Prudential Def. Solutions, Inc. v. Graham

498 F.Supp.3d 928

PRUDENTIAL DEFENSE SOLUTIONS, INC., Plaintiff,

v.Jake W. GRAHAM, Mark Sheahan, and Robert Charnot, Defendants.

Case No. 20-11785

United States District Court, E.D. Michigan, Southern Division.

Signed October 30, 2020

Benjamin I. Shipper, Stuart M. Schwartz, Clark Hill PLC, Detroit, MI, for Plaintiff.

Matthew J. Boettcher, Plunkett & Cooney, Bloomfield Hills, MI, for Defendants.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS

ROBERT H. CLELAND, UNITED STATES DISTRICT JUDGE

Plaintiff Prudential Defense Solutions, Inc., brings this action under the Michigan Uniform Trade Secrets Act ("MUTSA"), Mich. Comp. Laws § 445.1904, the federal Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836(b)(1), breach of contract, breach of fiduciary duty, silent fraud, tortious interference with contract, tortious interference with business expectancy, unjust enrichment, and civil conspiracy. (ECF No. 15, PageID.247-60.) It alleges Defendant Jake W. Graham was Plaintiff's Vice President and signed a non-compete agreement but then worked with Defendants Mark Sheahan and Robert Charnot, two non-employees, to establish a competing company.

Defendants move to dismiss all counts of the complaint. (ECF No. 13.) Plaintiff filed an amended complaint and a response, (ECF Nos. 15, 16); Defendants filed a reply. (ECF No. 17.) Having reviewed the record, the court does not find a hearing to be necessary. E.D. Mich. L.R. 7.1(f)(2). For the reasons provided below, the motion will be granted in part and denied in part.

I. BACKGROUND

The following are facts as alleged in Plaintiff's complaint. In a motion to dismiss, the court accepts Plaintiff's factual allegations as true but makes no overt finding as to truth or falsity. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Plaintiff provides on-site security guard and mobile patrol services. (ECF No. 15, PageID.226, ¶ 10.) In December 2012, Defendant Graham signed a non-compete agreement with Prudential Security, Inc. ("PSI"), which, after a restructuring period in February 2019, conveyed and assigned its assets to Plaintiff. (Id. , PageID.227, ¶¶ 15, 12.) Another employee for PSI, James Howard, signed a non-compete with PSI in September 2014. (Id. , PageID.228, ¶ 17.) After the restructuring, Defendant Graham and Howard continued employment with Plaintiff in executive-level positions. (Id. , ¶ 20.) As Vice President, Defendant Graham had access to Plaintiff's business information and worked directly with Plaintiff's clients. (Id. , PageID.231-32, ¶¶ 31-32.) He was a highly compensated non-owner officer. (Id. , PageID.232, ¶ 33.)

Plaintiff employed Howard as a Vice President, and tasked him with maintaining relationships with Plaintiff's educational institution clientele. (Id. , ¶ 34.) Defendant Charnot worked as a business manager for educational institutions that conduct business with Plaintiff. (Id. , ¶ 36.) Defendant Sheahan is a Certified Public Accountant ("CPA") who previously provided services to PSI. (Id. , PageID.233, ¶ 38.)

Defendant Graham attempted to partner with Howard, Defendant Charnot, and Defendant Sheahan to establish a competing security guard and mobile patrol service company. Defendant Graham approached Howard and stated that the new company would contact Plaintiff's educational institution clients and convince them to terminate their agreements with Plaintiff in favor of their new company.

(Id. , PageID.235, ¶ 47.) He explained that Defendant Sheahan understood PSI's finances from prior audit experience and would perform administrative tasks such as accounting and payroll; Defendant Charnot would help develop connections with educational institutions. (Id. , PageID.238, ¶ 61.) Plaintiff does not allege Howard joined the new firm but Defendants Graham, Charnot, and Sheahan entered an agreement to compete with Plaintiff. (Id. , PageID.239-40, ¶ 66.) In January 2020, Defendant Graham submitted an application for a private security contractor license. (Id. , PageID.242, ¶ 78.) Defendants established on office location, organized a new company, acquired funding, and obtained licenses. (Id. , PageID.236, ¶ 53.) According to the complaint, on June 2020, Defendant Graham downloaded Plaintiff's business information, including "information related to pricing, cost, and profit data, financial records, business plans, customer lists, organizational charts, copies of contracts with customers, contract bidding procedures and information, and employee information." (Id. , PageID.245-46, ¶ 89.)

