United States District Court, E.D. Virginia, Richmond Division
E. Payne Senior United States District Judge
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.
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. 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.
19, 2017, Steves and Sons Inc. ("Steves") moved,
under Fed.R.Civ.P. 12(b)(6) to dismiss the SECOND, SIXTH, and
SEVENTH COUNTERCLAIMS. 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
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).
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.
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.
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.
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.
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.
facts form the predicate for JELD-WEN's SECOND
counterclaim and also are integral to JELD-WEN's SIXTH
and SEVENTH counterclaims. 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.
AND APPLICATION OF LAW
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
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.
SECOND COUNTERCLAIM: Conspiracy to Violate Defend Trade
Secrets Act, 18 U.S.C. § 1832(a)(5)
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.
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.
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
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.
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.
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)
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).
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) 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."
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)).
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
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).
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. §
1836(b)(2). That subsection is Section 1836(b), which is
entitled "Private civil actions." The civil action