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Advanced Fluid Systems, Inc. v. Huber

United States District Court, M.D. Pennsylvania

May 7, 2014

ADVANCED FLUID SYSTEMS, INC., Plaintiff,
v.
KEVIN HUBER, INSYSMA (INTEGRATED SYSTEMS AND MACHINERY, LLC), LIVINGSTON & HAVEN, LLC, CLIFTON B. VANN IV, THOMAS AUFIERO, and ORBITAL SCIENCES CORPORATION, Defendants.

MEMORANDUM

CHRISTOPHER C. CONNER, Chief District Judge.

Plaintiff Advanced Fluid Systems, Inc. ("AFS") filed the above-captioned action for injunctive relief and compensatory and punitive damages based on the misappropriation of trade secrets and violations of the Lanham Act, 15 U.S.C. § 1051 et seq. , and Computer Fraud and Abuse Act, 18 U.S.C. § 1030. Presently before the court are three motions to dismiss filed by defendants Livingston & Haven, LLC ("L&H"), Clifton B. Vann IV, and Thomas Aufiero (Doc. 28), Orbital Sciences Corporation ("Orbital") (Doc. 32), and Kevin Huber and Integrated Systems and Machinery, LLC ("INSYSMA") (Doc. 33) (collectively, the "Defendants"). For the reasons that follow, the court will deny the motions in part and reserve ruling on the remaining issues.

I. Factual Background and Procedural History

A. Parties

Plaintiff AFS is incorporated in the Commonwealth of Pennsylvania with its headquarters in York, Pennsylvania. (Doc. 1 ¶ 1). AFS designs, assembles, and installs hydraulic systems that use pressurized fluids to move heavy machinery for complex operations. (Id.) Relevant to the instant action, AFS created the Transporter/Erector/Launcher/Hydraulic System ("TELHS") for the Mid-Atlantic Regional Spaceport ("MARS") on Wallops Island, Virginia pursuant to a contract with the Virginia Commercial Space Flight Authority ("VCSFA") dated September 30, 2009. (Id.) Under the TELHS contract, VCSFA hired AFS to "provide the complete specification, engineering drawings, analyses, testing requirements, operating descriptions, interfaces with other launch facility systems and all related engineering and professional design services to develop the final and complete design for the Antares' [sic] rocket['s] hydraulic motion control system." (Id. ¶ 28).

Defendant Orbital is a Delaware corporation that designs and manufactures rockets and space systems and maintains its corporate headquarters in Dulles, Virginia. (Id. ¶ 7). Orbital is the developer of the Antares rocket and agreed to launch the Antares rocket from the MARS facility upon construction of the facility and the purchase of certain hardware, including TELHS. (Id. ¶ 27). Since signing the TELHS contract, AFS successfully designed, assembled, and installed TELHS at the MARS facility, and the first test launch of the Antares rocket took place in February 2013. (Id. ¶¶ 31-33). In the process of completing the contract, AFS generated substantial internal documentation, including thousands of engineering drawings and diagrams and proprietary software code, which are kept in password-protected electronic files on AFS' server. (Id. ¶ 38). Although VCSFA acquired "legal ownership to all inventions or works" under the TELHS contract, AFS remains in possession and control of its trade secrets and has only used them in a confidential manner to fulfill its obligations. (Id. ¶ 39). When necessary, AFS also provided Orbital with certain information to help integrate TELHS with the Antares rocket. (Id.) However, AFS asserts that Orbital does not own TELHS and is merely the end user of TELHS. (Id. ¶ 78). In fact, on September 24, 2013, Orbital sued the Commonwealth of Virginia and VCSFA for $16.5 million to enforce a binding arbitration decision that VCSFA owned TELHS and related hardware and therefore must reimburse Orbital for the purchase of such hardware. (Id. ¶ 79).

During the performance of the TELHS contract, defendant Kevin Huber was AFS' main point of contact for Orbital. (Id. ¶ 46). From November 2006 until October 26, 2012, AFS employed Huber, a New York resident, as a full-time salesman/engineer. (Id. ¶ 2). Huber was initially hired by and reported to defendant Thomas Aufiero, the head of AFS' sales force and a key member of AFS' management team, until Aufiero resigned from AFS in January 2011. (Id. ¶¶ 43-44). Aufiero now resides in North Carolina and is the hydraulic sales manager for L&H. (Id. ¶ 6). Defendant L&H is a North Carolina limited liability company that also designs, assembles, and installs hydraulic fluid systems and maintains its corporate headquarters in Charlotte, North Carolina. (Id. ¶¶ 4, 41).

