United States District Court, D. Colorado
ORDER
PHILIP
A. BRIMMER, Chief United States District Judge.
This
matter is before the Court on defendant Ally Energy Services,
Inc. Motion to Dismiss and Opening Brief [Docket No. 103];
defendants Craig Hirschfeld and Joseph Johnson’s Motion
to Dismiss Second Amended Complaint [Docket No. 113];
defendant Katie Stromstad’s Motion to Dismiss Second
Amended Complaint [Docket No. 114]; and defendant Ross
Rhinehart’s Motion to Dismiss Second Amended Complaint
[Docket No. 115]. The Court has jurisdiction pursuant to 28
U.S.C. §§ 1331 and 1367.
I.
BACKGROUND
A.
Factual Background
Plaintiff
DTC Energy Group, Inc. (“DTC”) is a consulting
and staffing firm serving the oil and gas industry. Docket
No. 82 at 4, ¶ 8.[1] DTC’s business involves placing
candidates with companies in the oil and gas industry.
Id. at 7, ¶ 20. In connection with that
business, DTC has confidential information, some of which it
contends are “trade secrets.” These trade secrets
include: (1) “Candidate Folders, ” in which DTC
stores resumes, including resumes which it has
“re-formatted” to include the DTC logo and
contact information, id. at 12-13, ¶¶
42-48; (2) a “Candidate Database” that summarized
the contents of “more than 1, 000 of DTC’s
re-formatted resumes, ” id. at 13,
¶¶ 48-49; and (3) a “Profit Calculator”
that DTC uses “to evaluate several financial variables
and gain competitive advantages in the industry.”
Id. at 13-14, ¶ 50.
In May
2013, DTC hired defendant Adam Hirschfeld as a salesman.
Id. at 8, ¶ 27. In January 2014, DTC promoted
Adam Hirschfeld to be its business development lead.
Id. at 9, ¶ 29. As business development lead,
Adam Hirschfeld had access to DTC’s confidential
information. Id. ¶ 33. In July 2014, DTC hired
defendant Katie Stromstad as a human resources specialist.
Id. at 5, ¶ 13. In November 2014, DTC hired
defendant Joseph Galban (“Galban”) as a staff
accountant. Id. at 4, ¶ 10. From approximately
July 2015 to June 2016, DTC subleased office space to
defendant Ross Rhinehart (“Rhinehart”).
Id. at 5, ¶ 14.
In the
summer of 2015, DTC began discussing a potential business
relationship with defendant Ally Consulting, LLC (“Ally
Consulting”). Id. at 15, ¶
57.[2]
Ally Consulting provides similar staffing services in the oil
and gas industry. Id. at 16, ¶ 59. DTC agreed
that it would assist Ally Consulting by “taking on its
few employees and/or contractors and by handling the
associated administrative services . . . in exchange for
percentage-based payments from [Ally Consulting].”
Id. at 15, ¶ 58. DTC and Ally Consulting
executed an agreement on January 11, 2016; Ally Consulting
terminated the agreement on July 11, 2016. Id. at
16, ¶¶ 60-61.
DTC
alleges that, beginning in November 2015, Adam Hirschfeld,
defendant Craig Hirschfeld (“Hirschfeld”), and
defendant Joseph Johnson (“Johnson”) began
“plotting” to build up Ally Consulting by
“stealing DTC’s business.” Id. at
16, ¶ 64. The complaint is unclear what, if any,
management role or ownership interest Hirschfeld and Johnson
had at the time or at present in Ally Consulting. Compare
id. at 6, ¶ 16 (alleging that, since April 2017,
the sole member of Ally Consulting is defendant Ally Energy
Services, Inc. (“AES”)) with id. at 4-5,
¶¶ 11-12, 14 (alleging that Rhinehart, Hirschfeld,
and Johnson are currently “co-owner[s] and co-member[s]
of [Ally Consulting] and/or [AES]”). DTC alleges that
Adam Hirschfeld, Hirschfeld, and Johnson agreed that Adam
Hirschfeld would work for Ally Consulting while still
employed by DTC, and that Adam Hirschfeld would convince
Galban and Stromstad to assist him. Id. at 17,
¶ 66-67. DTC alleges that Adam Hirschfeld would secure
customers on Ally Consulting’s behalf from customers
who believed they were dealing with DTC, and that Adam
Hirschfeld, Galban, Stromstad, and Rhinehart would email the
customers “onboarding paperwork on Ally letterhead that
they had copied from DTC forms.” Id. at 18,
¶¶ 73-74. Stromstad sometimes mistakenly sent
candidates DTC onboarding paperwork instead of Ally
onboarding paperwork. Id. at 19, ¶ 82. Adam
Hirschfeld, Galban, Stromstad, and Rhinehart worked to
conceal the work they were doing for Ally Consulting from
DTC’s owners. Id. at 20-21, ¶¶
90-97.
