Opinion
Civil Action No. 3:02CV-265-S
August 1, 2002
MEMORANDUM OPINION
This matter is before the court on defendant's Motion to Dismiss. For the reasons stated below, defendant's motion will be GRANTED IN PART AND DENIED IN PART.
BACKGROUND
The facts relevant to this motion are set out in our Order, dated May 24, 2002.
DISCUSSION
In order to determine if plaintiff's claims should be dismissed pursuant to Fed.R.Civ.Pro. 12(b)(6) we "must construe the complaint in the light most favorable to [plaintiff], accept all of [plaintiff's] factual allegations as true, and determine whether [plaintiff] undoubtedly can prove no set of facts in support of [her] claims that would entitle [her] to relief." Meador v. Cabinet for Human Resources, 902 F.2d 474, 475 (6th Cir. 1990) (citing Dugan v. Brooks, 818 F.2d 513, 516 (6th Cir. 1987)). Plaintiff's claims include breach of contract, misappropriation/conversion of trade secrets, breach of loyalty, good faith, and fiduciary duties, tortious interference with business/ prospective business relationships, and conversion and attempted conversion of client/customer accounts. (Pltf. Compl. ¶ 1).
Defendant first argues our May 24, 2002 Order, which found the noncompete and nonsolicitation clauses in defendant's employment agreement unenforceable, mandates that plaintiff's breach of contract, tortious interference, and conversion of accounts claims be dismissed.
We find our prior Order precludes only certain aspects of plaintiff's breach of contract claim. Plaintiff alleges defendant breached her employment agreement through "violations of the nondisclosure, customer nonsolicitation, and noncompete provisions." (Pltf. Compl. ¶ 24). While we found the agreement's nonsolicitation and noncompete provisions unenforceable, and thus incapable of being breached, we specifically upheld its nondisclosure provision. (5/24/02 Order at 6-7). Thus, to the extent plaintiff alleges a breach of the agreement's nondisclosure provision, defendant's motion will be denied.
Similarly, defendant's motion will be granted to the extent plaintiff's tortious interference claim arises from a perceived breach of the employment agreement's noncompete and nonsolicitation provisions. Plaintiff alleges defendant willfully, maliciously, "and with specific intent to injure [plaintiff], has induced and continues to induce, certain of [plaintiff's] actual and prospective clients not to do business with [plaintiff] and instead to do business with McHugh [n/k/a RedPrairie]." (Pltf. Compl. ¶ 42). Our finding that the noncompete and nonsolicitation provisions in defendant's employment agreement are unenforceable allows her to contact and solicit plaintiff's customers. A tortious interference claim under Kentucky law requires that the interference be improper. See Cullen v. South East Coal Co., 685 S.W.2d 187, 190 (Ky.Ct.App. 1983) (finding "improper interference" the key factor in a tortious interference claim); see also Cheatham v. Paisano Communications, Inc., 891 F. Supp. 381, 387(W.D.Ky. 1995) (to prevail on a tortious interference claim "[t]he interference must have been intentional and must have occurred by the use of improper means."). As defendant is not precluded from contacting and soliciting plaintiff's customers, such conduct alone cannot be viewed as improper. However, to the extent plaintiff's claim is based on improper conduct independent of the noncompete and nonsolicitation provisions of defendant's employment agreement, defendant's motion will be denied.
Because our jurisdiction is invoked based on diversity, we apply Kentucky substantive law with respect to the claims in the Complaint.
Defendant's motion will be granted with respect to plaintiff's conversion of accounts claim. Conversion requires an intentional exercise of control over another's property. See 13 Ky. Prac. Tort Law § 8.1 (West 1995) (citing Restatement (Second) of Torts § 222A(1)). Thus, "the property converted must be property which the plaintiff has the exclusive right to control." Id. at § 8.4. As noted above, our prior Order held that defendant is not prohibited from contacting and soliciting plaintiff's customers. Thus, it cannot be said that plaintiff has "the exclusive right to control" its accounts and defendant cannot be held liable for an alleged conversion thereof.
