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Trading Secrets A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

Pennsylvania Federal Court Affirms Broad Pleading Standard for Uniform Trade Secrets Act and Ability to Plead Preempted Claims in the Alternative

Posted in Practice & Procedure, Trade Secrets

According to the allegations in a recently filed complaint, Defendant Implementation Management Assistance, Inc. (“IMA”) hired a long-time employee, Liana Hans, away from competitor Plaintiff Triage Consulting Group, Inc. (“Triage”). Hans allegedly had intimate knowledge of Triage’s proprietary systems and allegedly shared that knowledge with IMA, in derogation of her confidentiality agreement with Triage. IMA thereafter recruited another Triage employee, Sara Lewis, with the expressly stated purpose of allegedly seeking to use Triage’s proprietary information and to steal Triage’s clients. Hans and Lewis allegedly assisted in the development of IMA’s own version of Triage’s proprietary software.

After Triage notified IMA that it believed IMA possessed its proprietary information, IMA allegedly agreed to allow Triage to investigate, to remove any Triage information on its systems, and to pay for the investigation and any removal. Rather than proceeding, however, IMA terminated Hans and allegedly recanted on its agreement to remove Triage’s proprietary information from its system and to pay for the investigation. IMA also continued to employ Lewis.

Triage then brought suit.  Triage Consulting Group, Inc., v. Implementation Management Assistance, Inc., No. 12-4266 (E.D. Pa.)

IMA sought dismissal of Triage’s Pennsylvania Uniform Trade Secrets Act (“PUTSA”) and breach of contract claims against Lewis and intentional interference with contractual relations claim against IMA. IMA argued that Lewis’s mere knowledge or acquiescence of Hans’ alleged improper use of Triage’s information did not amount to “misappropriation” under the PUTSA. The court concluded that Triage adequately alleged that Lewis knew or should have known that she was using Triage’s proprietary information to assist IMA in creating copycat systems, and that, in the ordinary course of her business with IMA, Lewis knew or had reason to know that she used Triage’s proprietary information and whoever divulged it had a duty of secrecy to Triage.

The court also denied the motion to dismiss as to the breach of contract claim and tort claim on the grounds that, although the PUTSA generally preempts “tort, restitutionary, and other Pennsylvania law,” the PUTSA does not preempt breach contract claims against Lewis, and the tort claim was properly pled in the alternative.

This case is a cautionary tale for employers seeking to hire competitors’ employees. It also serves to demonstrate the variety of opinion across the country regarding trade secret preemption.