DTC
alleges that Hirschfeld and Craig Hirschfeld engaged in a
“fraudulent” scheme through CS Property Holdings,
a third-party LLC. Id. at 30-31, ¶¶
168-177. Under the alleged scheme, CS Property Holdings would
charge DTC “consultants” (placed customers) in
Ohio and West Virginia for their housing. Id. The
rent paid to CS Property Holdings by the consultants
“far exceeded” the actual rent charged by
landlords to CS Property Holdings. Id. at 31, ¶
176. DTC would then reimburse the consultants for their
housing. Id., ¶ 175.
On
November 8, 2016, Adam Hirschfeld emailed Rhinehart
DTC’s Profit Calculator. Id. at 34, ¶
197. On February 13, 2017, Stromstad resigned from DTC.
Id. at 5, ¶ 13. On May 3, 2017, Adam Hirschfeld
resigned from DTC, effective May 31. Id. at 32,
¶ 187. In late May 2017, Adam Hirschfeld asked Rhinehart
to obtain “confidential DTC financial
information” from Galban. Id. at 34, ¶
195. DTC alleges that Rhinehart did obtain
“confidential financial documents and trade
secrets” from Galban. Id. ¶ 198. Adam
Hirschfeld, Stromstad, and Galban now all work for Ally
Consulting. Id. at 35, ¶ 203. Before leaving
DTC, Adam Hirschfeld stole his work laptop and flash drives
that had “thousands of confidential DTC files he
downloaded to them.” Id. at 37, ¶ 220.
After DTC commenced this lawsuit, Rhinehart requested that
Adam Hirschfeld cease all use of the laptop. Id.
¶ 223.
B.
Procedural History
DTC
initiated this lawsuit on July 14, 2017. Docket No. 1. On the
same day, DTC moved for a temporary restraining order and
preliminary injunction based on the alleged misappropriation
of its trade secrets by Adam Hirschfeld, Galban, and Ally
Consulting. Docket No. 4. After a hearing on the motion on
July 20, 2017, the Court denied DTC’s request for a
temporary restraining order, finding that DTC had failed to
demonstrate a likelihood of success on the merits of its
misappropriation claims. See Docket No. 17 at 69. On
September 13, 2017, DTC filed an amended complaint and an
amended motion for a preliminary injunction. Docket Nos. 24,
25. The amended motion sought relief against Adam Hirschfeld,
Galban, and Ally Consulting for misappropriation of trade
secrets under federal and state law, breach of contract, and
breach of the duty of loyalty and unfair competition. Docket
No. 25 at 2, 6-16. After an evidentiary hearing on January
30, 2018, the Court denied DTC’s request for a
preliminary injunction on March 2, 2018. Docket No. 57. The
Court concluded that DTC had failed to demonstrate
irreparable harm on all of its claims save for the breach of
contract claim and further concluded that DTC had failed to
demonstrate a likelihood of success on the merits of the
breach of contract claim. Id. The Tenth Circuit
affirmed the Court’s denial of a preliminary
injunction. See DTC Energy Group, Inc. v.
Hirschfeld, 912 F.3d 1263 (10th Cir. 2018).
On
November 9, 2018, DTC filed its Second Amended Complaint (the
“complaint”). Docket No. 82. The complaint adds
as defendants Hirschfeld, Johnson, Stromstad, Rhinehart
(together, the “individual defendants”), and AES.
