The opinion of the court was delivered by: ROBERT KELLY, Senior District Judge
On June 23, 2003, Plaintiffs Kevin Flynn ("Flynn") and Healthcare
Advocates, Inc. ("HAS, Inc.") (collectively the "Plaintiffs") filed suit
against Health Advocate, Inc. ("HA"). Plaintiffs also brought suit
against Michael J. Cardillo ("Cardillo"), Arthur Liebowitz ("Liebowitz"),
Thomas A. Masci, Jr. ("Masci"), Martin B. Rosen ("Rosen"), David
Rocchino*fn1 ("Rocchino") and John Peppelman ("Peppelman") (collectively
the "HA Individual Defendants"). Finally, Plaintiffs brought suit against
Gordon Conwell & Associates, Inc. ("GCA") and Nancy Conwell
("Conwell"). HAS, Inc. provides assistance to people who are dealing with
healthcare insurance companies and the healthcare industry.
Significantly, HA provides similar services to its clients, and is a
rival company to HAS, Inc. In their Complaint, Plaintiffs allege that HA
is liable to Plaintiffs for unfair competition, trademark/service mark
infringement, violations of the Lanham Act (15 U.S.C. § 1125(a)),
breach of contract, unjust enrichment, tortious interference with
existing and prospective contractual relations, conspiracy, fraud,
misappropriation of trade secrets and copyright infringement. While
Plaintiffs include Defendant Peppelman in their breach of contract claim,
none of the other HA Individual Defendants is included in this claim. As
for Plaintiffs' claims against GCA and Conwell, they include
misappropriation of trade secrets, fraud, unjust enrichment and
conspiracy, as well as a claim against GCA for breach of contract.
Presently before this Court are the following motions: 1) GCA and
Conwell's Motion to Dismiss all of Plaintiffs' claims against them and 2)
HA and the HA Individual Defendants' Motion to Dismiss all of Plaintiffs'
claims against them except for the breach of contract claim against HA.
For the following reasons, the Court will grant in part and deny in part
GCA and Conwell's Motion to Dismiss. Additionally, the Court will grant
in part and deny in part HA and the HA Individual Defendants' Motion to
Dismiss the claims against them.
II. FACTUAL BACKGROUND*fn2
According to Plaintiffs' Complaint, Flynn formed HAS, Inc. in 1996 to
provide advice and consultation services to patients and employers in
their dealings with the healthcare industry. According to Plaintiffs,
HAS, Inc. and Flynn developed business strategies and methodologies which
would help HAS, Inc. succeed in assisting patients with the healthcare
system. Plaintiffs assert that these business strategies and
methodologies are novel and have been set forth in a patent application
that is currently pending in front of the United States Patent and
Trademark Office. The Plaintiffs consider the methodologies and
strategies as trade secrets.
According to Plaintiffs, Defendant Peppelman contacted Flynn during the
summer of 2001. Peppelman stated to Flynn that he worked for GCA and that
some of GCA's clients and employees were interested in HAS, Inc.'s
services. Peppelman thereafter requested that Flynn forward HAS, Inc.'s
materials to Conwell at GCA who would then transfer the materials to
Peppelman. Plaintiffs later learned that Conwell was Peppelman's wife and
that she was an office manager with GCA. Through subsequent conversations
between Flynn and Peppelman, Plaintiffs state that Peppelman and Flynn
formed an oral non-disclosure agreement (hereinafter the "oral
non-disclosure agreement"). Thereafter, on August 1, 2001, Flynn
forwarded the materials to Peppelman by sending the confidential
materials to Conwell at GCA. Plaintiffs allege that the true reason
Peppelman requested materials from HAS, Inc. and Flynn was not to benefit
GCA, its employees or clients, but rather, to help establish HA so as to
compete with HAS, Inc.
Having not heard from Peppelman for over a month, Flynn tried to
contact Peppelman at GCA. Instead, Flynn was put in touch with Conwell,
who stated that she passed the materials along to her husband.
Furthermore, Conwell stated that GCA had no interest in the materials
Flynn had sent.
Subsequently, in November, 2001, Flynn received promotional materials
being distributed by HA. Peppelman was listed as Vice-President of Sales
on these promotional materials. Plaintiffs state that the promotional
materials Flynn came into possession of in November, 2001, were
substantially similar to the materials Peppelman agreed to keep
confidential in their discussions over the summer.
