AirFacts, Inc. v. Amezaga, No. 8:2015cv01489 - Document 78 (D. Md. 2017)
Court Description: MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 8/21/2017. (sat, Chambers)
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AirFacts, Inc. v. Amezaga Doc. 78 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : AIRFACTS, INC. : v. : Civil Action No. DKC 15-1489 : DIEGO DE AMEZAGA : MEMORANDUM OPINION After Defendant Diego de Amezaga (“Defendant”) resigned his employment with Plaintiff AirFacts, Inc. (“Plaintiff” or “AirFacts”), Plaintiff commenced this action alleging breach of contract, misappropriation of trade secrets, and conversion. A five-day bench trial was held between January 25 and February 3, 2017. The following findings of fact and conclusions of law are issued pursuant to Fed.R.Civ.P. 52(a).1 1 Rule 52(a) provides, in relevant part, that “[i]n an action tried on the facts without a jury . . . , the court must find the facts specially and state its conclusions of law separately. The findings and conclusions . . . may appear in an opinion or a memorandum of decision filed by the court.” To comply with this rule, the court “‘need only make brief, definite, pertinent findings and conclusions upon the contested matters,’ as there is no need for ‘over-elaboration of detail or particularization of facts.’” Wooten v. Lightburn, 579 F.Supp.2d 769, 772 (W.D.Va. 2008) (quoting Fed.R.Civ.P. 52(a) advisory committee’s note to 1946 amendment). Rule 52(a) “does not require the court to make findings on all facts presented or to make detailed evidentiary findings; if the findings are sufficient to support the ultimate conclusion of the court they are sufficient.” Darter v. Greenville Cmty. Hotel Corp., 301 F.2d 70, 75 (4th Cir. 1962) (quoting Carr v. Yokohama Specie Bank, Ltd., 200 F.2d 251, 255 (9th Cir. 1952)). Dockets.Justia.com I. Factual Background Plaintiff licenses is a revenue Delaware corporation accounting software that for develops airlines. headquarters are located in Bethesda, Maryland. and Its April Pearson has been CEO since May 2001, and from the start of her tenure as CEO, auditing has been the company’s exclusive focus. 61, at 28:8-11, 29:17-23). Plaintiff’s primary (ECF No. product TicketGuard, an airfare auditing software product.2 is TicketGuard is used by airlines, including one department within American Airlines, to audit ticket sales by comparing tickets issued to an airline’s fares, taking into account commissions, taxes, and industry rules for sales. both an automated Plaintiff’s auditing process involves ticket review and a manual review. TicketGuard can also be used to audit refunds issued through a process that identified for is partially a ticket, automated. TicketGuard When violations invoices the are automated pricing systems or travel agents which priced the tickets in error on behalf of the airlines. Plaintiff has also attempted to develop a proration software product to assist airlines in receiving revenue that accurately reflects industry standards and negotiated rates, which are recorded in special prorate agreements (“SPAs”), when 2 TicketGuard Internet webpage. customers access 2 the product through an two or more transaction. airlines share ticket revenues in a single Plaintiff first began working “intermittently” and “sporadically” on a proration product in 2012 (ECF No. 61, at 70:25-71:9, 71:18-23), and entered into a contract with Alaska Airlines to develop a proration product on June 1, 2015 (PTX 172).3 Although Ms. Pearson testified that Plaintiff had “a complete and finished product” that Plaintiff’s airline client was evaluating at the time of the January 2017 trial, Plaintiff did not yet have a proration product in use. (See ECF No. 66, at 128:5-15). Defendant was employed by Plaintiff from June 2008 until February 2015. He was hired as a product development analyst before being promoted to manager of product development and then director of product development. His primary responsibilities included working with programmers and coders to develop products and managing client relationships. the development and proration product. sales pitches In addition, he worked on for Plaintiff’s proposed At the start of Defendant’s employment with Plaintiff, the parties executed an “Employment Agreement.” 3 (PTX “PTX” refers to exhibits offered by Plaintiff at trial, and “DTX” refers to exhibits offered by Defendant. References to trial testimony are designated by the ECF docket entry of the official transcript and page number where available. Official transcripts were not prepared for the fourth or fifth days of the bench trial. 3 35). The Employment Agreement restricted Defendant’s post- employment opportunities for a twelve-month period. Defendant first tendered his resignation to Plaintiff on October 10, 2014, but was convinced to continue his employment. In December, Defendant unsuccessfully applied for a position with Kayak, a metasearch engine that displays airline fares and is not Plaintiff’s competitor or customer. screenshots of TicketGuard to Kayak in He emailed static connection with his On February 6, 2015, Defendant resigned a second time. He application. did not have a job offer at that time and gave four weeks’ notice, but at Ms. February 13, 2015. Pearson’s direction, his last day was Both Ms. Pearson and Randy Laser, who had recently been hired as Plaintiff’s Vice President of Airline Strategy, told Defendant they would contact him after he left if they had questions about his work. In his last week of work, Defendant printed documents on which he had been working, and on his last day, he emailed a spreadsheet related to proration on which he had been working to his personal email account. On March 11, Defendant applied for a position with Fareportal, a travel agency. customer of (PTX 8). Plaintiff’s, tickets sold by Fareportal. Fareportal is not a competitor or but TicketGuard is used (ECF No. 72, at 18:2-9). to audit Defendant emailed two flowcharts which he had created for Plaintiff to 4 Fareportal in connection with his application. (PTX 6-7). He accessed the flowcharts by logging in to an AirFacts’ LucidChart account February on March 13 11. until May Defendant 11, 2015, remained when he unemployed began from working at American Airlines as a senior manager in the Refunds department. American Airlines is Plaintiff’s largest customer. U.S. Airways had begun using TicketGuard in 2006, and after U.S. Airways merged with American Airlines, American Airlines began using TicketGuard in its Travel Agency Audit department to audit domestic travel agency ticket sales in 2014.4 Prior to the airline merger, Plaintiff had discussed the development of a proration product for U.S. Airways in 2013, but the project did not come to fruition. American Airlines has a contract with Accelya Kale for proration work, and Plaintiff has never pitched a proration product to American Airlines. When American Defendant Airlines began assured working for Plaintiff American that Defendant Airlines, was not performing services that were in competition with, or similar to, services that were provided by Plaintiff. Defendant maintains that his work at American Airlines did not involve performing any services that were restricted by the Employment 4 The airline merger officially took place in December 2013, but Plaintiff and American Airlines entered into a service provider agreement in September 2014. (PTX 171; see also ECF No. 66, at 145:3-22). 