Economic Research Services, Inc. v. Resolution Economics, LLC

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ECONOMIC RESEARCH SERVICES, INC., )
)
Plaintiff, )
)
v. ) Civil Case No.
) 1:15-cv-1282 (RJL)
)
RESOLUTIGN ECONOMICS, LLC, )
PAUL WHITE, AND ALI SAAD, ) F I L E D
) SEP 22 2016
D f d t .
e en an s 54€'* ) cierk,u.s.o\mct&sankmpwy
Courts for the Distrlct of Co|umbla
MEMORANDUM OPINION
(September Zl , 2016) [Dkt. #29]
PlaintiffEconomic Research Services (“plaintiff’ or “ERS”) commenced the instant
action against defendants Resolution Economics, LLC (“Resolution”), Paul White
(“White”), and Ali Saad (“Saad”) (collectively, “defendants”) in August 2015. ln its
Verified Complaintl (“Complaint”) [Dkt. #l], ERS poses a veritable kitchen sink full of
claims related to White departing from ERS to Resolution and the corresponding
phenomenon of ERS’s employees and clients doing the same. Presently before the Court
is defendants’ l\/lotion to Dismiss the Complaint in its entirety. Defs.’ l\/Iot. to Dismiss
[Dkt. #29]. Upon consideration of the pleadings, the relevant lavv, and the entire record
herein, the Court GRANTS IN PART and DENIES lN PART defendants’ l\/lotion for the
reasons set forth beloW.
lA verified complaint is treated as an affidavit to the extent it is based on personal knowledge and sets forth
facts admissible in evidence See Neal v. Kelly, 963 F.Zd 453, 457-58 (D.C. Cir. 1992).
BACKGROUND
Plaintiff ERS provides economic research and statistical analysis for corporations
and law firms in a variety of disciplines, including employment discrimination, fair
lending, insurance coverage, and intellectual property. See Compl. 11 19. White began a
twenty-two year stint at ERS in 1993, when he was hired as an Economist. Compl. 1111 21,
25. He thereafter moved up the ranks, receiving a promotion to Vice President in 1998
before ultimately becoming a Managing Director of ERS’s Labor and Employment
(“L&E”) Group in ERS’s Washington, D.C. office in 2010. Compl. 1111 21 , 25. In that role,
White provided economic research, statistical analysis, and expert services related to the
field of labor and employment to ERS’s clients. Compl. 1111 1, 3. White supervised the nine
ERS employees in the L&E Group, interfaced directly with the clients, and was exposed
to and had access to ERS’s trade secrets and confidential and propriety information
Compl. 1111 3, 27.
As a condition of his employment, White signed periodic contracts with ERS,
including the 2015 Managing Directors’ Compensation Plan consummated on June 29,
2015 (the “2015 Employment Agreement” or the “Agreement”). Compl. Ex, 3 [Dkt. #1-3];
see Compl. 1111 28-32; see also Compl. Ex. l [Dkt. #l-l]', Compl. Ex. 2 [Dkt. #1-2].2 The
2 The 2015 Employment Agreement superseded any previous employment agreements between ERS and
White. See Compl Ex. 3 § 3(c) (“The parties . . . agree that there are no prior or other agreements or
understandings between the parties, including, without limitation, salaiy, bonus, compensation,
shareholder, membership, severance, transaction bonus or any other such agreements, covenants, promises,
or understandings between the parties hereto with respect to the terms of employment between ERS and
[White], except as expressly set forth herein.”).
2
2015 Employment Agreement contains several restrictive covenants that are applicable to
White given his role as a director, only a few of which are relevant here. First, the
Agreement bars directors from disclosing ERS’s confidential information to third parties
at any time following their departure from ERS.3 Compl. Ex. 3 § 3(i). Second, it prohibits
directors from soliciting ERS employees or clients for the twelve months following their
separation4 Compl. Ex. 3 §§ 3(k)(i)-(ii). Third, and finally, the Agreement precludes
Directors, once again for a period of twelve months after leaving ERS, from performing
“any act that [the] Director[s] knew, know[], or reasonably should have known might
directly injure ERS or its parents and affiliates in any material respect.” Compl. Ex. 3
§ 3(k)(iv).
On July 6, 2015, shortly after signing the 2015 Employme.nt Agreement, White
resigned from his position at ERS and, effective July 17, 2015, left to manage ERS’s
3 The Agreement states in relevant part: “Director will, during Director’s employment with ERS and at all
times following the date of termination of Director’s employment with ERS . . . not reveal, discuss,
communicate, publish, use, disclose or disseminate in any manner [ERS’s] Confldential lnformation to any
third party . . . .” Compl. Ex. 3 § 3(i); see also Compl. Ex. 3 § 3(j) (“ln order to preserve ERS’s rights and
interests in Confidential Information, Director agrees that he will not disclose such Confidential
lnformation without express authorization from ERS . . . .”).
4 Specifically, the 2015 Employment Agreement prevents Directors from doing any of the following:
“Hir[ing], or attempt[ing] to hire, contact or solicit with respect to hiring or assist in or influence the hiring
of, for Directo;' or on behalf of any other person, company or entity, any employee . . . who worked for or
was providing services to ERS at any time during Director’s employment with ERS provided, that this
clause (i) shall not apply to any individual who initiates contact with Director or applies for a position
through a general public solicitation for employment.” Compl. Ex. 3 § 3(l<)(i). The client non-solicitation
clause likewise precludes Director from doing any of the following: “Solicit[ing], divert[ing] or tak[ing]
away, or attempt[ing] to solicit, divert or take away . , . any customers, clients, referral sources, business,
or accounts of ERS, with whom Director worked with, serviced, contacted called upon, met, or
communicated with . . . during Director’s employment with ERS. The parties ag-'ee that this provision does
not preclude[] Director from providing services to customers, clients, or rei“:;'ral sources who contact
Director and seek to utilize Director’s services.” Compl. Ex. 3 § 3(k)(ii).
_)
competitor Resolution’s nascent Washington, D.C. office. Compl. 1111 38_39. ERS then
spoke with Saad, an owner and managing director of Resolution, about potentially selling
the remainder of ERS’s Washington, D.C.-based L&E Group and its related infrastructure
to Resolution. Compl. 1111 14, 49. Plaintiff alleges that Saad initially expressed interest in
an acquisition of the whole group but then stated that since ERS’s employees were free to
simply leave ERS and work elsewhere it did not make sense to do so. Compl. 11 50.
