Apex.AI, Inc. v. Langmead

Background

Apex.AI, Inc. sued Neil Richard Langmead, Verifa, Inc., and CodeClinic LLC doing business as Lattix. Apex.AI asserted a federal trade-secrets claim and related state-law claims, alleging that Langmead obtained access to its software, source code, and other intellectual property under a consulting agreement and misappropriated it. The court issued a temporary restraining order and later a stipulated preliminary injunction barring Defendants from using or disclosing Apex.AI’s trade secrets or confidential information.

Defendants answered without filing counterclaims. They later sought permission under Federal Rule of Civil Procedure 13(e) to file five counterclaims that they said matured after the answer: intentional interference with prospective economic advantage, tortious interference with contractual relations, defamation/libel, unfair competition or unfair business practices, and breach of contract. The first four claims were based on allegations that Apex.AI sent emails to Defendants’ customers and business partners, including copies of the preliminary injunction and statements that Defendants might have used Apex.AI’s trade secrets. The fifth claim alleged that Apex.AI failed to pay for all services performed under the consulting agreement.

Legal standard

Rule 13(e) allows a court to permit a supplemental pleading asserting a counterclaim that matured or was acquired after an earlier pleading. The court applied the factors used for permission to amend pleadings, including bad faith, undue delay, prejudice, and futility. Because Defendants filed their motion after the scheduling-order deadline for amending pleadings, they also had to show good cause to modify that schedule. The court found good cause, noting that Defendants missed the deadline by six weeks, Apex.AI did not challenge their diligence, and defense counsel represented that the factual investigation was ongoing and the motion was filed promptly given the late development of the claims.

Court’s analysis

The court focused on futility because Apex.AI did not assert bad faith, undue delay, or prejudice. Apex.AI argued that California’s litigation privilege barred Proposed Counterclaims 1 through 4. Under California law, the privilege applies to communications made in judicial or quasi-judicial proceedings by authorized participants, intended to achieve the purposes of the litigation, and connected to the action. When it applies, the privilege is absolute and generally bars tort claims, even if the communication was allegedly made with actual malice.

The court concluded that the proposed counterclaims showed on their face that the privilege applied. It determined that Defendants’ customers and business partners could have a substantial interest in the litigation, and that the alleged emails concerned the lawsuit and preliminary injunction. The court also found that the communications were intended to protect Apex.AI’s trade secrets and were logically related to the litigation. It rejected Defendants’ arguments that the recipients lacked a sufficient interest or that the privilege could not be decided at this stage.

Disposition

The court denied leave to file Proposed Counterclaims 1 through 4 because allowing them would be futile. It granted in part the motion as to Proposed Counterclaim 5, the unopposed breach-of-contract claim. The order limited leave to that counterclaim and stated that Defendants could not add additional counterclaims without prior court permission. If Defendants elected to proceed, they were required to file the breach-of-contract counterclaim by March 27, 2024. The court also vacated the May 2, 2024 motion hearing and terminated the motion docket entry.