SAS Institute Inc. v. Akin Gump Strauss Hauer & Feld, LLP et al, No. 5:2010cv00101 - Document 26 (E.D.N.C. 2011)
Court Description: ORDER denying 12 Motion to Dismiss. Signed by Senior Judge Malcolm J. Howard on 3/22/2011. (Heath, D.)
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SAS Institute Inc. v. Akin Gump Strauss Hauer & Feld, LLP et al Doc. 26 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION NO. 5:10-CV-101-H SAS INSTITUTE INC., Plaintiff, v. ORDER AKIN GUMP STRAUSS HAUER & FELD, LLP and MICHAEL L. KIKLIS, Defendants. This matter is before dismiss pursuant to Federal The plaintiff has responded, the court on defendants' Rule of Civil motion to Procedure 12 (b) (6) . and defendants have replied. This matter is ripe for adjudication. FACTUAL ALLEGATIONS In 2004, Timothy discuss K. defendant Michael L. Wilson Mr. ("Wilson"), Kiklis' partner Gump") IP ("Kiklis") Counsel representation In January 2007, in defendant Akin Gump Strauss Hauer intellectual property practice group. Akin Gump, Wilson. Senior potential intellectual property matters. Kiklis approached for SAS, to of SAS in Kiklis became a & Feld' s ("Akin Once Kiklis joined he again discussed potentially representing SAS with In April 2007, SAS was approached by IBM regarding the Dockets.Justia.com possibility of entering into a cross-licensing agreement. Wilson proposed to SAS management that the company hire Kiklis and Akin Gump IBM. SAS to negotiate the retained defendants cross-licensing agreement for this with cross-licensing matter and formalized their relationship in an Engagement Letter dated September 10, 2007. (Compl, Ex. A.) Prior to the engagement letter, and Akin Gump filed a patent JuxtaComm Technologies, Inc. on August 17, infringement suit 2007, on Kiklis behalf of in the United States District Court for the Eastern District of Texas ("JuxtaComm I"). SAS alleges that Kiklis advised Wilson about the lawsuit before it was filed and SAS further alleges Kiklis told Wilson that SAS would not be sued in this suit because it was an Akin Gump client. Plaintiff also attorney-client Kiklis. 11, alleges that relationship was as early as established June of between 2007 SAS an and When SAS received a written proposal from IBM on June 2007, Wilson discussed the proposal with Kiklis. When Kiklis offered to give Wilson specific advice on the proposal, Wilson hesitated because a formal engagement letter had not been signed. Kiklis told Wilson that SAS was already a client. Over the next several weeks, Kiklis and Wilson discussed a number of legal SAS' s issues regarding cross-licensing agreement, Wilson revealed to Kiklas response to IBM's request and as part of those conversations, SAS's 2 strategy for for responding a to allegations of patent infringement. SAS was named as a defendant filed by Diagnostic Systems Also, in August 2007, when in a patent infringement lawsuit Corporation, Wilson sent Kiklis a copy of the complaint in that case and discussed the company's approach to such suits. Plaintiff things, notes that the Engagement Letter, among other obligated defendants to "conform to the highest ethical standards" and to promptly notify SAS of any actual or potential conflict of defendants interest. either (Compl., notify SAS of Ex. A.) any At conflict no of time did interest or stating "I haven't heard from you in quite some time about this matter. I obtain a written waiver of any such conflict. On November 6, 2009, would therefore like Wilson replies to "Yes." Kiklis close it (Exhibi t emailed out. 1 to Wilson, Would Def' s that Mem. be okay?" Supp. Mot. Kiklis joined in a joint Dismiss. ) That same day, November 6, 2009, motion to dismiss Juxtacomm I, terminating the suit in which SAS had not been named a defendant due to its status as an Akin Gump client. At that time, he did not inform SAS of any potential conflicts of interest. On January 21, 2010, Akin Gump on behalf of JuxtaComm-Texas Software, LLC sued SAS District of Texas for patent infringement ("Juxtacomm II"). 3 in the Eastern SAS contends the complaint in Juxtacomm Juxtacomm I II is nearly other than the identical to identity of the complaint in the defendants who are named. SAS contends that by prosecuting a claim against SAS for patent infringement, which SAS's defendants have confidential client created a situation information about its in strategy for defense of patent infringement allegations will necessarily be used against it. COURT'S DISCUSSION I. Standard of Review A federal district court confronted with a motion to dismiss for failure to state a claim should view the allegations of the complaint in the light most favorable to the plaintiff. See Ibarra v. United States, The intent of complaint. Rule 120 F.3d 472, 12 (b) (6) is A surrounding the facts, 980 F.2d 943, the 952 been stated adequately, facts consistent Bell Atlantic Corp. "[AJ complaint 'forecast the (4th Cir. 1997). sufficiency of 178 F.3d 231, 243 a (4th Rule 12 (b) (6) motion" 'does not resolve contests applicability of defenses.'" of test Edwards v. City of Goldsboro, Cir. 1999) Martin, to 474 need evidence Id. of a claim, or the (quoting Republican Party v. (4th Cir. 1992)). "[O]nce a claim has it may be supported by showing any set with v. merits the allegations Twombly, not 'make 127 a sufficient to 4 S. case' in Ct. 1955, against prove an the a complaint." 