Thereafter, on July 17, 2015, White’s first day at Resolution, Resolution sent an “email
blast” directly to ERS’s clients announcing that White had joined Resolution as a Partner
and inviting them to contact White at his new phone numbers or email address Compl.
1111 42, 46; Compl. Ex. 5 [Dkt. #1-51. ERS claims that White and Resolution’s objective in
sending the email announcement was to solicit ERS’s clients, Compl. 11 45, and that White
and Resolution then made additional attempts to win over ERS’s clients by reaching out to
them individually, Compl. 1111 45~47. According to ERS, defendants’ efforts were
immediately successful, and ERS began to receive formal notices from its clients
requesting that their files be transitioned to Resolution. See Compl. 11 46.
The exodus was not limited to ERS’s clients. In the wake of White’s resignation,
several other members of ERS’s Washington, D.C. L&E Group, all of whom had worked
for White, quit their jobs at ERS and joined Resolution.5 See Compl. 11 52. By August 10,
5 The first wave of resignations commenced on July 28, 2015, when Victoria Dritsos, a Senior Database
Analyst at ERS, tendered her resignation See Compl.1153; Compl. Ex. 8 1Dkt. #1-8]. Rick Holt, a Principal
at ERS, followed suit less than an hour later at 11:20 a.m. See Compl. 11 54; Compl. Ex. 9 1Dkt. #1-9]. At
12:03 p.m. that same day, John Fahr, another Principal at ERS, tendered his resignation, and at 2:29 p.m.
and 4:00 p.m., Principal Edward Bierhanzel and Senior Database Analyst Kevin Weissman respectively
4
2015, nine of the ten employees in the practice group had resigned their posts. Compl.
1111 53-62. ERS places the blame for this defection squarely at White’s feet, asserting that
“White either actively solicited the Washington, D.C. [Labor and Employment] Group to
join Resolution or, at the least, influenced Resolution to hire them in breach of his non-
solicitation obligations.” Compl. 11 63. ERS contends, in short, that defendants
“decimated” its Washington, D.C. office. Compl. 1111 64-65.
ERS commenced this suit on August 10, 2015, by filing a Complaint alleging breach
of contract, numerous commercial torts, violations of the Computer Fraud and Abuse Act,
18 U.S.C. § 1030, et seq, and violations of the District of Columbia’s Uniform Trade
Secrets Act, D.C. Code § 36-401, et seq.6 That same day, ERS moved for a preliminary
injunction, which l denied on October 21, 2015. Mem. Op. [Dkt. #331. ln the meantime,
defendants filed the present Motion to Dismiss.
resigned their posts. See Compl. 1111 55-56; Compl. Exs. 10-12[Dkts. #1-10 ~ #1-121. Senior Consultant
Julie Frizell, who resigned at 4:07 p.m. was the last to resign that dayi See Compl. 11 58; Compl. Ex. 13
[Dkt. #1-13]. The onslaught of resignations continued the following day when, less than twenty-four hours
after Ms. Frizell’s resignation, ERS Office Manager Mark Sanchez resigned his post. See Compl. 11 59;
Compl. Ex. 14 [Dkt. #1-141. The following l\/Ionday, August 3, 2015, brought two additional departures:
Robin Das and Karen Calderon, both of whom were Senior Database Analysts at ERS. Compl. 1111 60-61;
Compl. Exs. 15-16 [Dkts. #1-15 - #1-16]. As ofAugust 10, 2015, only one employee remained in ERS’s
Washington, D.C. L&E Group, but ERS “anticipate[d] receiving his resignation upon his return from
vacation." Compl.1162.
6 'fhe Couit hasjurisdiction over the Computer Fraud and Abuse Act claim pursuant to 28 U.S.C. § 1331
and may exercise supplemental jurisdiction over plaintiffs state law claims under 28 U.S.C. § 1367(a).
l\/loreover, the Court has diversityjurisdiction as the matter in controversy exceeds 875,000 and is between
citizens of different states. See 28 U.S.C. § 1332; Compl. 11 ll (stating ERS is organized under Florida law
and has offices in Florida, California, and Washington, D.C. ); Saad Decl. 11 2 1Dkt. #19-21 (explaining
Resolution has offices in Los Angeles, Chicago, and ‘*now” Washington, D.C.); Compl, 11 13 (stating White
is a resident of Virginia).
5
LEGAL STANDARD
“[F ederal Rule of Civil Procedure] 8(a) sets out a minimum standard for the
sufficiency of complaints . . . .” Brown v. Calz``fano, 75 F.R.D. 497, 498 (D.D.C. 1977). lt
requires “a short and plain statement of the claim” and is intended “to give fair notice of
the claim being asserted so as to permit the adverse party the opportunity to file a
responsive answer, prepare an adequate defense and determine whether the doctrine of res
judicata is applicable.” Ial. lt also “serves to sharpen the issues to be litigated and to confine
discovery and the presentation of evidence at trial within reasonable bounds.” Id. The rule
“is by no means exacting,” and it “accords the plaintiff wide latitude in framing his claims
for relief.” Ial. at 499.
Under Rule 12(b)(6), meanwhile, “a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v.
Iql)al, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “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.” Ia’.; see also
BellAtl. Co.rp. v. Twombly, 550 U.S. 544, 555 (2007) (“Factual allegations must be enough
to raise a righ tc relief above the speculative level . . . .”). A eourt must “treat the
complaint’s factual allegations as true”'and “grant plaintiff the benefit of all inferences that
can be derived from the facts alleged[.]” Spa:”row v. Um``led/ll``r Lz"/ie ::, i’.'zc., 216 F.3d l 111,
1113 (D.C. Cir. 2000) (internal quotation marks omitted). Howe'/er, the court need not
“accept legal conclusions cast in the form of factual allegations.” Kowal v. MC[ Commc 'ns
6
Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). “In ruling on a 12(b)(6) motion, a court may
consider facts alleged in the complaint, documents attached to or incorporated in the
complaint, matters of which courts may take judicial notice, and documents appended to a
motion to dismiss whose authenticity is not disputed, if they are referred»to in the complaint
and integral to a Claim.” Harris v. Amalgamatea’ Transz``t Um'on Lobal 689, 825 F. Supp.
