Lodging Solutions, LLC v. Miller

Background

Lodging Solutions, LLC, doing business as Accommodations Plus International, sued former employee Robert Miller, Corporate Lodging Consultants, Inc., Fleetcor Technologies, Inc., and Travelliance, Inc. The plaintiff provides crew accommodations and operates a customized technology platform containing information about client contracts, client requirements, vendor arrangements, and financial matters. The plaintiff alleged that much of this information was confidential and protected by nondisclosure agreements and other safeguards.

Miller had been the plaintiff’s Vice President of Business Development and allegedly had broad access to its confidential information. His employment agreement included confidentiality obligations and a one-year restriction concerning employment or other involvement with three specifically named competitors: Hotel Connections, Travelliance, and TLX. The plaintiff alleged that Miller accessed confidential information shortly before resigning, deleted files from an external hard drive, and then went to work for a Fleetcor subsidiary. The plaintiff also alleged that Fleetcor had made a statement about abiding by its agreements while it was soliciting or hiring Miller.

Defendants moved to dismiss the amended complaint for failure to state a claim under Rule 12(b)(6). At this stage, the court treated the complaint’s factual allegations as true and drew reasonable inferences in the plaintiff’s favor, but required allegations sufficient to make each claim plausible rather than merely speculative.

Claims That Survived

The court held that the plaintiff plausibly stated a claim under the federal Defend Trade Secrets Act. The alleged trade secrets included contract details, customer requirements, vendor arrangements, and financial information. The plaintiff alleged that the information was not publicly available and that it used measures such as limited access, employee nondisclosure agreements, and data-access audit trails to protect it.

The court also found plausible the allegation that Miller misappropriated trade secrets by acquiring them improperly. The alleged repeated access to specific information, deletion of files, stated intent to wipe files, and access to information unrelated to Miller’s work duties supported an inference that he may have copied information for purposes unrelated to his employment. The court therefore denied the motion to dismiss Count 1, the federal trade-secret claim.

The court also denied the motion to dismiss Count 8, the New York common-law unfair-competition claim. The plaintiff alleged that defendants misrepresented whether they were soliciting Miller and that the plaintiff would have taken additional protective steps had defendants told the truth. The court held that these allegations plausibly supported bad faith. It stated that further factual development would determine whether the plaintiff was ultimately correct.

Claims Dismissed

The court dismissed Counts 3 and 4, which alleged common-law misappropriation and breach of the duty of loyalty. Unlike the federal trade-secret claim, these claims required allegations that Miller actually used or disseminated the information. The court found that the amended complaint did not adequately allege such use or dissemination.

The court dismissed Count 2, the alleged breach of Miller’s employment contract. The restrictive covenant identified three specific competing companies, and the complaint did not allege that Miller worked for or was associated with one of them. The court concluded that working for Fleetcor or its CLC subsidiary did not, as pleaded, establish an association with Travelliance, and the covenant did not extend to parents or affiliates of the named companies. The court also found that the alleged failures to provide notices and a copy of the agreement were not supported by a damages theory pleaded in the amended complaint.

The court dismissed Count 5, the tortious-interference claim against the corporate defendants, because that claim required an actual breach of Miller’s employment contract and resulting damages, and the plaintiff had not adequately alleged the underlying breach.

The court dismissed Count 6, alleging breach of the no-poaching provision in the nondisclosure agreement. The court assumed for purposes of its analysis that the plaintiff had alleged a breach, but held that the provision was unenforceable on the facts pleaded because it was unreasonable. The plaintiff did not allege a connection between information disclosed during the acquisition negotiations and Miller’s hiring. Enforcing the provision therefore would not serve the stated purpose of protecting information disclosed during those negotiations.

The court dismissed Count 7, negligent misrepresentation, because the plaintiff did not plausibly allege the special relationship of trust or confidence required under New York law. The length of the acquisition negotiations and the existence of the nondisclosure agreement did not establish such a relationship independent of the contract.

The court dismissed Count 9, promissory estoppel, because it duplicated the contract claim and could not be used to revive a claim based on an unenforceable restrictive covenant. It also dismissed Count 10, alleging breach of the implied covenant of good faith and fair dealing, because the no-hire provision was unenforceable and defendants therefore had not deprived the plaintiff of a contractual benefit to which it was entitled.

Disposition

Judge Alison J. Nathan granted defendants’ motion to dismiss in part and denied it in part. The motion was granted with respect to Counts 2, 3, 4, 5, 6, 7, 9, and 10, and denied with respect to Count 1, the federal trade-secret claim, and Count 8, the unfair-competition claim. The court stated that the initial pretrial conference would be rescheduled by separate order.