Payward, Inc. v. Runyon

Background

Payward, Inc. operates a global cryptocurrency exchange. It sued Nathan Peter Runyon, a former employee, asserting four claims. The First Claim alleged that Runyon violated the Defend Trade Secrets Act by disclosing Payward’s physical address in a publicly filed state-court complaint and providing Payward’s November 2017 board minutes with a demand letter. The Third Claim alleged that Runyon violated the Computer Fraud and Abuse Act by accessing a company-issued laptop after his employment ended and obtaining the board minutes. The Second Claim alleged misappropriation of trade secrets under state law, and the Fourth Claim alleged breach of an employment agreement based on trade-secret misappropriation and public disclosure of Payward’s physical address.

Runyon moved to dismiss all four claims or, alternatively, to stay the federal action because he had filed a state-court action. The opinion states that Runyon’s state-court action alleged wrongful termination based on his status as a veteran and as an assertedly disabled person, as well as retaliation for reporting alleged fraudulent conduct by Payward employees.

Federal Claims

The court applied Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint lacks a legally recognized claim or does not allege enough facts to make relief plausible.

For the Defend Trade Secrets Act claim, the court explained that a trade secret must have economic value because it is not generally known or readily ascertainable, and the owner must take reasonable measures to keep it secret. The court found that Payward had not alleged how competitors would gain an economic advantage from knowing Payward’s physical address. The court also found that Payward had not alleged that Runyon used the board minutes or physical address to gain a competitive advantage. The First Claim was therefore subject to dismissal.

For the Computer Fraud and Abuse Act claim, the court found that Payward had not alleged facts showing that Runyon’s access to the board minutes caused Payward at least $5,000 in loss, which was the basis for the private claim Payward pursued. The court also found missing allegations concerning several specific statutory provisions: Payward did not allege that the board minutes were the required type of financial-record information, that Runyon acted with an intent to defraud and furthered a fraud, or that his access caused damage or loss. The Third Claim was therefore subject to dismissal.

State Claims and Disposition

The court had original jurisdiction over the federal claims and supplemental jurisdiction over the state-law claims. After dismissing all claims within its original jurisdiction, the court declined to exercise supplemental jurisdiction over the Second and Fourth Causes of Action because the case was at an early stage. Those state-law claims were dismissed without prejudice.

Judge Chesney granted Runyon’s motion and dismissed the complaint. The order allowed Payward to file a First Amended Complaint no later than October 9, 2020. The court also continued the case-management conference from October 2, 2020, to January 15, 2021.