The complaint brings claims against some or all defendants
for (1) breach of contract; (2) breach of the duty of
loyalty; (3 and 4) misappropriation of trade secrets under
the federal Defend Trade Secrets Act (“DTSA”), 18
U.S.C. § 1831 et seq., and the Colorado Uniform
Trade Secrets Act (“CUTSA”), Colo. Rev. Stat
§ 7-74-101 et seq.; (5) unjust enrichment; (6)
tortious interference with business relations; (7) tortious
interference with contract; (8) unfair competition; (9) civil
theft; (10) conversion; (11) civil conspiracy; (12) violation
of the Civil Racketeer Influenced and Corrupt Organizations
Act (“RICO”), 18 U.S.C. § 1962 et
seq.; (13) violation of the Computer Fraud and Abuse Act
(“CFAA”), 18 U.S.C. § 1030 et seq.;
and (14) conspiracy to violate the CFAA. Id. at
40-57, ¶¶ 241-349.
AES and
the individual defendants have filed motions to dismiss.
Docket Nos. 103, 113, 114, 115.[3]
II.
LEGAL STANDARD
To
survive a motion to dismiss under Rule 12(b)(6) of the
Federal Rules of Civil Procedure, a complaint must allege
enough factual matter that, taken as true, makes the
plaintiff’s “claim to relief . . . plausible on
its face.” Khalik v. United Air Lines, 671
F.3d 1188, 1190 (10th Cir. 2012) (citing Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007)). “[W]here
the well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct, the complaint has
alleged–but it has not shown–that the pleader is
entitled to relief.” Ashcroft v. Iqbal, 556
U.S. 662, 679 (2009) (internal quotation marks and alteration
marks omitted); see also Khalik, 671 F.3d at 1190
(“A plaintiff must nudge [his] claims across the line
from conceivable to plausible in order to survive a motion to
dismiss.” (quoting Twombly, 550 U.S. at 570)).
If a complaint’s allegations are “so general that
they encompass a wide swath of conduct, much of it innocent,
” then plaintiff has not stated a plausible claim.
Khalik, 671 F.3d at 1191 (quotations omitted). Thus,
even though modern rules of pleading are somewhat forgiving,
“a complaint still must contain either direct or
inferential allegations respecting all the material elements
necessary to sustain a recovery under some viable legal
theory.” Bryson v. Gonzales, 534 F.3d 1282,
1286 (10th Cir. 2008) (alteration marks omitted).
III.
ANALYSIS
A.
AES’s Motion to Dismiss
In its
motion to dismiss, AES argues that, because it is a
“non-operating, holding company owning 100% of the
membership interest in [Ally Consulting], ” DTC has
“no basis for independent claims against AES.”
Docket No. 103 at 2. In response, DTC contends that it refers
to AES and Ally Consulting collectively as “Ally”
throughout the complaint. Docket No. 110 at
10-13.[4] As a result, AES argues that the complaint
is not sufficient to put AES on notice of the claims against
it. Docket No. 111 at 6-8.
The
complaint’s allegations against AES are oblique. The
first page refers to “Ally Consulting, LLC f/k/a Wyodak
Staffing, LLC and Ally Energy Services, Inc. (collectively,
‘Ally’).” Docket No. 82 at 1. The complaint
next identifies the parties, describing “Ally
Consulting, LLC” as
a Wyoming limited liability company in good standing with its
principal offices currently located in Casper, Wyoming and
Lakewood, Colorado. Ally formerly had a business relationship
with DTC and, as a result of the Defendants’ unlawful
acts alleged herein, is currently a direct competitor of DTC.
During calendar year 2016 and much of 2017, the majority of
Ally’s work was being performed by DTC employees out of
DTC’s physical office. On information and belief, Ally
did not officially open its Lakewood, Colorado office until
early 2017, shortly before DTC’s employees officially
“moved” to work for Ally. Ally is A.
Hirschfeld’s, Ms. Stromstad’s, Mr.
Galban’s, and Mr. Rhinehart’s current employer,
does business in Colorado, and one of its principal places of
business is located in Lakewood, Colorado.
Id. at 6, ¶ 15.[5] The complaint next identifies AES
as “a Wyoming corporation in good standing with its
principal offices located in Casper, Wyoming and has been the
sole member of [Ally Consulting] since April 2017.”
Id. at 6, ¶ 16. The complaint further alleges
that Hirschfeld, Johnson, and Rhinehart are
“co-owner[s] and co-member[s] of [] Ally Consulting,
LLC and/or Ally Energy Services, Inc.” Id. at
4-6, ¶¶ 11-12, 14. Taken together, these paragraphs
describe the relationship between AES and Ally Consulting:
AES owns Ally Consulting as its sole member. They also
describe Ally Consulting’s business: a competitor of
DTC in the oil and gas consulting and staffing field that
employs Adam Hirschfeld, Stromstad, Galban, and Rhinehart.
