United States District Court, E.D. Virginia, Alexandria Division
Integrated Direct Marketing, LLC, Plaintiff: Zachary Stevens
Stinson, LEAD ATTORNEY, Joleen Roslyn Okun, Ogletree Deakins
Nash Smoak & Stewart PC (DC), Washington, DC.
Drew May, Defendant: Rebecca Bricken Segal, LEAD ATTORNEY,
Brian Francis Chandler, James Bennett Kinsel, Jennifer
Angella Lucey, Protorae Law PLLC, Tysons, VA; John Hawley
Hawthorne, John H. Hawthorne, Attorney at Law, Fairfax, VA.
Merkle, Inc., Defendant: Declan C. Leonard, LEAD ATTORNEY,
Frank Regis Gulino, Nicholas Ryan Johnson, Ryen Christopher
Rasmus, Berenzweig Leonard LLP, McLean, VA.
Laura Donahoe, Interested Party: Patrick Kevin Burns, LEAD
ATTORNEY, Bancroft McGavin Horvath & Judkins PC, Fairfax, VA.
M. Brinkema, United States District Judge.
the Court is Defendant Drew May's Motion for Judgment on
the Pleadings, which seeks a ruling that Plaintiff Integrated
Direct Marketing, LLC's conversion claim fails on the
basis that Arkansas law does not provide a cause of action
for conversion of non-trade secret electronic data. For the
reasons that follow, the Court will move the Arkansas Supreme
Court to answer one question of law because the remaining
claim in this litigation presents an unresolved question of
Arkansas law that may be determinative of this pending civil
Integrated Direct Marketing, LLC (" IDM" )
commenced this suit against former employee Drew May ("
May" ) and his new employer Merkle, Inc. ("
Merkle" ), alleging that May misappropriated IDM's
confidential and proprietary information as well as its trade
secrets and then used that information for his benefit and
that of Merkle. Mem. Op. [Dkt. No. 295] at 2. IDM and Merkle
compete to provide data-integrated customer relationship
management (" CRM" ) services to high-tech
companies involved in (he data-driven marketing business.
Id. at 5. May, an Arkansas resident, was hired to
open IDM's Little Rock, Arkansas office and served as its
Executive Vice President for Data Integration from January
2012 until March 11, 2014, when IDM terminated his
employment. Id. at 6. May did not attempt to hide
his displeasure about this separation. Id. May began
working for Merkle on May 5, 2015 as Vice President and
Client Partner in the " High Technology/B2B Vertical
Markets Group." Id. During discovery, a digital
forensic examination revealed that May retained many IDM
files on his personal external hard drive after he was fired
by IDM and during his employment with Merkle and the initial
stages of the instant litigation. Id. at 7. By
retaining these electronic files, May violated Paragraph 9 of
the Confidentiality Agreement he signed upon beginning
employment with IDM, which required that he return or destroy
all company property upon termination. Id.
filed suit against both May and Merkle, alleging in part that
May wrongfully took IDM's confidential and proprietary
information. Am. Compl. [Dkt. No. 57] ¶ ¶ 18-28,
76-81. The information allegedly converted by May consisted
exclusively of electronic data that he downloaded, "
backed up," or otherwise copied to his personal external
hard drive. See id. Specifically, IDM alleged that May "
copied more than 300 files to his external hard drive,"
including almost all of his IDM e-mails and their
attachments, contracts and statements of work containing
confidential pricing information, a business plan for
IDM's Shopper Recognition Project, a project proposal for
IDM's Dell Consumer File Install. Dell's requirements
for IDM's customer-data integration project, and "
numerous" other files containing " IDM's
budgets, upcoming projects that IDM was bidding on, and IDM
proprietary solution data." Id. 22-27. IDM
claimed that these files " would let [May] directly
compete with IDM going forward." Id. ¶ 25.
Based on this alleged activity, IDM asserted that May "
wrongfully appropriated and exercised authority over
IDM's confidential and proprietary information" and
that his actions " constitute[d] a conversion of
IDM's property." Id. ¶ ¶ 77, 79.
an extensive period of discovery, both defendants moved for
summary judgment on all counts. In a Memorandum Opinion and
accompanying Order issued on September 8, 2015, the Court
granted Merkle's Motion for Summary Judgment in total and
granted May's Motion for Summary Judgment on all counts
except for the conversion claim in Count III, which is now
the sole remaining claim to be decided at the trial currently
scheduled for November 16, 2015. Mem. Op. at 60-61. The Court
ruled that Count III would " go forward for now,"
despite its reservations about whether a taking of electronic
data could support a conversion claim under Arkansas law,
because May did not raise that argument on summary judgment
and neither party had briefed the issue. Id. at 47
n.25 (citing Infinity Headwear & Apparel, LLC v.
Coughlin, 2014 Ark.App. 609, 447 S.W.3d 139, 143 (Ark.
