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VVIG, Inc. v. Alvarez

United States District Court, S.D. Florida

October 9, 2019

VVIG, INC., Plaintiff,
HENRY ALVAREZ, et al., Defendants.



         THIS CAUSE came before the Court on Plaintiff/Counter-Defendant VVIG, Inc. (“VVIG”); and Third-Party Defendants Brandtastic Parties, [1] Virtue Vape LLC (“Virtue Vape”), Flavor Suite, LLC (“Flavor Suite”), David O'Brien (“O'Brien”), John Abbey (“Abbey”), Catalina Jimenez (“Jimenez”), and Alan Smurfit's (“Smurfit['s]”) (collectively with VVIG, the “Counter-Defendants[']”) Motion to Dismiss Second Final Amended Counterclaim [ECF No. 79]. Defendants/Counter-Plaintiffs, Henry Alvarez and Mariano Cuesta (“Counter-Plaintiffs”), filed a Response [ECF No. 80], to which Counter-Defendants filed a Reply [ECF No. 81]. Counter-Defendants seek to dismiss each of Counter-Plaintiffs' 14 counterclaims. (See generally Mot.). The Court has reviewed the Second Final Amended Counterclaim (“FAC”) [ECF No. 78], [2] the parties' written submissions, and applicable law.

         I. BACKGROUND

         Counter-Plaintiffs and Counter-Defendants work in the e-cigarette industry. (See generally FAC). On August 18, 2018, VVIG filed a trademark infringement action against Counter-Plaintiffs, alleging federal question jurisdiction under 28 U.S.C. section 1331[3] and 28 U.S.C. sections 1338(a) and (b), and supplemental jurisdiction over state-law claims under 28 U.S.C. section 1367(a). (See generally Am. Compl. ¶ 2). VVIG alleges it developed several types of e-cigarette products which Counter-Plaintiffs marketed. (See Id. ¶¶ 7-10). According to VVIG, after its business relationship with Counter-Plaintiffs soured, Counter-Plaintiffs began to manufacture VVIG's products themselves, passing the products off as their own. (See Id. ¶¶ 15- 18). VVIG states three claims for relief: a claim of violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (see Id. 8-9); infringement of registered trademark and counterfeiting (see Id. 9-10); and cancellation of state registrations (see Id. 10).

         Counter-Plaintiffs now bring 14 counterclaims against VVIG and the remaining Counter-Defendants, alleging Counter-Defendants misappropriated Counter-Plaintiffs' products. (See generally FAC). The counterclaims allege misappropriation of trade secrets (Count I); breach of manufacturing agreement (Count II); trademark and tradename infringement (Count III); Florida trademark and tradename infringement (Count IV); breach of an oral agreement (Count V); declaratory judgment for shares and shareholder rights (Count VI); interference with contractual relationship (Count VII); battery (Count VIII); fraud (Counts IX and X); violation of the Lanham Act (Count XI); cancellation of registration (Count XII); violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) (Count XIII); and indemnity (Count XIV). (See id.).

         The FAC does not contain general factual allegations but includes the following definitions:

a. “Florida Misappropriated Products” is defined as the e-liquid products used for vaping with e-cigarette devices under the names Crack Pie, Dunks, Gush, Pound It, Raging Donut and Rolly.
b. “Misappropriated Products” is [sic] defined as e-liquid products used for vaping with e-cigarette devices including Dunks, Gush, Rolly, Crack Pie, Dirty Danish, Food Fighter Juice, Krispee, Monster Krisp, Pound It, Raging Donut, Puft (including Too Puft and 2 Puft); and Vape Breakfast Classics.
c. “Florida Misappropriated Product Trademark Items” is [sic] defined as the graphics, name and designs used, developed and created for the Florida Misappropriated Products.
d. “Misappropriated Product Trademark Items” is [sic] defined as the graphics, name and designs used, developed and created for the Misappropriated Products.
e. “Secret e-juice information” is all necessary know-how, standards and specifications (as well as any knowhow thereafter acquired) for the e-juice products which included [sic] “all information concerning the business affairs, products, marketing systems, technology, customers, end users, financial affairs, accounting statistical data” of Alvarez and Cuesta. The foregoing term includes:
i. any data documents, processes and methods and other information developed by Virtue Vape LLC for Alvarez and Cuesta and any other proprietary and trade secret information of Alvarez and Cuesta whether in oral, graphic written electronic or machine-readable form;
ii. the formula [sic] for each of the Misappropriated Products; iii. the taste [sic] of each of the Misappropriated Products;
iv. the customers of the Misappropriated Products (to whom Virtue Vape LLC had shipped products for Alvarez and Cuesta);
v. software and social media advertising and ordering systems for each of the Misappropriated Products;
vi. details and directions for the creation and reproduction of the graphic designs for the Misappropriated Products; and vii. marketing research for the clients and names of the Misappropriated Products.

