Opinion
Ryan K. Walsh, Jamila Marjani Hall, John Jason Williams, Natalie Williams, Jones Day, Atlanta, GA, for Plaintiff.
Fletcher Beaumont Howard, Desmond Mariona Dennis, Nicholas Bruce Corser, Freed Howard, LLC, Xin Zhan, Hall Booth Smith, P.C., Atlanta, GA, for Defendant.
ORDER
Eleanor L. Ross, United States District Judge
Presently before the Court are several matters. The Court’s rulings are set out below.
I. Background
Plaintiff Solvay Specialty Polymers USA, Inc. ("Solvay") is in the business of producing and selling advanced, high-performance composite and specialty materials, including polymers used in the manufacturing of planes, cars, batteries, smart and medical devices, and in mineral, oil, and gas extraction. Am. Compl. at ¶ 1 [Doc. 35]. Defendant Dr. Zhenguo (Leo) Liu, a Chinese-born U.S. citizen, was an employee of Plaintiff for roughly five (5) months. See id. at ¶ 27. Plaintiff alleges that while Dr. Liu was employed with the company, he accessed hundreds of confidential documents containing trade secrets, copied them to thumb drives, and absconded with them. See generally id.
On May 14, 2018, Plaintiff filed this action, under seal, against Dr. Liu, alleging misappropriation of trade secrets pursuant to the Federal Defend Trade Secrets Act, the Georgia Uniform Trade Secrets Act, and the Federal Computer Fraud and Abuse Act. Compl. [Doc. 1] at 29-41. It its original complaint, Plaintiff also alleged other state law violations. Id. When Plaintiff filed the complaint, it contemporaneously filed an Emergency Motion for Temporary Restraining Order ("TRO") ex parte, pursuant to Federal Rule of Civil Procedure 65(b). [Doc. 4]. That same day, the Court held a hearing on Plaintiff’s motion and granted Plaintiff an ex parte TRO. [Doc. 6]. The TRO orders Dr. Liu to, inter alia, return to Plaintiff all of its company information and present for inspection to Plaintiff’s counsel all of Dr. Liu’s electronic devices. [Id. at 2-3]. Upon several extensions [See Docs. 20, 27], the TRO currently remains in place. [Doc. 61].
The Court lifted the seal on this matter on June 20, 2018. [Doc. 31].
On June 25, 2018, Plaintiff filed an Amended Complaint. [Doc. 35]. In the Amended Complaint, Plaintiff withdrew certain state law claims, including counts for breach of the duty of loyalty, violation of the Georgia Computer Systems Protection Act, and unjust enrichment. See id. Additionally, Plaintiff added more allegations to the damages portion of its Computer Fraud and Abuse Act claim. Id. at ¶¶ 95-97. In the Amended Complaint, Plaintiff requests injunctive relief requesting that Dr. Liu return to Plaintiff all of its company information and for Dr. Liu to refrain from disclosing or using any of Solvay’s material. Id. at 36. Plaintiff also requests damages, costs, expenses, and its reasonable attorneys’ fees and litigation expenses. Id.
On July 10, 2018, Plaintiff filed a motion for preliminary injunction [Doc. 45] and, on September 28, 2018, the Court granted Plaintiff expedited discovery for the purpose of that motion [Doc. 67]. Specifically, the Court granted Plaintiff’s request to take Dr. Liu’s deposition and obtain his responses to two (2) interrogatories. [Id. at 4]. On October 1, 2018, the Parties met and agreed upon a ten-day deadline for the expedited discovery, delineating the specifics of the interrogatories and scheduling a deposition of Dr. Liu to occur on October 24, 2018. [Doc. 74 at 2]. However, the interrogatory responses that Plaintiff received were unverified, and Dr. Liu failed to appear at his deposition. [Id. ] As such, the Court ordered Dr. Liu to appear at his next scheduled deposition and to respond to Plaintiff’s interrogatories. [Doc. 75 at 4]. The Court warned that failure to comply with the Court’s Order could result in sanctions. [Id. ]
To date, Dr. Liu has not completed the ordered discovery. Instead, although Dr. Liu was served with the complaint and TRO and retained counsel for this case [Doc. 19 at ¶¶ 2, 5], he has been out of communication with the Court and his counsel since May 27, 2018. [See Docs. 26 at 6-7; 28 at 11-12]. According to an affidavit signed by Dr. Liu’s wife, Dr. Liu boarded a flight to New York on May 27, 2018, and has not returned. [Doc. 74-5 at ¶ 3.]. Dr. Liu’s counsel report that they have gone to great lengths to locate Dr. Liu but have been unable to do so. [Doc. 82 at 11-13]. Due to Dr. Liu’s failure to complete the ordered discovery, Plaintiff moves for default judgment, requesting that the Court enter a permanent injunction against Dr. Liu and award it damages and attorney’s fees. [Doc. 80].