5 Agreement. Plaintiff alleges that Defendant’s work for American Airlines constitutes a breach of the Employment Agreement, and further alleges that Defendant misappropriated trade secrets. Further facts will be discussed as relevant to the various legal issues. II. Procedural Background The breach three-count of complaint, May misappropriation contract; filed of 22, 2015, trade alleges secrets in violation of the Maryland Uniform Trade Secrets Act (“MUTSA”), Md.Code Ann., Com. Law I § 11–1201, et seq.; and conversion, and seeks money damages as well as injunctive relief. (ECF No. 1). Plaintiff filed a motion for a temporary restraining order and preliminary injunctive relief with the complaint. (ECF No. 2). Following a hearing, the court granted the temporary restraining order, temporarily destroying, restraining erasing, and enjoining mutilating, Defendant concealing, from altering, transferring, or otherwise disposing of, in any manner, directly or indirectly, any document that related to his employment with Plaintiff or any document or electronically stored information belonging to or Defendant filed received an from answer Plaintiff. (ECF No. 9), (ECF and Nos. 2; responded 6). in opposition to the motion for a preliminary injunction (ECF No. 14). Upon the consent of the parties, the court granted a preliminary injunction ordering 6 Defendant to return and not retain originals confidential 23). or copies any property, obtained information, of from including Plaintiff. (ECF No. The order also required Defendant to provide Plaintiff access to all electronic devices for forensic evaluation. Discovery closed on September 30, 2016 (ECF No. 43), and the case proceeded to a bench trial. Although Plaintiff’s breach of contract claim alleges violations of several provisions of the Employment Agreement, Plaintiff paragraph narrowed 8, the its claim during non-solicitation trial of to a clients breach of provision. Plaintiff also acknowledged at trial that it had recovered or deleted all AirFacts documents within Defendant’s custody, possession, or control through forensic measures, and that it had not proven its conversion claim. under advisement after the trial The court took the matter concluded and reviewed pleadings, trial transcripts, and admitted exhibits. the For the reasons set forth below, the court concludes that Plaintiff has not met its burden to prove by a preponderance of the evidence that Defendant breached the Employment Agreement or committed a violation of the MUTSA. III. Findings of Fact and Conclusions of Law A. Count I, Breach of Contract Claim A federal court sitting in diversity must apply the law of the state in which the court is located, including the forum 7 state’s choice of law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Colgan Air, Inc. v. Raytheon Aircraft Co., 507 F.3d 270, 275 (4th Cir. 2007). Maryland follows the rule of lex loci contractus for contract claims, applying the substantive law of the state where the contract was formed in the contract. absence of a choice-of-law provision in the Am. Motorists Ins. Co. v. ARTRA Group, Inc., 338 Md. 560, 573 (1995); Kronovet v. Lipchin, 288 Md. 30 (1980). Employment Agreement includes a choice of law The provision submitting to “the internal laws of the State of Maryland.” (PTX 35 ¶ 10.1). Accordingly, Maryland law governs the Plaintiff’s breach of contract claim. The relevant paragraph of the Employment Agreement states: 8. NON-SOLICITATION OF CLIENTS 8.1 During employee’s employment and for a period of 12 months thereafter or from the date of entry by a court of competent jurisdiction of a final judgment enforcing this covenant (whichever is later), employee will not, without the prior written consent of the employer, either directly or indirectly, for the benefit of anyone other than the employer: . . . . (d) Perform services for, own, work for, consult, be employed by, or become financially interested in any [of] the employer’s customers (as defined below) unless the services being performed [are] not in competition with, or similar to, either (i) the services or products provided 8 by the employer during the term of the employee’s employment or (ii) anticipated services or products of the employer of which the employee has material knowledge. 8.2 Customers . . . shall include any customer who within the twelve months prior to the date of employee’s termination has been a customer of the employer; or to whom the employee has directly or indirectly made or had knowledge of, within the twelve months prior to the date of employee’s termination, a proposal for becoming a customer of the employer. (PTX 35 ¶ 8). Plaintiff contends that Defendant violated the non- solicitation provision of the Employment Agreement in working for American Airlines. American Airlines became a TicketGuard client in October 2014, and accordingly, was a “customer” as defined in employment paragraph at American 8.2. Defendant Airlines disputes violated the that terms of his the Employment Agreement. Paragraph 8.1(d) prohibited Defendant from competing with Plaintiff by providing services to a customer that were “in competition with, or similar to . . . the services or products provided by employment” employer[.]” the or employer to during “anticipated the term services or of the employee’s products (PTX 35 PPP 8.1(d) (emphasis added)). of the Plaintiff has argued that this provision also prohibited Defendant from providing services to a customer that were similar to those he 9 had provided to Plaintiff during his employment. It introduced evidence purporting to show that Defendant is “doing similar work and applying similar techniques that he learned at AirFacts” in his work for American Airlines, such as managing projects and directing coders, using industry and technical knowledge he gained through his employment with AirFacts. Under the plain language of the contract, the Employment Agreement prohibited Defendant only from providing services to a customer that were in competition with those services provided by Plaintiff, not services that were similar to the work he had performed for Plaintiff during his employment.5 irrelevant to Plaintiff’s claim for breach It is therefore of the non- solicitation provision whether Defendant, for example, managed other employees or served as a project manager, while working for both Plaintiff and American Airlines. 