(Id. ¶ 3). Because each count includes specific factual allegations, the Court addresses the necessary background facts in its analysis of each count.[4]


         “A motion to dismiss tests the sufficiency of the complaint, not the merits of a suit.” Levy v. City of Hollywood, 90 F.Supp.2d 1344, 1345 (S.D. Fla. 2000) (internal quotation marks and citation omitted). “To survive a motion to dismiss [under Federal Rule of Civil Procedure 12(b)(6)], 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) (alteration added; quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The pleading standard “does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. (quoting Twombly, 550 U.S. at 555). Pleadings must contain more than “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citation omitted). Therefore a plaintiff must “plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (alteration added; citing Twombly, 550 U.S. at 556). When reviewing a motion to dismiss, the Court must construe the complaint in the light most favorable to the plaintiff and take the factual allegations therein as true. See Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1369 (11th Cir. 1997) (citation omitted).

         III. ANALYSIS

         Counter-Defendants argue Counter-Plaintiffs fail to state claims for relief in 11 of the 14 counterclaims. (See generally Mot.). Regarding the other three claims, Counter-Plaintiffs argue (1) Counts V and VI are duplicative of claims in a related state court action and are soon to be barred by collateral estoppel (see id. 12-13); and (2) Count VIII - for battery - should be severed because it is not sufficiently related to the claims in this lawsuit (see id. 11-12). The Court addresses each suggested basis for dismissal of the counterclaims in turn.

         A. Misappropriation of Trade Secrets (Count I)

         To state a cause of action for misappropriation of trade secrets under the Florida Uniform Trade Secrets Act (“FUTSA”), section 688.001, Florida Statutes, Counter-Plaintiffs must allege they (1) possessed secret information and took reasonable steps to protect its secrecy, and (2) the secret they possessed was misappropriated. See Medimport S.R.L. v. Cabreja, 929 F.Supp.2d 1302, 1322 (S.D. Fla. 2013) (citation omitted). Regarding the first element, “Florida courts . . . have said that the plaintiff is required to identify with reasonable particularity the trade secrets at issue before proceeding with discovery.” DynCorp Int'l v. AAR Airlift Grp., Inc., 664 Fed.Appx. 844, 848 (11th Cir. 2016) (internal quotation marks and citations omitted). “However, to satisfy this requirement at the dismissal stage in federal court, the plaintiff need only allege sufficient facts to plausibly show a trade secret was involved and to give the defendant notice of the material it claims constituted a trade secret.” Id. (citing Twombly 550 U.S. at 555-56; other citation omitted). Still, to state a claim with “sufficient particularity, ” the claimant must do more than simply “identify broad categories of information, such as financial and technical data.” Id. at 849.

         Counter-Defendants assert Counter-Plaintiffs fail to state a trade secret claim because they do not identify their trade secret with “reasonable particularity.” (Mot 3-5).[5] Under DynCorp, Counter-Plaintiffs need not do so. See DynCorp, 644 Fed.Appx. at 848. Whether Counter-Plaintiffs state a cause of action for misappropriation of trade secrets depends on whether their alleged trade secret - the “secret e-juice information” - meets the relatively low “sufficient particularity” standard.

         The Court concludes it does not. As noted by Counter-Defendants, the FAC's definition of “secret e-juice information” is a “grab-bag” of information (Mot. 4), so broad and conclusory as to be nonsensical. “Secret e-juice information” is defined, in part, as “all necessary know-how, standards and specifications . . . for the e-juice products;” including “all information concerning the business affairs, products, marketing systems, technology, customers, end users, financial affairs, accounting statistical data” of Counter-Plaintiffs. (FAC ¶ 3 (alteration and emphasis added)). “Secret e-juice information” is also defined in a conclusory fashion to include “any other propriety and trade secrets” of Counter-Plaintiffs. (Id.).

