Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Steves and Sons, Inc. v. Jeld-Wen, Inc.

United States District Court, E.D. Virginia, Richmond Division

September 13, 2017

STEVES AND SONS, INC., Plaintiff,
v.
JELD-WEN, INC., Defendant.

          MEMORANDUM OPINION

          Robert E. Payne Senior United States District Judge

         This matter is before the Court on PLAINTIFF STEVES AND SONS, INC.'S MOTION TO DISMISS JELD-WEN INC.'S SECOND, SIXTH, AND SEVENTH COUNTERCLAIMS (ECF No. 267) . For the reasons set forth below, the motion will be granted.

         BACKGROUND

         On May 22, 2017, after the Court granted DEFENDANT JELD-WEN, INC.'S MOTION FOR LEAVE TO AMEND ANSWER TO ADD COUNTERCLAIMS AGAINST STEVES & SONS, INC. (ECF No. 101), JELD-WEN filed an Amended Answer and Counterclaims.[1] JELD-WEN asserts the following counterclaims: FIRST COUNTERCLAIM FOR RELIEF, Violation of the Defend Trade Secrets Act, 18 U.S.C. § 1836; SECOND COUNTERCLAIM FOR RELIEF, Conspiracy to Violate Defend Trade Secrets Act, 18 U.S.C. § 1832(a)(5); THIRD COUNTERCLAIM FOR RELIEF, Violation of the Texas Uniform Trade Secret Act, Texas Civil Practice & Remedies Code Annotated §§ 134A.001-134A.008; FOURTH COUNTERCLAIM FOR RELIEF, Tortious Interference with Contract Under Texas Common Law; FIFTH COUNTERCLAIM FOR RELIEF, Tortious Interference with Contract Under Texas Common Law; SIXTH COUNTERCLAIM FOR RELIEF, Breach of the Implied Covenant of Good Faith and Fair Dealing Under Delaware Law; and SEVENTH COUNTERCLAIM FOR RELIEF, Breach of Contract.

         On June 19, 2017, Steves and Sons Inc. ("Steves") moved, under Fed.R.Civ.P. 12(b)(6) to dismiss the SECOND, SIXTH, and SEVENTH COUNTERCLAIMS.[2] The factual allegations pertaining to the three counterclaims challenged in the motion to dismiss are as follows and must be taken as true for purposes of this motion.

         According to JELD-WEN, "John Pierce (*Pierce') is a former Senior Executive Vice President of defendant/counter-claimant JELD-WEN. Pierce worked for JELD-WEN from June 4, 1979 until June 29, 2012. In his role as Senior Executive Vice President, Pierce oversaw JELD-WEN's entire molded door skins operations." JELD-WEN'S COUNTERCLAIMS (''CC") ¶ 4 (ECF No. 252).

         On January 1, 1988, Pierce and JELD-WEN entered into a Management Employment Contract which provided that Pierce would be exposed to "matters of confidence relating to manufacturing processes, costs, customer information and pricing, JELD-WEN policies and procedures and financial data, " which "JELD-WEN regards [as] confidential and in many cases as trade secrets." Id. ¶ 5. "On January 27, 2006, Pierce and JELD-WEN entered into a second Management Employment Contract." Id. ¶ 6. "During Pierce's employment at JELD-WEN, Steves purchased door skins from JELD-WEN. At various times during his employment, Pierce worked directly with Steves CEO Edward Steves and with other Steves employees regarding these purchases." Id. ¶ 8. "Pierce retired from JELD-WEN on June 29, 2012." Id. ¶ 9.

         "On or before February 26, 2015, Steves contacted Pierce, with knowledge of Pierce's former position at JELD-WEN, and entered into an agreement with Pierce pursuant to which Pierce would by surreptitious means acquire JELD-WEN trade secrets and other confidential information relating to JELD-WEN's door and door skin businesses and deliver that information to Steves. Steves and Pierce signed a Mutual Confidentiality and Non-Disclosure Agreement on March 15, 2015." Id. ¶ 10. "Steves agreed to pay Pierce at the rate of $8 00 per day, plus travel expenses, to travel to JELD-WEN facilities and to communicate with JELD-WEN employees for the purpose of eliciting confidential information about JELD-WEN operations and passing that information to Steves. Pursuant to that agreement, Pierce traveled to several JELD-WEN door skin plants and obtained trade secret and other confidential information from JELD-WEN employees." Id. ¶ 12. "Pierce acknowledged that he sold to Steves confidential financial information, and confidential information about primer costs, JELD-WEN's future plans for a primer facility in Towanda, and manufacturing process and plans for a new door adhesive, that Pierce learned through those trips." Id. ¶ 13. "The Steves brothers and Pierce discussed that Steves was buying confidential JELD-WEN information from Pierce" and "[o]n March 12, 2015, Pierce suggested to Edward and Sam Steves II that they keep Pierce's upcoming visit to Steves headquarters in San Antonio, Texas confidential." Id. ¶ 19.