In addition to Plaintiff’s motion for default judgment, three (3) other motions are pending before the Court. These motions include Defendant’s first Partial Motion to Dismiss based upon Plaintiff’s original complaint [Doc. 24]; Defendant’s Second Partial Motion to Dismiss based upon Plaintiff’s Amended Complaint [Doc. 41]; and Plaintiff’s Motion for Preliminary Injunction [Doc. 45]. All motions have been fully briefed and are now ripe for the Court’s review.
Plaintiff’s filing of its Amended Complaint [Doc. 35] renders Defendant’s first Partial Motion to Dismiss [Doc. 24] moot. See Pintando v. Miami-Dade Hous. Agency, 501 F.3d 1241, 1243 (11th Cir. 2007) (amended complaint supersedes original complaint); see, e.g., Kennebrew v. Cobb Cty. Sch. Dist., No. 1:15-CV-02495-RWS-CMS, 2016 WL 1569118, at *3 (N.D.Ga. Mar. 17, 2016), report and recommendation adopted, 2016 WL 1557224 (N.D.Ga. Apr. 18, 2016) ("Defendant’s motion to dismiss Plaintiff’s original complaint has been rendered moot by the timely filing of Plaintiff’s Amended Complaint.").
II. Discussion
The Court turns first to Plaintiff’s motion for default judgment as a sanction. [Doc. 80]. The Federal Rules of Civil Procedure provide a district court with the authority to impose sanctions on a party for failing to comply with a court’s discovery order. Fed.R.Civ.P. 37(b)(2). Rule 37(d) provides that "[t]he court where the action is pending may, on motion, order sanctions if: ... (i) a party ... fails, after being served with proper notice, to appear for [a] deposition" or if "a party, after being properly served with interrogatories under Rule 33 ... fails to serve its answers, objections, or written response." Fed.R.Civ.P. 37(d). Sanctions may include any of those listed in Rule 37(b)(2)(A)(i)-(vi) including "rendering a default judgment against the disobedient party." Fed.R.Civ.P. 37(b)(2)(A)(vi).
A default judgment is a drastic sanction that should be used only in extreme situations. Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985). To impose this sanction, the court must make a finding of willful or bad faith failure to comply with court orders. Rasmussen v. Cent. Fla. Council BSA, Inc., 412 Fed.Appx. 230, 232 (11th Cir. 2011) (citing Malautea v. Suzuki Motor Co., 987 F.2d 1536, 1542 (11th Cir. 1993)). The district court must also determine that lesser sanctions would not serve the interests of justice. Rasmussen, 412 Fed.Appx. at 232 (citing Cohen v. Carnival Cruise Lines, Inc., 782 F.2d 923, 925 (11th Cir. 1986)). Finally, prior to entering default judgment, the "court must investigate the legal sufficiency of the allegations and ensure that the complaint states a plausible claim for relief." Hill v. Duscio, 292 F.Supp.3d 1370, 1375 (N.D.Ga. 2018) (citing Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1278 (11th Cir. 2005)).
The Court finds that the sanction of default judgment is warranted. First, the Court finds that Dr. Liu has, in bad faith, failed to comply with the Court’s discovery orders. On two (2) separate occasions, the Court ordered Dr. Liu to appear for a deposition and provide responses to interrogatories; and on two (2) separate occasions Dr. Liu has failed to comply. Dr. Liu’s counsel argues that the Court should not find willfulness or bad faith because Dr. Liu is a bona fide missing person. [Doc. 82 at 14]. However, as noted in this Court’s previous Order and as demonstrated above, Dr. Liu was aware of this lawsuit prior to his disappearance. [See Doc. 26 at 4]. However, he has not participated in the discovery he is obligated to complete. On similar facts, other courts have found willfulness and bad faith. See Brill v. Queens Lumber Co., No. 1O-CV-1975(DLI), 2012 WL 441287 at *4 (E.D.N.Y. Feb. 10, 2012) ("His willfulness and bad faith are evident from (1) his failure to respond to his counsel’s and [p]laintiff’s repeated attempts at communication; and (2) his failure to offer any explanation for refusing to complete his deposition or respond to [p]laintiff’s discovery requests.") (citations omitted) (alteration in the original).