2d 82, 85 (D.D.C. 2011).
DISCUSSION
1. Count I: Breach of Contract
ln Count 1, plaintiff alleges that White breached his contractual obligations under
the 2015 Employment Agreement not to solicit ERS clients, not to solicit ERS employees,
not to disclose ERS’s propriety or confidential data, and not to take action that he knew or
reasonably should have known, might directly injure ERS. Compl. 1111 68~71. The 2015
Employment Agreement provided that it “shall be construed according to the laws of the
State of Virginia,” Compl. Ex. 3 § 3(f), and the parties assume Virginia law will apply to
plaintiff s breach of contract claim. When determining which state law to apply, “the Court
applies the District of Columbia’s choice-of-law rules.” Essroc Cement Corp. v. CTI/D. C.,
lnc., 740 F. Supp. 2d 131, 141 (D.D.C. 2010). Under those rules as applied by District of
Columbia courts, “parties to a contract may specify the law they wish to govern, as part of
their freedom to contract, as long as there is some reasonable relationship with the state
644
specified.” ].d. As White is a resident of Virginia, the reasonable relationship’ threshold”
is satisfied, and the Court will apply Virginia law to plaintiff’ s breach of contract claim.7``
Ia’.
Under Virginia law, the elements of a breach of contract claim are: “(1) a legally
enforceable obligation of a defendant to a plaintiff; (2) the defendant’s violation or breach
of that obligation; and (3) injury or damage to the plaintiff caused by the breach of
obligation.” Filak v. George, 594 S.E.2d 610, 614 (Va. 2004). Defendants argue plaintiff
has failed to state a claim of breach of any of the provisions of the 2015 Employment
Agreement. After careful evaluation of the parties’ respective arguments, 1 deny
defendants’ Motion as it pertains to plaintiff’ s claims that White breached the non-
solicitation of clients, non-solicitation of employees, and do no harm provisions of the
Agreement.
1 agree with defendants, however, that plaintiff failed to state a claim that White
breached his obligation not to disclose ERS’s confidential information. The Complaint
alleges that White breached the Agreement by sharing ERS’s customers’ identities and
non-public contact information with Resolution. Compl. 1111 43, 70. But the Complaint
does not sufficiently specify which aspect of the Agreement’s confidentiality provision
White violated by doing so. The 2015 Employment Agreement defines “Confidential
Information" as
any and all information that is proprietary and/or confidential, secret or
otherwise not generally known to those in ERS’s industry and pertains
7The Court will likewise apply Virginia law to plaintiffs implied covenant of good faith and fair dealing
claim (Count XII), as this is consistent with the parties’ assumption and as this claim arises out ofthe terms
of the 2015 Employment Agreement.
8
directly or indirectly to ERS and its operations and activities, products,
services, employees, contractors, consultants and suppliers, including any
and all formulae, methods, techniques, processes, know-how and data,
technical or non-technical whether written, graphic, computer-generated or
orally furnished to [White] by ERS or any of ERS’s authorized
Representatives. This Confidential lnformation does not include matters that
are owned by the client or that have been paid for by the client as part of the
fees for using the services of ERS . . . Conlidential Information does not
include information that (i) is or becomes publicly known; or (ii) is known
to [White1 other than from ERS (and became known legally and without the
violation of any rights of ERS) and is without any proprietary or
confidentiality restrictions at the time [White1 receives such information.
Compl. Ex. 3§ 3(i). As it failed to identify where the names and contact information of
ERS’s customers fit into this definition, plaintiff failed to state a plausible claim of breach
of the non-disclosure obligation. Cf. Compel v. Citl`` Mortgage, lnc., Civ. No. 04-1377,
2005 WL 4904816, at *2 (E.D. Va. Feb. 23, 2005) (explaining that in order to state a claim
of breach of contract, the plaintiff “must identify which provisions imposed the purportedly
breached obligation” and that “[t]he absence of such detail prejudices defendant’s
understanding of the defenses available to it and how it should proceed”). Count 1 is
therefore dismissed without prejudice with respect to plaintiff s claim that White breached
a non-disclosure obligation of the Agreement.
II. Counts lV, V, VI: Intentional Interference Claims
Counts lV, V, and Vl of the Complaint allege intentional interference with
contractual and business relations. The elements of intentional/tortious interference with
a contractual or business relationship under District of Columbia law8 are: “(1) existence
8 The parties assume District of Columbia law governs ERS’s claims contained in Counts ll, lll, lV, V, Vl,
9
of a valid contractual or other business relationship; (2) the defendant’s knowledge of the
relationship; (3) intentional interference with that relationship by the defendant; and
(4) resulting damages.” NCRIC, Irzc. v. Columbia llosp. for Women Med. Ctr., Inc., 957
A.2d 890, 900 (D.C. 2008). ln Count I``\/_, plaintiff alleges that each of the defendants
intentionally interfered with ERS’s contractual relationships with its clients. Compl. 11 87.
Plaintiff claims that “[b]y soliciting ERS’s customers and employees, Defendants, with
malice, have intentionally interfered with ERS’s contracts with its customers by preventing
ERS from fulfilling its contractual obligations . . . .” Compl. 11 88. Defendants are correct
that plaintiff failed to sufficiently allege interference9 Defs.’ Mem. 18, 19; Defs.’ Reply
14. The gist of plaintiff’s allegations is that the en masse departure of its L&E Group
employees rendered ERS unable to provide necessary services to its clients. See Pl.’s
Opp’n 23 (citing Compl. 1111 8, 10, 42_45 and Ex. 7). But the Complaint does not allege
any specific facts plausibly suggesting that ERS actually failed to perform any contractual
obligation owed to a client. And to the extent plaintiff argues that Count IV is premised
on ERS’s customers taking their business to Resolution, Pl.’s Opp’n 22, the Complaint
does not allege that by doing so any ERS customer breached or failed to perform a
Vll, X, XI, and Xlll. “[W]here all parties assume that D.C. law applies, ‘[t]he Court need not and does not
question the parties’ assumptions on that point.”’ Beyene v. Hilton Holels Corp.. 815 F. Supp. 2d 23 5, 248
(D.D.C. 2011) (quoting Davis v. Grant Park Nursing Home LP, 639 F. Supp. 2d 60, 65 (D.D.C. 2009)
(alteration in original)).
