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Engility Corp. v. Daniels

United States District Court, D. Colorado

December 5, 2016



          William J. Martínez United States District Judge.

         Engility Corporation (“Engility”) brings this action against two former employees -Defendants Charles Daniels (“Daniels”) and Rutherford “Chip” Surber (“Surber”)- and a company they recently formed, Deployable Technology Solutions (“DTS”) (collectively, “Defendants”). Engilty claims:

1. violation of the Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1836(b);
2. violation of the Colorado Uniform Trade Secrets Act (“CUTSA”), Colo. Rev. Stat. §§ 7-74-101 to -110;
3. breach of a confidentiality agreement;
4. breach of the duty of loyalty;
5. tortious interference with contract and prospective economic advantage;
6. unfair competition; and
7. defamation.

(See generally ECF No. 7.)

         Currently before the Court is the preliminary injunction portion of Engility's Motion for Temporary Restraining Order and Preliminary Injunction (“TRO/PI Motion”). (ECF No. 9.)[1] The Court has also received Defendants' Response (ECF No. 22), Engility's Reply (ECF No. 24). The Court held a Preliminary Injunction Hearing on November 21, 2016, after which it ordered further briefing (see ECF Nos. 35, 38, 39).

         Having carefully considered all of the briefing and evidence received thus far, and for the reasons explained below in greater detail, the preliminary injunction portion of Engility's TRO/PI Motion is granted in part. Conditioned on Engility posting a $1 million bond, Defendants are enjoined from disclosing or otherwise making use of Engility's trade secrets, and from competing for certain business for a period of one year beginning (retroactively) on October 4, 2016 expiring on October 3, 2017.

         I. BACKGROUND

         Based on the witness testimony and other evidence received into the record at the Preliminary Injunction Hearing, as well as the parties' filings to date, the Court makes the following factual findings:

         A. Engility's Business and Daniels' Employment[2]

         Engility describes itself as “the top solutions provider of military deployable communications equipment, ranging from collaboration tools such as video teleconferencing and streaming video to common operational picture tools.” (ECF No. 11 at 2, ¶ 1.) As relevant here, Engility says there are “two crucial programs performed by Engility” that fall within this business focus: (1) “the Deployable Communications Capabilities Systems (‘DCCS')”; and (2) “the upcoming requirement, Mobile User Objective System (‘MUOS').” (Id. at 3.)

         DCCS is a “solution” that Engility provides to U.S. Northern Command (“USNORTHCOM”), which is the United States military subdivision responsible for protecting the continental United States and closely related territorial interests. DCCS comprises equipment (e.g., radio terminals, antennas, satellite dishes, etc.) that Engility procures from third parties and then assembles into an interoperable system that permits the user to accomplish voice and data communications similar to modern cell phone technology, but unconstrained by the need to be near a cell phone tower. MUOS is, among other things, a new constellation of satellites that provides even greater bandwidth for such communications-what the parties describe as roughly analogous to going from a 3G cell phone network to a 4G network. Eventually, all DCCS equipment must be able to communicate through MUOS.

         Engility says that Daniels was “the ‘face' of Engility” to USNORTHCOM. (ECF No. 11 at 2-3, ¶ 2.) Specifically, he was “the Technical Program Manager” for Engility with respect to DCCS and, allegedly, MUOS. (Id.) “In this position, ” says Engility, “Defendant Daniels was privy to all of Engility's most sensitive information regarding these programs . . . . He was also the principal conduit of information from the USNORTHCOM programs back to Engility.” (Id.)

         Daniels and Surber formed DTS in May 2016-apparently unbeknownst to anyone else at Engility, and allegedly with the intention to “compete separately for the MUOS Procurement.” (ECF No. 7 ¶ 15.)

         B. Daniels' Confidentiality Agreement

         Engility is the successor-in-interest to a division of L-3 Communications. (Id. at 3 n.1.) When Daniels was hired by L-3, he signed an “Employee Confidentiality and Innovation Agreement” (“Confidentiality Agreement”). (See Plaintiff's Exhibit 1.)[3] The Confidentiality Agreement protects “Proprietary Information, ” defined as

all trade secrets, know-how and other information that relates to the business of L-3 and is not generally available to the public or generally known in the industries in which L-3 does business or may become engaged, including, without limitation, any formulas, devices, inventions, methods, techniques or processes, compilations of information, records and specifications that are owned or licensed by L-3 and used in the operation of L-3's business and any other information of L-3 relating to its services and products (offered or to be offered), research, development, marketing, pricing, clients and prospective clients, business methods, strategies, financial condition, plans, personnel information and capabilities, policies or prospects.

(Id. ¶ 4.) The Confidentiality Agreement also protects “L-3 Materials, ” meaning “[a]ll files, records, proposals, specifications or other documents, and all computer software, software applications, files, databases and the like relating to L-3's business or which contain Proprietary Information.” (Id. ¶ 2.)

         In the Confidentiality Agreement, Daniels agreed “to hold all Proprietary Information and L-3 Materials in strict confidence, ” and agreed not to “take, use, copy, disclose, publish or summarize any Proprietary Information or L-3 Materials except to the extent necessary to carry out [his] duties and responsibilities as an employee of L-3.” (Id. ¶ 1.) Daniels further agreed that, upon separation from L-3, he would “promptly deliver to L-3 all L-3 Materials in [his] possession, custody or control, ” and would not “retain any copies of the L-3 Materials in any form or medium whatsoever.” (Id. ¶ 2.)

         The Confidentiality Agreement explicitly inures to the benefit of L-3's successors (id. ¶ 8), so it continues to apply as between Engility and Daniels.

