Hewitt v. Allied Bus. Sols., LLC

BARBARA HEWITT, Plaintiff, v. ALLIED BUSINESS SOLUTIONS, LLC, et al., Defendant.

Case No. 19-02012-CM-KGG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

August 13, 2019

MEMORANDUM AND ORDER

Plaintiff Barbara Hewitt moves to strike defendants' affirmative defenses, to dismiss defendants Larry Alsup, Allied Business Solutions, LLC, and Allied Business Solutions Inc.'s ("ABS") counterclaims, and in the alternative for a more definite statement. (Doc. 9.)

I. FACTUAL BACKGROUND

Plaintiff formerly worked for defendants. Defendants ABS are two businesses that assist companies with various telecom needs, and the president of those businesses. Plaintiff filed suit against defendants for various employment-related claims including failure to pay wages, breach of contract, and fraud. Defendants answered the complaint, generally raised several affirmative defenses without pleading additional facts, and brought counterclaims for breach of contract, misappropriation of trade secrets, and breach of the duty of loyalty.

As relevant to the present motion, the parties submit multiple employment contracts, dispute plaintiff's former employment status, and dispute which agreement is the operative employment contract. Plaintiff now moves to strike defendants' generally-pleaded affirmative defenses as inadequately pleaded under the Iqbal/Twombly framework; to dismiss defendants' counterclaims as inadequately pleaded under their relevant theories; and in the alternative for a more definite statement to require defendants to more clearly define their claims for breach of contract and misappropriation of trade secrets.

II. LEGAL STANDARDS

A. 12(b)(6)

On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court assumes true all well-pleaded facts in the complaint, disregards all legal conclusions worded as factual allegations, and grants the non-moving party all reasonable inferences from the pleadings. Colony Ins. Co. v. Burke, 698 F.3d 1222, 1228 (10th Cir. 2012). To survive a motion to dismiss, the complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face," not merely possible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Co. v. Twombly, 550 U.S. 544, 570 (2007)) (quotation marks omitted); see Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007).

B. 12(e)

The court will grant a motion under Federal Rule of Civil Procedure 12(f) only if a pleading "is so vague or ambiguous that the [moving] party cannot reasonably prepare a response." Fed. R. Civ. P. 12(e). Rule 12(e) motions "are disfavored in light of the liberal discovery provided under the federal rules[,]" and are granted only when "the claims alleged are [insufficient] to enable a responsive pleading in the form of a denial or admission." Peterson v. Brownlee, 314 F. Supp. 2d 1150, 1155-56 (D. Kan. 2004) (citations omitted).

C. 12(f)

Federal Rule of Civil Procedure 12(f) allows the court to strike from a pleading "any redundant, immaterial, impertinent or scandalous matter." Fed. R. Civ. P. 12(f). The court has discretion to strikean "insufficient defense" from a pleading when no circumstances exist under which that defense can succeed as a matter of law. Wilhelm v. TLC Lawn Care, Inc., No. 07-2465-KHV, 2008 WL 474265, at *2 (D. Kan. Feb. 19, 2008); Resolution Trust Corp. v. Tri-State Realty Inv'rs of K.C., Inc., 838 F. Supp. 1448, 1450 (D. Kan. 1993). Motions to strike are disfavored and the striking of an affirmative defense is a "drastic remedy." Wilhelm, 2008 WL 474265, at *2.

III. DISCUSSION

The court will first address plaintiff's motion to strike before turning to her motion to dismiss and her alternative motion for a more definite statement.

A. Motion to Strike

Plaintiff moves to strike defendants' affirmative defenses because they have been raised as a general list of defenses without sufficient factual allegations to conform to the Iqbal/Twombly plausibility standard.

There is disagreement over whether an affirmative defense must conform to the Iqbal/Twombly plausibility standard for claims governed by Rule 8(a)(2). Compare Falley v. Friends Univ., 787 F. Supp. 2d 1255, 1258-59 (D. Kan. 2011) (Murguia, J.) (concluding that Iqbal/Twombly requirements do not apply to affirmative defenses in Rule 8(c)), with Hayne v. Green Ford Sales, Inc., 263 F.R.D. 647, 649-50 (D. Kan. 2009) (concluding opposite). In Falley, the court recognized requirements of Rule 8(c) as "markedly less demanding than that of 8(a), where a pleading must show an entitlement to relief . . . . The court cannot overlook that difference and require a factual showing where the rules do not require such showing." 787 F. Supp. 2d at 1258 (distinguishing Rule 8(c)'s requirement to "affirmatively state" defenses) (emphasis original). For the same reasons the court declined to import the Iqbal/Twombly standards in Falley, the court again declines to do so now, and the court denies plaintiff's motion to strike.

