Opinion · District Court, N.D. Ohio
FirstEnergy Corp. v. Pircio
FirstEnergy Corp. v. Pircio, No. 1:20-cv-01966, UP10369275 (District Court, N.D. Ohio Mar. 8, 2021)
- Type
- Opinion
- Court
- District Court, N.D. Ohio
- Jurisdiction
- Ohio
- Date
- 2021-03-08
- Topic
- antitrust
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION FIRSTENERGY CORP., et al., ) Case No. 1:20-cv-1966 ) Plaintiffs and ) Judge J. Philip Calabrese Counterclaim Defendants, ) ) Magistrate Judge v. ) Jonathan D. Greenberg ) MICHAEL PIRCIO, ) ) Defendant and ) Counterclaim Plaintiff. ) ) OPINION AND ORDER Since the summer of 2020, the indictment of then-Speaker of the Ohio House Larry Householder has rocked Ohio politics. Given the nature of the illegal activity at issue, those allegations have spilled over into certain corners of the business community as well. This case arises as a result of that indictment.
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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
FIRSTENERGY CORP., et al., ) Case No. 1:20-cv-1966
)
Plaintiffs and ) Judge J. Philip Calabrese
Counterclaim Defendants, )
) Magistrate Judge
v. ) Jonathan D. Greenberg
)
MICHAEL PIRCIO, )
)
Defendant and )
Counterclaim Plaintiff. )
)
OPINION AND ORDER
Since the summer of 2020, the indictment of then-Speaker of the Ohio House
Larry Householder has rocked Ohio politics. Given the nature of the illegal activity
at issue, those allegations have spilled over into certain corners of the business
community as well. This case arises as a result of that indictment. When the news
broke, Michael Pircio worked for Clearsulting LLC, a company that provided outside
audit services to FirstEnergy Corp., a former subsidiary of which was implicated in
the scandal. Upon hearing the news, Mr. Pircio downloaded files from FirstEnergy
through a Clearsulting shared workspace and provided them to a lawyer, who turned
them over to the Securities and Exchange Commission, which apparently opened an
investigation.
According to the complaint, Mr. Pircio’s actions came after Clearsulting
terminated him. Clearsulting and FirstEnergy brought suit under federal and State
trade-secret laws, among others. For his part, Mr. Pircio counterclaimed against his
former employer for wrongful termination and claims immunity against liability as a
whistleblower under federal law. In response to the parties’ respective motions to
dismiss, and following a hearing on the record on the motions on March 1, 2021, the
Court concludes that Plaintiffs fail to state a claim against Mr. Pircio under federal
law because the Defend Trade Secrets Act preempts Plaintiffs’ trade-secret claims
and the federal Computer Fraud and Abuse Act does not reach the conduct allegedly
at issue. Because these claims form the basis of the Court’s jurisdiction, the Court
declines to exercise jurisdiction over the parties’ claims against one another under
State law.
STATEMENT OF FACTS
On Mr. Pircio’s motion to dismiss, the Court takes the following facts Plaintiffs
allege as true.
Since June 2019, Clearsulting LLC provided consulting services to FirstEnergy
Corp. relating to compliance with provisions of the Sarbanes-Oxley Act. (ECF No. 1,
¶¶ 11 & 12, PageID #3.) To protect its proprietary and confidential information,
FirstEnergy took precautions, including obligating Clearsulting to guard against
unauthorized use of or access to FirstEnergy’s confidential information and
prohibiting Clearsulting employees from copying FirstEnergy’s confidential
information without FirstEnergy’s prior approval. (Id., ¶ 13.) For its part,
Clearsulting took measures with its own employees to protect FirstEnergy’s
confidential and proprietary information. (Id., ¶¶ 14 & 15, PageID #4.) For example,
the employment agreements Clearsulting used with its own employees acknowledged
2
the confidentiality of FirstEnergy’s information and limited access to that
information. (Id., ¶14.) Further, Clearsulting maintains a highly confidential
ShareFile work site with FirstEnergy with password protection. (Id., ¶ 15.)
Michael Pircio began working with Clearsulting on March 16, 2020. (Id., ¶ 16.)
His worked involved “preparing information technology (‘IT’) design assessment
documents and conducting testing on IT controls at FirstEnergy.” (Id., ¶ 17.) Before
commencing his employment with Clearsulting, Mr. Pircio signed an employment
agreement prohibiting the disclosure of confidential information. (Id., ¶¶ 18 & 19;
see also ECF No. 1-1, PageID #17.) Among other things, that agreement broadly
prohibited unauthorized disclosure of confidential information:
Employee shall not, at any time, either during or subsequent to their
[sic] employment with Clearsulting, directly or indirectly, appropriate,
disclose, or divulge any Confidential Information to any person not then
employed by Clearsulting.