         C. Daniels' Separation from Engility

         The crux of the present proceedings is precisely what Daniels did with Engility data in his possession shortly before and shortly after his final day with the company. The parties have somewhat conflicting stories in this regard. To understand the Court's eventual decisions regarding which story (or aspects of a story) to believe, the Court finds it helpful to present the parties' various accounts in the chronological order that they were presented to the Court. As will be obvious below, the change in stories over time is revealing, particularly with respect to Daniels.

         1. Engility's Original Story

         According to Engility's TRO/PI Motion, Daniels' last day with the company was August 29, 2016; this was also the date on which he returned his company computer, and on which Engility terminated his access credentials to the company network. (ECF No. 11 at 4, ¶ 6.) However, on an unspecified date after August 29, Daniels surrendered to Engility a flash drive full of Engility information, but with a “date modified” metadata date of August 30, 2016 as to most of that information. (Id.; see also ECF No. 7-4 at 3.)[4]

         From this, Engility inferred that “the contents of the flash drive-which include Engility trade secrets and proprietary information-were copied from a separate copy of the documents, which separate copy has not been disclosed, let alone returned to Engility.” (ECF No. 11 at 4, ¶ 6.) Based on that inference, Engility claims that Daniel still has access to:

• Engility's cost loading process, a proprietary tool by which Engility determines product pricing based on profitability targets and anticipated costs, including employee salaries.
• Profitability information, on the basis of which Engility bids its work for the government.
• Customer contact information and summaries of customer interactions regarding the customers' needs and purchasing goals.
• Engility's contract pipeline and opportunities, as well as documents pertaining to its contracting strategies for the identification of opportunities and the development of bidding strategies.
• Product designs and equipment configuration, including equipment, trailers, and IP schematics for the DCCS program, as well as equipment bundling for routers, switches, cryptographic, radios, VTC Phones, etc.

(ECF No. 7 ¶ 24.)

         2. Daniels' Original Story

         In a verified response brief, Daniels originally presented a materially different account. Daniels says he tendered his two-week notice to Engility on August 15, 2016, and he therefore agrees with Engility that his last day of work was supposed to be August 29, 2016. (ECF No. 22 at 5.) However, his supervisor, Jim Appleyard, had asked him “to create on a removable media device a copy of the files Daniels used in his day to day work, and to structure the files in a manner that would be easy for his replacement to follow.” (Id. at 5-6.) Due to more-pressing Engility assignments, Daniels could not complete the flash drive by August 29. He therefore “informed Appleyard he would be unable to complete the file project that day. Appleyard directed Daniels to continue working on the files, and to bring in his laptop computer and the [flash] drive as soon as he finished the project.” (Id. at 6.)

         According to Daniels, he completed the flash drive project the next day (August 30) when he used his Engility-issued MacBook Pro to create a 13-14 gigabyte collection of files that he then copied onto a 16 gigabyte flash drive. (Id. at 6 & n.3.) Specifically, “[a]ll files Daniels copied to the [flash] drive for Appleyard were either generated on or downloaded onto and copied from this laptop computer.” (Id.) Later that same day (August 30), Daniels physically surrendered the flash drive and his laptop to an Engility employee at an Engility office in Colorado Springs. (Id. at 6.) The day after that (August 31), Daniels surrendered his company badge and keyfob at another Engility office in Colorado Springs. (Id.)

         Given this sequence of events, Daniels argued that the August 30 metadata date on the flash drive is not evidence that he has kept a copy of anything, given that August 30 is the date he finalized the flash drive and then returned all of his materials to Engility. (ECF No. 22 at 8.) He admitted, however, that he did retain a few allegedly irrelevant files, and a few potentially relevant files, with permission:

Before returning the laptop, Daniels downloaded a copy of his personal calendar and photos . . . onto [another flash drive] for himself. He also printed/saved to .PDF files (from the Outlook Express program on the laptop computer) and retained copies of a few e-mails that concerned projects he planned to ask [Engility supervisor Christopher] Wasniak about, along with some personal e-mails (e.g., an e-mail from a customer thanking him for his hard work). Jim Appleyard gave Daniels consent to retain those e-mails. The e-mails Daniels retained contain 2.91 megabytes of data, and do not contain any Engility trade secrets.

(Id. at 7 (footnote omitted).) Daniels identified the “projects he planned to ask Wasniak about” as “concern[ing] the JFHQ-NCR, JTF-N Garrison Services, and 153rd CACs that Engility claims the Defendants failed to inform Engility about.” (Id. at 7 n.4.)[5] Daniels here refers to an allegation in Engility's Complaint regarding “three support opportunities under the USNORTHCOM umbrella” that Daniels “failed to inform Engility about” before resigning. (ECF No. 7 ¶ 17.) Daniels also represented that all of these files, and certain others, were part of a zip file that he placed on the flash drive, and that also remained on his laptop at the time he turned it in.

         3. Engility's Reply

         Engility's reply brief argued that Daniels' story is false. Engility proffered still images from surveillance camera footage showing that the surrender of company property Daniels says he performed on August 30 was actually performed on August 29-save for surrender of the flash drive, which happened on August 31. (See ECF Nos. 24-1, 24-2.) Engility's records also described two laptops that Daniels surrendered on August 29.

         According to Andrew Reisman, a computer forensics expert retained by Engility, the first laptop (the MacBook Pro from which Daniels allegedly copied the files onto the flash drive) shows “no evidence of activity on the device, whether by Mr. Daniels or otherwise, after November 2015.” (ECF No. 24-7 ¶ 7.) The second laptop (a Dell model) shows no activity after August 23, 2016, but multiple flash drives were inserted into that laptop between May 2016 and August 2016. (Id. ¶¶ 8-10.)

         In addition, Appleyard denied giving Daniels permission to keep any e-mails, personal or otherwise. (ECF No. 24-5 ¶¶ 3-4.)

         4. Pre-Hea ...

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