United States District Court, W.D. Virginia, Charlottesville Division
K. MOON, UNITED STATES DISTRICT JUDGE
Hawkins and Jonathan Fishbeck founded the BuilderFish
entities, three software development companies. But the
partners split, and Hawkins alleges that Fishbeck and the
other defendants (a co-worker, Fishbeck's father, and two
companies) utilized BuilderFish's resources improperly
for their own gain. He claims that they collectively
misappropriated trade secrets and infringed copyrights, and
that Fishbeck violated a non-compete agreement.
respond to these allegations in two ways. First, Jonathan
Fishbeck argues that the claims against him are subject to
arbitration. Because the employment agreement containing the
arbitration clause has a significant relationship to the
claims against him, the Court will grant the motion for all
claims for damages against him, but the claims for injunctive
relief are explicitly excepted by the agreement. Second,
Defendants collectively argue that Hawkins does not plead
sufficient facts to plausibly state his claims against them.
While Hawkins properly pleads facts that state a trade secret
claim, his copyright and covenant not to compete claims are
both fatally flawed. The motion will accordingly be granted
motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) tests the
legal sufficiency of a complaint to determine whether a
plaintiff has properly stated a claim. The complaint's
“[f]actual allegations must be enough to raise a right
to relief above the speculative level, ” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007),
with all allegations in the complaint taken as true and all
reasonable inferences drawn in the plaintiff's favor.
King v. Rubenstein, 825 F.3d 206, 212 (4th Cir.
2016). A motion to dismiss “does not, however, resolve
contests surrounding the facts, the merits of a claim, or the
applicability of defenses.” Id. at 214.
the complaint “does not need detailed factual
allegations, a plaintiff's obligation to provide the
‘grounds' of his entitle[ment] to relief requires
more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.”
Twombly, 550 U.S. at 555. A court need not
“accept the legal conclusions drawn from the
facts” or “accept as true unwarranted inferences,
unreasonable conclusions, or arguments.” Simmons v.
United Mortg. & Loan Inv., LLC, 634 F.3d 754, 768
(4th Cir. 2011) (quotation marks omitted). This is not to say
Rule 12(b)(6) requires “heightened fact pleading of
specifics, ” instead the plaintiff must plead
“only enough facts to state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at
570. Still, “only a complaint that states a plausible
claim for relief survives a motion to dismiss.”
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
Todd Hawkins and Defendant Jonathan Fishbeck co-founded the
BuilderFish entities in 2010. (Dkt. 6 ¶¶ 3, 10).
BuilderFish Enterprises, LLC, BuilderFish, LLC, and
BuilderFish Services, LLC (collectively “the
BuilderFish entities”) are each Virginia limited
liability companies. (Id. ¶ 2). BuilderFish,
LLC and BuilderFish Services, LLC are wholly owned
subsidiaries of Builderfish Enterprises, LLC. (Id.).
Plaintiff and Jonathan Fishbeck each own 50% of BuilderFish
Enterprises, LLC, the parent company. (Id. ¶
10). Plaintiff and Jonathan Fishbeck contributed to the
BuilderFish entities in different manners. Plaintiff provided
financial backing for the companies, while Jonathan Fishbeck
worked as an employee and officer. (Id. ¶¶
3, 10-11). The companies also employed at least one other
individual. Defendant William Heapes started working for the
BuilderFish entities as Chief Technology Officer in early
2016, but has no ownership stake in the company.
(Id. ¶¶ 4, 12).
the past three years, the BuilderFish entities have invested
$4 million dollars and the labor of its employees in the
development of the “Navigator/Gravity” software.
(Id. ¶ 11). Starting in September 2016,
Defendants Jonathan Fishbeck, Heapes, and Ronald Fishbeck
(Jonathan's father) allegedly removed this software from
the BuilderFish entities. (Id. ¶¶ 13, 14,
21). Defendants Ultra Lifestyle, LLC and Griffin Group
Global, LLC allegedly received this software code and used it
to create unauthorized derivative products. (Id.
¶¶ 21, 22). Defendants Jonathan Fishbeck, Ronald
Fishbeck, and Heapes have at least partial ownership of these
two LLCs. (Id. ¶¶ 6, 7).
alleges violations of the Defend Trade Secrets Act, 18 U.S.C.
§ 1831, et seq., the Copyright Act, 17 U.S.C.
§ 101, et seq., and the covenant not to compete
in Jonathan Fishbeck's employment agreement. (Dkt. 6 at
8-10). But before getting to those claims, Defendants
challenge whether Plaintiff can represent the BuilderFish
entities under Virginia corporate law.
