Cartiga, LLC v. Aquino

Background

Cartiga, described in the opinion as a legal financial services company, sued its former employee, Betty Aquino. Cartiga alleged that Aquino misappropriated trade secrets and violated confidentiality, non-compete, non-solicitation, and non-interference provisions in her employment agreement. Cartiga also asserted claims for breach of contract, tortious interference with prospective economic advantage, and breach of fiduciary duty.

The alleged trade secrets included referral-source identities, client lists, information about clients who obtained more funding, client pricing and rates, and strategic plans for obtaining and retaining clients and business relationships. Cartiga alleged that it protected this information through employment agreements, password-protected databases, individual usernames and passwords, firewall software, limited network access, and employee confidentiality acknowledgments.

Aquino moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction, Rule 12(b)(2) for lack of personal jurisdiction, Rule 12(b)(3) for improper venue, and Rule 12(b)(6) for failure to state a claim. She also made an alternative request to transfer the case under 28 U.S.C. § 1404(a).

Jurisdiction and Venue

The court denied the Rule 12(b)(1) motion. It found that Cartiga adequately alleged federal-question jurisdiction because the federal Defend Trade Secrets Act claim was sufficiently pleaded. The court also found an alternative basis for jurisdiction because Cartiga alleged that its members were citizens of Delaware or the Cayman Islands, Aquino was domiciled in Georgia, and the amount in controversy exceeded $75,000.

The court denied the Rule 12(b)(2) motion. It found that the allegations that Aquino solicited Cartiga’s referral sources and clients in New York, misappropriated trade secrets in New York, interfered with business relationships in New York, and otherwise conducted business in New York were sufficient at this stage to support specific personal jurisdiction.

The court denied the Rule 12(b)(3) motion. It concluded that a substantial part of the events alleged to support Cartiga’s claims occurred in New York County. It also relied on the employment agreement’s provision designating the Southern District of New York as the sole venue for disputes arising from or relating to the agreement. The court separately denied Aquino’s request to transfer the case under § 1404(a), relying on that forum-selection provision.

Failure to State a Claim

The court granted in part and denied in part the Rule 12(b)(6) motion.

Defend Trade Secrets Act claim. The court denied dismissal of Cartiga’s federal trade-secret claim. It held that Cartiga plausibly alleged both required elements: that it possessed trade secrets and that Aquino misappropriated them.

The court found that Cartiga identified the alleged trade secrets with enough specificity to put Aquino on notice of what she was accused of taking or using. It also found that Cartiga plausibly alleged reasonable steps to protect the information and alleged that the information had economic value because it was not generally known or readily available to others.

The court further found that Cartiga plausibly alleged that Aquino used or disclosed the information without Cartiga’s consent. Although Aquino argued that she had lawfully accessed the information while doing her job and used it only during her employment, the court was required at this stage to credit Cartiga’s allegations that Aquino used or disclosed the information during and after her employment for her own benefit or the benefit of a competitor.

Breach of contract. The court denied dismissal of the breach-of-contract claim. Cartiga alleged that an agreement existed, that it had performed its obligations, that Aquino breached confidentiality and restrictive-covenant provisions by using information and soliciting clients, and that Cartiga suffered damages.

Aquino argued that the restrictive covenants were vague and overly broad. The court declined to decide that issue on a motion to dismiss, explaining that whether the restrictions were reasonable, enforceable, or severable required a more developed factual record. The court stated that Aquino could renew that argument at summary judgment.

Tortious interference with prospective economic advantage. The court granted dismissal of this claim. Under New York law, Cartiga had to plausibly allege that Aquino acted solely out of malice or used dishonest, unfair, or improper means. The court found that the complaint did not allege that Aquino acted solely to harm Cartiga. Instead, it alleged that she sought business for herself or a competitor, which showed at least some economic self-interest. The court also stated that the claim would independently fail because it duplicated the contract claim.

Breach of fiduciary duty. The court granted dismissal of this claim as duplicative of the breach-of-contract claim. The allegations supporting the fiduciary-duty claim—soliciting Cartiga’s customers, using Cartiga’s information, planning a departure that harmed Cartiga, and diverting business opportunities—were the same conduct underlying the contract claim and sought the same damages.

Disposition

The court denied Aquino’s motions to dismiss under Rules 12(b)(1), 12(b)(2), and 12(b)(3). It denied the request to transfer venue. It granted in part and denied in part the Rule 12(b)(6) motion: the federal trade-secret and breach-of-contract claims remained, while the tortious-interference and fiduciary-duty claims were dismissed. Judge Paul A. Engelmayer directed the clerk to terminate the pending motions and stated that the court would schedule an initial conference and set a deadline for a proposed case-management plan.