Defendant next argues that plaintiff cannot allege facts to support its conversion of trade secrets and breach of loyalty, good faith and fiduciary duties claims because it cannot establish wrongful disclosure of trade secrets and damage therefrom. Specifically, defendant contends that because our prior Order enjoins her from disclosing any trade secrets she possesses, plaintiff's claims arising from such possession are precluded. We disagree. Plaintiff's conversion of trade secrets claim alleges defendant "misappropriated [its] trade secrets and used them for her own benefit" in violation of KRS 365.880. (Pltf. Compl. ¶ 30). Our Order merely addresses defendant's future conduct, it has no bearing on what she allegedly wrongfully disclosed in the past. Defendant's motion will therefore be denied regarding this claim.
KRS 365.880 is the definitions section of Kentucky's Uniform Trade Secrets Act. Since one cannot violate a definition, we assume plaintiff is alleging a violation of the Act. Notably, however, "misappropriation" under KRS 365.880(2) is defined as :
(a) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(b) Disclosure or use of a trade secret of another without express or implied consent by a person who:
1. Used improper means to acquire knowledge of the trade secret; or
2. At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:
a. Derived from or through a person who had utilized improper means to acquire it;
b. Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
c. Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
3. Before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
Similarly, plaintiff's breach of loyalty, good faith, and fiduciary duties claim stems from defendant's alleged misappropriation of trade secrets and wrongful solicitation of plaintiff's customers. (Pltf. Compl. ¶¶ 36-37). Regarding the misappropriation aspect of this claim, we again note that our prior Order does not preclude defendant's liability for what she allegedly disclosed in the past. The solicitation aspect of plaintiff's breach of duties claim is also not precluded by our prior Order because the Order merely addressed the contractual duties that arose from defendant's employment agreement. It did not consider any duties that may have existed independent therefrom. Defendant's Motion to Dismiss plaintiff's breach of loyalty, good faith, and fiduciary duties claim will therefore also be denied.
CONCLUSION
For the reasons stated above, defendant's Motion to Dismiss will be GRANTED with respect to plaintiff's breach of contract claim to the extent it alleges breach of the nonsolicitation and noncompete provisions of defendant's employment agreement. Defendant's motion will be GRANTED with respect to plaintiff's tortious interference with business/prospective business relationships claim to the extent it arises from a perceived breach of the noncompete and nonsolicitation provisions in defendant's employment agreement. Defendant's motion will also be GRANTED with respect to plaintiff's conversion and attempted conversion of client/customer accounts claim. Defendant's motion will be DENIED with respect to plaintiff's breach of contract claim to the extent it alleges breach of the nondisclosure provision of defendant's employment agreement. Defendant's motion will similarly be DENIED with respect to plaintiff's tortious interference with business/prospective business relationships claim to the extent it arises from conduct independent of the noncompete and nonsolicitation provisions of defendant's employment agreement. Defendant's motion will also be DENIED with respect to plaintiff's misappropriation/conversion of trade secrets and breach of loyalty, good faith, and fiduciary duties claims.
ORDER
For the reasons set forth in the memorandum opinion entered this date and the Court being otherwise sufficiently advised, IT IS HEREBY ORDERED AND ADJUDGED that defendant's Motion to Dismiss is GRANTED with respect to plaintiff's breach of contract claim to the extent it alleges breach of the nonsolicitation and noncompete provisions of defendant's employment agreement and such claim is DISMISSED WITH PREJUDICE. Defendant's motion is GRANTED with respect to plaintiff's tortious interference with business/prospective business relationships claim to the extent it arises from a perceived breach of the noncompete and nonsolicitation provisions in defendant's employment agreement and such claim is DISMISSED WITH PREJUDICE. Defendant's motion is also GRANTED with respect to plaintiff's conversion and attempted conversion of client/customer accounts claim and this claim is also DISMISSED WITH PREJUDICE. Defendant's motion is DENIED with respect to plaintiff's breach of contract claim to the extent it alleges breach of the nondisclosure provision of defendant's employment agreement. Defendant's motion is DENIED with respect to plaintiff's tortious interference with business/prospective business relationships claim to the extent it arises from conduct independent of the noncompete and nonsolicitation provisions in defendant's employment agreement. Defendant's motion is also DENIED with respect to plaintiff's misappropriation/conversion of trade secrets, and breach of loyalty, good faith, and fiduciary duties claims.