Ct.App. 2014)). In allowing the conversion claim to go
forward, the Court struck any evidence of actual damages and
ruled that IDM would only be entitled to nominal damages and
injunctive relief should it prevail on Count III.
Id. at 47. The Court now has before it May's
Motion for Judgment on the Pleadings, in which he seeks to
resolve Count III in his favor.
Motion for Judgment on the Pleadings seizes upon the
Court's stated reservations regarding whether the
Arkansas tort of conversion encompasses the taking of
non-trade secret electronic data. May argues that Arkansas
" has not recognized a cause of action for the
conversion of intangible electronic data" and that
IDM's claim consequently fails as a matter of law. Def.
Drew May's Mem, of P& A in Supp. of His Mot. for J. on
the Pleadings [Dkt. No. 299] (" Def.'s Br." )
at 3. In the alternative, May requests that the Court certify
the question of whether electronic data can be converted to
the Arkansas Supreme Court so that he will not be bound by a
judgment based on a misreading of Arkansas law. Def. Drew
May's Reply in Supp. of His Mot, for J. on the Pleadings
[Dkt. No. 307] (" Def.'s Reply" ) at 6. IDM
argues in response that Arkansas law does support a claim for
conversion of electronic data and that May's argument to
the contrary is based on " stray dicta...taken out of
context." Pl., Integrated Direct Marketing, LLC's
Mem. in Opp'n to Def. Drew May's Mot. for J. on the
Pleadings [Dkt. No. 305] (" Pl.'s Opp'n" )
at 1. IDM has not explicitly contested May's request for
certification but has argued in an unrelated motion that it
would be prejudiced by a delayed trial date. Pl. Integrated
Direct Marketing, LLC's Opp'n to Counsel's Mot.
for Leave to Withdraw [Dkt. No. 317] at 5.
Standard of Review
may move for judgment on the pleadings " [a]fter the
pleadings are closed--but early enough not to delay
trial," and may raise the defense of failure to state a
claim upon which relief can he granted in that motion. See
Fed.R.Civ.P. 12(c), (h)(2)(B); see also Newport News
Indus. v. Dynamic Testing, Inc., 130 F.Supp.2d 745, 749
(E.D. Va. 2001). Such a motion is governed by the standard
for a Rule 12(b)(6) motion. See Edwards v. City of
Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). Therefore,
the deciding court must presume that the complaint's
factual allegations are true and must " draw all
reasonable factual inferences in [the non-movant's]
favor." Burbach Broad. Co. of Del. v. Elkins Radio
Corp., 278 F.3d 401, 406 (4th Cir. 2002). The court
judgment for the movant " when the pleadings, construing
the facts in the light most favorable to the non-moving
party, fail to state any cognizable claim for relief, and the
matter can, therefore, be decided as a matter of law."
O'Ryan v. Dehler Mfg. Co., 99 F.Supp.2d 714, 718
(E.D. Va. 2000).
In adjudicating non-federal questions, a federal court must
apply the law of the state." United States v.
Little, 52 F.3d 495, 498 (4th Cir. 1995) (citing
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct.
817, 82 L.Ed. 1188 (1938)). If a federal court's decision
is governed by state law and there is no " state statute
or a controlling decision directly in [sic] point," the
court should not ignore " [c]onsidered dicta in the
opinions of the highest state court; " rather, it must
follow such dicta if it is " a clear exposition of the
law" and not in conflict with other decisions of the
highest state court. Sherby v. Weather Bros. Transfer
Co., 421 F.2d 1243, 1244 (4th Cir. 1970). Additionally,
if only a state intermediate appellate court has ruled on the
issue, that decision must be followed absent " other
persuasive data that the highest court of the state would
decide otherwise." Little, 52 F.3d at 498
(quoting West v. Am. Tel. & Tel. Co., 311 U.S. 223,
237, 61 S.Ct. 179, 85 L.Ed. 139 (1940)) (ruling that a
federal court could not independently interpret a state
statute where there was " an opinion of the second
highest court in the state directly on point" ).
parties' arguments hinge on the interpretation of a
handful of Arkansas cases. May relies primarily on the
Arkansas Court of Appeals' decision in Infinity Headwear
for the proposition that Arkansas law does not allow a claim
for conversion of purely electronic data, while IDM points to
the Arkansas Supreme Court's ruling in Godwin v.
Churchman, 305 Ark. 520, 810 S.W.2d 34 (Ark. 1991) for
the contrary proposition.
plaintiffs in Godwin alleged that the defendants "
removed the [client] files...copied the computer diskettes
which were the property of Plaintiffs, took the furniture
which was the property of Plaintiffs and took over the
Plaintiffs' accounting practice." Godwin,
810 S.W.2d at 38. The court found that the plaintiffs had
stated a claim for conversion because they had sufficiently
alleged that the ...