5 The Employment Agreement does contain a separate twelvemonth restriction prohibiting Defendant from “engag[ing] in activities or contribut[ing] skills and knowledge substantially related to duties performed at AirFacts to any business or entity in competition with AirFacts’ business” (PTX 35 ¶ 7.2), which was cited in the complaint (ECF No. 1 ¶¶ 27, 40). As noted above, Plaintiff narrowed its claim during trial to paragraph 8.1(d). Plaintiff has not introduced any evidence that American Airlines was a “business or entity in competition with AirFacts’ business,” and therefore cannot prove that Defendant breached this provision by working for American Airlines. 10 1. Refunds At American Airlines, Defendant works as the senior manager of the Refunds department. Revenue department within the Revenue Accounting He reports to Brenda Fullmer, a director in the Accounting department who oversees five departments, including the Refunds department and the Proration department. Ms. Fullmer does not oversee the Travel Agency Audit department, which is the American Airlines department that uses TicketGuard. The Travel Agency Audit department is also within the Revenue Accounting managed Ann is overseen process Refunds Monick and It automated The Beth responsible for processing passenger ticket refund requests. proprietary Michulsky. by is a Mary but department uses by department, for passenger refunds, which was first used by America West Airlines, then by U.S. Airways after it merged with American West, and is now used by American Airlines following the U.S. Airways-American merger. Defendant oversees the approximately 100 employees. Refunds department, managing (PTX 90). TicketGuard provides auditing services. While TicketGuard may be used to audit refunds, it does not process refunds.6 6 Ms. Again, while Defendant’s work for Plaintiff involved automating processes relating to the auditing of refunds and understanding the ATPCO categories for refunds, the employment restriction concerns only those services or products provided by Plaintiff. Plaintiff does not provide services or products relating to the processing of refunds. It was suggested at 11 Pearson testified that “you cannot process a refund without auditing the original ticket,” meaning that, in order to process a refund, an airline would first “have to go through the same process that you do when you’re auditing. sure that the ticket was refundable. are any penalties. the refund So you need to make You need to know if there If it is refundable, you need to calculate amount.” (ECF No. 71, at 59:9-19). Plaintiff contends that processing a refund of a direct sale ticket for a customer, so that the fare can be refunded to the passenger, is “the same process” as auditing an agency sale ticket for the airline, so that the airline may bill the travel agency if the agency issued the fare in error. (Id. at 60:4-23). Plaintiff concedes that these processes are done for different business purposes, but argues that Defendant should not be permitted under the agreement to perform this similar process. Defendant did not develop the refund processing system at American Airlines, employment, involve himself. for and managing which his was in use responsibilities employees, not before at directly he began his American Airlines processing refunds Even assuming that the services Defendant performed American Airlines in managing the Refunds department trial by Plaintiff’s counsel that Plaintiff had unsuccessfully pitched an internal refund processing product to U.S. Airways in 2010, but Plaintiff has not proven that it provided refund processing products or services or that such products or services were anticipated. 12 included automating refund processing or manually processing refunds, Plaintiff has not proven that those services were in competition with or similar to its services. sales or refunds and processing refunds Auditing ticket may involve the application of some of the same industry or airline rules, but they are separate and distinct processes performed for different purposes. Plaintiff provides refund auditing services, but it does not provide refund processing products or services, and Defendant’s work for American Airlines clearly did not involve performing services in competition with Plaintiff. above, these functions are the responsibilities As noted of separate departments led by different managers and directors at American Airlines. Moreover, Plaintiff has not shown that Defendant or American Airlines actually processes refunds in a way that is at all similar to the TicketGuard process for auditing refunds. Ms. Pearson testified that she would process a refund in the same way that she would audit a refund or ticket sale, but she cannot attest to American Airline’s refund process. Ms. Fullmer testified that she considers “auditing a ticket and calculating just the different refund based processes.” on resulting (ECF No. 66, values at . . . completely 79:10-15). explained: One is you are trying to determine whether a ticket was sold properly and if they met all of the rules of the ticket in order to 13 As she purchase the price that they got for the ticket. The other process is, we have sold a ticket, the customer has the ticket, has decided not to use the full or partial part of the ticket, and we are just calculating whatever value was remaining and giving them their money back. (Id. at 79:16-22; see also id. at 81:8-82:7 (“[R]efunds isn’t looking to see whether someone who processed it sold it properly or refunded it properly. . . . We are looking to . . . calculate[] the value and refund[] the value back to the customer.”)). Plaintiff has not shown that American Airline’s preexisting proprietary system processes refunds using the same or similar processes as TicketGuard uses to audit ticket sales and refunds. Plaintiff has also argued that Defendant’s work on refunds breached the agreement because he interacted with American Airlines employees in or formerly in the Travel Agency Audit department. The Refunds department at American Airlines primarily processes refunds of company sales, but Defendant did work with the Travel Agency Audit department on a backlog of international agency ticket refunds, which it was responsible for processing. (See PTX 197). Those refunds would not have been audited by TicketGuard under American Airline’s contract with Plaintiff, but Plaintiff contends that such refunds could 14 have been audited by TicketGuard.7 This is immaterial. Even showing Defendant processed refunds for tickets that had been or were later audited by TicketGuard would only further demonstrate that Defendant provided services to American that were dissimilar to and not in competition with those provided by Plaintiff. Plaintiff has also emphasized that Defendant is now reporting to Ms. Fullmer at American Airlines, who had, prior to September 2012, managed U.S. Airways’ travel agency audit department, and therefore had interacted with Defendant during that time as a TicketGuard customer. plainly does industry not contact prohibit he made Defendant during his The Employment Agreement from working employment. for any If this connection has any probative value, the fact that Ms. Fullmer had not managed the department which used TicketGuard for years before hiring Defendant underscores that he was not providing services to American Airlines similar to or in competition with those provided by Plaintiff. Similarly, the Employment Agreement plainly did not restrict Defendant from occasionally working with American Airlines employees in the Travel Agency 7 While TicketGuard can be used to audit both direct airline ticket sales and travel agency sales, American Airlines does not use TicketGuard to audit its own sales. (ECF No. 66, at 146:716). TicketGuard is also used by other AirFacts customers to audit international agency sales, but American Airlines uses it only to audit domestic agency sales. (See ECF No. 71, at 66:1967:24). 