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The Hurry Family Revocable Trust v. Frankel

United States District Court, M.D. Florida, Tampa Division

July 3, 2019

THE HURRY FAMILY REVOCABLE TRUST, SCOTTSDALE CAPITAL ADVISORS CORPORATION, and ALPINE SECURITIES CORPORATION, Plaintiffs,
v.
CHRISTOPHER FRANKEL, Defendant.

          ORDER

          VIRGINIA M. HERNANDEZ COVINGTON UNITED STATES DISTRICT JUDGE

         This matter comes before the Court in consideration of Defendant Christopher Frankel's Motion to Dismiss All Counts of Plaintiffs' Second Amended Complaint (Doc. # 68), filed on May 24, 2019. Plaintiffs the Hurry Family Revocable Trust, Scottsdale Capital Advisors Corporation, and Alpine Securities Corporation responded on June 7, 2019 (Doc. # 71), and the Court held oral argument on July 2, 2019. For the reasons that follow and those stated during oral argument, the Motion is denied.

         I. Background

         Plaintiffs Cayman Securities Clearing and Trading LTD, the Hurry Family Revocable Trust, Scottsdale Capital Advisors Corporation, and Alpine Securities Corporation initiated this action against Frankel on November 21, 2018. (Doc. # 1). The initial complaint alleged five counts: (1) breach of contract involving a nondisclosure agreement; (2) violations of the Defend Trade Secrets Act (DTSA); (3) violations of the Florida Uniform Trade Secret Act (FUTSA); (4) violations of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA); and (5) common law unfair competition. (Id. at ¶¶ 28-65).

         All counts relate to the same underlying facts - Plaintiffs allege that Frankel, a former CEO and consultant to Alpine Securities, misappropriated confidential information (trade secrets) from Plaintiffs after the parties' business relationship ended. (Id. at ¶¶ 11-20). Frankel allegedly did so to “solicit capital, establish banking relations, recruit Plaintiffs' clients, and compete with Plaintiffs' businesses [by] . . . mak[ing] a bid for a broker-dealer in Chicago.” (Id. at ¶ 20).

         Plaintiffs filed an amended complaint on February 26, 2019, after learning during discovery that the parties had entered into a second nondisclosure agreement that superseded the original nondisclosure agreement. (Doc. # 37). The amended complaint alleged five counts: (1) breach of contract involving the original nondisclosure agreement between Cayman Securities, the Hurry Trust, and Frankel; (2) breach of contract involving the second nondisclosure agreement between Alpine Securities, Scottsdale Capital, and Frankel; (3) violations of the DTSA; (4) violations of the FUTSA; and (5) violations of the FDUTPA. (Id. at 6-11). Plaintiffs dropped the common law unfair competition count in the amended complaint.

         The Court dismissed the amended complaint after hearing oral argument and determining that Plaintiffs failed to plead sufficient facts to provide Frankel with notice of the trade secrets he allegedly misappropriated. (Doc. # 47). The Court also ruled that the FUTSA claim preempted the FDUTPA claim as alleged because both claims were based upon the same set of underlying factual allegations - that Frankel unlawfully used Plaintiffs' trade secrets after misappropriating materials containing those secrets. (Id.).

         Cayman Securities subsequently dropped all counts and the remaining Plaintiffs filed a second amended complaint alleging four counts: (1) breach of the original nondisclosure agreement between the Hurry Trust and Frankel; (2) breach of the second nondisclosure agreement between Alpine Securities, Scottsdale Capital, and Frankel; (3) violations of the DTSA; and (4) violations of the FUTSA. (Doc. # 61 at ¶¶ 32-64). As a basis for those claims, Plaintiffs identify more than fifteen specific documents containing trade secrets that Frankel allegedly misappropriated by forwarding materials from his work email account to his personal email account. (Id.). Frankel subsequently filed this Motion to Dismiss All Counts of Plaintiffs' Second Amended Complaint on May 24, 2019. (Doc. # 68). The Hurry Trust, Scottsdale Capital, and Alpine Securities have responded, (Doc. # 71), and the Motion is now ripe.

         II. Discussion

         Frankel argues that all counts in the second amended complaint should be dismissed under Federal Rule of Civil Procedure 12(b)(6) for two reasons. First, Plaintiffs “failed to identify how and when Frankel misappropriated their allegedly confidential information.” (Doc. # 68 at 2). Second, Plaintiffs' “conclusory allegations upon information and belief do not meet the plausibility requirement for statutory and contractual claims based on misappropriation.” (Id. at 5). Frankel also argues that, even if the Court does not dismiss the DTSA count, “there is no factual support for [Plaintiffs'] allegations that [Plaintiffs] are entitled to exemplary damages” under the DTSA. (Id. at 7-8).

         Although the second amended complaint includes four counts, each count is predicated on a finding that Frankel misappropriated Plaintiffs' confidential information/trade secrets. (Doc. # 61 at ¶¶ 32-64). The same analysis is used when considering both statutory and contractual claims for misappropriation of trade secrets. See Am. Registry, LLC v. Hanaw (Am. Registry I), No. 2:13-cv-352-FtM-29UAM, 2013 WL 6332971, at *2-4 (M.D. Fla. Dec. 5, 2013)(dismissing both contractual and statutory claims alleging misappropriation of trade secrets because “the [statutory] allegations suffer from the same deficiencies as the previous [breach of contract] count”).

         A. Plaintiffs' Alleged Failure to Identify How and When Frankel Misappropriated Protected Information

         To state a claim for trade secret misappropriation under the FUTSA, a plaintiff must allege: (1) it possessed secret information and took reasonable steps to protect its secrecy; and (2) the secret it possessed was misappropriated, either by one who knew or had reason to know that the secret was improperly obtained or by one who used improper means to obtain it. Audiology Distrib., LLC v. Simmons, No. 8:12-cv-02427-JDW-AEP, 2014 WL 12620835, at *1 (M.D. Fla. Jan. 8, 2014). Courts in the Eleventh Circuit will not dismiss a complaint alleging misappropriation of trade secrets when the alleged trade secrets are identified with sufficient particularity “to put [a defendant] on notice as to what material formed the basis for [the] claims.” DynCorp Int'l v. AAR Airlift Grp., Inc., 664 Fed.Appx. 844, 849-50 (11th Cir. 2016). Still, the complaint must contain factual allegations, taken as true, to show that the misappropriated information constitutes a trade secret within the meaning of the FUTSA. Id. at 850.

         Frankel asserts that Plaintiffs “have not met DynCorp's requirement of specifically identifying how and when the information was misappropriated.” (Doc. # 68 at 6). However, that assertion misconstrues the holding in DynCorp. The court did not hold that a plaintiff must allege a specific time period when the defendant divulged the trade secrets, the people to whom the defendant divulged it, or the manner in which the defendant stored the materials. While those allegations may be pled to ...


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