Integrated Direct Mktg., LLC v. May

129 F.Supp.3d 336

INTEGRATED DIRECT MARKETING, LLC, Plaintiff,

v.Drew MAY and Merkle, Inc., Defendants.

No. 1:14–cv–1183 (LMB/IDD).

United States District Court, E.D. Virginia, Alexandria Division.

Signed Sept. 8, 2015.

Zachary Stevens Stinson, Joleen Roslyn Okun, Ogletree Deakins Nash Smoak & Stewart PC, Washington, DC, for Plaintiff.

Rebecca Bricken Segal, Brian Francis Chandler, James Bennett Kinsel, Jennifer Angella Lucey, Protorae Law PLLC, Tysons, VA, John Hawley Hawthorne, John H. Hawthorne, Attorney at Law, Fairfax, VA, Declan C. Leonard, Frank Regis Gulino, Nicholas Ryan Johnson, Ryen Christopher Rasmus, Berenzweig Leonard LLP, McLean, VA, for Defendants.

MEMORANDUM OPINION

LEONIE M. BRINKEMA, District Judge.

Before the Court are multiple motions, including Defendant Merkle, Inc.'s Motion for Summary Judgment ("Merkle's Motion for Summary Judgment"), Defendant Drew May's Motion for Summary Judgment ("May's Motion for Summary Judgment"), and Defendant Drew May's Motion to Strike Declarations and Other Material ("Motion to Strike"), For the reasons that follow, Merkle's Motion for Summary Judgment will be granted, May's Motion for Summary Judgment will be granted in part and denied in part, and May's Motion to Strike will be denied. Also pending before the Court are plaintiff IDM's Motion to Compel Merkle, Inc. to Respond to Plaintiff's Discovery Requests ("Motion to Compel"), Plaintiff Integrated Direct Marketing, L.L.C.'s Motion in Limine for an Adverse Inference for Defendants' Spoliation of Evidence and Other Relief ("Spoliation Motion"), and Plaintiff, [sic] Integrated Direct Marketing, L.L.C.'s Motion for Sanctions for Defendants' Failure to Produce Documents, Submission of a False Affidavit, and Refusal to Answer Questions at Deposition ("Motion for Sanctions"). For the reasons that follow, plaintiff's Motion to Compel and Spoliation Motion will be denied, and plaintiff's Motion for Sanctions will be granted in part and denied in part.

I. BACKGROUND

A. Procedural History

Plaintiff Integrated Direct Marketing, LLC ("plaintiff" or "IDM") instituted this action against former employee Drew May ("May") for allegedly misappropriating IDM's confidential and proprietary information, including its trade secrets, and using that information to benefit himself and his new employer, Merkle, Inc. ("Merkle"), Almost six months after filing the initial Complaint, IDM filed an amended complaint, titled "Integrated Direct Marketing, LLC's First Amended Complaint Against Drew Many and Merkle, Inc., for Injunctive Relief. Damages, and Other Relief" ("Amended Complaint"), adding Merkle as a defendant. The Amended Complaint alleges seven causes of action. The first four, consisting of breach of contract (Count I), breach of fiduciary duty (Count II), conversion (Count III), and violation of the Arkansas and Virginia trade secrets acts (Count IV), were filed solely against May. Count V, which also alleges a violation of the Arkansas and North Carolina trade secrets acts, was filed solely against Merkle, and the last two counts of intentional interference with business expectancies (Count VI¹ ); and unjust enrichment (Count VII² ) were filed against both defendants.

In terms of relief, IDM seeks an injunction barring May and Merkle from engaging in any use of IDM's trade secrets and the confidential information May learned while employed with IDM; directing May and Merkle to return any documents or electronic files containing those trade secrets or confidential information; and enjoining May and Merkle "from engaging in future activities that would result in misappropriation of IDM's trade secrets and confidential proprietary information, including refraining from work on all accounts on behalf of Merkle that are in competition with IDM, including on data integration, campaign analytics, data sourcing, data pricing, and any other activities in which May and Merkle have retained, used, and may use, IDM's trade secrets and confidential and proprietary information." IDM also seeks compensatory and punitive damages, Merkle's disgorgement of any unlawfully obtained profits, and reasonable royalties for misappropriating IDM's information.

