Altman Stage Lighting, Inc. v. Smith

Background

Altman Stage Lighting, Inc. alleged that it developed an LED grow light for agricultural products. Julie Smith was hired as the company’s General Manager and oversaw the engineering department and the employee working on the grow light. Altman alleged that Smith misrepresented the project’s progress, obtained the prototype at her home, told an employee that the project was separate from Altman Stage Lighting, and later worked for an OSRAM subsidiary. Altman also alleged that an OSRAM subsidiary later filed a patent application for a horticultural lighting fixture with characteristics and specifications similar to the grow light.

Altman’s complaint asserted a claim under the Defend Trade Secrets Act and common-law claims for breach of the duty of fidelity, fraudulent misrepresentation and concealment, and usurpation of a corporate opportunity. Smith moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), which tests whether the pleadings state a legally sufficient claim. Altman moved for leave to amend its complaint. The court evaluated the proposed amended complaint under the same basic plausibility standard used for a motion to dismiss for failure to state a claim, accepting its well-pleaded factual allegations as true for purposes of the motions.

Trade-secret claim

The court held that the proposed amended complaint identified the grow light prototype and related information, including technical specifications, prototype design, competition analysis, and marketing plans and strategy. But the complaint did not adequately allege that Altman took reasonable measures to keep the information secret, an element of a trade secret under the Act. The complaint alleged that employees were told not to discuss the project, but it did not allege security measures or confidentiality agreements. The court found that this instruction, without more, was insufficient.

The court therefore held that the proposed amendment was futile as to the Defend Trade Secrets Act claim and granted Smith’s motion for judgment on the pleadings with respect to that claim.

Common-law claims

For the breach-of-fidelity claim, the court held that Altman plausibly alleged Smith’s self-dealing based on allegations that she had access to the grow light, misrepresented its development, directed that the prototype be delivered to her home, kept its existence secret, and may have shared information to obtain employment at an OSRAM subsidiary. The court denied Smith’s motion for judgment on the pleadings as to that claim.

For fraudulent misrepresentation and concealment, the court found that Altman plausibly alleged that Smith’s statements about the project induced Altman to write up and terminate Jeffrey Maddox. The court rejected Smith’s argument at this stage that the alleged damages were only lost profits or were not sufficiently connected to the alleged misrepresentations. The court denied Smith’s motion for judgment on the pleadings as to these claims.

For usurpation of a corporate opportunity, the court found that Altman plausibly alleged a tangible expectancy in the grow light because the company had invested time, effort, resources, and planning in its development and was preparing to market it. The court also found plausible the allegation that Smith diverted the opportunity to obtain new employment. It denied Smith’s motion for judgment on the pleadings as to this claim.

Disposition

Judge Nelson S. Roman’s conclusion states that Smith’s motion for judgment on the pleadings was granted in part and denied in part, and Altman’s motion for leave to amend the complaint was granted in part and denied in part. Altman’s surviving claims were the common-law claims for breach of the duty of fidelity, fraudulent misrepresentation and concealment, and usurpation of a corporate opportunity. The court granted Altman leave to file an amended version of its proposed amended complaint by March 11, 2022, and directed Smith to answer or otherwise respond by March 28, 2022.