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Complete Logistical Services, LLC v. Rulh

United States District Court, E.D. Louisiana

October 15, 2018

COMPLETE LOGISTICAL SERVICES, LLC
v.
DONALD RULH, JR. ET AL

         SECTION "L" (5)

          ORDER & REASONS

          Eldon E. Fallon United States District Judge

         Before the Court is Defendant Donald Rulh's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1). R. Doc. 103. Plaintiff Complete Logistical Services, LLC (“CLS”) opposes the motion. R. Doc. 113. Defendant has filed a reply. R. Doc. 123. Having considered the applicable law, the parties' arguments, and having held oral argument on the motion, the Court is ready to rule.

         I. BACKGROUND

         CLS provides contract labor to various marine industries. It alleges its former member, Defendant Rulh, breached his fiduciary duties to CLS, misappropriated CLS' assets, damaged CLS' image, and took confidential and proprietary information after he was removed from the LLC by its remaining members. R. Doc. 98 at 1-3.

         In its verified complaint, CLS alleges that, as a result of Mr. Rulh's failure to collect payments from clients; refusal to reimburse the LLC for money he borrowed to refinance his private home; arriving intoxicated to company events; and changing the locks on the CLS office without first discussing the matter with the other LLC members, the other three members of CLS voted to treat Mr. Rulh as “an assignee of the Company, ” thereby revoking his authority to manage the business or act unilaterally for the business. R. Doc. 98 at 4-6. CLS alleges that after Mr. Rulh was stripped of this authority, he stole from CLS confidential information including financial statements, customer lists, and sales records while the other members were at a company crawfish boil. R. Doc. 98 at 8. According to CLS, these documents were printed, scanned, and then emailed to Mr. Rulh's personal email account. R. Doc. 98 at 8. CLS further alleges Mr. Rulh took this information intending to start a competing business with his co-Defendants. In support of this allegation, CLS points to a non-disclosure agreement between the Defendants, which CLS included as an attachment to its complaint. R. Doc. 98-5. Additionally, Plaintiff alleges Mr. Rulh took $222, 000.00 from the LLC's bank account without authorization.

         Based on these allegations, CLS brings claims against Defendants Donald Rulh, Arnold Baker, Morris Kahn, Michelle Elwell, and Shawana Harris for violations of the Defend Trade Secrets Act (“DTSA”); Louisiana Uniform Trade Secrets Act (“LUTSA”); Computer Fraud and Abuse Act (“CFA”); Louisiana Unfair Trade Practices Act (“LUTPA”); and for unjust enrichment; breach of fiduciary duties, duty of loyalty, and duty of due care; conversion; conspiracy; and fraud. R. Doc. 98 at 3. CLS also seeks injunctive relief. R. Doc. 98 at 4. Moreover, CLS submits that, after it initially filed suit, its remaining members “availed themselves of their rights in the CLS Operating Agreement to expel Mr. Rulh from CLS membership.” R. Doc. 98 at 4. In its amended complaint, Plaintiff seeks a declaration “that the expulsion proceedings were proper in all respects and confirming that Mr. Rulh is no longer a member of CLS.” R. Doc. 98 at 4.

         a. Procedural History

          On April 12, 2018, pursuant to CLS' request for a temporary restraining order (“TRO”), the Court held a telephone hearing with CLS and granted the request. Pursuant to the TRO, the Court directed Defendants to return materials taken from CLS, including a computer allegedly purchased with CLS funds. R. Doc. 8. On April 13, 2018, Defendant moved for an extension of the deadline to comply with the Court's order, R. Doc. 10, which the Court granted in part, R. Doc. 11.

         On April 16, 2018, Defendants moved to dissolve the temporary restraining order. R. Doc. 13. The Court held oral argument on Defendants' motion that same day. The Court determined the TRO should remain in effect as to the prohibitory elements and ordered the parties to discuss a plan to determine which information, if any, may be privileged and which should be returned to Plaintiff. On Wednesday, April 18, 2018, the Court approved the parties proposed order for mirroring the files on the computer and other devices held by counsel. R. Doc. 17.