         Furthermore, says JELD-WEN, "John Ambruz is a former Executive Vice President of Corporate Development for defendant/counter-claimant JELD-WEN. Ambruz worked for JELD-WEN from April 16, 2012, until March 12, 2014." Id. ¶ 24. JELD-WEN also had an employment contract with Ambruz, beginning April 18, 2012, which indicated that Ambruz would be exposed to confidential matters. Id. ¶ 25. "After the termination of his employment with JELD-WEN, on April 21, 2014, Ambruz signed a declaration certifying that he had returned and delivered to JELD-WEN all materials embodying any confidential information, " and "he acknowledged his ongoing duty to maintain as confidential any confidential information he acquired during his employment." Id. ¶¶ 27-28.

         "Following his departure from JELD-WEN, Ambruz started a consulting firm called Global Strategic Partners ('GSP')." Id. ¶ 29. "Steves retained Ambruz, through GSP, as a consultant on or around July 8, 2015. Steves admits that it retained Ambruz to help it evaluate the feasibility, logistics and economics of financing and developing its own molded door skin plant." Id. ¶ 30. "On information and belief, Steves provided to Ambruz confidential JELD-WEN information that JELD-WEN had provided to Steves pursuant to the confidentiality provisions of the parties' [Long Term] Supply Agreement." Id. ¶ 31.

         JELD-WEN alleges that, "[o]n information and belief, Steves has planned to use, and will continue to use, JELD-WEN's trade secrets and confidential information to assess whether it is feasible for the company to develop a door skin manufacturing operation in direct competition with JELD-WEN. The information stolen from JELD-WEN provides Steves a roadmap to develop a door skin manufacturing operation." Id. ¶ 39.

         These facts form the predicate for JELD-WEN's SECOND counterclaim and also are integral to JELD-WEN's SIXTH and SEVENTH counterclaims.[3] The SIXTH and SEVENTH counterclaims purport to be based on contract provisions that will be discussed fully in considering whether those two counterclaims are subject to dismissal.

         ANALYSIS AND APPLICATION OF LAW

         A motion to dismiss under Fed.R.Civ.P. 12(b)(6) challenges the legal sufficiency of a complaint. Jordan v. Alternative Resources Corp., 458 F.3d 332, 338 (4th Cir. 2006). When deciding a motion to dismiss under Rule 12(b)(6), a court must "draw all reasonable inferences in favor of the plaintiff." Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir. 2009) . While the court "will accept the pleader's description of what happened" and "any conclusions that can be reasonably drawn therefrom, " the court "need not accept conclusory allegations encompassing the legal effects of the pleaded facts." Charles A. Wright & Arthur R. Miller/ Federal Practice and Procedure § 1357 (3d ed. 1998); Chamblee v. Old Dominion Sec. Co., L.L.C., No. 3:13CV820, 2014 WL 1415095, at *4 (E.D. Va. 2014) . The court is not required to accept as true a legal conclusion unsupported by factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

         In the SECOND Counterclaim, JELD-WEN alleges that Steves combined and conspired with Pierce or Ambruz, or both, in violation of 18 U.S.C. § 1832(a)(5). CC ¶ 50. In the SIXTH Counterclaim, JELD-WEN alleges that Steves breached the implied covenant inherent in the parties Long Term Supply Agreement. "Steves [had] agreed to purchase 80% of its door skin requirements from JELD-WEN from January 1, 2012 through December 31, 2019." Id. ¶ 71. "By unlawfully stealing JELD-WEN's confidential and secret information in order to develop its own interior molded door skin manufacturing capability, Steves unreasonably deprived JELD-WEN of its expectation under the contract that Steves would purchase' the maximum volume [of door skins] possible' from JELD-WEN for the duration of the contract." Id. ¶ 73. As to the SEVENTH Counterclaim for breach of contract, JELD-WEN alleges that "Steves breached the confidentiality provision of the [Long Term] Supply Agreement by providing JELD-WEN's commercially sensitive information to Ambruz without JELD-WEN7s prior and express approval." Id. 77.