15 Audit department on non-auditing matters simply because they used TicketGuard.8 Plaintiff has not proven that Defendant breached the Employment Agreement through his work in the Refunds department or in connection with refunds for American Airlines. 2. Proration Plaintiff contends that Defendant also breached paragraph 8.1(d) by performing services for American Airlines that were similar to or in competition with its anticipated proration product, of which Defendant had material knowledge. a. Plaintiff Had an Anticipated Proration Service or Product of which Defendant Had Material Knowledge The proration product is under development for Alaska Airlines pursuant to a contract Plaintiff entered into on June 1, 2015. (PTX 172). Alaska Airlines first approached Plaintiff about developing a proration product in 2012, and Plaintiff had worked on it “sporadically” and “intermittently” time. (ECF No. 61, at 71:1-5, 20-23). since that Ms. Pearson testified that Plaintiff’s proration product development “really started in earnest in 2014,” and that Defendant spent approximately half of his time working on the product between October 2014 and his 8 Moreover, while some of the contact between Defendant and the Travel Agency Audit department occurred in January 2016 (see PTX 197), the Employment Agreement did not bar Defendant from performing any services for American Airlines after February 13, 2016. 16 resignation in February 2015. (Id. at 71:20-72:11). Defendant testified that, at the time of his resignation, Plaintiff was in the midst of working out a contract with Alaska Airlines for a proration product, and that he alone had material pieces of the potential product. did not enter into a contract for been working on Although Plaintiff the development of the proration product until after Defendant’s resignation, the court concludes that the proration product was anticipated at that time, and that Defendant had material knowledge of the anticipated product. The proration product was an anticipated product for Alaska Airlines, but not for American Airlines. American Airlines was a customer only of the TicketGuard auditing product.9 Plaintiff argues that the Employment Agreement prohibits Defendant from providing to any AirFacts customer services in competition with or similar to anticipated services or products for any other AirFacts customer, not just those services Plaintiff performed for that customer. At the time the parties entered into this agreement in 2008, this would have been a distinction without a difference. Plaintiff had one core product, TicketGuard, which 9 Plaintiff and U.S. Airways did discuss the development of a proration product in 2013, and Ms. Pearson testified that Plaintiff “knew that [American Airlines] had been interested in our proration product.” (ECF No. 61, at 113:8-14). Ms. Fullmer testified that American Airlines was not considering and had not considered changing proration products since 2013. (ECF No. 66, at 65:17-67:3). 17 provided auditing services. Assuming arguendo that the provision should be read as Plaintiff contends, Plaintiff has not proven that Defendant performed services for American Airlines that were similar to or in competition with Plaintiff’s anticipated proration product for Alaska Airlines. b. Defendant Did Not Perform Proration Services for American Airlines Defendant does not work in the Proration department at American Airlines and has not been involved in the development or use of a proration engine similar to that under development by Plaintiff. American Airlines has an in-house proration system that has been in use since it was America West Airlines, which is used to prorate “a very small number of transactions.” (ECF No. 66, at 66:23-67:3). The majority of its proration transactions are outsourced to Accelya Kale, a proration vendor. (Id.). There is no evidence that Defendant has provided proration services to American Airlines. What Plaintiff has shown at trial is that Defendant attended weekly staff meetings which were also attended by the senior manager of the Proration department; that he was occasionally copied on emails that were relevant to both the Refunds and Proration departments; and that, as the Revenue Accounting point of contact on a project, he served as a conduit for information relating to the 18 project between departments outside Revenue Accounting and those inside Revenue Accounting, including Proration. Plaintiff argues that any mention of “auditing,” “proration,” or “SPAs,” either directly to Defendant or to other employees at a meeting or on an email where Defendant was in attendance or included for unrelated reasons, was a violation of the provision.10 Such an interpretation goes far beyond the plain language of the Employment Agreement, and would amount to a restriction on working in the airline industry at all. proration Defendant services was to arguably American prohibited Airlines from similar providing to or in competition with those that Plaintiff anticipated providing to Alaska Airlines, and Plaintiff has not proven that he did so. 10 Plaintiff emphasized at trial an email Ms. Fullmer sent to her team, which was prepared by American Airlines’ in-house counsel, instructing them to avoid discussing these topics with Defendant in light of his Employment Agreement with Plaintiff. (PTX 38). It is far from clear that the email was intended as an opinion on the extent or reach of the non-solicitation clause, but even if it were plainly meant to be an interpretation of the agreement, the interpretation of a contract by counsel for a third-party years after the contract was entered into by the parties would be entitled to no evidentiary weight in interpreting the contract. Any legal advice given to Defendant’s new employer on how best to avoid a violation or the appearance of a violation of the Employment Agreement was not binding, and any business determination by that employer not to follow the advice could not constitute evidence of a breach by Defendant of his employment contract with Plaintiff. Even if the advice to American Airlines’ employees to avoid discussing proration software or SPAs with Defendant was reasonable, it would not make it a reasonable interpretation of paragraph 8.1(d) of the Employment Agreement. 