9 Although defendants argue that the Complaint does not allege “that ERS’s contracts with its customers
were breached,” the D.C. Court of Appeals has held that “a ‘breach’ as such is not required” to satisfy the
third element of tortious interference with contractual relations and that a “mere[] failure of performance”
will do. CASCO Marina Dev., 834 A.2d at 84.
10
,.~,aa¢./~W…\ “, l.e,… ,
contractual duty owed to ERS.
ln Count V, plaintiff claims that all the defendants intentionally interfered with
ERS’s relationships with its customers and employees with which ERS had “an expectancy
of 11 continuing business relationship[s]” and a corresponding “probability of future
economic benefit to ERS.” Compl. 1111 91-96. Defendants rightfully assert that plaintiffs
conclusory allegations are insufficient to state a claim. Defs.’ Mem. 18; Defs.’ Reply 16.
As to ERS’s relationships with its clients or customers, the Complaint fails to identify the
specific business relationships with which defendants are alleged to have interfered or to
substantiate ERS’s claim of an expectancy that those relationships would continue, and it
therefore fails to plead the existence of valid business relationships with the requisite
specificity.'0 See, e.g., Gov’t Relations lnc. v. Howe, Civ. No. 05-1081, 2007 WL 201264,
at *9 (D.D.C. Jan. 24, 2007) (properly alleging a tortious interference claim includes
specifying the subject of the alleged interference)_; Nyambal v. Alliea’barton Sec. Servs,,
LLC, 153 F. Supp. 3d 309, 316 (D.D.C. 2016) (a plaintiff must name the specific
relationships that “defendant allegedly interfered with” in order to state a claim).ll And as
10 Plaintiff provides an exhibit to its Complaint purporting to show one ERS client requesting to have its
account files transferred to Resolution at White’s behest. See Compl. Ex. 6 1Dkt. #1-6]. The client’s
identifying information is redacted. To the extent plaintiff desires material information in a filing to be
redacted from the public record, it should seek a leave from the Court to file the document under seal. See
hocal Ru|e 5.1(h).
" Defendants also argue plaintiff has not alleged any conduct that could support an intentional interference
claim. Defs.’ Mem. 19. Although the allegations could certainly be more specific, plaintiff has alleged
conduct on the part of White and Resolution that could support a claim of interference See Compl.
1111 8-10, 42~48. However, l do agree that the Complaint makes no specific allegations as to Saad interfering
with ERS’s relationships with its clients or customers, lndeed, the only concrete allegations regarding
Saad’s actions are those claiming he poached ERS’s employees Compl. 1111 50~51.
11
to the allegation of intentional interference with ERS’s relationships with its employees,
plaintiff sheds no light on the nature of their “business relationships.” Specific facts about
the terms of the relationships and whether the employees were subject to at-will
employment agreements are necessary to state a plausible claim, because, "if there is no
fixed or assured employment there is nothing tangible with which to interfere.” Dale v.
Thomason, 962 F. Supp. 181, 184 (D.D.C. 1997); see also Rl``ggs v. Home Baz``la'ers lnst.,
203 F. Supp. 2d 1, 24 (D.D.C. 2002) (explaining that under District of Columbia law, at-
will employees do not have a valid business relationship or expectancy with their
employers for the purposes of a tortious interference claim) (citing McManus v. MCI
Commanicatlons Corp., 748 A.2d 949, 957 (D.C. 2000)).
Count Vl alleges that Saad and Resolution tortiously interfered with the provisions
of White’s 2015 Employment Agreement that prohibited White from soliciting ERS’s
clients and employees Compl. 11 98. Defendants are correct, however, that Count Vl and
the paragraphs that precede it, see Compl. 11 97, lack sufficient allegations as to Saad’s and
Resolution’s involvement in White’s conduct. Indeed, they do not contain any allegations
plausibly suggesting Saad or Resolution “induce[ed] or otherwise caus[ed]” White to
breach his contractual obligations to ER,S. Paal vi Howaral Universz'ry, 754 A.2d 297, 309
n.23 (D.C. 2000) (quoting Restatement (Seconcl) ofTorts § 766 (1979)). Plaintiffpoints to
its allegation that Resolution sent out the email blast. Compl. 1111 8, 42, 43. While it is
possible that Saad and Resolution urged White to add ERS’s clients to the email
distribution list with the intent that White violate the non-solicitation or confidentiality
12
provisions of his employment agreement with ERS, none of the factual assertions in the
Complaint move such a claim “across the line from conceivable to plausible,” Iqbal, 556
U.S. at 680 (quoting Twombly, 550 U.S. at 570). Plaintiff next cites its allegations that
Saad eschewed the idea of acquiring the L&E Group through a transaction and stated “that
ERS’s employees [could1 simply leave and work elsewhere,” Compl. 11 50; see also Compl.
1111 51-52. These allegations perhaps support an inference that Saad then influenced ERS
employees to join Resolution. They do not, however, suggest that Saad or Resolution
prompted, swayed, influenced, or motivated White to himself lobby ERS employees to
defect.12 For all these reasons, Count IV, Count V, and Count Vl fail to state claims and
are dismissed without prejudice
III. Count VII: Unfair Competition
Count Vll alleges that defendants engaged in unfair competition by “systematically
12 Defendants further argue that Counts lV, V, and VI should be dismissed for failure to allege that the
intentional procurement of the alleged interference involved improper or egregious conduct. Under the
District of Columbia’s formulation of tortious interference, a defendant is liable only if his interference is
both “intentional[]” and “improper[]” or “wrongful.” NCRIC, Inc. v. Columbia Hosp. for Women Med.
