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DynaEnergetics GmbH & Co. KG v. Hunting Titan, Inc.

United States District Court, S.D. Texas, Houston Division

October 15, 2019

DYNAENERGETICS GMBH & CO. KG, and DYNAENERGETICS US, INC., Plaintiffs,
v.
HUNTING TITAN, INC., and HUNTING ENERGY SERVICES, INC., Defendants.

          ORDER

          Lee H. Rosenthal Chief United States District Judge

         DynaEnergetics GmbH & Co. KG and DynaEnergetics US, Inc. (DynaEnergetics), sued Hunting Titan, Inc. and Hunting Energy Services, LLC (Hunting), alleging that Hunting had obtained and used DynaEnergetics's confidential information relating to the DS Trinity System, an 8-inch perforating gun used in the oil and gas industry. (Docket Entry No. 1). DynaEnergetics asserted trade-secret misappropriation under Texas and federal law; tortious interference with contract, conversion of confidential information, and unfair competition under Texas law; and moved for a preliminary injunction. (Id.; Docket Entry No. 22). Hunting counterclaimed for unfair competition by misappropriation, alleging that it was DynaEnergetics that had misappropriated Hunting's technology. (Docket Entry No. 47). DynaEnergetics now moves to dismiss the counterclaim on two grounds: failure to state a claim and federal preemption. (Docket Entry No. 51). Hunting responded, and DynaEnergetics replied. (Docket Entry Nos. 55, 61).

         Based on the amended complaint and the counterclaim, the motion and response, and the applicable law, the court grants DynaEnergetics's motion to dismiss the counterclaim, with prejudice because it is preempted under federal law. The reasons for this ruling are set out below.

         I. Background

         DynaEnergetics and Hunting develop and manufacture technology for the oil and gas industry. In early 2019, the two companies announced new perforating systems, each with short-length guns, within one week of each other. (Docket Entry No. 43 at ¶¶ 53, 64). DynaEnergetics sued Hunting, and Hunting counterclaimed. (Docket Entry Nos. 1, 47).

         Hunting alleges that it developed the H-2 Perforating System “[t]hrough extensive time, labor, skill, and money.” (Docket Entry No. 47 at ¶ 160). In its response to DynaEnergetics's motion to dismiss the counterclaim, Hunting explains that in July 2017, it began to develop a system with an “ultra-short perforating gun, ” a “3-shot cluster, ” and a “modular detonator.” (Docket Entry No. 55 at 4). Hunting filed a patent application for its invention no later than February 2018.[1] (Docket Entry No. 47 at ¶ 160). Hunting alleges that this application included most of the features that DynaEnergetics alleges are its own trade secrets or confidential information. (Id.).

         Hunting alleges that on March 6, 2018, an employee of EOG Resources, a DynaEnergetics customer, “became aware” of the H-2 System. (Id. at ¶ 161). That employee, Jon Holt, allegedly told PerfX Wireline Services, a field operator and user of perforating systems, about the system and its short-length guns. (Id. at ¶¶ 161-162). Hunting alleges that PerfX then approached Hunting about purchasing the system in order to bid on, and use the system in, an EOG project. (Id. at ¶ 162). Hunting informed PerfX that the H-2 System was not yet available. (Id. at ¶ 163). Hunting alleges that either PerfX or another source told EOG that the H-2 System was not yet commercially available. (Id. at ¶ 164). EOG then met with DynaEnergetics, described the features of the H-2 System, and asked DynaEnergetics to copy the features into its technology, which it did. (Id. at ¶¶ 164-165). Hunting alleges that DynaEnergetics gained a “special advantage” by using this information without the expense Hunting incurred in developing it, putting Hunting at a competitive disadvantage. (Id. at ¶ 169).

         II. The Legal Standard

         Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Claims may be dismissed under Rule 12(b)(6) on the basis of a dispositive issue of law, including federal preemption. A complaint may also be dismissed if the complaint does not contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Rule 8 “does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). “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. (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556).

         The court should generally give a plaintiff at least one chance to amend under Rule 15(a) before dismissing the action with prejudice for factual pleading insufficiency, unless it is clear that to do so would be futile. See Pervasive Software Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214, 232 (5th Cir. 2012); Carroll v. Fort James Corp., 470 F.3d 1171, 1175 (5th Cir. 2006) (“[Rule 15(a)] evinces a bias in favor of granting leave to amend.” (quotation omitted)); Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002). “Whether leave to amend should be granted is entrusted to the sound discretion of the district court.” Pervasive Software, 688 F.3d at 232 (quotation omitted).

         In considering a motion to dismiss for failure to state a claim, the court is to consider “the contents of the pleadings, including attachments.” Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000). Documents attached to a motion to dismiss are “considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to [the] claim.” Id. at 498-99 (quoting Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993)). The court may also “take judicial notice of matters of public record.” Norris v. Hearst Tr., 500 F.3d 454, 461 n.9 (5th Cir. 2007)

         “On a Rule 12(b)(6) motion, a district court generally must limit itself to the contents of the pleadings, including attachments.” Brand Coupon Network, L.L.C. v. Catalina Mktg. Corp., 748 F.3d 631, 635 (5th Cir. 2014) (quotation omitted). “The court may also consider documents attached to either a motion to dismiss or an opposition to that motion when the documents are referred to in the pleadings and are central to a plaintiff's claims.” Id.; see, e.g., In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (“[B]ecause the defendants attached the contracts to their motions to dismiss, the contracts were referred to in the complaints, and the contracts are central to the plaintiffs' claims, we may consider the terms of the contracts in assessing the motions to dismiss.”). A district court errs by considering evidence “outside the pleadings-and not referred to therein-without converting the motion to dismiss into a motion for summary judgment.” Brand Coupon, 748 F.3d at 635; see also Katrina Canal Breaches, 495 F.3d at 205 (“Generally, in deciding a motion to dismiss for failure to state a claim, if matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment.” (quotation omitted)); Isquith for and on Behalf of Isquith v. Middle S. Utils., Inc., 847 F.2d 186, 196 (5th Cir. 1988) (“[W]hen non-pleading materials are filed with a motion to dismiss, . . . a district court has complete discretion under the Federal Rules of Civil Procedure to either accept the exhibits submitted or not, as it sees fit.”).

         III. Analysis

         DynaEnergetics argues that Hunting has recited the elements of a claim for unfair competition by misappropriation, but failed to allege necessary factual support. (Docket Entry No. 51 at 5). Hunting responds that it provided specific allegations ...


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