Second, the Court finds that lesser sanctions would not serve the interests of justice. Dr. Liu has been absent from this case since May 27, 2018, nearly ten (10) months. During this time, he has had no communication with his counsel nor, presumably, his family. The Court is not inclined to further delay this case when, as evidenced by the prior Orders in this case, any attempts would be futile. In addition, Plaintiff has an interest in swiftly litigating this case. See Golden Quality Ice Cream Co. v. Deerfield Specialty Papers, Inc., 87 F.R.D. 53, 56 (E.D. Pa. 1980) ("Any plaintiff in the federal courts enjoys the right to pursue his [or her] case and to vindicate his [or her] claim expeditiously."). The Court finds that under these unique circumstances where a party is completely absent from the case for as long as Dr. Liu has been, combined with a lack of response to various Orders issued, a lesser sanction would be insufficient, and would not serve the interests of justice.
Finally, the Court finds that the Amended Complaint states a plausible claim for relief. Pursuant to federal law in this circuit, although a Rule 37 sanction of default judgment may be warranted, such ruling is only proper if the Amended Complaint states a plausible claim as a matter of law. See McCoy v. Johnson, 176 F.R.D. 676, 679 (N.D.Ga. 1997) (finding that although the defendant’s conduct warranted the sanction of default, the court could not enter default judgment because the plaintiff’s complaint failed to state a claim). " ‘The defendant, by his default, admits the plaintiff’s well-pleaded allegations of fact,’ but ‘[t]he defendant is not held to admit facts that are not well-pleaded.’ " Lary v. Trinity Physician Fin. & Ins. Servs., 780 F.3d 1101, 1106 (11th Cir. 2015) (quoting Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). "Conceptually, then, a motion for default judgment is like a reverse motion to dismiss for failure to state a claim." Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1245 (11th Cir. 2015) (citation omitted). A grant of default judgment in favor of Plaintiff is warranted only if there exists "a sufficient basis in the pleadings for the judgment entered." Frazier v. Absolute Collection Serv., Inc., 767 F.Supp.2d 1354, 1362 (N.D.Ga. 2011) (quoting Nishimatsu Constr. Co., 515 F.2d at 1206).
A. Claims Pursuant to Federal Defend Trade Secrets Act and Georgia Uniform Trade Secrets Act
In the Amended Complaint, Plaintiff brings its first two (2) claims pursuant to the Federal Defend Trade Secrets Act ("DTSA") and the Georgia Uniform Trade Secrets Act ("GTSA"). Am. Compl. at 26-32. The DTSA creates a private cause of action for an "owner of a trade secret that is misappropriated ... if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce." 18 U.S.C. § 1836(b)(1). Similarly, the GTSA requires: (a) the existence of a trade secret; and (b)the misappropriation of that trade secret. O.C.G.A. § 10-1-762 (2)(A)-(B). Both the DTSA and GTSA define "misappropriation" 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 who —
(i) used improper means to acquire knowledge of the trade secret;
(ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was —
(I) derived from or through a person who had used improper means to acquire the trade secret;
(II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or
(III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or
(iii) before a material change of the position of the person, knew or had reason to know that —
(I) the trade secret was a trade secret; and
(II) knowledge of the trade secret had been acquired by accident or mistake.
18 U.S.C. § 1839(5); see O.C.G.A. § 10-1-761 (2); see also Adams Arms, LLC v. Unified Weapon Sys., No. 8:16-CV-1503-T-33AEP, 2016 WL 5391394, at *5 (M.D. Fla. Sept. 27, 2016) ("Pursuant to [the] DTSA, prohibited ‘misappropriation’ includes both the acquisition of a trade secret and its disclosure."). Both statutes provide injunctive relief from actual or threatened misappropriation of trade secrets. 18 U.S.C. § 1836; O.C.G.A. § 10-1-762 (a).
