § 51:1432(A). LUTSA also perm its a com plainant to recover dam ages for actual loss caused by the 43 R. Doc. 45-1 at 6. 14 m isappropriation of a trade secret. See La. Rev. Stat. § 51:1433. In order to recover dam ages under LUTSA, a complainant m ust prove (1) the existence of a trade secret; (2) m isappropriation of the trade secret by another; and (3) actual loss caused by the m isappropriation. See id.; Com put. Mgm t. Assis. Co. v. DeCastro, Inc., 220 F.3d 396, 40 3 (5th Cir. 20 0 0 ). The definition of “trade secret” provided by LUTSA is essentially identical to that provided by the DTSA. Com pare La. Rev. Stat. § 51:1431(4), w ith 18 U.S.C. § 1839(3). Manufacturing m ethods and processes are generally protectable under LUTSA, as they are under the DTSA. See La. Rev. Stat. § 51:1431(4). Additionally, under LUTSA plaintiffs exerted reasonable effort to keep their technologies secret. See La. Rev. Stat. § 51:1431 cm t. f (“Reasonable efforts to m aintain secrecy have been held to include advising em ployees of the existence of a trade secret, lim iting access to a trade secret on a ‘need to know basis,’ and controlling plant access.”). Finally, the secrecy of these technologies has independent econom ic value under LUTSA because of the resources plaintiffs expended on their developm ent. See Reingold, 126 F.3d at 650 . LUTSA also defines “m isappropriation” in the same way as does the DTSA. Com pare La. Rev. Stat. § 51:1431(2), w ith 18 U.S.C. § 1839(5). No Louisiana case law addresses the exact scenario in this case, where plaintiffs’ 15 com petitors allegedly acquired but did not use trade secrets from plaintiffs’ ex-em ployee. But one Louisiana appellate court did address a sim ilar situation in South East Auto Dealers Rental Ass’n, Inc. v. EZ Rent To Ow n, Inc., 980 So. 2d 89 (La. App. 4 Cir. 20 0 8). There, the plaintiff sought an injunction to prevent a former client from disclosing trade secrets to a com petitor. Id. at 99-10 0 . The court held that the plaintiff was entitled “to protection from m isappropriation of its trade secrets,” because the defendant was “operating in conjunction with Rent T Own, [plaintiff’s] com petitor, who could potentially acquire [plaintiff’s] trade secrets.” Id. at 10 1. Based on South East Auto Dealers, as well as the UTSA case law cited earlier, the Court finds that defendants’ acquisition of trade secrets qualifies as m isappropriation under LUTSA. Accordingly, plaintiffs allege a plausible claim for trade secret m isappropriation under LUTSA. A. Pre e m p tio n o f Co n ve rs io n an d LU TPA Claim s 1. Conversion Defendants next argue that plaintiffs’ conversion and LUTPA claim s are preempted by LUTSA. LUTSA “displaces conflicting tort, restitutionary, and other laws of this state pertaining to civil liability for m isappropriation of a trade secret.” La. Rev. Stat. § 51:1437(A); see also Reingold v. Sw iftships, Inc., 210 F.3d 320 , 322 (5th Cir. 20 0 0 ). Nevertheless, LUTSA is not a 16 com prehensive rem edy and “does not apply to duties im posed by law that are not dependent upon the existence of a trade secret.” Defcon, Inc. v. W ebb, 687 So. 2d 639, 643 (La. App. 2 Cir. 1997) (citing La. Rev. Stat. § 51:1437 cm t.); see also La. Rev. Stat. § 51:1437(B) (“This Chapter does not affect: . . . contractual or other civil liability or relief that is not based upon m isappropriation of a trade secret.”). Although Louisiana courts have not interpreted the extent of LUTSA’s preem ption provision, federal courts have addressed this provision, as well as nearly identical provisions adopted by other states. See, e.g., Reingold, 210 F.3d at 322; Brand Servs., LLC v. Irex Corp., No. 15-5712, 20 17 WL 30 24245, at *2 (E.D. La. J uly 17, 20 17). Generally, these courts have found that a claim is not preem pted as long as it is not based on trade secret m isappropriation. See Reingold, 210 F.3d at 322; Brand Servs., 20 17 WL 30 24245, at *2; 360 Mortg. Grp., LLC v. Hom ebridge Fin. Servs., Inc., No. 14-847, 20 16 WL 90 0 577, at *6 (W.D. Tex. Mar. 2, 20 16). Thus, whether LUTSA preem pts plaintiffs’ conversion claim depends on whether this claim alleges the conversion only of trade secrets. The Court finds that LUTSA preempts plaintiffs’ conversion claim against Isoflex USA, Isoflex Radioactive, and McKannay. Plaintiffs allege that these defendants wrongfully possess plaintiffs’ confidential and 17 proprietary information. 