In his capacity as a salesman/engineer, Huber had access to AFS' confidential information, including complete sets of drawings, diagrams, and other documents generated in connection with numerous projects. (Id. ¶ 45). Huber also had access to AFS' component and labor costs as well as AFS' quotes for all of its projects. (Id. ¶¶ 45, 60). All of these documents are password-protected documents located on AFS' server in York, Pennsylvania. (Id. ¶ 45).

On October 9, 2012, Huber announced his resignation from AFS and officially left his position on October 26, 2012. (Id. ¶ 47). When AFS finally retrieved Huber's company-issued laptop computer and cell phone, AFS determined that Huber had attempted to erase all the data from both devices. (Id. ¶¶ 47-48). Upon restoring the deleted information, AFS discovered that Huber was working with L&H and Orbital as early as January 2012 while he was a full-time AFS employee. (Id. ¶¶ 49-50).

B. Conspiracy Among Defendants

AFS avers that Defendants conspired to gain access to AFS' confidential information and use that confidential information to divert business from AFS. (Id. ¶¶ 11, 42). According to AFS, Huber first accessed AFS' server and e-mail system in November 2011 to send L&H photographs and videotapes of the Antares rocket test launches using TELHS. (Id. ¶ 67). In January 2012, L&H granted Huber access to L&H's private network through a Virtual Private Network ("VPN") connection and password. (Id. ¶ 51). L&H also set up an e-mail address for Huber in its internal e-mail system around the same time. (Id. ¶¶ 52-53). On April 12, 2012, Huber organized a secret meeting at the MARS facility with L&H and Orbital, including defendants Aufiero and Clifton Vann, who is the President of L&H and a resident of North Carolina. (Id. ¶¶ 5, 54). According to several deleted e-mails, the purpose of the meeting was to discuss future upgrades to TELHS. (Id. ¶¶ 54-57). Upon establishing the basis for the alleged conspiracy, AFS sets forth detailed allegations regarding actions taken in furtherance of the conspiracy.

C. Stealing Confidential Information

AFS asserts that, beginning in September 2012, Huber accessed AFS' server and downloaded numerous files that did not correlate with any project on which he was working. (Id. ¶ 58). In October 2012, upon announcing his resignation, Huber began saving significant amounts of confidential information to an external drive. (Id. ¶ 60). In particular, AFS discovered that Huber stored information about two of his past projects-the Passaic N.J. Valley Sewer and New York Power projects-as well as a folder containing all pending AFS quotes for all territories and projects. (Id. ¶¶ 60, 96-97). AFS alleges that Huber transmitted this confidential information to L&H and Orbital. (Id. ¶¶ 58, 60).

On October 18, 2012, Huber formed a company called INSYSMA with offices in New York and Connecticut. (Id. ¶¶ 3, 59). AFS states that Huber then duplicated at least four AFS drawings of engineering plans and re-signed the drawings for INSYSMA with his own initials. (Id. ¶ 65). Moreover, the INSYSMA website displays a photograph of a successful launch of the Antares rocket using TELHS on September 18, 2013. (Id. ¶ 76). However, the website does not attribute TELHS to AFS; rather, the website states that INSYSMA is currently working with Orbital in support of current and upcoming launches and falsely implies that INSYSMA designed and installed TELHS. (Id.)

Lastly, AFS asserts that, in February or March 2012, L&H attempted to recruit AFS' top electrical engineers, Tom Reiker and Larry Quickel. (Id. ¶¶ 99-101). L&H allegedly called Mr. Reiker in York, Pennsylvania and offered him a position, which Mr. Reiker declined. (Id. ¶ 99). Huber also spoke in person with Mr. Quickel, AFS' chief electrical engineer, on multiple occasions about leaving AFS to join L&H and gave Mr. Quickel the contact information for Aufiero. (Id. ¶ 100). In April 2013, after the successful launch of the Antares rocket, Huber called Mr. Reiker again to congratulate him. (Id. ¶ 101). During the call, however, Huber stated that AFS would not be receiving any more upgrade work on the Antares rocket in a purported second attempt to recruit Mr. Reiker to L&H. (Id.)

D. Usurping Business Opportunities

In addition to stealing confidential information, AFS avers that the purpose of the alleged conspiracy was to divert AFS' business opportunities related to TELHS and other projects. (Id. ¶ 42).

i. Business related to TELHS

AFS first asserts that, in September 2012, Huber submitted an unusually high bid on behalf of AFS for upgrades to TELHS's gripper arms. (Id. ¶ 61). Huber then secretly and simultaneously submitted a substantially lower bid on behalf of L&H for the same project. (Id. ¶ 62). As a result, L&H and INSYSMA received the contract for the gripper arms upgrade. (Id. ¶ 68). When Orbital subsequently decided to move forward with a $4 million upgrade to the entire TELHS system, (id. ¶ 69), Huber sent Orbital an informal quote on November 2, 2012 on behalf of L&H and INSYSMA, as agent of the S3 Group at L&H. (Id. ¶¶ 63-64, 70). AFS alleges that Jim Vaughn, President of AFS, had repeatedly informed Orbital that AFS wanted to bid on this upgrade and all future upgrades, as well as training and maintenance contracts. (Id. ¶ 71). However, L&H and INSYSMA received the contract for the complete TELHS upgrade. (Id. ¶ 72).