         A. SECOND COUNTERCLAIM: Conspiracy to Violate Defend Trade Secrets Act, 18 U.S.C. § 1832(a)(5)

         In the SECOND Counterclaim, JELD-WEN alleges that Steves combined and conspired with Pierce or Ambruz, or both, in violation of 18 U.S.C. § 1832(a)(5). Id. ¶ 50. Steves seeks dismissal because Section 1832 "does not establish a private cause of action, and private citizens simply do not have the right to enforce criminal statutes." Opening Brief at 6.[4]

         JELD-WEN argues that whether the amendment of the Espionage Act permits a private cause of action under 18 U.S.C. § 1832 is an issue of first impression, but that the statutory scheme supports its interpretation. According to JELD-WEN, under 18 U.S.C. § 1836(b)(2), an individual can apply for a civil seizure order, which may be entered if the applicant is likely to succeed in showing that the information is a trade secret, and the order can be directed against a person who "conspired to use improper means to misappropriate the trade secret of the application." And, according to JELD-WEN, xx [h] ow would you get a civil seizure order based on the likelihood of success of showing a conspiracy if you didn't have a private right of conspiracy. It would make no sense otherwise." In other words, the SECOND counterclaim is based on the theory that Section 1836(b)(2) permits the inference that Section 1832(a)(5) creates a private right of action.

         To assess that argument, it is appropriate briefly to examine the statutory scheme of the ECONOMIC ESPIONAGE ACT OF 1996, Title 18, Chapter 90, 18 U.S.C. §§ 1831-39 ("Chapter 90").

         Chapter 90 proscribes economic espionage and theft of trade secrets as federal crimes and provides certain mechanisms to prosecute those crimes and to allow certain limited civil proceedings to help address those crimes. Section 1832(a), a part of Chapter 90, makes certain trade secret thefts punishable as federal crimes. Section 1832 does not provide for a private right of action to redress the trade secret thefts that it proscribes.

         Both parties agree that Chapter 90 does provide a civil private right of action in Section 1836, which authorizes civil proceedings in two circumstances. First, Section 1836(a) allows the Attorney General to initiate '' a civil action" to "obtain appropriate injunctive relief against any violation of this chapter [which includes Section 1832(a)]." That is quite clearly not a private right of action because only the Attorney General is given the right.

         Second, effective May 2016, Congress enacted the Defend Trade Secrets Act ("DTSA"), which amended Chapter 90 by creating a private right of action for civil seizure of "property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action." 18 U.S.C. § 1836(b)(2)(A). Section 1836(b)(1) provides that'' [a] n owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce." ''In a civil action brought under this subsection with respect to the misappropriation of a trade secret, " the Court may award "damages for actual loss caused by the misappropriation of the trade secret, '7 and "damages for any unjust enrichment caused by the misappropriation." 18 U.S.C. § 1836(b)(3)(B)

         And, following the 2016 amendment, district courts have recognized a private right of action under 18 U.S.C. § 1836(b)(1). For instance, in Molon Motor & Coil Corp. v. Nidec Motor Corp., No. 16 C 03545, 2017 WL 1954531, at *1 (N.D. Ill. May 11, 2017), Molon sued Nidec Motor Corporation for, among other things, violation of the DTSA. The court held that: "[t]he D[TSA] allows' [a]n owner of a trade secret that is misappropriated . . . [to] bring a civil action ... if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.' 18 U.S.C. § 1836(b)(1)." See also Brand Energy & Infrastructure Servs., Inc. v. Irex Contracting Grp., No. CV 16-2499, 2017 WL 1105648, at *3 (E.D. Pa. Mar. 24, 2017) ("Brand's federal claims are under the recently enacted D[TSA], 18 U.S.C. § 1832, et seq.") ; Mission Measurement Corp. v. Blackbaud, Inc., 216 F.Supp.3d 915, 920-22 (N.D. Ill. 2016) (finding that plaintiff had adequately pleaded claim under DTSA).

