ImageTrend, Inc. v. Locality Media, Inc.

Background

ImageTrend alleged that Locality Media, doing business as First Due, and several current or former employees obtained or misused ImageTrend’s confidential, nonpublic, and proprietary information. The alleged conduct included access to ImageTrend’s software platform and information through accounts associated with the Staunton Fire Department, as well as alleged copying, retention, disclosure, or use of information by former ImageTrend employees.

The amended complaint asserted nine counts: misappropriation of trade secrets under the Minnesota Uniform Trade Secrets Act and the federal Defend Trade Secrets Act; breach of fiduciary duty; unjust enrichment; civil conspiracy; civil theft; two forms of tortious interference; and corporate defamation. Defendants moved to dismiss every count. The court applied the pleading standard requiring enough factual allegations to make a claim plausible, while accepting well-pleaded factual allegations as true for purposes of the motion.

Anti-SLAPP Argument

The court denied the motion to dismiss based on New York’s anti-strategic-litigation-against-public-participation law. Assuming without deciding that New York law applied, the court held that the statute did not create a defense that barred ImageTrend’s claims. Instead, the statute could allow defendants to seek damages through a counterclaim for maintaining a baseless lawsuit.

Trade-Secret Claims—Counts I and II

The court granted the motion as to the claims under the Minnesota Uniform Trade Secrets Act and the federal Defend Trade Secrets Act and dismissed both claims without prejudice. The court explained that ImageTrend needed to plausibly allege that the information was not generally known or readily ascertainable, had economic value because it was secret, and was protected through reasonable secrecy measures. It also needed to plausibly connect specific trade secrets to specific acts of misappropriation.

The court found ImageTrend’s broad references to confidential or proprietary information insufficient. The more specific allegations—concerning customer lists, strategic planning information, project implementation information, meeting notes, software-project details, backup data, programming information, and database scripts—still did not adequately allege the information’s value from secrecy, its non-ascertainability, or the measures used to protect it. The court also found that the complaint did not plausibly connect particular trade secrets to particular acts of improper acquisition, use, or disclosure.

Unjust Enrichment, Civil Theft, and Tortious Interference—Counts IV, VI, and VII

The court denied the motion to dismiss Counts IV, VI, and VII. Defendants argued that the Minnesota Uniform Trade Secrets Act displaced these claims. The court rejected dismissal on that basis because the claims were pleaded in the alternative and included allegations broader than trade-secret misappropriation, including alleged misuse of ImageTrend’s software and possible violations of the Health Insurance Portability and Accountability Act.

The court also held that, although minimal, ImageTrend’s allegations plausibly addressed the financial benefits First Due allegedly obtained and the harm ImageTrend allegedly suffered. Those allegations were enough at the pleading stage for the unjust-enrichment and tortious-interference claims to proceed.

Breach of Fiduciary Duty—Count III

The court denied the motion to dismiss Count III. ImageTrend alleged that Dutcher, Hulsether, and Koistinen, while still employed by ImageTrend, accessed, transferred, disclosed, or retained confidential and proprietary information and engaged in conduct connected to First Due. The court held that these allegations and reasonable inferences, if proven, could establish breaches of duties of loyalty and confidentiality, even if the information did not qualify as a trade secret.

Civil Conspiracy—Count V

The court granted the motion to dismiss Count V and dismissed the claim without prejudice. ImageTrend alleged a campaign to recruit its employees and steal trade-secret information, but the court held that persuading at-will employees to change jobs was not itself unlawful. The complaint also did not plausibly allege that all six defendants agreed to engage in tortious conduct and took coordinated action to accomplish that purpose.

Tortious Interference with Prospective Contractual Relationships—Count VIII

The court granted the motion to dismiss Count VIII. ImageTrend sought voluntary dismissal of this claim in its response to the motion, and the court granted defendants’ motion as to Count VIII.

Corporate Defamation—Count IX

The court granted the motion to dismiss Count IX and dismissed the claim with prejudice. ImageTrend based the claim on a text message from Hulsether to two ImageTrend clients stating, “Imagetrend is suing me.” The court held that the statement was true on its face and that ImageTrend had not plausibly alleged a false or defamatory implication created by omitted or juxtaposed facts. To the extent the message could imply that the lawsuit was improper, the court held that such an implication would be an opinion.

Personal Jurisdiction over Richard French

The court granted the motion to dismiss Richard French from the lawsuit for lack of personal jurisdiction and dismissed ImageTrend’s claims against him without prejudice. The only remaining claim against French was civil theft. The court noted that French was a Virginia resident, had visited Minnesota about four times for ImageTrend conferences, and had not visited since 2019.

The court held that the complaint did not adequately allege that French intentionally engaged in the alleged theft, expressly aimed his conduct at Minnesota, or knew that harm would likely be felt there. The fact that ImageTrend was based in Minnesota was not enough, and the complaint did not allege that French knew the software platform was physically located in Minnesota or acted for the purpose of causing harm there.

Disposition

The court ordered that defendants’ motion to dismiss was granted in part and denied in part. The motion was granted as to Counts I, II, V, and VIII, which were dismissed without prejudice; granted as to Count IX, which was dismissed with prejudice; and granted as to Richard French, whose claims were dismissed without prejudice for lack of personal jurisdiction. The motion was denied in all other respects. The earlier motion to dismiss the original complaint was denied as moot after ImageTrend filed its amended complaint.