Recoop LLC v. Outliers Inc. d/b/a Thesis Nootropics Inc.

Background

Recoop alleged that Outliers Inc., doing business as Thesis Nootropics Inc., and Daniel Freed improperly accessed Recoop’s website systems, installed tracking code, and obtained or used Recoop’s customer information. Recoop brought claims under the federal Defend Trade Secrets Act, common law, the federal Wiretap Act, and the California Invasion of Privacy Act. Outliers and Freed denied improper access or use and asserted counterclaims and third-party claims against Recoop and Anastasia Alt.

The court had ordered a forensic examination by Stroz Friedberg. The resulting report found no evidence that Outliers or Freed accessed or changed Recoop’s relevant tracking tools after Freed left Recoop, transmitted Recoop data to systems controlled by Outliers or Freed, or possessed or used Recoop customer information. The court later granted Outliers summary judgment on April 14, 2025, concluding that Recoop lacked evidence that Outliers or Freed used Recoop information in violation of an agreement or confidence or through improper means.

Motion for Reconsideration

Recoop asked the court to reconsider the summary-judgment decision. It argued that the forensic report was incomplete and inaccurate, that the report did not obtain records directly from Google or Meta, and that Freed’s declaration contained misrepresentations concerning a Google Analytics identification number visible in a video. Recoop also argued that disputed factual issues required a trial.

The court applied the strict standard for reconsideration. Reconsideration generally requires an intervening change in controlling law, newly available evidence, or a need to correct clear error or prevent manifest injustice. The court found that Recoop’s arguments and the video were available before its deadline to oppose summary judgment. Recoop had not timely opposed the summary-judgment motion and had not shown good cause for its failure to meet the court’s deadline to retain counsel.

The court also rejected Recoop’s challenges on the merits of the reconsideration request. It found that the forensic report examined relevant Google and Meta accounts and supported the conclusion that there was no evidence of customized tracking configurations, collection or export of Recoop customer information, or improper access by Freed or Outliers. The court further found that the video did not necessarily contradict Freed’s declaration and that, even if Freed had seen the identification number, that fact would not establish trade-secret misappropriation.

The court emphasized that Recoop bore the burden of proving misappropriation. Outliers could obtain summary judgment by showing an absence of evidence supporting an essential part of Recoop’s claims. Recoop’s conjecture and attacks on the credibility of Outliers’ evidence were insufficient to create a trial-worthy factual dispute.

Rule 11 Sanctions

Outliers sought sanctions under Federal Rule of Civil Procedure 11, which permits sanctions for certain false, misleading, improper, or frivolous representations to the court. Rule 11 requires the moving party to serve the actual sanctions motion at least 21 days before filing it, giving the opposing party an opportunity to withdraw or correct the challenged filing. A warning letter alone does not begin this 21-day period.

Outliers and Freed sent Recoop a letter threatening sanctions, but the court held that the letter did not satisfy Rule 11’s safe-harbor requirement. Because the required procedure was not followed, the court denied the request for Rule 11 sanctions.

Attorney’s Fees Under the Defend Trade Secrets Act

The Defend Trade Secrets Act permits, but does not require, a court to award reasonable attorney’s fees to a prevailing party when a trade-secret claim was made in bad faith, among other circumstances. The court held that bad faith requires more than a losing or weak claim. The claim must be objectively without evidentiary support, and the plaintiff must have acted with subjective bad faith, such as knowing or recklessly disregarding that the claim lacked merit or pursuing it for an improper purpose.

The court found that Outliers had not established the required bad faith. Although the complaint’s allegations and Recoop’s litigation conduct raised concerns, Recoop had evidence that an employee and member had installed tracking tags and that the employee was also the chief executive officer of a competing company. The court therefore could not conclude that the claim was wholly without merit when filed or that Recoop knew it lacked merit. Recoop’s failure to prosecute the case was also partly explained by its counsel’s withdrawal and its apparent difficulty finding new counsel.

Disposition

The court denied Recoop’s motion for reconsideration. It also denied Outliers’ request for Rule 11 sanctions and its request for attorney’s fees under the Defend Trade Secrets Act. The court directed the Clerk of Court to close several docket entries, including the reconsideration and sanctions motions.