TransPerfect Global, Inc. v. Lionbridge Technologies, Inc.

Background

TransPerfect provides translation, website-localization, and litigation-support services. The Delaware Court of Chancery ordered a process for selling the company. H.I.G. participated in that auction and had acquired Lionbridge, which TransPerfect described as its largest competitor.

H.I.G. signed a confidentiality agreement limiting its use of information received from TransPerfect to evaluating a possible purchase of TransPerfect. H.I.G. and the auction process also involved a restricted “Clean Room” containing particularly sensitive information. TransPerfect alleged that H.I.G. and Lionbridge accessed confidential information through the auction, including client information, revenue, pricing methods, and translator-pay rates. It further alleged that Lionbridge used the information to restructure its business, target TransPerfect’s major clients, undercut TransPerfect’s prices, and evaluate bids through a “Deal Desk.”

Claims and legal standard

TransPerfect’s amended complaint asserted claims under the federal Defend Trade Secrets Act, or DTSA; the federal Computer Fraud and Abuse Act, or CFAA; and state law for trade-secret misappropriation, unfair competition, unjust enrichment, breach of contract, and fraud.

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not allege enough facts to state a legally valid claim. For this motion, the court accepted the complaint’s factual allegations as true and drew reasonable inferences in TransPerfect’s favor. The court evaluated whether the allegations made the claims plausible, not whether TransPerfect had already proved them.

DTSA claims

The court held that TransPerfect adequately pleaded its DTSA claims. The complaint identified sixteen categories of alleged trade secrets, including client lists and related revenue, translation rates, pricing methodology, and translator rates. The court found sufficient allegations that TransPerfect took reasonable steps to keep the information secret, including using a password-protected network, limiting access, and enforcing confidentiality agreements.

The court also found that TransPerfect adequately alleged misappropriation. The confidentiality agreement limited H.I.G.’s use of the information to evaluating a potential purchase. TransPerfect alleged that H.I.G. disclosed trade secrets to Lionbridge’s sales team and “Deal Desk” for competitive purposes. The court concluded that these allegations plausibly described acquisition or use of trade secrets under circumstances creating a duty to maintain secrecy.

CFAA claims

The court granted the motion to dismiss the CFAA claims. Under the Second Circuit’s interpretation of the statute, a person exceeds authorized computer access only by obtaining or altering information that the person was not authorized to access for any purpose, while using a computer the person was otherwise authorized to access.

The court found that TransPerfect alleged the defendants were given access to the Data Room and misused that access, not that they entered files they were unauthorized to access. The complaint did not allege that the defendants hacked into TransPerfect’s files. The court also concluded that any earlier understanding limiting H.I.G.’s access had been superseded by the confidentiality agreement, and the complaint did not allege that the defendants exceeded the access permitted by that agreement. The allegation that defendants accessed documents through the general Data Room that should have been placed in the Clean Room likewise described overly broad permission by the Data Room administrator, not access beyond the defendants’ authorization.

Choice of law and state claims

The defendants argued that Delaware law applied to TransPerfect’s state claims and that the Delaware Uniform Trade Secrets Act preempted certain common-law claims. The court rejected that argument at the pleading stage. It determined that the confidentiality agreement’s Delaware choice-of-law clause governed the agreement but did not extend to the related tort claims. Because New York has no comparable trade-secret preemption statute, the court held that there was no basis at this stage to dismiss the common-law claims on Delaware preemption grounds.

The court stated that New York law appeared to apply because the alleged conduct occurred in New York, including through TransPerfect’s principal place of business, Lionbridge management, Credit Suisse’s New York office, and interviews at TransPerfect’s New York offices. The court did not conclusively determine the governing state law at that stage. It also rejected the defendants’ argument that the Delaware Chancery Court’s oversight of the auction gave Delaware the greater legal interest.

Other claims

The court denied the motion to dismiss TransPerfect’s unjust-enrichment claim against Lionbridge. TransPerfect brought that claim only against Lionbridge, which was not a signatory to the confidentiality agreement. Under the court’s description of New York law, the existence of a related contract does not automatically bar an unjust-enrichment claim against a non-signatory.

The court also denied the motion to dismiss the breach-of-contract claim against H.I.G. TransPerfect alleged that H.I.G. disclosed confidential information to Lionbridge for competitive purposes and circumvented the Clean Room restrictions by downloading sensitive documents available through the regular Data Room. The court found those allegations sufficient to proceed.

Finally, the court denied the motion to dismiss the fraud claim. TransPerfect alleged that H.I.G. submitted bids during the auction that it did not intend to pay unless a noncompetition restriction was imposed on Shawe, and that H.I.G. used those bids to obtain access to TransPerfect’s trade secrets. The court found that the complaint identified the alleged fraudulent statements and omissions, the speaker, the location, and why the statements were fraudulent. It also found that the allegations of fraudulent intent were sufficient at this stage; contrary facts raised issues for a later stage rather than requiring dismissal.

Disposition

Judge Denise Cote granted the defendants’ August 12, 2019 motion to dismiss as to TransPerfect’s CFAA claims and otherwise denied the motion. The order allowed the remaining claims addressed in the opinion to continue; it did not determine ultimate liability or damages.