Mason v. Amtrust Financial Services, Inc.

Background

Eugene Mason alleged that he developed a Microsoft Excel pricing model between 1998 and 2010 for calculating insurance premiums. He claimed that, before AmTrust hired him in September 2013, he reached an understanding with AmTrust executives that AmTrust’s use of the model would be conditioned on his employment. The written employment agreement did not mention the pricing model. After Mason sent the model to David Lewis by email, Mason alleged that he took steps to protect his ownership interest, including calling it personal and proprietary, seeking to prevent its storage on AmTrust’s central system, and restricting access by auditors, vendors, and team members.

AmTrust terminated Mason’s employment on July 17, 2019. Mason then demanded that AmTrust stop using the pricing model and filed this action. His amended complaint asserted a claim under the federal Defend Trade Secrets Act against AmTrust and Lewis, along with New York claims against AmTrust for trade-secret misappropriation, breach of implied license, unjust enrichment, and breach of contract. AmTrust moved to dismiss all claims except the breach-of-contract claim, and Lewis moved to dismiss the federal trade-secret claim.

Rule 12(b)(6) Standard

The court applied the standard for a motion to dismiss for failure to state a claim. It accepted the complaint’s factual allegations as true, drew reasonable inferences for Mason, and considered documents integral to the complaint. Mason nevertheless had to allege enough facts to make each challenged claim plausible rather than merely possible.

Federal Trade-Secret Claim

The Defend Trade Secrets Act protects information that has independent economic value from not being generally known or readily ascertainable, when its owner has taken reasonable measures to keep it secret. The court explained that Mason had to plausibly allege that the pricing model was a trade secret.

The court held that Mason’s alleged secrecy measures were not reasonable as a matter of law. The alleged agreement limiting AmTrust’s use of the model was not described with particularity in the employment agreement or in a separate licensing agreement. Mason also did not obtain a nondisclosure agreement preventing AmTrust from sharing the model with third parties, and he emailed the model to Lewis without marking it confidential or proprietary. The court therefore concluded that Mason failed to state a claim under the federal statute and did not reach the defendants’ separate argument that Mason failed to adequately allege misappropriation.

New York Trade-Secret Claim

New York law likewise requires a plaintiff to possess a trade secret and to show use in breach of an agreement, confidence, or duty, or through improper means. It also requires reasonable measures to protect secrecy. For the same reasons given for the federal claim, the court held that Mason had not sufficiently pleaded a New York trade-secret claim.

Implied-License and Implied-Contract Theories

The court stated that an implied license is generally a defense to copyright infringement and that this case was not a copyright case. It therefore found that the law of implied license had no relevance to Mason’s claim.

The court also considered whether Mason had pleaded a breach of implied contract. It held that he had not alleged conduct by AmTrust supporting a reasonable inference that AmTrust agreed to use the pricing model only while Mason remained employed. In addition, the written employment agreement governed the terms and conditions of Mason’s employment and compensation, but did not mention the pricing model. Because an express contract covered the relevant subject matter, the court held that Mason could not rely on an implied contract concerning that same subject matter.

Unjust Enrichment

Under New York law, unjust enrichment is a quasi-contract theory that applies when a defendant was enriched at the plaintiff’s expense and it would be unfair for the defendant to retain the benefit. The court held that the written employment agreement governed Mason’s employment and compensation and therefore precluded recovery under unjust enrichment. The court also noted that Mason had pleaded a breach-of-contract claim.

Disposition

In Mason v. Amtrust Financial Services, Inc., Judge Denise Cote granted the defendants’ November 7, 2019 motion to dismiss. The court dismissed the Defend Trade Secrets Act claim against Lewis and dismissed Counts One, Two, Three, and Four of the amended complaint against AmTrust. The sole remaining claim was Mason’s breach-of-contract claim against AmTrust. The opinion does not add a with-prejudice or without-prejudice qualifier to these dismissals.