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Arkema Inc. v. Emerson Process Management, LLLP

United States District Court, S.D. Alabama, Southern Division

September 6, 2019

ARKEMA INC., et al., Plaintiffs,
v.
EMERSON PROCESS MANAGEMENT, LLLP, et al., Defendants.

          ORDER

          WILLIAM H. STEELE UNITED STATES DISTRICT JUDGE.

         This 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.

         BACKGROUND

         According 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.

         The 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.

         DISCUSSION

         I. Conversion.

         Emerson argues that ATSA preempts this claim. The plaintiffs respond that ATSA does not preempt conversion claims in general or their claim in particular.

         ATSA 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.”

         The 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.

         In this 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.

         The 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.

         The 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.

         The 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)).[1] In neither case, however, was any preemption argument asserted, and the Supreme Court's ...


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