Vero Fin. Techs. v. Maddox

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VERO FINANCE TECHNOLOGIES, INC., Plaintiff, v. JULIE MADDOX, Defendant.

Civil Action No. 1:22-CV-4186-TWT

United States District Court, N.D. Georgia, Atlanta Division

June 10, 2024

OPINION AND ORDER

THOMAS W. THRASH, JR. United States District Judge.

This is an action for breach of a restrictive covenant. It is before the Court on the Defendant's Motion to Dismiss [Doc. 23] which is GRANTED in part and DENIED in part.

I. Background^[1]

This case arises from the events following the Defendant Julie Maddox's resignation from her job with the Plaintiff Vero Finance Technologies, Inc. (Compl. ¶ 10). Vero operates “a commercial lending platform that partners with banks and credit unions to offer inventory financing for dealers of manufactured goods.” (Id. ¶ 7). Beginning in September 2021, Maddox worked for Vero as Vice President of Sales and Operations on their executive leadership team handling account management and sales operations in the Southeast. (Id. ¶ 10). Through her employment with Vero, Maddox had access to proprietary and confidential company information, including client lists, financing strategies, financing positions, lending processes, inventory valuations, and budget data. (Id. ¶ 12).

When Vero hired Maddox, she signed a Proprietary Information and Inventions Agreement (“PIIA”), under which she “agreed not to use or disclose confidential or proprietary information during and after her employment.” (Id. ¶ 28 (citing Doc. 1-2)). Under the PIIA, Maddox specifically agreed to promptly return all company items containing proprietary information upon her termination. (Id. ¶ 29). The PIIA also contained non-competition and non-solicitation clauses that prohibited Maddox from performing certain competitive activities after her termination. (Id. ¶¶ 31-35).

Maddox worked for Vero until May 2022 when she submitted her resignation. (Id. ¶ 38). Vero alleges that before Maddox returned her company computer, she deleted all of her emails and the contents of her hard drive, destroying the data on her laptop that she was obligated to preserve under the PIIA. (Id. ¶ 40). After resigning, Maddox returned to work for her former employer and Vero competitor, NextGear Capital. (Id. ¶¶ 11, 43). Vero alleges that upon Maddox's return to NextGear, she used confidential information from her employment with Vero to advantageously repossess certain inventory from Atlanta Auto Firm (“AAF”), a local preowned car dealer. (Id. ¶¶ 41-52).

Vero alleges that Maddox violated the PIIA's non-competition clause by accepting reemployment with NextGear and the PIIA's confidentiality provision by sharing Vero's confidential information with NextGear. (Id. ¶¶ 57, 59). Vero also alleges that Maddox violated the PIIA's customer-specific non-competition clause by providing services to a known client of Vero, AAF. (Id. ¶ 58). Vero claims that “Maddox's conduct reveals an improper intent to steal Vero's information and documents for her own benefit, the benefit of NextGear, and potentially the benefit [of] other Vero competitors.” (Id. ¶ 60).

Vero filed the present action on October 20, 2022, bringing three counts of breach of restrictive covenants and confidentiality obligations under the PIIA, two counts of violation of federal and state trade secrets statutes, and one count of tortious interference with business and contractual relationships. Maddox now moves to dismiss all claims against her for failure to state a claim.

II. Legal Standard

A complaint should be dismissed under Rule 12(b)(6) only where it appears that the facts alleged fail to state a “plausible” claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Fed.R.Civ.P. 12(b)(6). A complaint may survive a motion to dismiss for failure to state a claim, however, even if it is “improbable” that a plaintiff would be able to prove those facts; even if the possibility of recovery is extremely “remote and unlikely.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). In ruling on a motion to dismiss, the court must accept the facts pleaded in the complaint as true and construe them in the light most favorable to the plaintiff. See Quality Foods de Centro Am., S.A. v. Latin Amwi. Agribusiness Dev. Corp., S.A., 711 F.2d 989, 994-95 (11th Cir. 1983); see also Sanjuan v. American Bd. of Psychiatry & Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994) (noting that at the pleading stage, the plaintiff “receives the benefit of imagination”). Generally, notice pleading is all that is required for a valid complaint. See Lombard's, Inc. v. Prince Mfg., Inc., 753 F.2d 974, 975 (11th Cir. 1985). Under notice pleading, the plaintiff need only give the defendant fair notice of the plaintiff's claim and the grounds upon which it rests. See Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citing Twombly, 550 U.S. at 555).