44 This allegation falls into the heartland of m isappropriation covered by LUTSA. See Brand Servs., 20 17 WL 30 24245, at *2. The amended com plaint contains no suggestion that these defendants possess any other property belonging to plaintiffs, or infringed legal duties not dependent on the existence of a trade secret. Because LUTSA preem pts plaintiffs’ conversion claim against Isoflex USA, Isoflex Radioactive, and McKannay, this claim m ust be dism issed. Whether LUTSA preempts plaintiffs’ conversion claim against Schehr, on the other hand, is a closer question. Plaintiffs contend that Schehr converted physical property, including thum b drives and CDs. 45 Some federal courts have found that the UTSA does not preempt conversion claim s for physical property. See Lifesize, Inc. v. Chim ene, No. 16-110 9, 20 17 WL 153260 9, at *12-13 (W.D. Tex. Apr. 26, 20 17) (conversion claim for laptop not preem pted to extent claim seeks recovery for value of property itself); Pow ell Prods., Inc. v. Marks, 948 F. Supp. 1469, 1474-75 (D. Colo. 1996) (“Because plaintiff’s claim also seeks recovery of the physical item s stolen, including blueprints and drawings, which would not be the subject of a m isappropriation claim under the UTSA, plaintiff’s conversion claim is not 44 45 R. Doc. 33 at 57 ¶ 192. Id. at 37-38 ¶¶ 115-16, 56 ¶ 190 ; R. Doc. 46 at 12-13. 18 entirely preempted.”). Other courts have found preemption because the “value” of physical property containing trade secrets (including computers and CDs) is derived prim arily from the inform ation contained within it. See Hauck Mfg. Co. v. Astec Indus., Inc., 375 F. Supp. 2d 649, 661 (E.D. Tenn. 20 0 4) (finding conversion claim for physical items preem pted because “the physical property [allegedly] stolen derived its prim ary, if not entire, value from the trade secrets contained therein”); AutoMed Techs., Inc. v. Eller, 160 F. Supp. 2d 915, 922 (N.D. Ill 20 0 1) (conversion claim preempted because although physical item s “exist in tangible form , their value is prim arily from the inform ation contained within that form ”). The Court finds that LUTSA does not preem pt plaintiffs’ conversion claim against Schehr to the extent plaintiffs seek to recover physical property or its value. Louisiana law im poses no de m inim is bar on dam ages claim s. See Sonnier v. U.S. Cas. Co., 165 So. 2d 3, 5 (La. 1964) (“The com m on law doctrine of ‘de m inim is non curat lex’ is not embodied in the corpus of the law of this state . . . .”); see also Bauer v. Dean Morris, L.L.P., No. 0 8-50 13, 20 11 WL 130 3814, at *7-8 (E.D. La. Mar. 30 , 20 11) (citing Sonnier for this proposition). Even if the thum b drives and CDs at issue derive their value prim arily from the inform ation contained within them , they clearly have some value beyond that inform ation. Plaintiffs do not lose their right to 19 recover that value sim ply because the physical items also contain trade secrets. Accordingly, to the extent plaintiffs seek to recover the physical value of their thumb drives and CDs from Schehr, their conversion claim is not preempted. See Lifesize, Inc, 20 17 WL 153260 9, at *13. To the extent plaintiffs seek to recover the value of the trade secrets contained within this physical property, their conversion claim is preempted. 2. LUTPA Defendants also m ove to dism iss plaintiffs’ LUTPA claim as preem pted by LUTSA. The Fifth Circuit has explicitly rejected this preem ption argument. See Com put. Mgm t. Assis., 220 F.3d at 40 5 (finding that LUTSA did not preem pt plaintiff’s LUTPA claim because LUTSA and LUTPA “provide parallel rem edies for sim ilar conduct”). Furtherm ore, Louisiana state courts recognize that the sam e challenged conduct can give rise to both LUTSA and LUTPA claim s. See Bihm v. Deca Sy s., Inc., No. 20 16-0 356, 20 17 WL 340 5176, at *9 (La. App. 1 Cir. Aug. 8, 20 17) (“[C]laim s of violations under both acts are frequently pled and tried together . . . .”). The Court therefore finds that LUTSA does not preempt plaintiffs’ LUTPA claim . 20 IV. CON CLU SION For the foregoing reasons, the Court GRANTS defendants’ m otions to dism iss with respect to plaintiffs’ conversion claim against Isoflex USA, Isoflex Radioactive, and McKannay, as well as plaintiffs’ conversion claim against Schehr to the extent plaintiffs seek to recover the value of their trade secrets. The Court otherwise DENIES defendants’ m otions to dism iss. The Court DISMISSES WITH PREJ UDICE plaintiffs’ conversion claim against Isoflex USA, Isoflex Radioactive, and McKannay, as well as plaintiffs’ conversion claim against Schehr to the extent plaintiffs seek to recover the value of their trade secrets. 29th New Orleans, Louisiana, this _ _ _ _ _ day of August, 20 17 _____________________ SARAH S. VANCE UNITED STATES DISTRICT J UDGE 21
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