United States District Court, W.D. Texas, Austin Division
PITMAN UNITED STATES DISTRICT JUDGE.
the Court is a partial motion to dismiss filed by Defendants
Process Pro Consulting, LLC (“Process Pro”); Adam
Sharrow (“Sharrow”); and Andrew Millet
(“Millet”) (together, “Defendants”).
(Dkt. 17). Having considered the parties' submissions,
the record, and the applicable law, the Court will grant the
motion in part.
and Millet were employees of Plaintiff ScaleFactor, Inc.
(“ScaleFactor”) who left to start their own
business, Process Pro. ScaleFactor alleges that Sharrow and
Millet copied, deleted, or destroyed company data before
forming a competing business in violation of their
non-competition agreements. (Compl., Dkt. 1, at 4-22).
ScaleFactor also alleges that at Process Pro, Sharrow and
Millet are using ScaleFactor's trade secrets.
(Id.). Finally, ScaleFactor alleges that because
Sharrow and Millet exercised their ScaleFactor stock options
while in violation of their stock-option agreements,
ScaleFactor is entitled to rescind the stocks they bought.
these allegations, ScaleFactor asserts eight causes of action
against Defendants. (Id. at 22-44). Among those
causes of action is a claim for violations of the Texas
Uniform Trade Secrets Act, Tex. Civ. Prac. & Rem. Code
§§ 134A.001 et seq. (“TUTSA”).
(Id. at 27-31). Relevant to the instant motion to
dismiss are four other claims: (1) violations of the Harmful
Access by Computer Act, Tex. Civ. Prac. & Rem. Code
§§ 143.001 et seq. (“HACA”);
(2) breach of fiduciary duty; (3) conversion; and (4)
misrepresentation. (Id. at 37-44). Believing that
ScaleFactor's TUTSA claim preempts these four claims,
Defendants filed a motion to dismiss them under Federal Rule
of Civil Procedure 12(b)(6). (Mot., Dkt. 17).
to Rule 12(b)(6), a court may dismiss a complaint for
“failure to state a claim upon which relief can be
granted.” Fed.R.Civ.P. 12(b)(6). In deciding a 12(b)(6)
motion, a “court accepts ‘all well-pleaded facts
as true, viewing them in the light most favorable to the
plaintiff.'” In re Katrina Canal Breaches
Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting
Martin K. Eby Constr. Co. v. Dallas Area Rapid
Transit, 369 F.3d 464, 467 (5th Cir. 2004)). “To
survive a Rule 12(b)(6) motion to dismiss, a complaint
‘does not need detailed factual allegations,' but
must provide the plaintiff's grounds for entitlement to
relief-including factual allegations that when assumed to be
true ‘raise a right to relief above the speculative
level.'” Cuvillier v. Taylor, 503 F.3d
397, 401 (5th Cir. 2007) (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). That is, “a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
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. “The tenet that a court
must accept as true all of the allegations contained in a
complaint is inapplicable to legal conclusions. Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.”
Id. A court ruling on a 12(b)(6) motion may rely on
the complaint, its proper attachments, “documents
incorporated into the complaint by reference, and matters of
which a court may take judicial notice.” Dorsey v.
Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir.
2008) (citations and internal quotation marks omitted). A
court may also consider documents that a defendant attaches
to a motion to dismiss “if they are referred to in the
plaintiff's complaint and are central to her
claim.” Causey v. Sewell Cadillac-Chevrolet,
Inc., 394 F.3d 285, 288 (5th Cir. 2004). But because the
court reviews only the well-pleaded facts in the complaint,
it may not consider new factual allegations made outside the
complaint. Dorsey, 540 F.3d at 338. “[A]
motion to dismiss under 12(b)(6) ‘is viewed with
disfavor and is rarely granted.'” Turner v.
Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (quoting
Harrington v. State Farm Fire & Cas. Co., 563
F.3d 141, 147 (5th Cir. 2009)).
central issue presented by Defendants' motion is whether
ScaleFactor's TUTSA claim preemps its four state-law tort
claims. TUTSA's preemption provision provides
that the statute “displaces conflicting tort,
restitutionary, and other law of this state providing civil
remedies for misappropriation of a trade secret.” Tex.
Civ. Prac. & Rem. Code § 134A.007(a). Excepted from
the provision are “contractual remedies” and
“other civil remedies that are not based upon
misappropriation of a trade secret.” Id.
§ 134A.007(b)(1), (2).
scope of TUTSA preemption is somewhat undeveloped; as this
Court has previously observed, “[t]here is . . . little
case law from Texas courts applying the statute's
preemption provision.” Embarcadero Techs., Inc. v.