(ECF No. 1, ¶ 19, PageID #4; ECF No. 1-1, § 2.1.3, PageID #17.) Further, the
agreement limited access to the confidential information of Clearsulting’s clients to
that which is necessary to perform one’s job. (ECF No. 1, ¶ 22, PageID #5; ECF
No. 1-1, § 2.1.2, PageID #17.) Additionally, the agreement makes clear that all
confidential information remains the property of Clearsulting, and the employee
must return that information to Clearsulting on request or termination of
employment. (ECF No. 1, ¶ 22, PageID #5; ECF No. 1-1, § 2.1.4, PageID #17–18.)
On July 30, 2020, Clearsulting terminated Mr. Pircio’s employment. (ECF
No. 1, ¶ 24, PageID #6.) After his termination, Plaintiffs allege that Mr. Pircio
3
accessed Clearsulting’s computer, without authorization, and downloaded
confidential information belonging to FirstEnergy. (Id., ¶ 26.) Based on its
investigation, Clearsulting alleges that Mr. Pircio downloaded 57 unique files of
FirstEnergy’s confidential information relating to internal controls, Sarbanes-Oxley
compliance, and other sensitive matters. (Id., ¶¶ 27–28.) Plaintiffs allege that
Mr. Pircio downloaded confidential information unrelated to the work to which he
was assigned while at Clearsulting. (Id., ¶17, PageID #4.) Clearsulting advised
FirstEnergy of the situation, and FirstEnergy launched its own investigation. (Id.,
¶¶ 31 & 32, PageID #7.)
Clearsulting demanded that Mr. Pircio delete any confidential information he
took from the company in an email dated August 20, 2020. (ECF No. 1, ¶ 29, PageID
#7; ECF No. 1-2, PageID #23.) The next day, counsel for Mr. Pircio responded,
confirming that his client shared confidential documents with him and that he in turn
provided them to “a government agency.” (ECF No. 1, ¶ 30, PageID #7; ECF No. 1-3,
PageID #24.) Mr. Pircio’s counsel also advised that Mr. Pircio “has not shared any
company information or documents with anyone other than his counsel and, through
his counsel, with government officials.” (ECF No. 1-3, PageID #24.)
STATEMENT OF THE CASE
A. Plaintiffs Claims Against Mr. Pircio
Based on these allegations, Plaintiffs bring six claims against Mr. Pircio:
4
1. Clearsulting alleges breach of contract against Mr. Pircio, specifically
that he violated his contractual confidentiality obligations (Count I). (ECF No. 1,
¶¶ 35–40, PageID #7–8.)
2. Plaintiffs allege that Mr. Pircio violated the federal Computer Fraud
and Abuse Act (Count II). (Id., ¶¶ 41–47, PageID #8–9.)
3. Plaintiffs seek civil recovery for criminal acts under Ohio law
(Count III). (Id., ¶¶ 48–52, PageID # 9–10.)
4. FirstEnergy brings a claim for misappropriation of trade secrets under
the federal Defend Trade Secrets Act against Mr. Pircio (Count IV). (Id., ¶¶ 53–64,
PageID #10–11.)
5. FirstEnergy asserts a claim for misappropriation of trade secrets under
Ohio’s Uniform Trade Secret Act against Mr. Pircio (Count V). (Id., ¶¶ 65–77, PageID
#11–13.)
6. Plaintiffs seek a declaratory judgment that Mr. Pircio may not rely on
18 U.S.C. § 1833
(b)(1) to avoid liability (Count VI). (Id., ¶¶ 78–85, PageID #13–14.)
In briefing, Plaintiffs do not oppose dismissal of their declaratory judgment count.
(ECF No. 19, PageID #204; ECF No. 21, PageID #254–55.)
B. Mr. Pircio’s Counterclaims Against Clearsulting
Mr. Pircio moves to dismiss each of the claims Plaintiffs assert against him.
(ECF No. 15.) For his part, Mr. Pircio brings two counterclaims against Clearsulting:
1. Mr. Pircio claims Clearsulting violated the Ohio Whistleblower Act
(Count I). (ECF No. 14, ¶¶ 39–54, PageID #122–25.)
5
2. Mr. Pircio alleges wrongful discharge in violation of Ohio public policy
(Count II). (Id., ¶¶ 55–63, PageID #125–26.)
