United States District Court, E.D. Pennsylvania
BRAND ENERGY & INFRASTRUCTURE SERVICES, INC., et al., Plaintiffs,
IREX CONTRACTING GROUP, et al., Defendants.
Energy & Infrastructure Services, Inc., a construction
company, contends that some of its former employees stole its
trade secrets and equipment, and misappropriated its
proprietary business information. These former employees have
since left Brand and joined one of Brand's competitors:
Irex Corporation. Brand claims these individuals have been
using Brand's stolen equipment and trade secrets to
benefit Irex and poach business from Brand.
federal claims are under the recently enacted Defend Trade
Secrets Act of 2016, 18 U.S.C. § 1832, et seq.
(DTSA), the Racketeer Influenced and Corrupt Organizations
Act, 18 U.S.C. § 1961 et seq. (RICO), and the
Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et
seq. (CFAA). Brand also brings eleven claims under
filed a motion to dismiss Brand's amended complaint. I
will deny the motion to dismiss.
Energy & Infrastructure Services, Inc., is a company that
provides scaffolding, industrial coatings, industrial
insulation, fireproofing, asbestos remediation, and other
construction-related services. Brand has a strong presence
throughout the country, including in Pennsylvania and New
Jersey. Irex Corporation is a Pennsylvania corporation with
various subsidiaries in Pennsylvania that compete with
individual defendants in this case formerly worked in
high-level positions at Brand. In 2011, Irex and another
company, Harsco Infrastructure, entered into an agreement to
attempt to compete with Brand in the construction industry.
However, two years later, Brand acquired Harsco. From 2014 to
2015, all of the individual defendants left Brand and joined
to the plaintiff, while some of the individual defendants
were moving to Irex, other individual defendants (who were
still employed at Brand) were siphoning them Brand's
protected business information. This conspiracy allegedly
began in early 2014. It involved the individual defendants
accessing Brand's revenues, customers, drawings, and
business opportunities. According to Brand, the defendants
planned all along to steal Brand's business information,
leave Brand, join Irex, and then run Brand out of business.
specific item Brand alleges the defendants stole is
Brand's “Market Playbook.” The Market
Playbook is a database that is only accessible on
Brand-network computers. It contains billions of dollars in
proprietary information, including Brand's future
business plans and targets. Brand alleges that after the
individual defendants left and went to Irex, Cathy Walls (a
Brand employee) began accessing Brand information from the
Market Playbook and giving it to the individual defendants.
Brand claims, to this day, the individual defendants continue
to use information they illegally obtained from the Market
further claims that defendants have fraudulently transformed
the business information they stole from Brand into their
own. For example, Brand alleges that many documents Irex now
uses are really Brand documents that were modified to remove
the Brand logo and add the Irex logo. Brand maintains it
discovered much of this information through forensic analysis
of the computers that the individual defendants used while
employees at Brand.
claims it has lost business opportunities as a result of the
defendants' conduct. For years, Brand held a contract to
provide scaffolding to the Westvaco Paper Mill in Maryland.
While at Brand, one of the individual defendants, John
Kwiatkoski, handled the Brand-Westvaco contract. Brand avers
that, after Kwiatkoski left Brand, in conjunction with the
other defendants, he used Brand's stolen equipment and
business information to win over the Westvaco contract for
Irex. In the process of doing so, Kwiatkoski transported
stolen Brand scaffolding equipment from West Virginia to
Maryland. According to Brand, the Westvaco contract yielded
Brand about $600, 000 in yearly revenue. In addition, Brand
alleges the defendants used Brand's stolen property to
steal away and out-bid Brand on various other scaffolding
projects that had previously been performed by Brand for
this alleged conspiracy began in 2014, Brand alleges the
defendants' theft and misappropriation continued
consistently through 2015 and 2016, and continues to this
day. Brand claims it has suffered millions of dollars in
losses as a result of the defendants' alleged theft and
motion to dismiss under Rule 12(b)(6) of the Federal Rules of
Civil Procedure for failure to state a claim upon which
relief can be granted examines the legal sufficiency of the
complaint. Conley v. Gibson, 355 U.S. 41, 45-46
(1957). The factual allegations must be sufficient to make
the claim for relief more than just speculative. Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In
determining whether to grant a motion to dismiss, a federal
court must construe the complaint liberally, accept all
factual allegations in the complaint as true, and draw all
reasonable inferences in favor of the plaintiff.
Id.; see also D.P. Enters. v. Bucks County Cmty.
Coll., 725 F.2d 943, 944 (3d Cir. 1984).
Federal Rules of Civil Procedure do not require a plaintiff
to plead in detail all of the facts upon which she bases her
claim. Conley, 355 U.S. at 47. Rather, the Rules
require a “short and plain statement” of the
claim that will give the defendant fair notice of the
plaintiff's claim and the grounds upon which it rests.