19 Plaintiff has not proven that Defendant breached the Employment Agreement, and accordingly, judgment will be entered in favor of Defendant on Plaintiff’s breach of contract claim. B. Count II, Maryland Uniform Trade Secrets Act Claim Plaintiff alleges that Defendant violated the MUTSA by misappropriating trade secret information contained in several documents and files. materials at misappropriated. It is Plaintiff’s burden to prove that the issue were Under the both trade MUTSA, the secrets and definition of were “Trade secret” is: [I]nformation, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of reasonable under the maintain its secrecy. efforts that circumstances are to Md.Code Ann., Com. Law I § 11–1201(e). The Restatement (First) of Torts sets forth six factors for courts to consider in determining whether given information constitutes a trade secret: (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the 20 extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Restatement (First) of Torts § 757 cmt. b. “Although all of the Restatement’s factors no longer are required to find a trade secret, those factors still provide helpful guidance to determine whether the information in a given case constitutes ‘trade secrets’ within the definition of the statute.” Optic Graphics, Inc. v. Agee, 87 Md.App. 770, 784 (1991); see also Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655, 661 (4th Cir. 1993). “Misappropriation” can be either the acquisition of a trade secret of another by improper means, defined as “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means,” or the disclosure or use of a trade secret of another. Id. § 11-1201(b)-(c). Plaintiff’s claim consists of four separate alleged trade secret violations: (1) screenshots of the TicketGuard library and upload user interface, sent by email from Defendant to Kayak on December 24, 2014, in connection with a job application (PTX 17); (2) “pseudocode” relating to Fare By Rule processing, which Defendant printed during his last 21 week of employment, as captured by Spector 360 software (PTX 14-16); (3) flowcharts relating to the Fare By Rule, which Defendant downloaded from LucidChart and sent by email to Fareportal on March 11, 2015, in connection with a job application (PTX 6-7); and (4) a spreadsheet relating to the Alaska Airlines proration product, which Defendant emailed from his work email account to his personal email account on his final day of employment (PTX 2123).11 Forensic evidence showed that Defendant used these documents as described, and he does not dispute that he acquired or used these materials. The questions before the court are whether these materials were protected trade secrets and whether Defendant’s acquisition or use was in violation of the MUTSA. The materials must be considered individually. 11 Evidence was also introduced regarding documents Defendant sent to his personal email account or stored in an AirFacts Dropbox account in 2009, 2011, and 2013. (PTX 1-4). Plaintiff’s counsel stated in closing argument that Plaintiff considered these documents to be relevant to Defendant’s credibility, but that it did not advance claims for their misappropriation. The purported cost of the misappropriation of these documents was included in Plaintiff’s expert’s damages calculations, however. As these documents were used by Defendant during his employment long before his resignation and not accessed or used after his employment ended, the court agrees that Plaintiff has not proven they were acquired by improper means. The court finds Defendant’s testimony, that he simply did not recall that these documents were still in his personal email account or stored in a company Dropbox account, to be credible. 22 1. TicketGuard Screenshots Defendant emailed two static screenshots of the TicketGuard user interface to Kayak in connection with a job application on December 24, “library” 2014. page (PTX and the 17). The screenshots upload user interface TicketGuard client’s webpage interface. showed page the of a Defendant created the screenshots while logged in to his own TicketGuard account, and concedes that he did not receive authorization from Plaintiff to create or use application. the screenshots in connection with his job Plaintiff contends that the screenshots are trade secrets because they reveal the type of interface TicketGuard provides to its customers, a feature that sets Plaintiff apart from its competitors. For the screenshots to be protected under the MUTSA, Plaintiff must prove that the static display of the TicketGuard user interface was the subject of reasonable efforts to maintain its secrecy. Plaintiff made some efforts that would have contributed to keeping the TicketGuard interface secret, such as including confidentiality provisions in its employment agreements with employees (see PTX 35 ¶ 2), using a system of passwords to prevent unauthorized access (ECF No. 72, at 57:2058:2), and information, including a defined to provision include relating AirFacts’ to confidential “user interface designs,” in its service provider agreements with its clients 23 (see, e.g., PTX 172 ¶ 8). See Trandes Corp., at 664. However, in light of the other evidence presented, these steps fail to show that reasonable interface’s secrecy. passwords to its efforts were taken to maintain the It is not clear that Plaintiff provides customers to maintain the secrecy of its interface, rather than to maintain the secrecy of its customer’s information and to limit access to the number of users for which the customer provision of paid the a licensing service fee. provider The confidentiality agreements also limits disclosure only outside the airline, rather than, for example, to any non-authorized user. (PTX 172 ¶ 8). A customer’s contractors or service providers may access the software on its behalf with unreasonably written permission withheld.” (Id. from ¶ Plaintiff, 5(a)). Most “not to be significantly, TicketGuard is regularly demonstrated to prospective clients and at its booths at industry trade shows.12 These demonstrations would reveal not only the interface pages sent by Defendant, but 12 Plaintiff argued that it is significant that Defendant sent screenshots from live client accounts rather than from a “test” account that could be used when demonstrating the product. It did not prove that a “test” account was used for demonstrations, however, or that there would have been any difference in the information shown in the screenshots. The screenshots were static, and did not reveal client information or enable the recipient to “click through” the links shown. Moreover, even if client information had been disclosed through Defendant’s use of the client pages rather than the test pages, Plaintiff’ clients’ data would not be Plaintiff’s own trade secret. 24 all the TicketGuard screens and its functionality. There is no evidence that Plaintiff required prospective customers to sign non-disclosure agreements before viewing the user interface. Plaintiff has not proven that the front-end appearance of its interface was the subject of reasonable efforts to maintain its secrecy, and accordingly, it is not trade secret information. 