B. Motion to Dismiss

Plaintiff moves to dismiss defendants' counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff argues that defendants' breach of contract claim has insufficiently pleaded the existence of an operative contract, that their trade secret claim does not distinguish between trade secrets and unprotected confidential information, and that their duty of loyalty claim arises from and is precluded by their contract claim. The court turns to each of these three arguments in order.

1. Breach of Contract

Plaintiff argues that defendants' counterclaim fails to adequately identify the contract allegedly breached, the nature of the alleged breach, and the existence of damages. Defendants argue that plaintiff's disputes are generally based on the sufficiency of evidence, rather than the plausibility of the claims, and should be resolved through discovery or on summary judgment rather than on motion to dismiss.

In Kansas, a claim for breach of contract requires: "(1) the existence of a contract between the parties; (2) sufficient consideration to support the contract; (3) the plaintiff's performance or willingness to perform in compliance with the contract; (4) the defendant's breach of the contract; and (5) damages to the plaintiff caused by the breach." Stechschulte v. Jennings, 298 P.3d 1083, 1098 (Kan. 2013) (citations omitted).

First, defendants' counterclaim alleges an operative employment agreement (Doc. 6-1, at 15-20), later modified by a second agreement (Id. at 21-25). The first attached agreement is signed by the parties, while the signature lines for the second agreement are blank. Plaintiff argues that because the second agreement is unsigned, no contract exists. Defendants argue that there was a signed agreement which is now missing from their records and suggest that it was removed by plaintiff or someoneacting on her behalf. Whether defendants can meet their evidentiary burden at trial to show that the second agreement was actually in effect, defendants have plausibly alleged the existence of both agreements. See Swierkiewicz v. Sorema N. A., 534 U.S. 506, 511 (2002) ("The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims").

Second, as to the sufficiency of defendants' breach and damage allegations, plaintiff argues that defendants needed to allege the termination of the agreement, the persons or entities to whom plaintiff improperly disclosed information, and how that protected information is allegedly being used by plaintiff. Defendants' counterclaims allege that plaintiff breached her purported employment agreement "by retaining ABS's confidential information . . . by disclosing and using [that] confidential information[,] and by competing for and soliciting ABS's customers[.]" (Doc. 6-1, at 10.) The agreements attached to and referred to in defendants' counterclaims describe in detail the type of information which is alleged to be confidential and the types of client contact that plaintiff may not pursue. (Id. at 16-17 (first agreement), 23-24 (second agreement).) Accordingly, defendants have plausibly alleged a breach of the employment agreement.

Finally, plaintiff argues that defendants' damages allegations are insufficient for failure to allege which customers were allegedly solicited, when, and where. Defendants' counterclaims allege that plaintiff solicited defendants' customers, and both disclosed and used defendants' protected information "on behalf of herself and/or another company." (Doc. 6-1, at 10.) While defendants do not allege particular clients lost in their allegation of "harm," defendants' counterclaims plausibly allege harm relating to lost business through solicitation of clients and the use of protected information. (See id.) As with plaintiff's arguments on the existence of the amended agreement, the ultimatesufficiency of defendants' evidence is not for resolution on a motion to dismiss.¹ Because the court concludes that defendants' counterclaim plausibly alleges a claim for breach of contract, the court does not dismiss defendants' counterclaim.

2. Misappropriation of Trade Secrets

Plaintiff argues defendants' description of "trade secrets and confidential information" cannot sufficiently describe "trade secrets," and that defendants' damages allegations do not sufficiently specify how plaintiff is using defendants' trade secrets.

The Kansas Uniform Trade Secret Act (KUTSA) defines a trade secret as "information, including a formula, pattern, compilation, program, device, method, technique, or process," that derives independent economic value from its secrecy, and is subject to reasonable efforts to maintain that secrecy. Kan. Stat. Ann. § 60-3320. A party alleging a KUTSA violation must "come forward with some showing that the information alleged to be a trade secret meets the definition." Servi-Tech, Inc. v....