1969 (2007). defendant element' of or the claim. Cir. 1I Chao v. 2005) Rivendell Woods, (quoting Iodice v. Inc., 415 F.3d 342, United States, 349 (4th 289 F.3d 270, 281 (4th Cir. 2002)). II. Constructive Fraud Claim To prevail on a claim of constructive fraud, plaintiff must show the existence of facts and circumstances "(1) which created the relation of surrounded the trust and confidence, consummation of and the (2) led up transaction to in and which defendant is alleged to have taken advantage of his position of trust to the hurt of plaintiff." 549 (1950). Rhodes v. Jones, 232 N.C. 547, A claim of constructive fraud does not require the Terry v. same rigorous adherence to elements as actual fraud. Terry, 302 N.C. 77, 83 (1981). Defendants argue that plaintiff SAS has not properly stated a clam for constructive fraud. that defendants "benefited f iduc iary duty [, ] " complaint is defendants received, silent financially ~ (Compl. on and Arguing that SAS only alleges 42), what the from their defendants type complaint of breach contend financial fails to of the benefits identify the person or entity from whom a benefit was received. SAS counters defendants' not argument, contending that it does allege benefited from that defendants their actions by receiving a fee from SAS, but rather SAS alleges that defendants 5 benefited by receiving a fee from another client, Juxtacomm, through its breach of fiduciary duty to SAS. SAS pled a argues, and claim for this court agrees, that it has properly constructive fraud by alleging that: (1) an attorney-client relationship existed between SAS and defendants; (2) defendants that obtained relationship against having relating allegations obtained relevant confidential of to and could be SAS's patent confidential information strategy infringement; information used against SAS, patent infringement lawsuit against SAS information) on behalf of SAS notes that the benefit for and (3) that to defending was despite directly defendants brought a (using the confidential another client, that SAS infringed Juxtacomm's patent. pursuant Juxtacomm, (CompI. defendants alleging H 17,19,36.) received is the fee defendants receive from Juxtacomm for suing SAS. This court finds that SAS has sufficiently pled a claim for constructive fraud. Whether SAS can prove a claim for constructive fraud is not for the court to decide at this stage of the litigation. Defendants' motion to dismiss is DENIED as to the claim for constructive fraud. III. Breach of Contract Claim Defendant argues that plaintiff's breach of contract claim must be dismissed because there was not a valid contract between plaintiff and defendants at the 6 time plaintiff claims the alleged breach In occurred. short, defendants argue that because Juxtacomm II was filed in 2010, after the November 2009 email terminate in which the parties agreed to client relationship, alleged incident constituting claim attorney there was no contract at the time of the breach and therefore the claim SAS argues that this view misinterprets its must be dismissed. contract the and the contract itself, contending that defendants breached the contract well before Juxtacomm II was filed by failing conflict of defendants to inform SAS SAS argues interest. knew they would sue of an that SAS on actual or potential on November behalf of 6, 2009, Juxtacomm, evidenced by the motion to dismiss Juxtacomm I on the very same day. Additionally, duty of matters contends confidentiality termination. client SAS defendants survived any were alleged under a contract SAS alleges that defendants obtained confidential information about and that that that SAS's defense defendants are of patent presently infringement using that confidential client information to profit by suing SAS. Plaintiff claim. has sufficiently alleged a breach of contract Therefore, defendants' motion to dismiss is DENIED as to the breach of contract claim. 7 CONCLUSION For the foregoing reasons, defendants' motion to dismiss is DENIED. ~ This ~~ day of March 2011. Senior United States District JUdge At Greenville, NC #26 8
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