Orbital Engineering v. Short Elliott Hendrickson

Background

Orbital Engineering, Inc. (Orbital) is an engineering-services company that competes in what the complaint describes as a "highly competitive" field. Two of its former employees — Douglas M. Cabak and Daniel Messner — worked in Orbital's Electrical Distribution Services (EDS) division, serving customers in the electric utility industry. Orbital alleges that before Cabak resigned, he copied confidential documents (including a "Master Tracker" spreadsheet containing project budgets, costs, staffing data, and other proprietary information), began secretly recruiting Orbital employees and customers, and concealed his plans to join Short Elliott Hendrickson, Inc. (SEH), a direct competitor. SEH then hired Cabak to lead a newly created "Distribution Design" group, publicly touting his ability to "hit the ground running." SEH later hired Messner as well. Shortly after Messner joined SEH, an Orbital customer whom Messner had previously served switched that work to SEH, allegedly diverting hundreds of thousands of dollars in revenue from Orbital.

Claims at Issue

Orbital filed seven counts seeking money damages and injunctive relief: - Count I: Misappropriation of trade secrets under the federal Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836 et seq. - Count II: Misappropriation of trade secrets under the Minnesota Uniform Trade Secrets Act (MUTSA), Minn. Stat. ch. 325C. - Count III: Breach of contract by Cabak. - Count IV: Breach of contract by Messner. - Count V: Tortious interference with existing and prospective business relations by all Defendants. - Count VI: Tortious interference with existing contractual relationships by SEH. - Count VII: Unfair competition by all Defendants.

Defendants moved to dismiss Counts I, II, V, VI, and VII — every count except the two breach-of-contract claims.

Legal Standard

The court applied the standard for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), which requires the court to accept all facts alleged in the complaint as true and determine whether they plausibly support a claim for relief. "Plausibility" means the factual allegations allow a reasonable inference that the defendant is liable; bare legal conclusions dressed up as facts do not count. The court drew all reasonable inferences in Orbital's favor but declined to extend unreasonable ones.

Trade Secret Claims (Counts I and II)

Identification of Trade Secrets

Both the DTSA and MUTSA define "trade secret" broadly to cover financial, business, technical, and other information, subject to two conditions: (1) the owner took reasonable measures to keep the information secret, and (2) the information has independent economic value from not being generally known or readily ascertainable. Courts in this district have held that trade secrets need not be described in detail to survive a motion to dismiss.

Defendants argued, relying on Hot Stuff Foods, LLC v. Dornbach, 726 F. Supp. 2d 1038 (D. Minn. 2010), that Orbital's allegations were too conclusory. The court rejected this comparison. Unlike the complaint in Hot Stuff Foods, Orbital identified specific categories of allegedly misappropriated information (pricing and cost models, project-task cost-estimation tools, project processes and timelines tailored to specific customers, and negotiated billing rates). Orbital also described the Master Tracker in detail, explained its competitive value, and — critically — alleged that Defendants actually succeeded in diverting a major customer using the misappropriated information, supporting the inference that the information was genuinely valuable and not publicly available. The court cited the Eighth Circuit's decision in Ahern Rentals, Inc. v. EquipmentShare.com, Inc., 59 F.4th 948 (8th Cir. 2023), and several district-court decisions — including a prior case involving Orbital itself — as confirming that similar allegations are sufficient.

Reasonable Efforts to Maintain Confidentiality

Defendants also argued that Orbital failed to adequately allege it tried to keep the information secret. The court disagreed. Orbital alleged that it: (1) limits access to confidential information on a need-to-know basis; (2) uses password protection and other technological safeguards; (3) requires employees to sign confidentiality agreements; and (4) requires employees to acknowledge confidentiality provisions in its employee handbook. Orbital further alleged that both Cabak and Messner signed confidentiality agreements that specifically identified the types of information at issue. The court found these allegations sufficient under both federal and Minnesota law. The court noted that Defendants' attempt to introduce contrary facts (suggesting Orbital shares some information with third parties) was improper on a motion to dismiss and, in any event, addressed only a subset of the many types of trade-secret information alleged.

Tortious Interference Claims (Counts V and VI) — MUTSA Displacement

MUTSA displaces (i.e., preempts) other state-law claims that are "based upon misappropriation of a trade secret," but expressly preserves "other civil remedies that are not based upon misappropriation of a trade secret." Minn. Stat. § 325C.07. Courts apply this by asking whether the separate claim has "more" to it factually than just trade-secret misappropriation.

Defendants argued that Orbital's tortious-interference claims were merely repackaged trade-secret claims. The court disagreed. Orbital's tortious-interference allegations go beyond information theft: they assert that Defendants wrongfully interfered with Orbital's employment contracts and customer relationships by poaching employees who possessed valuable customer relationships and experience — not merely by taking confidential data. Because these claims have independent factual content, they are not displaced by MUTSA. The court denied the motion as to Counts V and VI.

Unfair Competition Claim (Count VII) — Dismissed Without Prejudice

The court granted the motion as to Count VII. Under Minnesota law, there is no standalone tort of "unfair competition." Rehab. Specialists, Inc. v. Koering, 404 N.W.2d 301, 305 (Minn. Ct. App. 1987). An unfair-competition claim must rest on some other identifiable tort.

Orbital's Count VII alleged that Defendants organized a scheme to jumpstart SEH's Distribution Design practice by improperly soliciting Orbital's employees and acquiring Orbital's proprietary information, customers, and goodwill. The court found two problems: (1) to the extent the claim rested on wrongful solicitation and acquisition of customers and employees, it was duplicative of Counts V and VI (tortious interference); and (2) to the extent it rested on misappropriation of proprietary information, it was displaced by MUTSA. Orbital argued it could plead the count in the alternative, but the court found the complaint did not identify any independent underlying tort to support it. Count VII was therefore dismissed without prejudice — meaning Orbital is not permanently barred from attempting to replead it, but any such attempt must come through a formal motion to amend the complaint under the court's local rules.

Disposition

- Counts I and II (federal and Minnesota trade-secret misappropriation): Motion to dismiss denied. - Counts III and IV (breach of contract): Not challenged; remain pending. - Counts V and VI (tortious interference): Motion to dismiss denied. - Count VII (unfair competition): Motion to dismiss granted; Count VII dismissed without prejudice.