Although he originally named both FirstEnergy and Clearsulting as
counterclaim defendants, Mr. Pircio dismissed his counterclaims against
FirstEnergy. (ECF No. 27.) Clearsulting moves to dismiss each of the counterclaims
brought against it. (ECF No. 22.) In the interest of maintaining a clean record, the
Court omits an overview of Mr. Pircio’s allegations that form the basis of his
counterclaims and bases its analysis of his motion to dismiss solely on the allegations
in Plaintiffs’ complaint and the materials referenced and incorporated in it.
ANALYSIS
At the motion to dismiss stage, a complaint must “contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly,550 U.S. 544, 570
(2007)). A complaint “states a claim for relief that is plausible, when measured against the elements” of the cause of action asserted. Darby v. Childvine, Inc.,964 F.3d 440, 444
(6th Cir. 2020) (citing Binno v. American Bar Ass’n,826 F.3d 338
, 345–46 (6th Cir. 2016)). To meet Rule 8’s pleading standard, a complaint must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal,556 U.S. at 678
(citing Twombly,550 U.S. at 556
). To state a claim, a complaint must “raise a right to relief above the speculative level” into the “realm of plausible liability.” Twombly,550 U.S. at 555
.
6
In assessing plausibility, the Court construes factual allegations in the
complaint in the light most favorable to the non-moving party, accepts the allegations
of the complaint as true, and draws all reasonable inferences in favor of the
non-movant. Wilburn v. United States, 616 F. App’x 848, 852
(6th Cir. 2015). In reviewing a motion to dismiss, the Court distinguishes between “well-pled factual allegations,” which it must treat as true, and “naked assertions,” which it need not. Iqbal,556 U.S. at 628
(“Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement.”) (cleaned up). Nor does a court accept “[c]onclusory allegations or legal conclusions masquerading as factual allegations[.]” Eidson v. Tennessee Dep’t of Children’s Servs.,510 F.3d 631, 634
(6th Cir. 2007).
Against the backdrop of this familiar standard, the Court turns to the
arguments Mr. Pircio makes to dismiss the claims Plaintiffs assert against him.
First, the Court briefly addresses one procedural matter. In addition to the
allegations in the complaint, courts “may consider exhibits attached to the complaint,
public records, items appearing in the record of the case, and exhibits attached to
defendant’s motion to dismiss, so long as they are referred to in the complaint and
are central to the claims contained therein.” DeShetler v. FCA US LLC, No. 3:18 CV
78, 2018 WL 6257377
, at *4 (N.D. Ohio Nov. 30, 2018) (quoting Gavitt v. Born,835 F.3d 623, 640
(6th Cir. 2016)). What the Court may not consider, without converting
the motion to one for summary judgment, arguably, is the record with respect to the
stipulated injunction the Court entered. (ECF No. 11; see also ECF No. 10; ECF No.
10-1, PageID #94.) The Court declines to convert the motion brought under Rule
7
12(b)(6) into one for summary judgment; therefore, it does not consider any materials
beyond the pleadings or those items referenced or incorporated into the pleadings.
On this motion to dismiss, the Court does not consider the agreed injunction or the
record relating to it.
I. Mr. Pircio’s Motion to Dismiss Plaintiffs’ Claims
Of Plaintiffs’ five remaining claims, two assert causes of action under federal
or Ohio trade secret statutes (Counts IV and V). Each of these claims turns on the
threshold issue of interpreting the federal Defend Trade Secrets Act of 2016, Pub. L. 114-153, 130
Stat. 376, so the Court begins its analysis there before addressing
Mr. Pircio’s motion to dismiss the remaining counts.
I.A. Immunity under the Defend Trade Secrets Act
On Mr. Pircio’s motion to dismiss, the Court construes the allegations in favor
of the non-movants and so assumes that the files at issue Mr. Pircio accessed
constitute trade secrets under each of the relevant statutes. On its face, the Defend
Trade Secrets Act “does not prohibit . . . the disclosure of a trade secret” in certain
narrowly defined circumstances involving whistleblowing. 18 U.S.C. § 1833
(a)(2).
Specifically, as relevant here, the statute provides:
(1) IMMUNITY. An individual shall not be held criminally or
civilly liable under any Federal or State trade secret law for the
disclosure of a trade secret that—
(A) is made—
(i) in confidence to a Federal, State, or local
government official, either directly or indirectly, or to an
attorney; and
8
(ii) solely for the purpose of reporting or
investigating a suspected violation of law[.]
Id.