         On May 7, 2018, Defendants answered the complaint and filed counterclaims against CLS and a third party complaint against CLS members Spencer Sens and Natchez Morice, III. R. Doc. 30. On August 21, 2018, the Court granted Mr. Sens and Dr. Morice's motion to strike Defendants' third party claims against them. R. Doc. 94.

         In their counterclaim, Defendants claim CLS wrongfully seized information from them in violation of the DTSA and the LUTPA. Additionally, Mr. Rulh brings claims against CLS for breach of fiduciary duties and due care, breach of contract, unjust enrichment, conversion, and derivative action. Mr. Rulh also seeks an accounting of CLS. R. Doc. 30 at 18-24. On June 25, 2018, Plaintiff moved to dismiss Defendants' counterclaims. On August 21, 2018, the Court granted the motion in part, dismissing Defendants' LUTPA claim and Defendant Rulh's claims for unjust enrichment, conversion, and derivative action. R. Doc. 93.

         On June 26, 2018, Defendants Harris, Elwell, Baker, and Kahn filed a motion seeking summary judgment on Plaintiff's claims against them. R. Doc. 52. The Court denied the motion as premature on August 21, 2018. R. Doc. 92.

         On September 13, 2018, Defendant Rulh filed the instant motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1). R. Doc. 103. Defendants Harris, Elwell, Baker, and Kahn did not join in the motion. In his motion, Defendant Rulh argues Plaintiff has failed to state a federal claim upon which relief may be granted and, as a result, the Court lacks subject matter jurisdiction over the action.

         II. DISCUSSION

         Defendant argues CLS has failed to allege facts that give rise to a plausible claim for relief under either of Plaintiff's two federal law-based claims: the DTSA and the CFAA.[1] With respect to the DTSA, Defendant argues this cause of action must be dismissed, as Plaintiff: (1) failed to allege a viable trade secret, as the information it alleges Defendant took is generally known and readily ascertainable; (2) does not allege it took reasonable measures to keep its information secret; (3) has not alleged facts sufficient to establish any trade secrets were misappropriated; and (4) fails to allege more than a conclusory nexus to interstate commerce. With respect to the CFAA, Defendant argues CLS failed to allege facts that give rise to a plausible claim for relief, as Plaintiff fails to allege his actions caused any damage to CLS's computers or any interruption in service when he allegedly accessed CLS's confidential information without authority. Rather, according to Defendant, Plaintiff “merely regurgitates statutory language without any real factual support, which cannot support a plausible claim for relief.” R. Doc. 103-2 at 20.

         CLS filed its opposition on October 2, 2018. R. Doc. 113. First, it argues Defendant's motion to dismiss for lack of jurisdiction should be denied as procedurally improper, arguing that, because CLS alleged federal causes of action, the Court must exercise jurisdiction over its complaint. Second, because Defendant attaches his sworn declaration with his motion to dismiss, CLS argues Defendant's motion should be construed as a Rule 56 motion for summary judgment, which it submits should be denied as premature. R. Doc. 113 at 6. Finally, Plaintiff avers that, to the extent Defendant's motion is considered one filed pursuant to Rule 12(b)(6), it has pleaded facts sufficient to state a claim for relief under both the CFAA and DTSA.

         III. LEGAL STANDARD

         a. Motion to Dismiss Standard

         Where a motion to dismiss for lack of jurisdiction is limited to a facial attack on the pleadings, as here, it is subject to the same standard as a motion brought under Rule 12(b)(6). See Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir. 2008); Benton v. United States, 960 F.2d 19, 21 (5th Cir. 1992). In either case, the Court must “take the well-pled factual allegations of the complaint as true and view them in the light most favorable to the plaintiff.” Lane, 529 F.3d at 557; In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). The Federal Rules of Civil Procedure permit a defendant to seek a dismissal of a complaint based on the “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A complaint should not be dismissed for failure to state a claim “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 47 (1957). Generally, when evaluating a motion to dismiss pursuant to Rule 12(b)(6), the court should not look past the pleadings.

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The district court must construe facts in the light most favorable to the nonmoving party and must accept as true all factual allegations contained in the complaint. Id. at 678. “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.” Id. A court “do[es] not accept as true conclusory allegations, unwarranted factual inferences, or legal conclusions.” Plotkin v. IP Axess Inc., 407 F.3d 690, 696 (5th Cir. 2005).

         IV. ...


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