The Court finds that Plaintiff states a plausible claim for relief pursuant to both the DTSA and GTSA. In the Amended Complaint, Plaintiff alleges that Dr. Liu acquired highly confidential information which constitute trade secrets related to products used in interstate and/or foreign commerce, and which were developed by Plaintiff at great expense and effort. Am. Compl. at ¶¶ 43, 65, 66, 70, 82. Plaintiff also alleges that it went through significant lengths to keep the information secret including providing its employees, including Dr. Liu, with confidentiality agreements, instituting a code of conduct and ethics policies, and maintaining significant IT security measures, such as password protection and segregation of files. Id. at ¶¶ 67, 79. Plaintiff presents plausible theories that Dr. Liu accessed and obtained this confidential information, without authorization, by downloading it to his company laptop and/or transferring the information to thumb drives. Id. at ¶¶ 68-69, 80-81. Finally, Plaintiff, upon information and belief, alleges that Dr. Liu continues to use and/or possess its trade secrets, with a strong risk that Dr. Liu will share the information with competitors or foreign entities. Id. at ¶¶ 71, 83. The sum of these allegations support claims pursuant to both the DTSA and GTSA. Dr. Liu’s counsel argues that the Amended Complaint fails to state a plausible claim pursuant to the DTSA or GTSA. First, they argue that the attachments to Plaintiff’s Amended Complaint contradict the allegations contained within. [Doc. 82 at 18]. Specifically, Dr. Liu’s counsel argue that the affidavits attached to the Amended Complaint show that it is not plausible that Dr. Liu copied the alleged information from his laptop to thumb drives. [Id. at 4]. However, this argument focuses only on the alleged transfer of files from Dr. Liu’s laptop to thumb drives; Plaintiff has also plausibly alleged that Dr. Liu downloaded confidential files directly from Solvay’s network onto thumb drives. Am. Compl. at ¶¶ 53-55. The allegations to support this different method of transfer are sufficient on their own to state a claim for relief. Thus, even if the Court were to disregard the alleged contradictory allegations, Plaintiff would have still stated a plausible claim. Therefore, this argument is without merit.
Second, Dr. Liu’s counsel argue that Plaintiff’s allegations of misappropriation are pled "upon information and belief," which therefore undermine their plausibility. [Doc. 82 at 20]. As Defendant’s counsel correctly indicates, conclusory allegations of misappropriation without supporting factual detail is insufficient. C.f. In re AFC Enters., 224 F.R.D. 515, 521 (N.D.Ga. 2004) ("Mere conclusory allegations, unsupported by factual pleadings, will not prevent dismissal."). However, here, Plaintiff provides sufficient factual detail to support its limited allegations made "upon information or belief." Thus, Defendant’s argument fails.
In sum, the Court finds that Plaintiff states a plausible claim for misappropriation of trade secrets under both the DTSA and GTSA. Thus, the Court grants Plaintiff’s motion for default judgment as to these claims.
B. Claim Pursuant to the Computer Fraud & Abuse Act
Plaintiff brings its third and final claim pursuant to the Computer Fraud and Abuse Act ("CFAA"). Am. Compl. at 32. The CFAA, 18 U.S.C. § 1030, "prohibits accessing a computer and obtaining information without authorization or by exceeding authorized access." Diamond Power Int’l, Inc. v. Davidson, 540 F.Supp.2d 1322, 1341 (N.D.Ga. 2007). "Although principally a criminal statute, the CFAA provides that ‘any person who suffers damage or loss [as a result of a violation] ... may maintain a civil action ... for compensatory damages and injunctive relief or other equitable relief.’ " Id. (citing 18 U.S.C. § 1030(g)). To state a claim pursuant to § 1030(a)(4) Plaintiff must allege that Dr. Liu "(1) knowingly and with intent to defraud (2) accessed a protected computer (3) without authorization or exceeding authorized access (4) obtained anything of value, (5) causing a loss resulting in economic damages aggregating at least $ 5,000." Agilysys, Inc. v. Hall, 258 F.Supp.3d 1331, 1340 (N.D.Ga. 2017) (citing IPC Sys. v. Garrigan, No. 1:11-CV-3910-AT, 2012 WL 12872028, at *6 (N.D.Ga. May 21, 2012)).
