Maxim Defense Industries, LLC v. Kunsky
- Paul Magnuson
- 0:19-cv-01225
- U.S. District Court · District of Minnesota
- 9
In Maxim Defense Industries v. Kunsky, Judge Magnuson granted in part and denied in part defendants’ motion to dismiss.
Maxim’s claims were allowed to proceed in part, while specified portions of its contract, conversion, and duty-of-loyalty claims were dismissed at the pleading stage. The defendants were Jake Kunsky and Unconventional Equipment Solutions, LLC.
What happened
Maxim Defense Industries, LLC sued Jake Kunsky and Unconventional Equipment Solutions, LLC after Kunsky’s employment ended, alleging misuse or destruction of data, unauthorized credit-card purchases, and failure to return property. In Maxim Defense Industries v. Kunsky, the defendants asked the court to dismiss seven claims.
The court allowed the declaratory-judgment claim about patent-application agreements to proceed. It dismissed only the part of the contract claim concerning use or disclosure of information, and allowed the other contract allegations to proceed. It dismissed conversion claims involving the returned laptop and cellphone and lost data, but allowed claims involving other equipment and business property. It also dismissed the duty-of-loyalty claim involving lost devices and files, while allowing the credit-card-purchase claim and the claims under the Computer Fraud and Abuse Act, unjust-enrichment law, and Minnesota’s civil-theft statute to proceed.
The court therefore granted in part and denied in part the motion to dismiss. Judge Magnuson issued the order on October 10, 2019.
The detailed version
- Maxim Defense Industries, LLC v. Kunsky · No. 0:19-cv-01225
- Paul Magnuson
- Oct. 10, 2019
Background
Maxim Defense Industries, LLC sued Jake Kunsky and Unconventional Equipment Solutions, LLC (UES) after the termination of Kunsky’s employment relationship with Maxim. Maxim alleged that Kunsky misused and destroyed Maxim’s data, made unauthorized purchases with Maxim’s credit card, and failed to return Maxim’s devices and equipment. After the court denied Maxim’s request for a preliminary injunction, Maxim filed an amended complaint asserting alternative theories concerning the allegedly unreturned property, misused information and data, and credit-card purchases.
Kunsky and UES moved under Rule 12(b)(6), which permits dismissal for failure to state a legally sufficient claim, seeking dismissal of Counts II through VIII. At this stage, the court accepted plausible factual allegations as true and viewed them in the light most favorable to Maxim.
Rulings
Declaratory judgment
Maxim sought a declaration concerning three patent-application agreements. The court found that the claim concerned the validity of the agreements assigning ownership of patent applications, rather than ownership of patents that had not yet issued. The court concluded that the contract dispute was ripe and that Maxim had stated a claim for relief. The motion was therefore not granted as to this claim.
Breach of contract
Maxim alleged that the Agreement required Kunsky and UES to return Maxim’s property and confidential information and not destroy confidential information. The court found those allegations sufficient to proceed. However, the Agreement allowed defendants to retain a copy of the work for their legal files, and Maxim did not allege that Kunsky or UES had disclosed the information. The motion was granted as to the part of the claim concerning use and disclosure of information and denied as to the other aspects of the breach-of-contract claim.
Conversion
Conversion is the wrongful deprivation of another person’s property interest. The court granted the motion as to Maxim’s conversion claim concerning the laptop and cellphone because those items had been returned by the preliminary-injunction hearing. It also granted the motion as to conversion based on lost information and data because Minnesota law does not extend conversion to alleged misappropriation of intangible property interests. The motion was denied as to the other computer, office furniture, and equipment that Kunsky allegedly had not returned.
Breach of duty of loyalty
The court held that an employee’s duty of loyalty to an employer ends when the employment relationship ends. It therefore granted the motion as to the lost devices and files, which concerned conduct after Kunsky’s termination. The court denied the motion as to the alleged unauthorized credit-card purchases because Maxim plausibly alleged that the purchases occurred during Kunsky’s employment and breached duties owed to Maxim. The opinion states that Maxim alleged more than 50 fuel purchases for Kunsky’s personal vehicle, $2,784.31 in payloader tractor parts for his own tractor, and purchases of machine parts and tools for his shop.
Computer Fraud and Abuse Act
Maxim alleged that Kunsky intentionally accessed and obtained information from Maxim’s laptop and iPhone without authority after the employment relationship ended. The court found the claim plausible because Maxim alleged data loss within one year, more than $5,000 in damages, and costs for forensic analysis of the returned devices. The motion was not granted as to this claim.
Unjust enrichment
Maxim alleged that Kunsky received a benefit through approximately $16,000 in unauthorized credit-card purchases and by retaining computer equipment and office furniture. Although equitable relief generally is unavailable when a valid contract governs the parties’ rights, the court held that Maxim could plead unjust enrichment as an alternative claim. The motion was denied as to this claim.
Civil theft
Maxim alleged that Kunsky improperly used Maxim’s credit card and retained computer equipment and office furniture. The court held that Maxim plausibly alleged an initial wrongful act because the credit-card purchases were alleged to be unauthorized and Kunsky allegedly kept the equipment after Maxim requested its return. The court also rejected the challenge based on conduct in Idaho because defendants offered no on-point authority and the amended complaint alleged facts supporting application of Minnesota law. The motion was denied as to the civil-theft claim.
Disposition
The court ordered that defendants’ motion to dismiss was granted in part and denied in part.
Read the full 9-page opinion on CourtListener, the free public archive maintained by the Free Law Project.