2. In Printed “Pseudocode” October 2014, Ms. Pearson assigned two development projects to Defendant, one relating to the Fare By Rule display and the other to the SPA proration framework. at 41:16-18). (See ECF No. 71, During the final week of his employment with Plaintiff, Defendant cut and pasted “pseudocode” relating to the Fare By Rule display into a notepad document, then printed the documents. 360 (PTX 14-16). monitoring software These actions were captured by Spector installed on Plaintiff’s employees’ computers. Plaintiff has not proven that this information was trade secret information. Defendant testified that he had been asked to translate ATPCO code into text, which he would do by copying column names from an ATPCO database and the text display for that information from ATPCO’s Fare Manager tool into a single document.13 Plaintiff’s programmers would then be able to use 13 “ATPCO” is the Airline Tariff Publishing Company, an organization that collects and distributes fare information or 25 this translation document for coding. information because information that ATPCO. it was was being He copied and pasted the faster copied than and retyping, pasted all and the came from The documents contained information from ATPCO that was generally known to subscribed users of ATPCO, and to the extent that the document Defendant created by combining information from two ATPCO sources had economic value, the information was readily ascertainable by proper means by persons who subscribed to ATPCO. In addition, Plaintiff has misappropriated this material. not proven that Defendant Although Ms. Pearson testified that it was unusual to print such a document (see ECF No. 72, at 22:1-10, 24:1-8), Defendant testified that Plaintiff’s employees would regularly print their work and it was a matter of personal preference. Defendant was authorized to be working on the document when he printed it, and Plaintiff has not proven that Defendant retained the printed copy of this material. Plaintiff’s counsel suggested in his closing argument While that Defendant had deleted this material before leaving AirFacts and not left it for Plaintiff’s use, this contention is unsupported by the evidence. Defendant testified that he would normally the airline and travel industry. AirFacts pays a monthly subscription to ATPCO to access its data and data application, which “describe[s] how to use ATPCO data.” (ECF No. 71, at 26:5-21). 26 have saved the material in JIRA, an issued tracking system used by Plaintiff’s employees to communicate internally, and Ms. Pearson testified that Defendant “put it electronically in the JIRA that he was assigned . . . so the programmer could look at it.” (ECF No. 72, at 23:18-23; see also id. at 22:3-7). Plaintiff has not proven that Defendant misappropriated trade secret information by printing these materials. 3. Fare By Rule Flowcharts On March 11, 2015, Defendant retrieved two flowcharts that were part of the same Fare By Rule display project “pseudocode” and sent them to a prospective employer. as the (PTX 6-7) He retrieved them from a LucidChart online data modeling service account he had created while working for AirFacts. testified that they “describe[e] the decisions Ms. Pearson and the data tables and the ATPCO fares database,” and “took a lot of time” for Defendant to develop. (ECF No. 71, at 38:12-17). Ms. Pearson testified that they contain “processing logic,” that is “entirely proprietary and sensitive to our process.” 71, at 47:9-13). (ECF No. Defendant testified, however, that the charts show how ATPCO displays Fare By Rule text in Fare Manager, and that they contained standard ATPCO processing information, and Cindy Regan, Plaintiff’s director of client accounts, testified that the charts were “an overview . . . of what Fare By Rule is,” and that competitors did not have the information in “this 27 form” (ECF No. 72, at 54:4-55:14). Although Defendant may have created a visual display of ATPCO data that was unique, the underlying ATPCO information industry. These flowcharts was did widely not known contain within information the or processes unique to Plaintiff; rather, they provided an overview of APTCO’s processes for Plaintiff’s employees’ use. both the information themselves appear to in the have flowcharts been widely employees, as was their intended purpose. has not proven that this information and known the to Moreover, flowcharts Plaintiff’s Ultimately, Plaintiff derives independent economic value from not being generally known and not being readily ascertainable to others who can obtain economic value from their disclosure or use, nor has Plaintiff shown that it took reasonable efforts to maintain their secrecy. Although Defendant was not authorized to acquire or use the LucidChart flowcharts as he did, Plaintiff has not proven that the flowcharts were trade secrets. 4. SPA Proration Framework and Database Model On February 13, 2015, his last day at AirFacts, Defendant emailed the SPA proration framework and a database model on which he had been working since October 2014 to his personal email account from his AirFacts email account. (PTX 21-23). As shown by Plaintiff’s Spector 360 monitoring software, he then deleted the copy of this email saved in his work email “sent” 28 folder. (PTX 15C; ECF No. 64, at 63:20-64:17). were incomplete, but had The documents Defendant emailed taken months to develop. They represent the database tables that would be used to store SPA contract information in the proration engine under development. Plaintiff has shown that this framework and database model derive potential independent economic value from not being generally known.14 Plaintiff did not necessarily take measures to protect these documents. example, that the documents were specific security It has not shown, for designated internally as confidential, that they were password protected, or that access to these documents was limited within employees who reasonably needed access. AirFacts to those See PADCO Advisors, Inc. v. Omdahl, 179 F.Supp.2d 600, 604, 610 (D.Md. 2002) (noting that, where databased alleged to be a trade secret was protected by “firewalls” and passwords, “[t]he strongest support for [the] argument that it has been kept secret is that only about 23 employees out of 160 have access to this database and everyone who is granted access is required to sign the [confidentiality agreement]”). team were Ms. Pearson testified that “all members of the working on” the proration 14 product development, This value, however, lies only in the process or method represented by the framework. The fact that the framework contained some actual pricing data from Plaintiff’s customer’s expired, anticipated, or active SPAs is not relevant to this claim, as such information is not Plaintiff’s trade secret. 