This action has been heavily litigated from the beginning due to the parties' failure to follow the Local Civil Rules and numerous discovery-related disputes which required endless motions hearings resulting in an almost three-month extension of discovery. Still pending is IDM's Motion to Compel, which seeks further discovery of Merkle's financial information in relation to IDM's unjust enrichment claim and damages theory. That motion has been held in abeyance pending the outcome of summary judgment. In addition, upon the defendants' motions, IDM's two damages experts were stricken from this case because they were not timely disclosed. See Order of April 13, 2015 [Dkt. No. 113] (magistrate judge's order); Order of May 1, 2015 [Dkt. No. 162] (Order affirming the magistrate judge's ruling). Accordingly, IDM has no expert to testify at trial about its damages. Also still pending are plaintiffs Spoliation Motion, which accuses May and Merkle of spoliating evidence, and plaintiff's Motion for Sanctions, which was filed against both defendants on multiple grounds. After hearing argument on both motions, including live testimony from May on the spoliation issue, the Court declined to rule on those motions.

Following the close of discovery and after hearing oral argument on plaintiff's Spoliation Motion and Motion for Sanctions, each defendant filed a motion for summary judgment. Subsequently, May moved to strike certain exhibits attached to IDM's brief in opposition to his summary judgment motion. All three motions were fully briefed and a hearing was held on August 21, 2015. During that hearing, the Court granted summary judgment in favor of May on the breach of contract claim (Count I), which alleged that May breached Paragraph 2 of his Confidentiality Agreement with IDM. Paragraph 2 indefinitely prohibited May from disclosing any of IDM's confidential information to any third party. "Confidential information" was defined as "any and all information furnished by" IDM that is not publicly known, As May argued, the breadth of that definition made that clause unenforceable. For example, it would prevent May from ever disclosing information such as the identity of IDM's janitor services vendor. Accordingly, the Court ruled that the confidentiality provision was not narrowly tailored to protect IDM's legitimate business interests, thereby rendering it unenforceable under Virginia law.³ See Assurance Data, Inc. v. Malyevac, 286 Va. 137, 747 S.E.2d 804, 808 (2013) (reiterating the principle that an agreement that restrains competition or trade must be "no greater than necessary to protect a legitimate business interest," "not unduly harsh or oppressive in curtailing an employee's ability to earn a livelihood," and "reasonable in light of sound public policy"); Lasership Inc. v. Watson, 2009 WL 7388870, at *8, 79 Va. Cir. 205 (Aug. 12, 2009) (finding a confidentiality agreement overbroad because it precluded the disclosure of any information concerning the business to any person in perpetuity, including information not "worthy of confidence"); see also BB & T Ins. Servs., Inc. v. Thomas Rutherfoord, Inc., 2010 WL 7373709, at *5, 80 Va. Cir. 174 (Va.Cir. Feb. 9, 2010) (confidentiality clause unenforceable because its duration was "for perpetuity"). Moreover, even if Paragraph 2 were enforceable, IDM failed to produce any evidence of actual damages resulting from May's alleged breach, which is an essential element of a breach of contract claim. See Sunrise Continuing Care, LLC v. Wright, 277 Va. 148, 671 S.E.2d 132, 135 (2009).

The remainder of the issues raised in the parties' summary judgment motions, as well as during the August 21 hearing, are addressed in this Opinion.

B. Factual Background

Both IDM and Merkle are engaged in the data-driven marketing business. IDM provides data solutions, analytics, and strategies to technology and retail companies for their business-to-business ("B2B") and business-to-consumer ("B2C") marketing needs. See Deck Slater Supp. Pl.'s Opp'n to Merkle's Mot. Summ. J. ("Slater Deck Opp'n MSJ") ¶ 3. IDM's principal place of business is in Reston, Virginia. Its focus is to help its clients achieve their customer acquisition and retention goals, as well as their sales goals. Id. Two key areas of IDM's business are data sourcing and customer data integration ("CDI"). Id. ¶ 4. "Data sourcing involves selecting and acquiring the best data for each [data] solution, including drawing from large data providers to hundreds of niche sources in order to build the greatest depth and accuracy at the best value." Id. "CDI involves matching various data sources using special processes to provide a dataset that has no errors or duplications." Id. ¶ 5; see also Deck Brian Wiedower ("Wiedower Decl.") ¶ 5 (explaining that CDI is the process of consolidating and managing customer information from multiple data sources). CDI is an element of customer relationship management ("CRM") for companies and enables a company to maximize the success of a marketing campaign using customer data. Id.

Merkle's principal place of business is in Columbia. Maryland. It provides data solutions, analytics, and strategies to businesses in support of their B2B and B2C marketing. Both IDM's and Merkle's businesses involve procuring custom data for clients from external data sources and combining it with client internal data to produce custom data-based CRM programs. Both companies compete to provide their data-integrated CRM services to high-tech businesses.

May, a resident of Arkansas, was hired by IDM in January 2012, J. Slip. [Dkt. No. 188] ¶ 5, to open IDM's Little Rock, Arkansas office, see Slater Decl. Opp'n MSJ ¶ 6. May had known Chad Slater ("Slater"), IDM's President and CEO. since 1997 or 1998 through their mutual...