Clr., Inc., 957 A.2d 890, 900 (D.C. 2008) (quoting Restatement (Seconcl) of Torts § 766). However, the
D.C. Court oprpeals has made clear that unlike the intentional conduct prong, “[w]rongful conduct is not
an element of a prima facie case of tortious interference under District of Columbia law.” Id. at 901; see
also Armslrong v. Thompson, 80 A.3d 177, 190 (D.C. 2013). lnstead, a potential affirmative defense to a
tortious interference claim is that defendants’ conduct was “legallyjustified or privileged.” NCRIC, Inc.,
957 A.2d at 901; see also ia'. (“lnstead of the plaintiff bearing the burden of proving that the defendant’s
conduct was wrongful, it is the defendant who bears the burden of proving that it was not.”). The Federal
Rules of Civil Procedure “do not require a plaintiff to anticipate affirmative defenses which might be raised
by a defendant.” McNamara v. Picken, 866 F. Supp. 2d 10, 17 (D.D.C. 2012) (quoting Chem-Met Co. v.
Mel‘alana' Inl’l, Civ. No. 96-2548, 1997 WL 74 541 (D.D.C. Feb. 19, 1997)); see also Abbas v. Dixon, 480
F.3d 636, 640 (2d Cir. 2007) (“The pleading requirements in the Federal Rules of``Civil Procedure, however,
do not compel a litigant to anticipate potential affirmative defenses, . . . [or] to affirmatively plead facts in
avoidance of such defenses.”). As such, plaintiff need not allege wrongful or improper conduct in order to
survive a motion to dismiss for failure to state a tortious interference claim under District of Columbia law.
13
induc[ing] ERS’s employees to leave their present employment with the purpose of
crippling and destroying a critical part of ERS’s labor and employment practice area” and
by executing the inducement with “malice and the intent of illicitly seizing and pirating
ERS’s business identity, its trade secrets and confidential information, technical expertise,
employees and clients.” Compl. 1111 103-104. ln the District of Columbia, “[u]nfair
competition is not defined in terms of specific elements, but by various acts that would
constitute the tort if they resulted in damages.” Hanley-Wood LLC v. Hanley Wood LLC,
783 F. Supp. 2d 147, 153 (D.D.C. 2011). Acts that have been recognized as supporting an
unfair competition claim include, “defamation, disparagement of a competitor’s goods or
business methods, intimidation of customers or employees, interference with access to the
business, threats of groundless suits, commercial bribery, inducing employees to sabotage,
[and1 false advertising or deceptive packaging likely to mislead customers into believing
goods are those of a competitor.” Ia’. (quoting B & W Mgmt., Inc. v. Tasea lnv. Co., 451
A.2d 879, 881 n.3 (D.C. 1982)).
Plaintiff does not argue that it has made allegations of one or more of the recognized
acts listed above but instead maintains that defendants’ alleged “corporate raid” of ERS
constitutes unfair competition and relies on statements by courts in other jurisdictions that
“systematically[] inducing employees to leave their present employment is actionable
[unfair competition] when the purpose of such enticement is to cripple and destroy an
93
integral part of a competitive business organization Pl.’s Opp’n 28 (quoting Reaa’ing
Raz``nbow, ]nc. v. Fink, 833 A.2d 199, 212 (Pa. Super. Ct. 2003)). To be sure, our Circuit
14
Court made a similar_-though not identical-_observation about District of Columbia
unfair competition law in 1978, stating that “engaging in activities designed solely to
destroy a rival” is a form ofunfair competition Ray v. Proxmz're, 581 F.2d 998, 1002 (D.C.
Cir. 1978). However, the Circuit Court provided the caveat that unfair competition is a
“limited” tort given our society’s encouragement of "aggressive economic competition.”
Id. at 1002. Even assuming Ray’s recognition of plaintiffs theory is not dicta and remains
good law, plaintiffs own Complaint acknowledges that Saad and Resolution were
attempting to expand their business by entering the Washington, D.C. market and that
White was selected to lead the launch of Resolution’s Washington, D.C. office
Compl.1111 2, 4, 5, 49. With such acknowledgement of legitimate business motivations,
plaintiff has not sufficiently alleged that defendants’ sole aim was to dismantle ERS’s L&E
Group, and thus the Complaint fails to state a claim of unfair competition See Scanwell
Labs., Inc. v. Thomas, 521 F.2d 941, 949 (D.C. Cir. 1975).
IV. Count VIII: Computer Fraud and Abuse Act
Plaintiff alleges in Count VIII that defendants violated the Computer Fraud and
Abuse Act (“CFAA”), 18 U.S.C. § 1030, by either obtaining-in the case of White_or
directing ERS employees to obtain-in the case of all defendants_ERS’s confidential
information on its computers without access or in excess of authorized access. Compl.
1111 107-09. The CFAA, which is intended “primarily to deter computer hacking,”
Lewis~Bar/ce Assocs., LLC v. Wia’cler, 725 F. Supp. 2d 187, 194 (D.D.C. 2010), contains
“a private cause of action for any person ‘suffering damage or loss’ from a violation of the
15
act.” Roe v. Bernal)el`` & Wachtel PLLC, 85 F. Supp. 3d 89, 102 (D.D.C. 2015) (quoting
18 U.S.C. § 1030(g)). Plaintiff argues that defendants violated 18 U.S.C. § 1030(a)(2)(c),
which forbids “intentionally access[ing1 a computer without authorization or exceed[ing]
authorized access, and thereby obtain[ing] . . . information from any protected computer.”
Compl. 1111 106~111. The CFAA defines “exceeds authorized access” as “access[ing] a
computer with authorization and . . . us[ing] such access to obtain or alter information in
the computer that the accesser is not entitled so to obtain or alter.” Ia’. § 1030(e)(6).
Defendants argue that plaintiff has failed to state a claim because plaintiff does not
allege any defendant “accessed information without authorization or beyond their
authorization.” Defs.’ Mem. 21. They point out that the Complaint concedes that White
“had access to ERS trade secrets and confidential proprietary information” in the course of
his employment with ERS. Compl. 11 27. Moreover, although the Complaint alleges that
each of the defendants directed ERS L&E Group employees to “copy and remove ERS
data” for defendants’ benefit, it does not allege that in doing so any of those ERS employees
retrieved data that they did not have permission or credentials to access. Compl. 11 109.
