Locus Technologies v. Honeywell International Inc.

Background

Locus Technologies brought claims against Honeywell International Inc. for breach of contract, account stated, and misappropriation of trade secrets. The claims arose from a business relationship in which Honeywell used Locus’s software under several agreements: a Software License Agreement and Order Form, a separate agreement concerning the Remediation Information Management System (RIMS), and a nondisclosure agreement.

Locus alleged that Honeywell prematurely ended its ePortal and Environmental Information Management subscriptions, failed to pay or paid late on invoices, and disclosed confidential information in a request for proposals for replacement software. The disputed invoices included charges for ePortal and EIM services, an EIM termination fee, and RIMS services. Locus also alleged that Honeywell disclosed confidential pricing, software, data, and related information to competitors.

Honeywell moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a legal claim. Magistrate Judge Katharine H. Parker recommended denying the motion except as to Locus’s account-stated claim based on the RIMS invoices. Honeywell objected to most of that recommendation.

Court’s analysis

Judge Gardephe overruled Honeywell’s objections and adopted the recommendation. At the motion-to-dismiss stage, the court accepted the complaint’s factual allegations as true and considered whether Locus had plausibly stated its claims.

Breach of contract. The court denied dismissal of Locus’s breach-of-contract claim. For the ePortal and EIM invoices, the court held that Locus plausibly alleged that the Order Form continued to govern the parties’ relationship after its stated December 31, 2015 end date. Under the Delaware law discussed in the opinion, the parties’ course of conduct—including continued use of the Order Form’s pricing and payment terms—could have modified the written expiration date. The court also held that Locus plausibly alleged breaches involving the late-paid EIM First Half Invoice, the unpaid EIM Second Half Invoice, the EIM Termination Fee Invoice, and the ePortal Invoice.

The court also denied dismissal of Locus’s claims concerning unpaid and allegedly untimely-paid RIMS invoices. Honeywell argued that the parties had settled the unpaid invoices and that the late payments complied with the RIMS Agreement. The court declined to resolve those issues on a motion to dismiss. It found that the alleged settlement was not part of, incorporated into, or integral to the complaint, and that Honeywell had not shown that the RIMS payment claims were barred as a matter of law.

Account stated. An account-stated claim concerns an alleged agreement reflected by an account or invoices. The court allowed Locus’s account-stated claim to proceed as to the EIM and ePortal invoices. It rejected Honeywell’s argument that this claim duplicated the breach-of-contract claim, noting that the contract claim allowed Locus to seek attorneys’ fees, while an account-stated claim ordinarily did not.

The court adopted the recommendation to dismiss Locus’s account-stated claim as to the RIMS invoices. Neither party objected to that part of the recommendation, and the court found no error in it.

Trade-secret claim. The court denied dismissal of Locus’s misappropriation-of-trade-secrets claim under the Delaware Uniform Trade Secrets Act. Locus alleged that it disclosed confidential engineering, financial, software, pricing, and related information to Honeywell under a nondisclosure agreement; that Honeywell was required to protect the information; and that Honeywell later disclosed it in a request for proposals sent to competitors. The court found these allegations sufficient to state a claim and did not find that the License Agreement’s damages limitation clearly barred the claim at this stage.

Disposition

Judge Gardephe overruled Honeywell’s objections, adopted the magistrate judge’s Report and Recommendation in its entirety, and denied Honeywell’s motion to dismiss except as to the RIMS invoices that were the subject of Locus’s account-stated claim. The opinion did not add a prejudice designation to that ruling. The court also scheduled a conference for November 10, 2022.