Plaintiff's ability to bring a derivative suit under
“well settled” that “Virginia law does not
accord a shareholder standing to sue in his own right for
compensatory damages caused by injury to a
corporation.” Womble v. Dixon, 752 F.2d 80, 82
(4th Cir. 1984) (citing Keepe v. Shell Oil Co., 220
Va. 587, 591 (Va. 1979)). “The rule is that an officer
or a shareholder of a corporation, even if he is the sole
shareholder, has no personal or individual right of action
against third parties for a wrong or injury inflicted by
those third parties upon the corporation.” Mullins
v. First Nat. Exch. Bank of Va., 275 F.Supp. 712, 721
(W.D. Va. 1967); see Mission Residential, LLC v. Triple
Net Properties, LLC, 275 Va. 157, 161-62 (Va. 2008)
(applying this principle to limited liability companies).
Plaintiff cannot sue directly for any alleged injuries to the
BuilderFish entities, he can sue on behalf of the limited
liability companies, or “derivatively.” “A
derivative action is an equitable proceeding in which a
member asserts, on behalf of the limited liability company, a
claim that belongs to that entity rather than the
member.” Mission Residential, 275 Va. at 161-
62. Va. Code § 13.1-1042 governs derivative actions
brought on behalf of limited liability companies. Plaintiff
can only bring a derivative action if he was a member of the
company during the alleged injury, made a written demand on
the company to take action, and waited ninety days to see
whether the company would take action on its own behalf. Va.
Code § 13.1-1042. Plaintiff must also
“fairly and adequately” represent the interests
of the limited liability company. Id. at
§§ 13.1-1042, 13.1-1043.
made a written demand on the company, and the first three
requirements are satisfied. (Dkt. 6 ¶¶ 10,
However, Defendants dispute whether Plaintiff can
“fairly and adequately” represent the interests
of the company. (Dkt. 12 at 3-4). They claim that
“economic antagonisms between representative and
class” and “other litigation pending between the
plaintiff and defendants” weigh against the
Plaintiff's ability to fairly and adequately represent
the BuilderFish entities. (Dkt. 12 at 3 (quoting Office
of Strategic Servs., Inc. v. Sadeghian, 528 F. App'x
336, 350 (4th Cir. 2013))).
parties' animosity does not necessarily doom a derivative
action. See Cattano v. Bragg, 283 Va. 638, 647-48
(Va. 2012). In Cattano, the Virginia Supreme Court
upheld the ability of one shareholder in a two-shareholder
corporation to fairly and adequately bring a derivative
action against the other. In that case, there was also
“economic antagonism as well as apparent animosity
between the Firm's only two shareholders, ” but the
court was unwilling to find that this was determinative.
Id. “To so hold would be to enact a de
facto bar on derivative suits in two-shareholder
corporations.” Id. Instead, a court
“must look beyond the mere presence of economic and
emotional conflict, placing more emphasis on whether the
totality of the circumstances suggest that the plaintiff will
vigorously pursue the suit and that the remedy sought is in
the interest of the corporation.” Id.
the totality of the circumstances demonstrate that Plaintiff
is able to vigorously pursue the derivative suit in the
interest of the corporation and that the remedy sought is in
the interest of the corporation. First, because of
Plaintiff's large interest in the company, Plaintiff
would vigorously pursue these claims and be “the
driving force behind the litigation.”
Jennings, 275 Va. at 601. This would resound to the
benefit of the BuilderFish entities as a whole. Second, the
remedy sought (the return of any trade secrets or money
derived from them) is the same type of remedy that the
company would seek on its own behalf. See Cattano,
283 Va. at 648 (“The remedy sought-the return of funds,
misappropriated by an officer, to the corporation-is highly
appropriate for a derivative claim.”). Third, Plaintiff
is intimately familiar with the litigation and, as the
BuilderFish entities are owned only by Plaintiff and
Defendant Jonathan Fishbeck, there is no one more familiar
with the dispute who could bring a derivative action.
is “other litigation pending between the plaintiff and
defendants.” Jennings, 275 Va. at 601. This
distinguishes this case from Cattano, but the
underlying concern of Cattano still holds: Allowing
the “[c]harged emotions and economic antagonism [that]
are virtually endemic to disputes in closely held
corporations” to prevent derivative actions
“would be to enact a de facto bar on
derivative suits in two-shareholder corporations.” 283
Va. at 647. The totality of these circumstances ...