Id. The “complaint must allege facts
suggestive of [the proscribed] conduct.”
Twombly, 550 U.S. at 564. Neither “bald
assertions” nor “vague and conclusory
allegations” are accepted as true. See Morse v.
Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir.
1997); Sterling v. Southeastern Pennsylvania Transp.
Auth., 897 F.Supp. 893 (E.D. Pa. 1995). The claim must
contain enough factual matters to suggest the required
elements of the claim or to “raise a reasonable
expectation that discovery will reveal evidence of”
those elements. Phillips v. County of Allegheny, 515
F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550
U.S. at 556).
Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme
Court defined a two-pronged approach to a court's review
of a motion to dismiss. “First, 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. at 678. Thus, while “Rule 8 marks a
notable and generous departure from the hyper-technical,
code-pleading regime of a prior era . . . it does not unlock
the doors of discovery for a plaintiff armed with nothing
more than conclusions.” Id. at 678-79.
“may dismiss a complaint only if it is clear that no
relief could be granted under any set of facts that could be
proved consistent with the allegations.” Brown v.
Card Service Center, 464 F.3d 450, 456 (3d Cir. 2006)
(quoting Hishon v. King & Spalding, 467 U.S. 69,
moves to dismiss Brand's claims under the DTSA, RICO, and
CFAA. I will deny Irex's motion to dismiss in its
Defend Trade Secrets Act (DTSA) Claim
argues that the DTSA does not apply to this action because
the DTSA was enacted after the allegedly unlawful acts took
place. Irex also contends that application of the
DTSA here would be unconstitutionally retroactive. The
DTSA's statutory language and history, emerging DTSA case
law, and constitutional principles on retroactivity refute
The DTSA's Statutory Framework
DTSA is the first federal law to create a private right of
action for the misappropriation of trade
secrets. The DTSA was formally enacted on May 11,
2016. See Defend Trade Secrets Act of 2016, Pub. L.
No. 114-153, § 2, 130 Stat. 376 (2016) (codified as
amended at 18 U.S.C. § 1831 et seq.). Now, the
owner of a trade secret can bring a private cause of action
in federal court for trade secret misappropriation. 18 U.S.C.
the DTSA, “misappropriation” is defined in
several different ways. The “acquisition of a trade
secret of another by a person who knows or has reason to know
that the trade secret was acquired by improper means”
constitutes a misappropriation. Id. §
1839(5)(A). A misappropriation also occurs when one
“disclos[es]” or “use[s]”
another's trade secret without the consent of the
trade-secret owner. Id. § 1839(5)(B). The DTSA
applies to the “misappropriation of a trade secret . .
. for which any act occurs on or after the date of the
enactment of [the DTSA].” Defend Trade Secrets Act of
2016, Pub. L. No. 114-153, § 2(e), 130 Stat. 376
are key differences between the DTSA's language and the
language of other trade secrets statutes. One useful
comparison comes from the Uniform Trade Secrets Act (UTSA). A
large majority of states used the UTSA as a model while
drafting their own trade secrets statutes. The UTSA contains
a provision stating that it “does not apply to
misappropriation occurring prior to the effective
date.” Unif. Trade Secrets Act § 11(Nat'l
Conference Comm'rs on Unif. State Laws 1985) [hereinafter
UTSA]. The UTSA also does not apply to a “continuing
misappropriation that occurs after the effective date.”
Id. Pennsylvania's Uniform Trade Secrets Act
(PUTSA) contains a nearly identical provision that has the
same effect. Pennsylvania Uniform Trade Secrets Act, Pub. L.
No. 143, § 4 (2004). Unlike the UTSA and the PUTSA, the
DTSA does not contain such a provision.
Emerging DTSA Case Law
district courts have analyzed the applicability of the DTSA
to misappropriations that occurred before the DTSA was
enacted. These courts have all held that the DTSA
applies to misappropriations that began prior to the
DTSA's enactment if the misappropriation continues to
occur after the enactment date. See Syntel Sterling Best
Shores Mauritius Ltd. v. Trizetto Grp., Inc., 15-cv-211,
2016 WL 5338550, at *6 (S.D.N.Y. Sept. 23, 2016) (finding
viable a continuing misappropriation claim that began
pre-enactment because the DTSA defines misappropriation as
the “disclosure or use of a trade
secret” and the complaint alleged that the defendants
“continue[d] to use” the trade secrets after the
DTSA was enacted) (emphasis in original) (quoting 18
U.S.C. § 1839(5)(B)); Adams Arms, LLC v. Unified
Weapon Sys., Inc., 16-cv-1503, 2016 WL 5391394, at *5-7
(M.D. Fla. Sept. 27, 2016) (same). One of these courts rested
its decision, in part, on the fact that the DTSA-unlike the
UTSA-does not preclude application to continuing
misappropriations that continue to occur after the enactment
date. Adams Arms, 2016 WL 5391394, at *6.
cases have, without question, applied the DTSA to
misappropriations that occurred before and continued after
the statute's enactment. See Allstate Ins. Co. v.