29 however. used (ECF No. 61, at 72:24-73:3). individual passwords to access Plaintiff’s employees their work computers generally, and Spector 360 monitoring software was installed on those computers to track employees’ usage. (See ECF No. 72, at 100:18-21). that, Ms. Pearson also testified in order to protect Plaintiff’s confidential information generally, “all of our employees sign confidentiality clauses as part of their employment agreement.” (ECF No. 71, at 10:6-13; see PTX 35 ¶ 2. But at see ECF No. 64, 136:7-137:12, 155:2-18 (Plaintiff’s director of technical development, Li Ying, testified that all employees were asked to sign a confidentiality statement after Defendant’s Source resignation)). Consulting Group Chief James Technology Mlodgenski, Officer who worked of on Open the database diagram (PTX 22) with Defendant, testified that the diagram was confidential and that AirFacts and Open Consulting Group had a non-disclosure agreement in place. No. 64, at 120:7-16). The court concludes that Source (ECF reasonable efforts were made to maintain the secrecy of these documents, and accordingly, Plaintiff has proven that they contained trade secrets. A current employee authorized to access trade secrets may acquire those trade secrets by improper means. In LeJeune v. Coin Acceptors, Inc., 381 Md. 288 (2004), for example, the Court of Appeals of Maryland held that an outgoing employee acquired 30 trade secrets by improper means when he burned digital copies of documents from his company laptop to a compact disc on three occasions, created a second copy of the disc, and retained hard copies of documents. The court noted that the employee had erased information from his company laptop, “suggest[ing] that [the employee] was attempting to hide his conduct and was aware that transferring the files was improper,” and that he “again demonstrated an intent to hide his possession of trade secrets when he told his supervisor that ‘everything’ had been returned, although numerous possession.” hard-copy Id. at 314-15. trade secrets remained in [his] The trial court had not found the employee’s justifications for his actions to be credible, and the Court of Appeals found this evidence sufficient to support the finding that the employee had acquired trade secrets by improper means. It relied on Bond v. PolyCycle, 127 Md.App. 365 (1999), where: the former engineer of a plastic recycling company, on the evening prior to resigning, “took all of the work product that he had done in the preceding two years on improving [the company’s technology], placed it on a floppy disc, [and] then erased it from the company computers.” Because this technology was a trade secret belonging to the company, Bond did not have authority to take it. Id. at 313 (alterations in original) (quoting Bond, 127 Md.App. at 377). But see Diamond v. T. Rowe Price Assocs., Inc., 852 F.Supp. 372, 409-12 (D.Md. 1994) (holding that former employee 31 who retained company documents at her home after the termination of her employment did not acquire them by improper means because they were within the scope of her legitimate business duties and she was allowed to have such documents at her home while she was an employee). Upon consideration concludes that of Plaintiff the has evidence not presented, proven misappropriated the documents under the MUTSA. that the court Defendant As the creator or co-creator of the documents, Defendant was clearly authorized to access them. The evidence proves that he was instructed to and did continue to work on this project through February 13, his last day. Defendant emailed the documents to himself at his personal email address as he had previously done in order to work remotely. This may not have been an explicitly authorized practice, but other employees also used personal email accounts for AirFacts business or worked on home computers.15 Defendant testified that he sent these documents to his personal email account because had been asked to be available to answer questions after he left and he wanted to be able to answer any questions that arose. Defendant believed that Plaintiff was close to signing a contract with Alaska Airlines, 15 When Mr. Laser contacted Defendant at his personal email address to ask him work-related questions following Defendant’s departure, for example, he did so using his own personal email account. (See DTX 3; ECF No. 72, at 87:10-12). 32 and testified Although Ms. Defendant that he Pearson to take felt a responsibility testified copies that of the she had documents, to the not client. instructed she had told Defendant that she and other employees would contact him if they had questions about his work. noted, this project had (ECF No. 71, at 24:19-25:3). made up approximately As half of Defendant’s workload in the four months before his resignation. (ECF No. 61, at 71:24-72:11). Mr. Laser also asked Defendant if he would be available to answer questions after having left AirFacts because, based on his industry experience, “when somebody leaves . . . there is a grace period of being able to ask questions once they leave if there is anything outstanding or products that are incomplete[.]” 85:12-20). that is (ECF No. 72, at Mr. Laser did contact Defendant with questions after his departure (id. at 85:21-24), as did Ms. Ying (ECF No. 64, at 137:13-21). The court finds Defendant’s testimony to be credible. forensic analysis of Defendant’s personal email account The and computer show that he did not access the documents after the end of his employment. secret is not (See DTX 7). required to prove Use or disclosure of a trade misappropriation, but this evidence lends credibility to Defendant’s testimony that he took copies of the documents only in case he needed them to answer questions from Plaintiff’s employees, which he ultimately did 33 not. It is unclear why Defendant deleted the sent copy of his email, but he also used his work computer and email account to send the documents and testified that he was aware of the monitoring software on his computer. Accordingly, this is not convincing knew evidence that Defendant his improper and intended to hide those actions. actions were A breach of a duty to maintain secrecy can constitute improper means, and Defendant continued to be bound by the confidentiality provision of his Employment Agreement after his resignation. proven that he maintaining the breached that documents duty in his to Plaintiff has not maintain personal secrecy email by account, however, particularly given that Plaintiff’s employees consulted Defendant through his personal email on substantive internal issues following his resignation. Defendant was authorized to access so, the documents when he did and Plaintiff has not proven that he acquired them by improper means. Accordingly, although the court finds that the documents Defendant emailed to himself on his last day of employment were entitled to trade secret protection, Plaintiff has not proven that Defendant misappropriated the documents. IV. Preliminary Injunction In his closing argument, Defendant’s counsel argued that the preliminary injunction should be terminated. consented to the entry of the 34 preliminary The parties injunction, which provided allow that Defendant Plaintiff to have would return access to accounts for a forensic evaluation. AirFacts’ his property electronic (ECF No. 23). media and and Defendant was also ordered not to disclose proprietary, confidential, or trade secret materials. The order was not broader than the confidentiality provision of the