This past Spring, we reported on the recently enacted Defend Trade Secrets Act (“DTSA”), which provides a new federal civil cause of action to trade secret owners seeking to pursue claims of trade secret misappropriation.  Last week, the U.S. District Court in Massachusetts addressed the whistleblower immunity provision of the DTSA, which protects anyone who discloses a trade secret in confidence to a government official or an attorney “solely for the purpose of reporting or investigating a suspected violation of law.”  In denying an employee’s motion to dismiss his employer’s DTSA claim, the district court held that a defendant must present evidence to justify the immunity.  The case is Unum Group v. Loftus, No. 16-cv-40154-TSH (D. Mass. December 6, 2016).

Summary of the Case.  Timothy Loftus was employed by Unum Group as the Director of Individual Disability Insurance Benefits, which exposed him to a significant amount of confidential information, including Unum’s trade secrets.  In September 2016, Loftus was captured on video leaving Unum’s office building with two boxes and a brief case.  Two days later, Loftus was again captured on video exiting the office building with a shopping bag full of documents.  When Unum investigated Loftus’s removal of documents, he refused to cooperate, and was subsequently seen leaving the office with his company laptop and a full shopping bag.

After Unum made received only Loftus’s laptop after numerous requests for both the laptop and documents, it filed suit in federal court under the DTSA and the Massachusetts Trade Secrets Act, and for conversion.  Unum sought a preliminary injunction to enjoin Loftus from copying the documents, and to compel him to return all of the documents and make a mirror-image copy of the laptop as they had previously agreed.  Unum claimed that it was highly likely that the documents that Loftus took contain confidential customer and employee information and/or trade secrets, including protected health insurance information.

Loftus moved to dismiss Unum’s federal and state law claims for trade secret misappropriation on the grounds that he had turned over the documents that he removed from Unum to his attorney to report and investigate a violation of law, invoking the whistleblower immunity provision of the DTSA, 18 U.S.C. § 1833(b).

The district court deemed Loftus’s DTSA immunity defense an affirmative defense and stated that, as a general rule, a properly raised affirmative defense can only be decided at the motion to dismiss stage if “the facts establishing the defense are definitively ascertainable from the complaint and the other allowable sources of information,” such as public records that the court can take judicial notice of and “those facts suffice to establish the affirmative defense with certitude.”  Upon examining the complaint, the court denied Loftus’s motion to dismiss, holding that “the record lacks facts to support or reject his affirmative defense at this stage of litigation.  There has been no discovery to determine the significance of the documents taken or their contents and Loftus has not filed any potential lawsuit that could be supported by information in those documents” of which the court could take judicial notice.  The court further stated that “it is not ascertainable from the complaint whether Loftus turned over all of Unum’s documents to his attorney, which documents he took and what information they contained, or whether he used, is using, or plans to use, those documents for any purpose other than investigating a potential violation of law.  Taking all facts in the complaint as true, and making all reasonable inferences in favor of Unum, the court finds the complaint states a plausible claim for trade secret misappropriation and declines to dismiss Counts I and II.”

The court then weighed the factors presented by Unum regarding Loftus’s conversion of its documents, including Loftus’s concession at the hearing that Unum has stated a colorable claim for conversion, and granted the motion for preliminary injunction.  Among other things, the court ordered Loftus and his attorney to return all of the removed documents and destroy all copies made.  The court found that the conversion claim alone is sufficient to warrant the injunction that Unum sought and did not address the merits of its trade secret misappropriation claim.