Redgate Software, Inc., 1:17-CV-444-RP, 2018 WL 315753,
at *2 (W.D. Tex. Jan. 5, 2018). But the purpose of TUTSA
preemption is to “prevent inconsistent theories of
relief for the same underlying harm by eliminating
alternative theories of common law recovery which are
premised on the misappropriation of a trade secret.”
Id. (quoting Super Starr Int'l, LLC v. Fresh
Tex Produce, LLC, 531 S.W.3d 829, 843 (Tex. App.-Corpus
Christi 2017, no pet.)). Consistent with that purpose,
“[m]ost courts considering [the scope of TUTSA
preemption] have determined [that the] UTSA was intended to
preempt all claims based upon the unauthorized use of
information.” Id. (quoting 360 Mortgage
Group, LLC v. Homebridge Financial Servs., Inc., No.
A-14-CA- 847-SS, 2016 WL 900577, at *8 (W.D. Tex. March 2,
2016)). So, faced previously with the question of
whether TUTSA preempts claims based on the unauthorized use
of confidential information that was not a trade secret, this
Court held that it does. Id. at *2-*4 (rejecting the
contention that “a breach of fiduciary duty claim is
not preempted by TUTSA when it alleges the improper taking of
confidential information that does not qualify as a trade
the same approach to TUTSA preemption here, the Court finds
that ScaleFactor's conversion and HACA claims are both
preempted. ScaleFactor alleges that Sharrow and Millet
destroyed and copied company data before leaving. (Compl.,
Dkt. 1, at 15-16, 18-19). Before his termination, Sharrow
allegedly performed a “factory reset” of his
laptop, rendering the data on the laptop “permanently
unrecoverable.” (Id. at 15). It is not alleged
that all such data was trade secret information. (See
id.). Millet, meanwhile, copied company documents to a
personal hard drive, some of which included trade secret
information. (Id. at 18). He later destroyed that
hard drive. (Id. at 19). Finally, Sharrow and Millet
are each alleged to have deleted documents from
ScaleFactor's server and emails from his corporate
account. (Id. at 15, 18). The deleted documents and
emails are alleged to contain company information but not
necessarily trade secrets. (See id.).
conversion claim is based on these alleged acts of
destruction and copying. (See id. at 39-40
(“Sharrow and Millet are liable to ScaleFactor for
conversion of ScaleFactor's property due to their
unauthorized destruction, copying, and retention of
ScaleFactor property”)). According to ScaleFactor,
Sharrow and Millet unlawfully assumed control over
ScaleFactor property by wiping Sharrow's laptop, copying
Millet's documents to his hard drive, and deleting their
emails. (Id. at 39). ScaleFactor argues that these
actions constitute conversion and argues that some of the
converted property is “entirely independent from the
trade secrets at issue” in this case. (Resp., Dkt. 28,
at 8; see also Compl. Dkt. 1, at 39). But as the
Court found in Embarcadero, a tort claim is
preempted by TUTSA if it is “based on the unauthorized
use of information”-trade secret or not.
Embarcadero, 2018 WL 315753, at *2 (quoting 360
Mortgage Group, 2016 WL 900577, at *8). And here,
ScaleFactor's conversion claim is fundamentally concerned
with the unauthorized acquisition (and later destruction) of
company information, some but not all of which is
trade-secret. (See Compl., Dkt. 1, at 25 (alleging
that “Sharrow's deliberate destruction of all data
residing on his company laptop is evidence of his
misappropriation of ScaleFactor's trade secrets”)).
Indeed, ScaleFactor alleges that its conversion damages
include the “loss of confidential, proprietary, and
trade secret information.” (Id. at 40).
Because ScaleFactor's TUTSA and conversion claims each
“stem from the same underlying harm-the taking of
[ScaleFactor's] confidential information”-its
conversion claim is preempted by TUTSA. Embarcadero,
2018 WL 315753, at *3.
same is true for ScaleFactor's HACA claim. Like
ScaleFactor's conversion claim, its HACA claim is based
on Sharrow and Millet's destruction or copying of company
data. ScaleFactor alleges that the defendants “accessed
ScaleFactor's computers . . . for the purpose of
destroying ScaleFactor's information, unauthorized
copying and retention of ScaleFactor's information, and
misappropriation of ScaleFactor's confidential,
proprietary, and trade secret information.” (Compl.,
Dkt. 1, at 39). It clarifies that Sharrow and Millet's
access to its computer network was “not for the purpose
of permitting [them] to destroy, copy, retain, and
misappropriate ScaleFactor's confidential, proprietary,
trade secret, or other information.” (Id.).
Like its conversion claim, ScaleFactor's HACA damages
include the “loss of confidential, proprietary, and
trade secret information.” (Id.). Once again,
the harm stemming ...