         However, JELD-WEN has cited no decision holding that there is a private right of action under Section 1832(a). Rather, JELD-WEN takes the view that, by authorizing the civil seizure of property necessary to prevent the propagation or dissemination of trade secrets (the theft of which is prohibited by Section 1832(a)(5)), and by allowing a district court to award damages for actual loss (or unjust enrichment)[5] caused by misappropriation of those trade secrets, Section 1836(b) implicitly creates a private right of action, under Section 1832(a), for conspiracy to engage in the theft of trade secrets. And, for support of that view, JELD-WEN points to Section 1836(b)(2)(A)(IV)(bb)(BB), which provides that the order of seizure could be based, inter alia, on a finding that the applicant for the seizure order likely could show that the person who stole the trade secret *conspired to use improper means to misappropriate the trade secrets of the applicant."

         JELD-WEN'S position presents a question of statutory interpretation. "When interpreting a statute, we begin with the statute's plain language". Sijapati v. Boente, 848 F.3d 210, 215 (4th Cir. 2 017) . "We are obliged to look at the statutory language as a whole, construing each section in harmony with every other part or section, because 'Act[s] of Congress . . . should not be read as a series of unrelated and isolated provisions.'" Id. (quoting Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 570 (1995)).

         Nowhere in Section 1832(a) does the statutory text mention a private right of action to redress violations of its prohibitory terms. Nor does the remedial section of Section 1832(a) permit the inference that a private civil action is to be implied in Section 1832(a). See 18 U.S.C. § 1832(a)(5) ("Whoever, with intent to convert a trade secret . . . conspires with one or more other persons to commit any offense. . . shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both.")- Those penal remedies are drastically different than the civil remedies provided under Section 1836.

         Where, as here, a criminal statute establishes what is a crime and specifies the punishment for committing the crime, it is not enforceable in a private civil action unless Congress specifically so provides. See Doe v. Broderick, 225 F.3d 440, 447-48 (4th Cir. 2000) . That is because private citizens do not have the right to enforce federal criminal statutes absent specific authority from Congress. Linda R.S. v. Richard P., 410 U.S. 614, 619 (1973); Lopez v. Robinson, 914 F.2d 486, 494 (4th Cir. 1990); Zegato Travel Solutions, LLC v. Bailey, No. TDC-14-3808, 2014 WL 7365807, at *2 (D. Md. Dec. 22, 2014). Thus, it is unsurprising that, before the 2016 amendment to Chapter 90, courts rather uniformly held that Section 1832(a) does not provide a private right of action for redress of the criminal conduct that it prohibits. See, e.g., Super Chefs, Inc. v. Second Bite Foods, Inc., No. CV 15-00525, 2015 WL 12914330, at *4 (CD. Cal. June 15, 2015); Auto-Opt Networks, Inc. v. GTL USA, Inc., No. 3:14-CV-1252, 2014 WL 2719219, at *10 (N.D. Tex. June 16, 2014); Anderson v. Google Inc., No. 12-cv-06573, 2013 WL 2468364, at *2 (N.D. Cal. June 7, 2013); Masoud v. Suliman, 816 F.Supp.2d 77, 80 (D.D.C. 2011); Cooper Square Realty Inc. v. Jensen, No. 04 Civ. 01011(CSH), 2005 WL 53284, at *2 (S.D.N.Y. Jan. 10, 2005) . Furthermore, even after the enactment of the DTSA, plaintiffs who asserted claims for trade secrets misappropriation under the DTSA have relied on state law to present conspiracy claims. That rather strongly suggests that the DTSA is not generally seen as creating a private right of action pertaining to all of the conduct prohibited by Section 1832(a). See, e.g., Kuryakyn Holdings, LLC v. Ciro, LLC, 242 F.Supp.3d 789, 2017 WL 1026025, at *1, 5 (W.D. Wis. 2017); Neopart Transit, LLC v. Mgmt. Consulting, Inc., No. CV 16-3103, 2017 WL 714043, at *2 (E.D. Pa. Feb. 23, 2017); VBS Distribution, Inc. v. Nutivita Labs., Inc., No. SACV 16-01553-CJC(DFMx), 2016 WL 9024809, at *2 (CD. Cal. Dec. 1, 2016).

         Nor can Section 1836(b) be read to imply that a private right of action lies for redress of Section 1832. Although Section 1836 permits a limited right to bring private civil actions for limited purposes, the right is confined to a "civil action under this subsection." 18 U.S.C. ยง 1836(b)(2). That subsection is Section 1836(b), which is entitled "Private civil actions." The civil action ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.