AT&T Enterprises, LLC v. Atos IT Solutions and Services, Inc.

Background

AT&T Corp. sued Atos IT Solutions and Services, Inc. for breach of contract. Atos answered and brought counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory judgment. Atos later sought permission to add seven counterclaims based on documents produced during discovery:

- fraudulent inducement; - fraudulent concealment; - aiding and abetting breach of fiduciary duty; - violation of the Defend Trade Secrets Act; - unfair competition; - tortious interference with contract; and - civil conspiracy.

The dispute involved a 2019 contract under which AT&T was to assume control over network services for some Atos customers. Atos alleged that AT&T concealed information about the pricing and scope of the services and later used a “mole” inside Atos to obtain confidential information about the parties’ contract dispute and promote AT&T’s interests within Atos.

The scheduling order required motions to amend by November 25, 2021. Atos filed its motion on April 10, 2023. The court therefore applied the stricter rule requiring Atos to show good cause and diligence, while also considering whether the proposed claims were futile, were brought in bad faith, or would unfairly prejudice AT&T.

Court’s analysis

The court found that Atos was not diligent. Atos had received the relevant document production about 14 months before filing its motion and waited about four months after it says it learned of the “mole” before alerting the court that it intended to seek amendment. The court concluded that Atos should have reviewed the documents more promptly.

Despite that lack of diligence, the court exercised its discretion to consider the other amendment factors. It found no evidence that Atos acted in bad faith. It also found no undue prejudice to AT&T because depositions, expert reports, and summary-judgment motions had not occurred, and AT&T had not identified specific additional discovery it would need.

The court applied the standard used to decide whether a claim would fail on a motion to dismiss for failure to state a claim. It concluded that the proposed fraudulent-inducement claim was futile because it duplicated Atos’s contract and implied-covenant claims. The alleged pricing and service-scope representations concerned AT&T’s promised performance under the contract rather than a separate duty or collateral misrepresentation. The court also held that the Master Agreement’s merger provision barred reliance on the prior proposals underlying the claim.

The court rejected the pricing-and-scope theory of fraudulent concealment for similar reasons, treating it as another version of the failed fraudulent-inducement theory. It permitted the separate fraudulent-concealment theory based on AT&T’s alleged concealment of its use of the “mole,” because that alleged conduct was collateral to the contract and was not addressed by the contract’s pricing and scope provisions.

The court also found the proposed claims for aiding and abetting breach of fiduciary duty, violation of the Defend Trade Secrets Act, unfair competition, and tortious interference with contract sufficiently plausible to proceed as amended. At this stage, the allegations supported reasonable inferences that AT&T actively participated in obtaining Atos’s confidential information, that the information could qualify as protected trade-secret information, that AT&T acted in bad faith for unfair-competition purposes, and that AT&T knowingly encouraged a breach of the “mole’s” nondisclosure obligations.

The civil-conspiracy claim was rejected as futile because it added no allegations beyond those supporting the other proposed tort claims. The court treated it as duplicative rather than as an independent claim.

Disposition

The court granted in part and denied in part Atos’s motion for leave to amend. It granted permission to add claims for fraudulent concealment based on AT&T’s alleged concealment of its use of the “mole,” aiding and abetting breach of fiduciary duty, violation of the Defend Trade Secrets Act, unfair competition, and tortious interference with contract. It denied permission to add fraudulent inducement, fraudulent concealment based on AT&T’s alleged concealment of its understanding of the pricing and scope requirements, and civil conspiracy.

The court ordered Atos to file its amended counterclaims within seven days and ordered the parties to meet and confer and submit a proposed schedule for completing fact and expert discovery within 14 days.