Flynn thereafter contacted HA to congratulate them on their new
business and to find out whether Peppelman had ever actually worked for
GCA. Upon making this inquiry, discussions began between HA, the HA
Individual Defendants and Flynn about a possible merger and/or
co-marketing agreement between HAS, Inc. and HA. These negotiations
cumulated on March 8, 2002, where HAS, Inc. and HA agreed to a written
non-disclosure agreement (hereinafter, the "written non-disclosure
agreement"). HAS, Inc. then forwarded its marketing position, marketing
strategies, business strategies, sales and marketing opportunities,
business plans and numerous other pieces of information to HA. Plaintiffs
state these items were trade secrets. According to Plaintiffs, HA and the
HA Individual Defendants never had any intention of merging HAS, Inc.
into HA. Plaintiffs allege that the real reason for the merger talks and
written non-disclosure agreement was to allow HA to examine and use HAS,
Inc.'s trade secrets to compete with HAS, Inc. Plaintiffs allege that HA
has changed its marketing strategies and implemented HAS Inc.'s
methodologies and business plans. As previously
stated, Plaintiffs assert that the methodologies, strategies and
plans are confidential trade secrets. Thereafter, on June 23, 2003,
Plaintiffs brought suit against the Defendants asserting various federal
and state law claims.
A motion to dismiss, pursuant to Federal Rule of Civil Procedure
12(b)(6), tests the legal sufficiency of the complaint. Conley v.
Gibson, 355 U.S. 41, 45-46 (1957). A court must determine whether
the party making the claim would be entitled to relief under any set of
facts that could be established in support of his or her claim.
Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)(citing
Conley, 355 U.S. at 45-46); see also Wisniewski v.
Johns-Manville Corp., 759 F.2d 271, 273 (3d Cir. 1985). In
considering a motion to dismiss, all allegations in the complaint must be
accepted as true and viewed in the light most favorable to the non-moving
party. Rocks, 868 F.2d at 645(citations omitted). However, the
United States Court of Appeals for the Third Circuit ("Third Circuit")
has stated that "while our standard of review requires us to accept as
true all factual allegations in the complaint, we need not accept as true
unsupported conclusions and unwarranted inferences." Doug Grant,
Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir.
2000)(internal quotation and citations omitted). Furthermore, the Third
Circuit has stated that "[c]ourts have an obligation in matters before
them to view the complaint as a whole and to base rulings not upon the
presence of mere words but, rather, upon the presence of a factual
situation which is or is not justiciable." Id. at 184 (internal
quotation and citation omitted). With this as a background, the Court
will now turn its attention to the two Motions to Dismiss filed by the
A. GCA AND CONWELL'S MOTION TO DISMISS
The Court will first examine GCA and Conwell's Motion to Dismiss.
Plaintiffs have brought four claims against both GCA and Conwell. The
claims being brought against these Defendants are misappropriation of
trade secrets, fraud, unjust enrichment and conspiracy. Additionally,
Plaintiffs have brought a breach of contract claim against GCA. The Court
will analyze each of these claims as they pertain to Conwell and GCA to
decide whether they can survive a motion to dismiss.
1. Misappropriation of Trade Secrets
The parties are in agreement that Pennsylvania law controls in this
case as to the state law claims.
Under Pennsylvania law, the prima facie elements
of the tort of misappropriation of a trade secret
are derived from the Restatement (First) of Torts
§ 757. Van Products Co. v. General
Welding & Fabricating Co., 419 Pa. 248,
258, 213 A.2d 769, 774 (1965). Those elements are
as follows: (1) the existence of a trade secret;
(2) communication of the trade secret pursuant to
a confidential relationship; (3) use of the trade
secret, in violation of that confidence; and (4)
harm to the plaintiff.
Moore v. Kulicke & Soffa Industs., Inc.,
318 F.3d 561
, 567 (3d Cir. 2003)(footnotes omitted). The main
argument made by Conwell and GCA is that the Plaintiffs have failed
to allege that Conwell and GCA used the trade secrets to the detriment
of Plaintiffs. The alleged trade secrets at issue in this case are the
business strategies and methodologies HAS, Inc. has developed over the
past several years.
Defendant Conwell's alleged role in this case was limited to passing
the information onto her husband Peppelman. While Plaintiffs allege that
the true motivation behind Peppelman's request was purposefully hidden
from Flynn, the only allegation in the Complaint regarding Conwell is
passed the information to Peppelman, as she was supposed to do
pursuant to the oral non-disclosure agreement. Plaintiffs' Complaint is
lacking as to any allegation that Conwell herself is using or used the
business methodologies and strategies. Rather, as will be discussed in
infra Part IV.B.7, Plaintiffs allege that the trade secrets were
used by HA to directly compete with HAS, Inc.
Additionally, it is not alleged that GCA is "using" these trade secrets
to further their business enterprise. See Homenexus, Inc. v.
Directweb, Inc., No. 99-CV-2316, 1999 WL 959823, at *3-4 (E.D. Pa.
Oct. 14, 1999)(denying motion to dismiss misappropriation claim where
plaintiff has alleged Defendant used trade secrets acquired "to further
its own business enterprise"). Unlike Homenexus, at no time in
Plaintiffs' Complaint do they allege GCA or Conwell ever used Plaintiffs'
trade secrets to further their own business enterprise. Rather, it is
alleged that such trade secrets were used by HA and the HA ...