United States District Court, S.D. Alabama, Southern Division
WILLIAM H. STEELE UNITED STATES DISTRICT JUDGE.
matter is before the Court on the motion of the entity
defendant (“Emerson”) to dismiss. (Doc. 20). The
plaintiffs have filed a response and Emerson a reply, (Docs.
28, 30), and the motion is ripe for resolution. After careful
consideration, the Court concludes the motion is due to be
granted in part and denied in part.
to the complaint, (Doc. 1), the plaintiffs hired Emerson to
perform programming and configuration services for a control
system in a manufacturing unit. Emerson sent co-defendant
Nilesh Chaudhari to perform this work. Chaudhari took
unauthorized photos and videos on his cell phone documenting
the plaintiffs' secret new technology. Emerson and
Chaudhari have refused to cooperate with the plaintiffs'
attempts to determine what images Chaudhari captured and what
he may have done with them.
complaint asserts eight claims for relief: (1) the federal
Trade Secrets Act; (2) the Alabama Trade Secrets Act
(“ATSA”); (3) conversion; (4) negligent/wanton
training/supervision; (5) respondeat superior; (6)
the Alabama Digital Crime Act (“ADCA”); (7) the
federal Computer Fraud and Abuse Act (“CFAA”);
and (8) breach of contract. (Doc. 1 at 27-32). Emerson seeks
the dismissal of Counts Three through Seven.
argues that ATSA preempts this claim. The plaintiffs respond
that ATSA does not preempt conversion claims in general or
their claim in particular.
provides a cause of action “for misappropriation of [a]
trade secret.” Ala. Code § 8-27-3. “Those
provisions of this chapter that are inconsistent with the
common law of trade secrets supersede the common law;
otherwise, this chapter should be construed as consistent
with the common law of trade secrets.” Id.
§ 8-27-6. The accompanying comment explains that
“[t]he act is intended to codify and to modify the
common law of trade secrets in Alabama. Where the act
codifies, pre-existing sources may shed light on the meaning
of the statute. There is no intention, however, to supersede
other areas of the law.”
meaning of Section 8-27-6 and its comment is open to
interpretation. The Alabama Supreme Court has supplied the
following interpretation: “[T]he legislature intended
for the Act to replace common law tort remedies for the
misappropriation of trade secrets.” Allied Supply
Co. v. Brown, 585 So.2d 33, 37 (Ala. 1991). Again,
“existing common law tort theories of recovery have
been replaced by the provisions of the Act ….”
Id. The plaintiff in Allied Supply alleged
the defendants “had breached their fiduciary duty by
… misappropriating confidential documents” that
the plaintiff “characterized as ‘trade
secrets.'” Id. at 34, 37. Based on its
reading of ATSA, the Supreme Court reversed the trial
court's ruling “that Allied could pursue a common
law misappropriation cause of action.” Id.
diversity case, the Court is bound to follow controlling
precedent from the Alabama Supreme Court. State Farm
Mutual Automobile Insurance Co. v. Duckworth, 648 F.3d
1216, 1224 (11th Cir. 2011). In assessing the
preemptive scope of Section 8-27- 6 as applied to this case,
Allied Supply is that controlling precedent.
Allied Supply establishes the principle that any
common law tort claim that, whatever its name, provides a
theory of recovery for the misappropriation of a trade secret
is preempted by ATSA. Thus, as in Allied Supply, a
misappropriation of a trade secret accomplished by a breach
of fiduciary duty is still a misappropriation of a trade
secret, which must be redressed under ATSA and not under the
common law theory of breach of fiduciary duty.
same necessarily holds true for conversion. A
misappropriation of a trade secret accomplished by a
conversion is still a misappropriation of a trade secret and
must be redressed under ATSA and not under the common law
theory of conversion. Because Count Three alleges that
Chaudhari converted a trade secret, it asserts a common law
tort theory of recovery for the misappropriation of a trade
secret and cannot proceed.
plaintiffs, relying on the decision of a sister court, deny
that conversion claims can ever be preempted by ATSA. (Doc.
28 at 11-12). In Acoustic Artistry, LLC v. Peavey
Electronics Corp., 2013 WL 12250381 (N.D. Ala. 2013),
the Court focused on Allied Supply's reference
to a “common law misappropriation cause of
action” to conclude that any claim not calling itself a
misappropriation claim (including a claim for conversion of a
trade secret) is not preempted. Id. at *8. As shown
above, however, Allied Supply did not use the quoted
phrase to restrict preemption to a single cause of action
traveling under a particular name but rather as a shorthand
to describe any tort claim brought to redress the
misappropriation of a trade secret.
Acoustic Artistry Court found support for its
position in two state cases that, post-Allied
Supply, allowed common law tort claims (including
conversion) to proceed alongside an ATSA claim. 2013 WL
12250381 at *8 (citing Sevier Insurance Agency, Inc. v.
Willis Corroon Corp., 711 So.2d 995(Ala. 1998) and
Soap Co. v. Ecolab, Inc., 646 So.2d 1366 (Ala.
1994)). In neither case, however, was any
preemption argument asserted, and the Supreme Court's