Defendant Graham solicited at least one worker employed by Plaintiff other than Howard, and intended to solicit more in the future. (Id. , PageID.245, ¶¶ 86-87.) Defendants plan to solicit Plaintiff's clients. (Id. , PageID.246, ¶ 92.)

Plaintiff learned about Defendant Graham's actions and terminated his employment on July 2, 2020. (Id. , PageID.231, ¶ 30.) Plaintiff filed this action on July 1, 2020. (ECF No. 1.)

II. STANDARD

Under Federal Rule of Civil Procedure 12(b)(6) a party can move to dismiss a complaint for "failure to state a claim upon which relief can be granted." In considering a motion to dismiss, the court must "construe the complaint in the light most favorable to the plaintiff and accept all factual allegations as true." Laborers’ Local 265 Pension Fund v. iShares Trust , 769 F.3d 399, 403 (6th Cir. 2014). "To survive a motion to dismiss, a complaint must contain factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Determining plausibility is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937. The plaintiff must present "more than labels and conclusions." Twombly , 550 U.S. at 545, 127 S.Ct. 1955. "[A] formulaic recitation of a cause of action's elements will not do." Id.

When reviewing a motion to dismiss, the court "may not consider matters beyond the complaint." Hensley Mfg. v. ProPride, Inc. , 579 F.3d 603, 613 (6th Cir. 2009). However, the court may consider "documents incorporated into the complaint by reference ... and matters of which a court may take judicial notice" in addition to the complaint's allegations. Tellabs, Inc. v. Makor Issues & Rights, Ltd. , 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). The court may also consider "a document that is not formally incorporated by reference or attached to a complaint" when "[the] document is referred to in the complaint and is central to the plaintiff's claim." Greenberg v. Life Ins. Co. of Va. , 177 F.3d 507, 514 (6th Cir. 1999).

III. DISCUSSION

Defendants seek to dismiss all nine counts of the complaint. The court will address each claim in turn.

A. MUTSA

Plaintiff alleges Defendants misappropriated trade secrets under MUTSA. MUTSA allows "a complainant to recover damages for misappropriation" of trade secrets. Mich. Comp. Laws § 445.1904. A "trade secret" is "information, including a formula, pattern, compilation, program, device, method, technique, or process, that is both of the following":

(i) 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.

(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Mich. Comp. Laws § 445.1902(d) ; see also Planet Bingo, LLC v. VKGS, LLC , 319 Mich. App. 308, 321, 900 N.W.2d 680, 688 n.1 (2017). Although few published cases from Michigan courts or the Sixth Circuit have interpreted the meaning of this statutory language, relying on pre-existing precedent, the Sixth Circuit has stated that "[o]f critical importance ... to be worthy of trade secret status, the secret information must afford the owner a competitive advantage by having value to the owner and potential competitors." Dice Corp. v. Bold Tech. , 556 F. App'x 378, 385 (6th Cir. 2014) (quoting Daimler-Chrysler Servs. N. Am., LLC v. Summit Nat'l., Inc. , 289 F. App'x 916, 922 (6th Cir. 2008) ). "[T]rade secret law does not protect ‘an idea which is well known or easily ascertainable.’ " Id. (quoting Manos v. Melton , 358 Mich. 500, 508, 100 N.W.2d 235, 238 (1960) ).

"Misappropriation" under MUTSA is defined as:

(i) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means.

(ii) Disclosure or use of a trade secret of another without express or implied consent by a person who did 1 or more of the following:

(A) Used improper means to acquire knowledge of the trade secret.

(B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was derived from or through a person who had utilized improper means to acquire it, acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use, or derived from or through a person who owed a duty to the person to maintain its secrecy or limit its use.

(C) Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

Mich. Comp. Laws § 445.1902(b) ; see also Planet Bingo, LLC , 900 N.W.2d at 687-88.

1. Trade Secret

Defendants first contend that Plaintiff has not alleged the existence of a trade secret. (ECF No. 13, PageID.192-95.) Plaintiff alleges in its complaint that Defendants illegally took its "client lists and contact information, the details of its client contracts, pricing for services,...