As part of the complete upgrade, Huber contacted Maritime Hydraulic, a cylinder manufacturer with whom AFS has a non-disclosure agreement, for a quote on new cylinders. (Id. ¶¶ 66, 73). Kim Carruthers, the owner of Maritime Hydraulic, informed Huber that all information related to the cylinders for TELHS was AFS' proprietary information. (Id. ¶ 73). According to the complaint, Keith Fava from Orbital called Ms. Carruthers and represented that Orbital owned the rights to AFS' designs. (Id. ¶ 74). Mr. Fava further instructed her to provide a quote to Huber. (Id.) With no other option, Maritime Hydraulic submitted a quote to Huber, and it is currently manufacturing two new cylinders for the TELHS upgrade. (Id. ¶¶ 74-75). As a result of all of these actions, AFS alleges that it has been shut out of all future work with Orbital at other launch sites as well as VCSFA's plan to further develop the MARS facility for Orbital and other commercial space clients. (Id. ¶¶ 77-78; see also id. ¶¶ 24, 36, 40).

ii. Other Business Opportunities

AFS also alleges that Defendants usurped several non-TELHS business opportunities. (Id. ¶ 81). First, as early as November 2011, Huber e-mailed L&H regarding plans for a potential bid on a U.S. Army TACOM Hydraulic Manifold and suggested submitting the bid proposal through Rexroth, L&H's principal supplier and AFS' largest competitor. (Id. ¶ 95). Second, in December 2011, Huber and Aufiero at L&H exchanged e-mails regarding a U.S. Navy Hydraulic Test Stand project. (Id. ¶¶ 89-90). Huber subsequently sent numerous communications to the U.S. Navy as well as an independent engineering and testing laboratory on behalf of L&H. (Id. ¶¶ 91-93). Huber also requested extensive information in support of a potential bid on the Navy Hydraulic Test Stand project from Harry Kahn Associates, who submitted a presentation under the impression that AFS had requested the information. (Id. ¶ 94).

Finally, in June 2012, Huber sent L&H a detailed bid proposal for a U.S. Air Force Hydraulic Test Stand, listing Huber as the project manager for L&H. (Id. ¶ 82). In the final version, Huber also listed Orbital as a reference for L&H's capabilities and represented that L&H designed, fabricated, and installed TELHS on Wallops Island. (Id. ¶¶ 84-85). In addition to such representations, Huber sent the U.S. Air Force a document containing the start-up procedures for TELHS, which clearly states that the document was "originated by and is the property of Advanced Fluid Systems." (Id. ¶ 86). However, Huber indicated to the U.S. Air Force that AFS was simply a subcontractor that generates L&H's documentation. (Id.) Thus, L&H and Huber, who acted as L&H's agent while a full-time AFS employee, prevented AFS from pursuing these business opportunities. (Id. ¶ 88).

E. Procedural History

On December 24, 2013, AFS filed a complaint against Defendants, alleging several claims based on the misappropriation of trade secrets as well as violations of the Computer Fraud and Abuse Act and the Lanham Act. (Doc. 1). On February 14, 2014, AFS requested a preliminary injunction to prevent Defendants from working on upgrades to TELHS and constructing additional hydraulic launch systems using the alleged trade secrets. (Doc. 29). Defendants simultaneously filed the instant motions to dismiss (Docs. 28, 32, 33) for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), lack of personal jurisdiction under Rule 12(b)(2), failure to state a claim upon which relief may be granted under Rule 12(b)(6), and failure to join a required party under Rules 12(b)(7) and 19. In the alternative, Orbital requests that the court transfer the case to the U.S. District Court for the Eastern District of Virginia pursuant to 28 U.S.C. § 1404(a). (Doc. 32 ¶ 4).

Prior to addressing the merits of the case, including a hearing for a preliminary injunction, the court must ensure that it has jurisdiction over all the parties. See Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 93-95, 101-02 (1998); Solis v. Koresko, No. 09-988, 2009 WL 2776630, at *4 (E.D. Pa. Aug. 31, 2009). In this memorandum, the court will address the threshold issues related to jurisdiction, joinder, and venue. The court ...


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