Defendants rely on Roe, in which my colleague Judge 'l``anya Chutkan of our Court held
that a person “exceeds authorized access” when he or she “accesses information on the
computer that the person is not entitled to access.” 85 F. Supp. 3d at 102 (quoting LVRC
Hola’l'ngs LLC v. Brekka, 581 F.3d 1127, 1133 (9th Cir. 2009)). Under this interpretation
of the CFAA, an employee’s misuse of data that he was authorized to access in the course
16
of his employment is not actionable.13 Ia’.; see also Lewis~Bar/ce Assocs., 725 F. Supp. 2d
at 194 (“‘Exceeds authorized access’ should not be confused with exceeds authorized
use.” . 1 agree this is the proper interpretation of the statute, “which speaks only of
authorized ‘access’ to data and not of use.” Roe, 85 F. Supp. 3d at 103. Because the
Complaint does not allege that any defendant accessed or caused any other person to access
ERS data that the accesser did not have permission to obtain in the scope of his or her
employment with ERS, plaintiff fails to state a CFAA claim.
V. Count IX: District of Columbia Uniform Trade Secrets Act
ln Count IX, plaintiff alleges that defendants misappropriated ERS’s trade secrets,
“including information related to ERS’s customers, as well as proprietary formulas,
software code and databases used for performing expert economist services and
calculations for its clients” in violation of the District of Columbia Uniform Trade Secrets
Act (“DCUTSA”), D.C. Code § 36-401, erseq. Compl.11 113. The elements ofa DCUTSA
claim are: “(1) the existence of a trade secret; and (2) acquisition of the trade secret by
improper means, or improper use or disclosure by one under a duty not to disclose.”
DSMC, lne. v. Convera Corp., 479 F. Supp. 2d 68, 77 (D.D.C. 2007). To qualify as a trade
secret, “(1) the information must be secret; (2) its value must derive from its secrecy; and
13 The Ninth Circuit’s interpretation of the CFAA, followed by Judge Chutkan and Magistrate Judge
Facciola ofthis District, has also been adopted by the Second and Fourth Circuits. See Roe, 85 F. Supp. 3d
at 102-103. The Fifth and Seventh Circuits employ a broader interpretation under which accessing a
computer in conjunction with L‘violating the duty of loyalty or acting with interests adverse to the employer
voids the authorization an employee may have to access the computer,” Ial. at 102; see also Lewis-Burke
Assocs., 725 F. Supp. 2d at 192 (explaining circuit split). Our Circuit Court has yet to weigh in.
17
(3) its owner must use reasonable efforts to safeguard its secrecy.” Ia’. at 78. Although the
question of whether a piece of information is a trade secret is typically a question of fact,
information is not a trade secret as a matter of law if it is “easily ascertainable by the public
or generally known within an industry.” la’. (internal quotation marks and citation omitted).
As defendants argue, the Complaint contains no factual allegations that would support an
inference that any of the information defendants allegedly misappropriated was valuable
because of its secrecy or that ERS used “reasonable efforts to safeguard its secrecy.” Defs."
Reply 20~21. lndeed, defendants assert that ERS routinely discloses its clients’ identities
and its formulas and methods in the course of its work assisting clients in litigation
Without supporting details, plaintiffs assertion that the allegedly misappropriated
information constitutes a trade secret is nothing more than a “legal conclusion[] cast in the
form of [a] factual allegation[].” Kowal, 16 F.3d at 1276. Count IX is therefore dismissed
without prejudice for failure to state a claim.
VI. Count X: Breach of Fiduciary Duty
Count X alleges that White violated the fiduciary duty he owed to ERS as its
managing director by “taking steps to raid ERS’s business for the benefit of a competitor
of ERS, including providing the competitor with confidential client information and
assisting in the solicitation of ERS’s employees and clients.”14 Compl. 11 121. In the
14 ln its opposition, plaintiff also argues that White breached his fiduciary duty by failing to disclose his
intent to leave ERS and compete with it as an officer of Resolution Pl.’s Opp’n 31 (citing Compl. 11 6).
However, that theory is inconsistent with Count X, which only alleges that the breach of fiduciary duty was
White’s preparation for “raid[ing]” ERS. See Compl. 11 121.
18
District of Columbia, “[c]orporate officers and directors owe an undivided and unselfish
loyalty to the corporation such that there shall be no conflict between duty and self-
interest.” Farash & Co. v. McClave, 130 F. Supp. 2d 48, 53 (D.D.C. 2001) (internal
quotation marks omitted). However, “upon termination of [his] employment, [a director]
may compete against [his] former employer.” Draim v. Virtaal Geosatellite Holclings, lnc.,
631 F. Supp. 2d 32, 40 (D.D.C. 2009); see also Phl'llips v. Mabas, 894 F. Supp. 2d 71, 93
(D.D.C. 2012) (“As a general rule, an employee’s fiduciary duty ends upon termination of
the employment relationship.”). Thus, in general, “post-termination activities 11 cannot
serve as the basis for any claim of breach of an agent’s fiduciary duty to his principal.”
Draim, 631 F. Supp. 2d at 40.
Defendants argue that the Complaint fails to state a claim of breach of fiduciary duty
because it does not adequately allege White took any specific action while still employed
at ERS. Defs.’ Mem. 25-26. lnstead, defendants state, the only concrete actions set forth
in the Complaint which could support Count X were taken after White’s departure from
ERS or at an unidentifiable time In response, plaintiff cites its allegation that White
accessed ERS’s confidential information while still employed at ERS as supporting its
claim of breach of fiduciary duty. Pl.’s Opp’n 31 (citing Compl. 11 107). Curiously,
elsewhere in the Complaint, plaintiff claims that White did not disclose ERS’s confidential
information to Resolution until immediately after resigning from ERS. Compl. 11 135. As
the breach of fiduciary duty claim is premised on White’s provision of the information to
Resolution, the contradictory allegations of the Complaint do not state a plausible claim
19
that White breached his fiduciary duty in this respect And as to Count X’s allegation that
White assisted in the solicitation of ERS employees while he himself was still at ERS, l
note that White’s last day at ERS was July 17, 2015, Compl. 11 38, and the L&E Group
defectors did not begin to resign until July 28, 2015, Compl. 1111 53-61. The Complaint
therefore lacks any non-conclusory allegations to render plaintiff s timeline for the alleged
solicitation plausible For these reasons, Count X is dismissed without prejudice
VII. Counts XI and XII: Fraud In the Inducement and Breach of the Covenant of
Good Faith and Fair Dealing
ln Count Xl, plaintiff claims White defrauded ERS when he negotiated and entered
into the 2015 Employment Agreement by failing to disclose that he intended to leave ERS
and take ERS’s clients and employees with him. Compl. 11 125. In the District of
Columbia, the elements of a fraud claim are “( 1) a false representation (2) in reference to
material fact, (3) made with knowledge of its falsity, (4) with the intent to deceive, and
”
(5) action is taken in reliance upon the representation Saacier v. Countrywide Home
Loans, 64 A.3d 428, 43 8 (D.C. 2013). “A false representation may be either an affirmative
misrepresentation or a failure to disclose a material fact when a duty to disclose that fact
has arisen.” Ia’. (quoting Rotlzenberg v. Aero Mayflower Transit Co., Inc., 495 F. Supp.