Rote, 16-cv-1432, 2016 WL 4191015, at *1-5 (D. Or. Aug.
7, 2016) (granting preliminary injunction in DTSA case where
the defendant left her job before the DTSA was enacted but
remained in possession of alleged trade secrets after the
DTSA's enactment); Henry Schein, Inc. v. Cook,
191 F.Supp.3d 1072, 1076-78 (N.D. Cal. 2016) (same with
temporary restraining order).
Brand Adequately Pleads a Continuing
amended complaint alleges various times, after the enactment
of the DTSA, that the defendants “used”
Brand's alleged trade secrets.
alleges that, to this day, the defendants continue to
“obtain access to Brand's confidential and
proprietary business information.” (Doc. No. 61 ¶
189). Brand also alleges “many documents currently in
use in [defendants'] business are Brand documents that
[defendants] . . . modified only to remove the Brand logo,
insert the [defendants'] logos, and adjust
pricing.” (Id. ¶ 201). Brand's
amended complaint contains various other allegations that
defendants continued to use Brand's trade secrets after
the DTSA's effective date. (Id. ¶¶
“use” of another's trade secret explicitly
qualifies as an act of misappropriation under the DTSA. 18
U.S.C. § 1839(5)(B); Syntel Sterling Best
Shores, 2016 WL 5338550, at *7. Brand's amended
complaint alleges multiple uses of its trade secrets that
continued to occur after the date the DTSA was enacted.
Accordingly, Brand may pursue its claim under the
next raise constitutional concerns with an application of the
DTSA to this case. They argue that application of the DTSA
here would render the statute an unconstitutional ex post
facto law. After careful consideration, I find that
applying the DTSA to the claim in this case does not violate
the Ex Post Facto Clause of the United States
Constitution. Thus, the DTSA, as applied here, is not
Ex Post Facto Analytical Framework
United States Constitution proclaims that no “ex post
facto Law shall be passed.” U.S. Const. art. I §
9, cl. 3. An ex post facto inquiry is really a
question of whether it is permissible for a statute to apply
retroactively. Fernandez-Vargas v. Gonzalez, 548
U.S. 30, 37 (2006).
retroactive statute is one that takes away or impairs vested
rights, creates new obligations, imposes a new duty, or
attaches a new disability with respect to transactions or
events that have already passed. Id. (citing
Soc'y for the Propagation of the Gospel v. Wheeler,
22 F. Cas. 756, 767 (C.C.N.H. 1814) (No. 13, 156) (Story,
J.)). Such retroactive statutes are disfavored “when
their application would impair rights a party possessed when
he acted, increase a party's liability for past conduct,
or impose new duties with respect to transactions already
completed.” Fernandez-Vargas, 548 U.S. at 37
(quoting Landgraf v. USI Film Prods., 511 U.S. 244,
280 (1994)). Nevertheless, a statute is not impermissibly
retroactive simply because it is applied in a case arising
from conduct that pre-dates the statute's enactment.
Landgraf, 511 U.S. at 269. “Rather, the court
must ask whether the new provision attaches new legal
consequences to events completed before its enactment.”
Id. at 269-70.
United States Supreme Court has set forth a framework for
courts to apply in determining whether a statute may or may
not apply retroactively. This test is applicable when, as
here, the “case implicates a federal statute enacted
after the events in suit.” Landgraf, 511 U.S.
at 280. First, courts must look to
“whether Congress has expressly prescribed the
statute's proper reach.” Fernandez-Vargas,
548 U.S. at 37 (quoting Landgraf, 511 U.S. at 280).
If it has, the inquiry ends there. Id. In the
absence of an express congressional command, however, courts
“try to draw a comparably firm conclusion about the
temporal reach specifically intended by applying our normal
rules of construction.” Id.
applying normal rules of statutory construction proves
unavailing, courts finally ask “whether applying the
statute to the person objecting would have a retroactive
consequence in the disfavored sense of affecting substantive
rights, liabilities, or duties [on the basis of] conduct
arising before [its] enactment.” Id.
(quoting Landgraf, 548 U.S. at 37) (alterations in
original)). “If the answer is yes, we then apply the
presumption against retroactivity by construing the statute
as inapplicable to the event or act in question owing to the
absen[ce of] a clear indication from Congress that it
intended such a result.” Id. (alterations in