They do not, however, allege that AES, the holding company,
is a competitor to DTC or that it has any employees.
Moreover, throughout the general factual allegations the
complaint appears to use “Ally” solely to refer
to Ally Consulting, as opposed to Ally Consulting and AES,
and never mentions AES specifically. See, e.g.,
id. at 14, ¶ 53 (referring to the
“illegitimate clone company, Ally”); id.
at 15-16, ¶¶ 57-63 (describing the initial business
relationship between DTC and “Wyodak Staffing,
LLC” (Ally)).[6] Despite DTC’s use of the collective
“Ally” to purportedly refer to Ally Consulting
and AES, the complaint does not plausibly allege the
involvement of AES – Ally’s corporate parent
– in any of DTC’s causes of action. Thus, there
is no basis for the Court to infer that there is a basis for
legal claims against AES independent of its ownership of Ally
Consulting.
DTC
argues that the allegation that Ally Consulting and AES
“share common ownership and the same or similar
employees” is sufficient to establish the claims
against AES. Docket No. 110 at 12. This argument is not
persuasive. First, the complaint does not allege that the
entities have “the same or similar employees.”
See Docket No. 82 at 6, ¶¶ 15-16. Second,
a bare allegation that the entities have common ownership
does not lead to an inference that AES, as an entity, is
responsible for all of Ally Consulting’s acts. Cf.
McCallum Family LLC v. Winger, 221 P.3d 69, 74
(Colo.App. 2009) (discussing eight factors courts use to
determine whether a corporate entity is an alter ego of
another).[7] DTC also argues that the allegations
against AES are sufficient because the complaint alleges that
both Ally Consulting and AES “were each involved in the
plot to enrich themselves.” Docket No. 110 at 12.
However, DTC fails to explain how, given the allegations in
the complaint about the corporate structure of AES and Ally
Consulting, the Court could infer that AES was involved in
the “plot” solely on the basis of DTC’s
inconsistent collective reference.
DTC
argues that the use of a collective reference in the
complaint is permissible. However, as a general matter,
“[w]ithout allegations sufficient to make clear the
grounds on which the plaintiff is entitled to relief, ”
it is “impossible for the [C]ourt to perform its
function of determining . . . whether the asserted claim is
clearly established.” Robbins v. Oklahoma, 519
F.3d 1242, 1249 (10th Cir. 2008) (internal citation and
quotation omitted). “The need for individualized
allegations is especially important where . . . each of the
defendants ha[s] different powers and duties.”
Brown, 662 F.3d at 1165. Here, the collective
reference in the complaint to both Ally Consulting and AES
does not make clear on what grounds DTC is entitled to relief
from AES. The cases cited by DTC do not support a bright-line
rule that the use of a collective reference is permissible.
Rather, those cases found that the complaint contained
allegations that made clear the grounds on which plaintiff
was entitled to relief. See Dawson v. Bd. of Cty.
Comm’rs of Jefferson Cty., No. 16-cv-01281-MEH,
2017 WL 5188341, at *11 (D. Colo. Jan. 3, 2017) (collective
action permissible in § 1983 action where plaintiff
alleges that a similar group of defendants “all failed
to take one specific act”); Bark v. Chacon,
No. 10-cv-01570-WYD-MJW, 2011 WL 1884691, at *5 (D. Colo. May
18, 2011) (collective reference permissible in § 1983
action where the allegations against a group of defendants
“all relate to a single incident” where
defendants “are alleged to have been present at that
incident and to have acted in concert”); Ferguson
v. Bd. of Cty. Comm’rs of Sierra Cty, 2013 WL
12334214, at *4 (D.N.M. April 2, 2013) (holding that, because
the “key inquiry” is “whether each
defendant knows why he or she was named in the complaint,
” collective action permissible in § 1983 action
where the allegations against defendants using
“and/or” were tailored to specific claims). By
contrast, the complaint in this case does not make clear the
grounds on which DTC is entitled to relief from AES.
Because
the complaint does not assert any claims upon which relief
can be granted against AES, the Court grants AES’s
motion to dismiss.[8]
B.
