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Oros, Inc. v. Dajani

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

June 4, 2019

OROS, INC., Plaintiff and Counterclaim Defendant,
v.
JAMAL DAJANI, Defendant, Counterclaim Plaintiff, and Third-Party Plaintiff,
v.
OROS AMERICAS, INC., et al, Third-Party Defendants.

          MEMORANDUM OPINION

          LEONIE M. BRINKEMA UNITED STATES DISTRICT JUDGE.

         Before the Court is defendant Jamal Dajani's ("Dajani" or "defendant") motion to dismiss Counts I, II, and III of OROS, Inc.'s ("Oros Inc." or "plaintiff") complaint, to which plaintiff has responded, and defendant has filed a reply brief.[1] The parties have waived a hearing, and the Court finds that oral argument would not aid the decisional process. For the reasons that follow, defendant's motion to dismiss will be granted as to Count I and denied as to Counts II and III.

         Oros Inc. initiated this civil action on March 27, 2019. Its complaint sets forth five counts. Count I is a standalone request for injunctive relief. Counts II and III allege that Dajani's actions constitute misappropriation of trade secret information in violation of the federal Defend Trade Secrets Act ("DTSA") and the Virginia Uniform Trade Secrets Act ("VUTSA"), respectively. Finally, Counts IV and V are state-law claims sounding in breach of fiduciary duty and conversion, respectively. Only Counts I, II, and III are at issue in Dajani's motion to dismiss.[2]

         I.[3]

         Oros Inc. is incorporated in Delaware and has its principal place of business in Virginia. Its mission is to serve as the United States seller and distributor of instruments to measure noise and vibration that are designed and manufactured by Oros SASU, a French company. Oros SASU owns an 80% interest in Oros Inc. The remaining 20% interest is owned by Dajani, who since 1998 was also Oros Inc.'s president and a member of its board of directors.

         Plaintiff alleges that Dajani was an unsatisfactory president in several ways. Oros Inc.'s financial performance was "largely inadequate throughout his tenure ..., declining particularly in recent years." Verified Compl. [Dkt. No. 1] ("Compl.") ¶ 11. Dajani also, among other acts, issued himself a $130, 000 loan without the board's permission; refused to provide access to the company's bank accounts to other board members; failed to cooperate during a financial audit; and refused to discuss issues such as his salary or activities of the company's sales representatives with the board. That conduct, along with what plaintiff alleges was a "generally obstructive and defiant" attitude toward Oros SASU, id. ¶ 12, led to Dajani's termination by the board on January 18, 2019.

         Dajani has not ceded his role as president. Instead, he has retained control over Oros Inc.'s computer server, equipment, financial records, and bank accounts, as well as the access codes to cloud-based services. He continues to access the company's email accounts and has been holding himself out to employees and customers as the company's rightful president. And he has refused to give up or return information that plaintiff alleges is confidential and proprietary, including "the pricing structure of [Oros Inc.'s] products, lists of customers and prospects, and knowledge of the product obsolescence in the hands of its customers." Compl. ¶ 25. Plaintiff alleges that Dajani has refused to return this information in order to "maximize the price of a buy-back" of the 20% interest he owns in Oros Inc. Id. ¶ 1.

         II.

         Dajani argues that Counts II and III of Oros Inc.'s complaint should be dismissed because the complaint fails to allege sufficient facts plausibly indicating that Dajani is liable for trade secret misappropriation. He also argues that Count I, Oros Inc.'s request for injunctive relief, is not properly pleaded as a separate count and should also be dismissed. Oros Inc. responds as to Counts II and III that it has more than satisfied the pleading standards set out in Rules 8 and 12 of the Federal Rules of Civil Procedure. And although Oros Inc. does not contest that a request for injunctive relief is not an independent cause of action, it argues that such a request is clearly articulated in the current iteration of the complaint. Nonetheless, Oros Inc. seeks leave to amend its complaint in the event the Court concludes that the remaining counts do not adequately request injunctive relief.

         A complaint should be dismissed under Rule 12(b)(6) if it "fail[s] to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The plausibility standard "is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 570). The Court must "assume the facts alleged in the complaint are true and draw all reasonable factual inferences in [the plaintiffs] favor," Burbach Broad. Co. of Del, v. Elkins Radio Corp., 278 F.3d 401, 406 (4th Cir. 2002), but only to the extent those allegations pertain to facts rather than legal conclusions. Iqbal, 556 U.S. at 678-79.

         III.

         Traditionally, trade secret protections were entirely a matter of state law. In 2016, Congress passed the DTSA to provide federal jurisdiction for trade secret misappropriation claims where the trade secrets at issue are "related to a product or service used in, or intended for use in, interstate or foreign commerce." Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, § 2, 130 Stat. 376, 376 (codified at 18 U.S.C. § 1836). The DTSA provides additional federal protections for trade secret holders but does not "preempt or displace any other remedies, whether civil or criminal, provided by ... State ... law." 18 U.S.C. § 1838. And in critical respects, the applicable standards under the DTSA and under state-law analogues-for instance, the VUTSA-are nearly identical. To make out a trade secret misappropriation claim under the DTSA and the VUTSA, Oros Inc.'s complaint must allege both (a) that the information at issue qualifies as one or more trade secrets and (b) that Dajani misappropriated the trade secrets with the requisite mens rea, either by wrongfully acquiring the information or by using or disclosing it with actual or imputed knowledge that it was a trade secret. Dajani argues that Oros Inc.'s complaint fails on both fronts.

         A.

         Defendant first argues that the complaint fails to identify any trade secrets. Under the DTSA, ...


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