399 (D.D.C. 1980)). “[T]he general rule is that one party to a transaction has no duty of
disclosure to the other unless (1) the party is a fiduciary of the other, or (2) the party knows
that the other is acting unaware of a material fact that is unobservable or undiscoverable
by an ordinarily prudent person upon reasonable inspection.” Salea v. Barclays Bank
20
PLC, 151 F. Supp. 3d 94, 107 (D.D.C. 2015) (citing Szmima v. Philippine Airlines, ]nc.,
792 F. Supp. 2d 39, 51 (D.D.C. 2011)).
Plaintiff argues White had a duty to disclose, given his status as an officer of ERS.
Defendants maintain that the very terms of the 2015 Employment Agreement, which the
Court notes are cited in the Complaint, make it apparent that ERS was on notice of the
potential that White could leave his job and would desire some option to work with ERS
employees and clients when and if he did. Defs.’ Mem. 28. 1 agree The Complaint’s
acknowledgment that a precise topic of ERS and White’s negotiations was the terms for
White’s interaction with ERS employees and clients in the event of his departure from ERS
contradicts plaintiff’s claim that it would not have entered into the 2015 Employment
Agreement had it known that very eventuality would materialize Thus, Count Xl, as
written, does not state a plausible claim that ERS relied on a false impression that White
was staying at ERS or that he would not hope to work with ERS clients and employees if
he moved on from ERS. lt is therefore dismissed without prejudice
Count XII makes a related claim that White violated an implied covenant of good
faith and fair dealing by entering into the 2015 Employment Agreement, then promptly
resigning from ERS, and “thereafter immediately disclosing ERS,’s confidential
information and soliciting ERS’s employees and clients for the benefit of a competitor.”
Compl.1111 133, 135. Generally, “[i]n Virginia, every contract contains an implied covenant
of good faith and fair dealing which is breached when a party exercises contractual
discretion in bad faith.” Harmon v. Dyncorp Im’l, Inc., Civ. No. 13-1597, 2015 WL
21
518594, at * 13 (E.D. Va. Feb. 6, 2015) (internal quotation marks, citations, and alteration
omitted). As defendants argue, however, an exception applies to employment contracts.
See, e.g, id. (“Virginia law ‘does not recognize a cause of action for breach of an implied
covenant of good faith and fair dealing in employment contracts, and in at-will employment
contracts in particular.”’) (quoting Devnew v. Brown & Brown, Inc., 396 F. Supp. 2d 665,
671 (E.D. Va. 2005)); er``ght v. St. Charles WaterAatlz., 59 Va. Cir. 244 (2002) (“Virginia
does not recognize an independent claim for breach of an implied covenant of good faith
and fair dealing in an at-will employment contract.”).
As the at-will employment agreement between White and ERS did not contain an
implied covenant of good faith and fair dealing that gives rise to a cause of action, plaintiff
did not, and cannot, state a claim by alleging White violated such a duty by resigning from
ERS.15 Plaintiff argues the non-solicitation and non-disclosure provisions of the 2015
Employment Agreement fall outside of the at-will employment doctrine, and, therefore, an
implied covenant of good faith and fair dealing should be imposed at least as to those
provisions. Pl.’s Opp’n 35. Unfoitunately for plaintiff, courts interpreting Virginia law
have declined to recognize an implied covenant of good faith and fair dealing not just as to
termination of at-will employment but in the entire “employment context.” Devnew, 396
15 Plaintiff argues that Virginia law only precludes a cause of action where imposing a duty of good faith
and fair dealing would “alter the at-will nature of the employment contract and prevent an employer from
terminating the employee.” Pl.’s Opp’n 34. Defendants rightfully respond that such a “one-way rule”
benefitting employers in litigation “is illogical and impractical.” Defs.’ Reply 24. More importantly here,
however, it finds no support in the case law cited by the parties which imposes no such limitation on the
exception to the implied covenant of good faith and fair dealing for employment contracts
22
F. Supp. 2d at 671 (holding plaintiff failed to state a claim of breach of an implied covenant
of~ good faith and fair dealing where the conduct alleged was related to a provision of the
employment agreement that required plaintiff to “remain an insurance agent in good
standing in the Commonwealth” and stating that the federal court is “not empowered to
broaden the scope of an implied covenant of good faith and fair dealing from the
commercial context to the employment context”). Count Xll is therefore dismissed with
prejudice
VIII. Counts II, III, and XIII: Conspiracy, Aiding and Abetting, and Accounting
Three counts in plaintiffs Complaint identify theories of liability and a remedy as
opposed to actionable legal claims. In Count 11, plaintiff alleges that defendants engaged
in a conspiracy “by agreeing with each other to wrongfully and tortiously seize and pirate
the business identity, technical expertise, employees and clients of [ERS’s] L&E Group.”