The Court finds that Plaintiff states a plausible claim for relief pursuant to the CFAA. Plaintiff alleges that Dr. Liu, exceeding his authorization, knowingly downloaded to his personal property Plaintiff’s valuable, sensitive, and confidential information. Am. Compl. at ¶ 87. Plaintiff further alleges that the computer Plaintiff used was a "protected computer" within the meaning of the CFAA because it is a computer used in interstate or foreign commerce or communication. Id. at ¶ 94. Plaintiff contends it has sustained damages beyond $ 5,000 because the value of the information Dr. Liu allegedly misappropriated exceeds $ 5,000 and Plaintiff has expended greater than $ 5,000 to completely assess the extent of Dr. Liu’s unauthorized activities. Id. at ¶¶ 95, 96. This Court has previously found similar allegations to support a claim for relief pursuant to the CFAA. See EarthCam, Inc. v. OxBlue Corp., No. 1:11-cv-02278-WSD, 2012 WL 12836518, at *12 (N.D.Ga. Mar. 26, 2012).
In sum, the Court finds that the Amended Complaint states a plausible claim for relief pursuant to the DTSA, GTSA, and CFAA. Having already found that Dr. Liu has, in bad faith, failed to comply with this Court’s discovery Orders, and that lesser sanctions would not serve the interests of justice, the Court grants Plaintiff’s request for default judgment as a sanction. Because the Court grants Plaintiff’s motion, the Court denies as moot Defendant’s Second Partial Motion to Dismiss [Doc. 41] and Plaintiff’s Motion for Preliminary Injunction [Doc. 45].
In its motion, Plaintiff requests a hearing to assess damages and other appropriate relief. However, a "district court may forego a hearing where all essential evidence is already of record." Giovanno v. Fabec, 804 F.3d 1361, 1366 (11th Cir. 2015). Therefore, the Court directs Plaintiff to file on the docket evidence of its claimed damages.
Additionally, Plaintiff requests, and Dr. Liu’s counsel does not oppose, its reasonable expenses, including attorney’s fees, incurred in bringing this motion. The Court grants this request. See Fed.R.Civ.P. 37(b)(2)(C) ("[T]he court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure [to comply with the court’s discovery orders], unless the failure was substantially justified or other circumstances make an award of expenses unjust."). The Court directs Plaintiff’s counsel to file on the docket evidence of its requested attorney’s fees, with appropriate affidavits and other supporting documentation. See LR 54.2A(2), N.D.Ga.
Finally, apart from its request for damages and attorney’s fees, Plaintiff requests that a permanent injunction be entered against Dr. Liu. [Doc. 80] Specifically, Plaintiff requests an injunction ordering Dr. Liu to return to Plaintiff all of its company information and for Dr. Liu to refrain from disclosing or using any of Solvay’s material. Because the Court grants Plaintiff’s Motion for Default Judgment [Doc. 80], the Court enters a permanent injunction against Dr. Liu. However, the Court will reserve entering final judgment until the Court rules on Plaintiff’s damages.
III. Conclusion
For the foregoing reasons, the Court DENIES AS MOOT Defendant’s First Partial Motion to Dismiss [Doc. 24]; Defendant’s Second Partial Motion to Dismiss [Doc. 41]; and Plaintiff’s Motion for Preliminary Injunction [Doc. 45]. The Court GRANTS Plaintiff’s Motion for Default Judgment [Doc. 80] and DIRECTS the Clerk to enter default against Defendant as to all of Plaintiff’s claims against him. The Court DIRECTS counsel for Plaintiff to file, on the docket, evidence of its damages and attorney’s fees within thirty (30) days of the date of entry of this order.
Additionally, the Court ORDERS Dr. Liu and all those in active concert and participation with him to (1) return to Solvay Specialty Polymers USA, LLC all of its company information, including without limitation any trade secrets or other confidential information stored on any electronic device in Dr. Liu’s possession; and (2) refrain from disclosing, transmitting, transferring, or using any Solvay Specialty Polymers USA, LLC trade secret and confidential information or material that he acquired by virtue of his employment.
SO ORDERED.