III. Discussion

Maddox moves to dismiss all six of Vero's claims against her, arguing that (1) the breach of contract claims should be dismissed because the PIIA's restrictive covenants are unenforceable under New York law and because the factual allegations do not demonstrate that Maddox breached the covenants, (2) the trade secrets claims fail as a matter of law because the information that Maddox allegedly misappropriated was not secret, and (3) the tortious interference claim fails as a matter of law because Maddox did not unlawfully interfere with any of Vero's business relationships. (Br. in Supp. of Def.'s Mot. to Dismiss, at 1-3). The Court addresses Maddox's arguments in support of dismissal and Vero's responses thereto in turn.

A. Enforceability of the Restrictive Covenants (Counts I-III)

Maddox first argues that the restrictive covenants in the PIIA are unenforceable under New York law and that Counts I, II, and III should therefore be dismissed.^[2] (Br. in Supp. of Def.'s Mot. to Dismiss, at 10-17). She claims that the restrictive covenants are not necessary to prevent her from using or disclosing trade secrets or confidential information and that the services she provided to Vero were not unique or extraordinary. (Id. at 11, 16). In response, Vero contends that the restrictive covenants are valid because they protect against misappropriation of trade secrets and other confidential information and that Maddox's services as a senior executive were unique and extraordinary. (Pl.'s Resp. Br. in Opp'n to Def.'s Mot. to Dismiss, at 11-17).

Under New York law, a restrictive covenant is reasonable and thus enforceable if it “(1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public.” BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 388-89 (1999) (citations omitted). Maddox contests only the first prong. (See Br. in Supp. of Def.'s Mot. to Dismiss, at 10-11). The legitimate interest inquiry provides that “restrictive covenants will be enforceable to the extent necessary to prevent the disclosure or use of trade secrets or confidential customer information” or “where an employee's services are unique or extraordinary.” Reed, Roberts Assocs., Inc. v. Strauman, 40 N.Y.2d 303, 308 (1976) (citations omitted).

Maddox first contends that the restrictive covenants are not necessary to prevent her from using or disclosing trade secrets or confidential information because the allegedly protected information itself-“information about Vero not placing PMSIs [purchase money security interests] on its inventory at AAF”-does not constitute a trade secret. (Br. in Supp. of Def.'s Mot. to Dismiss, at 11-12). She also contends that the Complaint lacks any allegation that she took trade secrets or confidential information from her employment with Vero and used them during her employment with NextGear, arguing that her alleged knowledge of AAF inventory with PMSI status amounts to nothing more than general knowledge that was ascertainable by proper means. (Id. at 12-15). Finally, Maddox contends that the services she provided to Vero were not unique or extraordinary because they did not require any special talents and that Vero fails to allege that she was a salesperson who controlled client relationships. (Id. at 17).

In response, Vero argues that Maddox misstates its allegations, which are not limited to information about PMSIs, but rather encompass “Vero's strategies for establishing PMSIs on specific inventory, together with its funding arrangements, lien priorities, monitoring applications, lending processes, inventory valuations, and financing portfolios.” (Pl.'s Resp. Br. in Opp'n to Def.'s Mot. to Dismiss, at 12). And Vero contends that it sufficiently pleads that Maddox's services were unique and extraordinary because she had control over Vero's relationship with AAF in both her onboarding and portfolio development of the client. (Id. at 16).

The Court agrees with Vero that these issues are not properly resolved at the motion to dismiss stage. (Id. at 13 (citing Chevron U.S.A., Inc. v. Roxen Serv., Inc., 813 F.2d 26, 29 (2d Cir. 1987))). New York courts have acknowledged that “a non-compete agreement's enforceability generally turns on the fact-laden question of whether the agreement is ‘reasonable'” and have therefore declined to find restrictive covenants are unenforceable at the motion to dismiss stage. Installed Bldg. Prod., LLC v. Cottrell, 2014 WL 3729369, at *6-8 (W.D.N.Y. July 25, 2014). And the cases that Maddox cites in opposition to this conclusion are distinguishable on the facts. See e.g., AM Medica Commc'ns Grp. v. Kilgallen, 90 Fed.Appx. 10, 11 (2d Cir. 2003); (Reply Br. in Supp. of Def.'s Mot. to Dismiss, at 5, n.2).

In its Complaint, Vero plausibly pleads the existence of a trade secret as defined under New York law to...