         In this respect, DynCorp is instructive. In DynCorp, the complaint described the trade secrets as

confidential and proprietary [company] financial and technical data . . . such as lists of the personnel employed by [the company] to provide services under [an] Incumbent Contract, the salaries and pay differentials for those personnel on the Incumbent Contract, other pricing and financial data about [the company's] performance on the Incumbent Contract, and technical data about [the company's] staffing approach and business operations pertaining to the Incumbent Contract[;]

as well as a binder with “lists of [the company's] employees staffed on [the] Incumbent Contract and their salary information, as well as numerous emails and other documents with [the company] logos.” 664 Fed.Appx. at 849 (emphasis and alterations added). The court found “[t]hese allegations identified the trade secrets for which [the company] was claiming protection with sufficient particularity to survive a motion to dismiss.” Id. (alterations added). The court specifically distinguished the foregoing allegations from “broad categories of information, such as financial and technical data.” Id.

         Here, Counter-Plaintiffs' trade secrets claim relies on the sort of “broad categories of information” DynCorp takes pains to distinguish. DynCorp, 644 Fed.Appx. at 849. General allegations of “business affairs, products, marketing systems technology, customers, end users, financial affairs, accounting statistical data, ” and certainly the catch-all “all necessary know how” are insufficient. (FAC ¶ 3). Simply put, “all information” (id.) concerning a product is not a trade secret.[6]

         It does not matter that the definition of “secret e-juice information” includes some descriptors - the “formula” or “customers” of the Misappropriated Products - that are more specific. Couching specific terms within a sweeping definition is insufficient to state a trade secret claim because doing so fails to notify Counter-Defendants which trade secret or secrets they allegedly misappropriated. See Taxinet, Corp. v. Leon, No. 16-24266-CIV, 2018 WL 3405243, at *3 (S.D. Fla. July 12, 2018).

         Taxinet, Corp. is also helpful in explaining why the trade secrets claim here is insufficient. In Taxinet, Corp., the complaint defined the trade secrets as “confidential business information, processes, techniques, software applications, and business characteristics, including present, future, and proposed services, and business model.” Id. The complaint also described specific characteristics of the business model, including its “Taximeter, GPS Navigation System, a Tracking System with panic button, a Payment Gateway for credit cards, and a future booking system.” Id. The court found the trade secret claim lacking, notwithstanding the finer description of the business model, because the complaint did “not lay out . . . which of these ‘trade secrets' were impermissibly used[.]” Id. (alterations added).

         So too here. Counter-Plaintiffs fail to set forth which aspects of the “secret e-juice information” - defined as all information concerning the products - Counter-Defendants misappropriated. Instead, Counter-Plaintiffs allege “VVIG and Virtue shared and used the secret e-juice information” and “thus wrongfully and improperly misappropriated the secret e-juice information in order to use and continue the manufacture and distribution of the Misappropriated Products for their benefit.” (FAC ¶¶ 11, 13). This allegation is insufficient because it fails to notify Counter-Defendants what aspects of the “secret e-juice information” Counter-Defendants misappropriated. Counter-Plaintiffs have failed to describe their trade secrets with sufficient particularity to state a claim.

         B. Contract-based Claims: Breach (Count II); Tortious Interference (Count VII); and Indemnity (Count XIV)

         Counter-Plaintiffs bring three claims based on a Manufacturing Agreement dated December 6, 2014, between “Virtue Vape John Abbey” (the “Manufacturer”) and “Henry Alvarez & Mariano Cuesta of Lee & Quids Vapor, LLC” (the “Client”). (See FAC, Ex. 1, Manufacturing Agreement [ECF No. 78-1]). Counter-Plaintiffs allege (1) Virtue Vape breached the Manufacturing Agreement by divulging confidential information without authorization (see FAC ΒΆΒΆ 17-28); (2) VVIG tortiously interfered with the Manufacturing Agreement by inducing Virtue Vape to disclose the ...

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