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Futrend Technology, Inc. v. Microhealth LLC

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

May 2, 2019

FUTREND TECHNOLOGY INC., Plaintiff,
v.
MICROHEALTH LLC, el al, Defendants.

          MEMORANDUM OPINION & ORDER

          HON. LIAM O'GRADY JUDGE.

         This matter comes before the Court on Plaintiffs Motion for Leave to Amend the First Amended Complaint (Dkt. 9) and Motion to Remand (Dkt. 6). Both motions have been fully briefed and the Court dispensed with oral argument. For the reasons that follow, and for good cause shown, both Motions are hereby GRANTED.

         I. BACKGROUND

         Plaintiff Futrend Technology Inc. alleges that Defendant Microhealth LLC (a) breached a contract by refusing to award Futrend a subcontract after Futrend helped Microhealth obtain a government primary contract, (b) stole Futrend's employees, and (c) conspired with Futrend's employees to steal Futrend's trade secrets and confidential information. On October 18, 2018, Plaintiff Futrend sued Defendant Microhealth and five of Futrend's former employees in Virginia state court alleging breach of contract, fraud, tortious interference, trade secret misappropriation under the Virginia Uniform Trade Secret Act, conspiracy, and other state law torts.

         After a period of discovery, Futrend amended its state court complaint to add additional factual allegations and counts. Most importantly for the purposes of the present motions, Futrend added a count alleging Defendants violated the Virginia Computer Crimes Act by copying "computer files containing Futrend's confidential and proprietary business information." The First Amended Complaint was deemed filed on March 15, 2019.

         Defendants removed the case to this Court on March 29, 2019. In the Notice of Removal, Defendants asserted this case should be heard in federal court because the new Virginia Computer Crimes Act count is completely preempted by the federal Copyright Act.

         One week later, Plaintiff filed a Motion to Amend and a Motion to Remand. Plaintiff challenged the sufficiency of Defendants' Notice of Removal, arguing that Defendants failed to sufficiently allege that the information purportedly stolen from Plaintiffs computers was protected under the Copyright Act. Plaintiff also moved to amend the First Amended Complaint to remove the Virginia Computer Crimes Act claim because Plaintiff never intended to bring any federal claims, and argued removal would be appropriate once that count was removed.

         II. MOTION TO AMEND

         Defendants' removal of this case is based solely on Plaintiffs Virginia Computer Crimes Act claim, which Defendants argue is completely preempted by the federal Copyright Act. Plaintiff has moved to amend the First Amended Complaint to remove the Virginia Computer Crimes Act count because Plaintiff had intended only to bring claims under state law and "did not intend to bring a claim under the Copyright Act." Dkt. 10 at 4, 6.

         Leave to amend should generally be "freely given" absent undue delay, undue prejudice to the non-movant, futility of amendment, or bad faith or dilatory motive by the movant. Foman v. Davis, 371 U.S. 178, 182 (1962). Defendants argue the present Motion to Amend should be denied because it is brought solely to obtain a remand to state court and thus, in Defendants' view, constitutes bad-faith forum-shopping.

         The Fourth Circuit's opinion in Harless v. CSX Hotels, Inc., 389 F.3d 444 (4th Cir. 2004), is directly on point and demonstrates that Plaintiffs Motion to Amend should be granted. In Harless, the Fourth Circuit granted leave to amend even though the plaintiff "clearly wanted to avoid federal court" because the plaintiff "also had substantive reasons for amending the pleadings," namely, that her counsel "never intended to allege a federal claim" and had intended "to allege a claim based solely on state law." Id. at 448. Following Harless, Judge Payne also recently granted leave to amend where the plaintiff sought leave to remove a count "largely for the purpose of seeking remand to Virginia state court," but also in response to the defendant's arguments that the count did not state a viable cause of action. Boone v. CSX Transp., Inc., 2018 WL 1308914, at *4 (E.D. Va. March 13, 2018).

         As in Harless, Plaintiffs counsel has stated that Plaintiff never intended to bring a federal claim and had intended to solely bring claims under Virginia state law. Plaintiffs counsel's assertion is supported by the fact that all the counts in the First Amended Complaint are state law claims and removal in this action is premised only on a preemption argument. Id. At *5 ("[G]iven that plaintiffs suit reached this Court only by way of preemption-based removal, i.e., plaintiff did not specifically plead a federal cause of action, it is probable that, as in Harless, , plaintiff did not 'intend' to raise a raise federal claim."). It is also worth noting that much of the computer data allegedly stolen from Plaintiff may not even be protected by the Copyright Act, which further supports Plaintiffs allegation that it never intended to bring a federal Copyright Act claim.

Indeed, Plaintiff does not claim any copyright protection for any of the information Defendants allegedly accessed and does not assert any claims for copyright infringement. While those aspects of Plaintiffs complaint are not dispositive, they do illustrate that Defendants' alleged underlying copying is, at best, incidental to Plaintiffs core complaint of illegal, deceitful, and unauthorized computer access to trade secret information, ideas and concepts in order to gain an unfair competitive advantage.

Maxient, LLC v. Symplicity Corp., 63 F.Supp.3d 592, 597-98 (E.D. Va. 2014) (Trenga, J.).[1]Thus, the record supports that Plaintiff never intended to raise a federal claim, even if, as Defendants argue, Plaintiff should have known that the Virginia Computer Crimes Act ...


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