Individual Defendants’ Motion to Dismiss
The
Court will address the motions to dismiss filed by the
individual defendants on a claim-by-claim basis.
1.
Second Claim – Breach of the Duty of
Loyalty
DTC
alleges that Stromstad “breached her duty of loyalty by
soliciting customers for Ally while still employed by
DTC.” Docket No. 126 at 5. Stromstad argues that the
complaint fails to state a claim for breach of the duty of
loyalty. Docket No. 114 at 6-7.
Under
Colorado law, an employee breaches her duty of loyalty if she
solicits customers for a rival business or solicits other
employees to terminate their employment. Jet Courier
Serv., Inc. v. Mulei, 771 P.2d 486, 497 (Colo. 1989). In
applying Jet Courier, the Tenth Circuit has stated
that “courts should focus on the following factors in
determining whether an employee’s actions rise to the
level of a breach of loyalty: (1) the nature of the
employment relationship; (2) the impact or potential impact
of the employee’s actions on the employer’s
operations; and (3) the extent of any benefits promised or
inducements made . . . to obtain their services in the
competing business.” In re Prof'l Home Health
Care, Inc., 159 F. App’x. 32, 34 (10th Cir. 2005)
(unpublished). Furthermore, the factors must be weighed, as
no one factor is determinative. Id.[9]
Turning
to the first factor, Stromstad argues that DTC alleges only
that she, as a human resources employee, complied with
directives made by Adam Hirschfeld. Docket No. 114 at 7.
Because, Stromstad argues, she lacked “substantial
discretion” in her role, DTC’s claim for breach
of the duty of loyalty cannot survive. Docket No. 131 at 2-3.
The Court agrees that the first factor weighs strongly in
Stromstad’s favor. Jet Courier
derived its analysis of an employer’s claim for breach
of the duty of loyalty from agency principles. Jet
Courier, 771 P.2d at 491-493 (adopting test set out in
the Restatement (Second) of Agency); cf. 19 Richard
A. Lord, Williston on Contracts § 54.26 (noting
that courts allowing claims for breach of the duty of loyalty
“derive guidance from analogous principles of agency
law” in “determining the scope and extent of the
duty”). As noted in the Jet Courier
concurrence, “not every employee is the
employer’s agent, and an employee may act as an agent
with regard to certain job functions but not with regard to
others.” Jet Courier, 771 P.2d at 503
(Mullarkey, J., specially concurring). The Court finds
Stromstad’s job functions and level of independent
authority to be central to the analysis. See Graphic
Directions, Inc. v. Bush, 862 P.2d 1020, 1023 (Colo.App.
1993) (noting that, under Jet Courier, “there
may be circumstances under which the duty of loyalty does not
apply to an employee”); cf. Restatement of
Employment Law § 8.01(a) (“Employees in a position
of trust and confidence with their employer owe a fiduciary
duty of loyalty to the employer in matters related to their
employment.”). The complaint alleges that Stromstad was
employed as a “human resources specialist.”
See Docket No. 82 at 5, ¶ 13. The complaint
further alleges that she acted at the direction of Adam
Hirschfeld, who was employed by DTC at the time. See
id. at 19, ¶¶ 80-82, 86-87. The complaint does
not allege that Stromstad actively solicited customers; it
alleges that her job was to send customers “onboarding
paperwork.” See id. at 19, ¶ 82. The
Court finds that these facts are insufficient to demonstrate
that Stromstad, in her role as human resources specialist,
was acting as DTC’s agent.
The
second factor weighs slightly in favor of DTC. DTC generally
alleges that, “[a]s a direct and proximate result of
all of the foregoing acts, DTC has lost . . . current and
future business, ” as well as “goodwill.”
See id. at 39-40, ¶ 238. Although the complaint
fails to explain how Stromstad’s actions, in
particular, led DTC to lose business, the Court can
reasonably infer that sending Ally Consulting onboarding
paperwork to customers who would otherwise have joined DTC
would cause DTC to lose business. The third factor weighs in
favor of Stromstad, as the complaint is devoid of any
allegations that Stromstad promised benefits or inducements
to any customers or employees in order to get them to join
Ally Consulting. Indeed, the only allegations regarding
Stromstad’s interaction with customers is that she sent
customers – who had been recruited by ...