Employment Agreement, and that provision, unlike the non-solicitation and conflicts of interest provisions, does not expire after twelve months. (PTX 35 ¶ 2). Nevertheless, the purpose of a preliminary injunction is “to preserve the relative positions of the parties until a trial on the merits can be held.” University of Texas v. Camenisch, 451 U.S. A 390, 395 (1981). preliminary injunction expires upon entry of a final judgment. necessarily There is no basis on which to grant permanent injunctive relief. V. Defendant’s Motion in Limine Shortly before trial, Defendant filed a motion in limine to exclude evidence regarding TicketGuard documents and damages based upon an unjust enrichment theory (ECF No. 48), which was discussed at a pretrial conference held on December 13, 2017 (ECF No. 47). To the extent any objections were not resolved or waived during trial and remain, they will be denied as moot. VI. Plaintiff’s Motion to Seal and Motion for Redaction Plaintiff moved for a protective order sealing the trial transcripts and exhibits shortly before trial, requesting that 35 the court temporarily seal the trial transcripts and exhibits and permit Plaintiff 60 days to review and selectively redact confidential and proprietary information. (ECF No. 59). The court did not grant the motion prior to trial (see ECF No. 61, at 4:20-5:6), and Plaintiff moved for redactions of the trial transcripts after the trial ended (ECF No. 76). Accordingly, Plaintiff’s motion for a protective order will be denied as moot, and the court will consider Plaintiff’s motion for redactions. Plaintiff describes in requests detail limited features redactions of of AirFacts’ testimony that confidential and proprietary software that AirFacts contends differentiates the software from its competitors. pricing information AirFacts It also requests that specific received from its customers and agreed to hold in confidence be redacted from the transcripts. (ECF No. 76, at 2-3). A. At Defendant does not object to this motion. Standard of Review issue in principles of Amendment analysis any request common-law access that to redact and the applies to or more seal are rigorous judicial the First records. “[D]ocuments filed with the court are ‘judicial records’ if they play a role in substantive rights.” the adjudicative process, or adjudicate In re United States for an Order Pursuant to 18 U.S.C. Section 2703[(D)], 707 F.3d 283, 290 (4th 36 Cir. 2013). The United States Court of Appeals for the Circuit recently reminded us that: It is well settled that the public and press have a qualified right of access to judicial documents and records filed in civil and criminal proceedings. See Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 580 n.17 (1980); Nixon v. Warner Communications, Inc., 435 U.S. 589, 597 (1978); Media Gen. Operations, Inc. v. Buchanan, 417 F.3d 424, 428 (4th Cir. 2005). The right of public access springs from the First Amendment and the common-law tradition that court proceedings are presumptively open to public scrutiny. Va. Dep’t of State Police v. Wash. Post, 386 F.3d 567, 575 (4th Cir. 2004). “The distinction between the rights of access afforded by the common law and the First Amendment is significant, because the common law does not afford as much substantive protection to the interests of the press and the public as does the First Amendment.” [In re United States for an Order, 707 F.3d at 290] (quoting Va. Dep’t of State Police, 386 F.3d at 575) (internal quotation marks omitted). The common-law presumptive right of access extends to all judicial documents and records, and the presumption can be rebutted only by showing that “countervailing interests heavily outweigh the public interests in access.” Rushford v. New Yorker Magazine, Inc., 846 F.2d 249, 253 (4th Cir. 1988). By contrast, the First Amendment secures a right of access “only to particular judicial records and documents,” Stone v. Univ. of Md. Med. Sys. Corp., 855 F.2d 178, 180 (4th Cir. 1988), and, when it applies, access may be restricted only if closure is “necessitated by a compelling government interest” and the denial of access is “narrowly tailored to serve that interest.” In re Wash. Post Co., 807 F.2d 383, 390 (4th Cir. 1986) (quoting Press– Enter. Co. v. Superior Court, 464 U.S. 501, 37 Fourth 510 (1984) omitted)). (internal quotation marks Doe v. Pub. Citizen, 749 F.3d 246, 265-66 (4th Cir. 2014). The First Amendment right of access applies to judicial records made part of a dispositive motion or entered into evidence at trial. See Minter v. Wells Fargo Bank, N.A., 258 F.R.D. 118, 121 (D.Md. 2009) (citing Va. Dep’t of State Police, 386 F.3d at 576; Rushford, 846 F.2d at 253); Level 3 Commc’ns, LLC v. Limelight Networks, Inc., 611 F.Supp.2d 572, 576, 589 (E.D.Va. 2009). Furthermore, “[t]he burden to overcome a First Amendment right of access rests on the party seeking to restrict access, and that party position.” must present specific reasons in support of its Va. Dep’t of State Police, 386 F.3d at 575 (citing Press–Enterprise Co. v. Superior Court, 478 U.S. 1, 15 (1986)). B. Analysis The court did not rely on Plaintiff’s customer’s specific pricing three information, lines of and testimony Plaintiff’s from the motion January to 25, redact 2017 these morning session transcripts will be granted. The court did rely on testimony describing the proprietary features of Plaintiff’s decisional process. civil trial, these software and SPA framework in the Considered during the adjudication of a portions of the transcripts constitute a judicial record subject to the First Amendment right of access. 38 See In re U.S. for an Order, 707 F.3d at 290; Level 3 Commc’ns, 611 F.Supp.2d at 590. Consequently, the court must weigh the appropriate interests competing to determine whether the redactions are “justified by ‘an overriding interest based on findings that closure is essential to preserve higher values.’” Level 3 Commc’ns, 611 F.Supp.2d at 590 (quoting Press-Enter. Co. v. Superior Court of California, Riverside Cty., 464 U.S. 501, 510 (1984)). preserving “A corporation may possess a strong interest in the confidentiality of its proprietary and trade- secret information, which in turn may justify partial sealing of court records.” Pub. Citizen, 749 F.3d at 269; see also Level 3 Commc’ns, 611 F.Supp.2d at 591. Plaintiff claims these features are proprietary and trade secret information, and the court has found that framework is entitled to trade secret protection. the SPA Accordingly, the court determines that the limited redactions requested are justified by Plaintiff’s confidentiality of these interest materials. in preserving Plaintiff’s motion the for redactions will be granted. VII. Conclusion For the foregoing reasons, judgment will be favor of Defendant on all counts in the complaint. entered in Defendant’s motion in limine and Plaintiff’s motion to seal will be denied 39 as moot. Plaintiff’s motion for redactions will be granted. separate order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 40 A
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