Compl. 11 76. District of Columbia "law does not provide an independent cause of action
for conspiracy; instead, it is a means for establishing vicarious liability for an underlying
tort.” Kenley v. District of Columbia, 83 F. Supp. 3d 20, 40 (D.D.C. 2015) (internal
quotation marks and alterations omitted). “To the extent, therefore, that Plaintiff seeks to
hold Defendants liable for ‘conspiracy’ independent of any other tort,” Count ll fails to
state a claim as a matter of law and is dismissed with prejudice Id. l\/loreover, insofar as
plaintiff is attempting to state derivative claims that defendants are vicariously liable as co-
23
conspirators for one another’s underlying torts,16 defendants are correct that the allegations
set forth in Count 11 and the paragraphs that precede it, see Compl. 11 75, fail to specify the
precise torts for which plaintiff seeks to hold each defendant liable under plaintiffs civil
conspiracy theory. See Defs.’ Mem. 16; Defs.’ Reply 12. lnstead, plaintiff generally and
vaguely identifies examples of categories of “overt acts in furtherance of the conspiracy.”
Compl. 1178; see also Compl. 111 1, 4. As such, plaintiffs “allegations do not give the
defendants sufficient notice of the actions for which [plaintiff] seeks to hold them
vicariously liable under a civil conspiracy theory.” Dooley v. Unitea’ Techs. Corp., Civ.
No. 91-2499, 1992 WL 167053, at *14 (D.D.C. June 17, 1992). Therefore to the extent
Count 11 alleges liability based on conspiracy for underlying torts, it is dismissed without
prejudice
Similar analysis applies to Count 111, in which plaintiff claims Saad and Resolution
aided and abetted White, because “[a]ccording to the District of Columbia Court of
Appeals, to which this Court looks on issues of District of Columbia law, the tort of aiding
and abetting is not recognized under District Law.” 3M Co. v. Boulter, 842 F. Supp. 2d
85, 119 (D.D.C. 2012) (citing Flax v. Scheriler, 935 A.2d 1091, 1108 n.15 (D.C. 2007)).
lnstead, aiding and abetting is at most a means of establishing vicarious liability.17 Carroll
16 To allege such a claim, a plaintiff must first successfully plead the elements of the underlying tort and
then must sufficiently plead “the existence of a conspiracy,” ia’., the elements of which are: “‘(1)an
agreement between two or more persons; (2) to participate in an unlawful act, or in a lawful act in an
unlawful manner; and (3) an injury caused by an unlawful overt act performed by one of the parties to the
agreement (4) pursuant to, and in furtherance of, the common scheme.”’ Kenley. 83 F. Supp. 3d at 40
(quoting Exec. Sandwich Shoppe, Inc. v. Carr Really Corp., 749 A.2d 724, 738 (D.C. 2000)).
11lndeed, it is questionable whether aiding and abetting is even “an actionable theory of liability” in the
24
v. Fremont Inv. & Loan, 636 F. Supp. 2d 41, 53 (D.D.C. 2009). To state a claim, a plaintiff
must adequately plead three elements: "(1) a wrongful act causing an injury by a party
aided by the defendant; (2) the defendant’s knowledge of his role as part of an overall
illegal or tortious activity at the time that he provided assistance; and (3) the defendant’s
knowing and substantial assistance in the principal violation.” Aeosta Orellana, 711 F.
Supp. 2d at 108. The Complaint alleges that Saad and Resolution aided and abetted White
in “unlawful and tortious acts . . . including, but not limited to, breaching the non-
solicitation and confidentiality agreements and intentionally interfering with ERS’s
contractual and business relations.” 18 Compl. 11 81. Plaintiff argues that its allegations in
paragraphs 4, 82, 83, and 116 of the Complaint are sufficient to plead “Saad’s and
Resolution’s awareness and encouragement of, and role in inducing, White’s misconduct.”
Pl.’s Opp’n 40. However, these paragraphs contain only “threadbare recitals of a cause of
action’s elements, supported by mere conclusory statements.” Iql)al, 556 U.S. at 663.
They are entirely devoid of the factual allegations necessary to state plausible claims_, see
Twombly, 550 U.S. at 570, and therefore Count 111 is also dismissed without prejudice
1n Count X111, entitled “Accounting,” plaintiff demands an order “[c]ompelling
Defendants to provide Plaintiff with an accounting of all revenues and profits they have
District of Columbia. Acosta Orellana v. CropLife Int'l, 711 F. Supp. 2d 81, 107 (D.D.C. 2010) (stating
that “[t]here does not appear to be case law in the District of Columbia that explicitly recognizes” such a
theory). This Court will assume for now that aiding and abetting is indeed a recognized theory of civil
liability in the District of Columbia.
111 To the extent the Complaint seeks to hold Saad and Resolution vicariously liable for additional,
unspecified tortious conduct on the part of White7 it does not give defendants sufficient notice and thus
fails.
25
received from or in connection with any current or former client of ERS.” Compl. 11 13.
But, as defendants assert, an accounting is a remedy “that is only appropriate, if at all, after
liability has been determined.” Haynes v. Navy Fed. Credit Union, 52 F. Supp. 3d l, 10
(D.D.C. 2014) (internal citation and quotation marks omitted). As our Circuit Court has
made clear, “identifying a remedy is not stating a claim.” Abdelfattah v. U.S. Dep ’t of
Homeland Sec., 787 F.3d 524, 538 (D.C. Cir. 2015). Although plaintiffis free to argue an
accounting would be an appropriate remedy if it is successful on the merits, Count XIII
does not state a claim as a matter of law and is therefore dismissed with prejudice
CONCLUSI()N
For all of the foregoing reasons, the Court GRANTS defendants’ Motion to Dismiss,
with prejudice, as to Counts 11 and 111, to the extent they are standalone claims of conspiracy
and aiding and abetting, Count Xll, and Count Xlll. Further, the Court GRANTS
defendants’ Motion to Dismiss, without prejudice, as to Count 1, with respect to plaintiffs
claims that White breached a non-disclosure obligation of the Agreement, Counts 11 and
111, to the extent they allege vicarious liability for other underlying torts, Counts lV, V, VI,
VII, Vlll, IX, X, and Xl. Finally, the Court DENIES defendants’ l\/lotion as to Count 1,
with respect to plaintiffs claims that White breached the non-solicitation of clients, non-
solicitation of employees, and do no harm provisions of the 2015 Employment Agreement.
Plaintiff will hopefully exercise more careful judgment as this case continues to move
26
forward in the future An Order consistent with this decision accompanies this
Memorandum Opinion.
l
ruan J.LE N ``
United State ist ``ct Judge
27