§ 1833(b). In other words, the Defend Trade Secrets Act confers limited immunity
on a person for a cause of action “under any Federal or State trade secret law” to the
extent disclosure of the trade secret at issue is made (1) to an attorney or, directly or
indirectly, in confidence to a governmental official; and (2) for the sole purpose of
reporting or investigating suspected violations of law. (Id.)
On the face of the statute and on the facts alleged, the Defend Trade Secrets
Act affords Mr. Pircio immunity against civil liability for Plaintiffs’ claims in
Count IV (for misappropriation of trade secrets under the Defend Trade Secrets Act)
and Count V (brought under Ohio’s Uniform Trade Secret Act). Each of the claims
under these statutes arises under trade-secret laws within the meaning of the Defend
Trade Secrets Act. And the documents Plaintiffs themselves attached to and
incorporated into the pleadings show that Mr. Pircio only disclosed the trade secrets
at issue to his attorney and did so to report suspected violations of federal laws. (See
ECF No. 1-3, PageID #24.)
Plaintiffs oppose dismissal of these claims on three separate grounds. Each
fails as a matter of law.
I.A.1. “Solely” to Report or Investigate Suspected Wrongdoing
First, Plaintiffs rely on the word “solely” in 18 U.S.C. § 1833
(b)(1)(A)(ii). (ECF
No. 19, PageID #198; ECF No. 21, PageID #243.) They argue that Mr. Pircio did not
appropriate the trade secrets at issue “solely” to report or investigate suspected
9
wrongdoing on the part of FirstEnergy. More specifically, Plaintiffs maintain that
discovery may show that Mr. Pircio did not act solely to disclose the information to
the SEC. (Id.) But discovery is not a fishing expedition, and Plaintiffs’ speculation
about what discovery may reveal does not suffice to raise the right to relief they claim
above the speculative level. Twombly, 550 U.S. at 555
; Iqbal, 556 U.S. at 678–79.
Plaintiffs point to no allegation supporting even an inference that Mr. Pircio acted for
any reason other than whistleblowing. Nor does the complaint contain any allegation
that Mr. Pircio disseminated trade secrets to anyone other than his counsel or,
through his counsel, the government.
Unlike the authorities on which Plaintiffs rely, the pleadings here contain
sufficient information to make a determination at the pleading stage that Mr. Pircio’s
actions fall within the statutory protection of Section 1833(b)(1)(A)(ii). Specifically,
Plaintiffs’ pleadings show that Mr. Pircio did not share “any company information or
documents with anyone other than his counsel and, through his counsel, with
government officials.” (ECF No. 1-3, PageID #24.) Plaintiffs make no other
allegations that directly or inferentially call this fact into question. Nor do
Mr. Pircio’s motivations, to the extent they may not be entirely pure, as Plaintiffs
contended at argument, lead to a contrary result where the complaint makes no
allegation that he disclosed the materials at issue more broadly than allowed under
Section 1833(b).
10
I.A.2. Improper Acquisition
Plaintiffs assert that the statutory immunity of Section 1833(b) does not bar a
claim for trade-secret misappropriation by improper acquisition under the Computer
Fraud and Abuse Act or the Defend Trade Secrets Act. (ECF No. 19, PageID #197
(quotation omitted); ECF No. 21, PageID #243.) Plaintiffs allege that Mr. Pircio
exceeded the scope of his authorized access in the ShareFile work site Clearsulting
used with FirstEnergy and obtained trade secrets unlawfully by doing so. For
example, they allege that Mr. Pircio accessed documents on which he was not working
and that pre-dated his employment. (ECF No. 1, ¶17, PageID #4; ECF No. 21, PageID
#244 n.5.) They argue that the statutory immunity provision only applies to
“disclosure of a trade secret” such that Mr. Pircio’s access of FirstEnergy’s trade
secrets beyond the scope of his permission to do so remains actionable. Further, they
bolster this reading by reference to Section 1833(b)(5), which provides that, “[e]xcept
as expressly provided for under this subsection, nothing in this subsection shall be
construed to authorize, or limit liability for, an act that is otherwise prohibited by
law, such as the unlawful access of material by unauthorized means” (emphasis
added). Because Plaintiffs base their claims, in part, on Mr. Pircio’s unlawful access
to trade secrets, they argue they may proceed with their claims notwithstanding the
immunity provision in Section 1833(b).
I.A.2.a. “Misappropriation” Versus “Disclosure”
Although Plaintiffs’ argument has some superficial appeal, it runs headlong
into the plain language of the statute. In particular, the distinction between
11
disclosure and misappropriation on which Plaintiffs’ argument depends does not
withstand textual scrutiny. Section 1839(5) defines the term “misappropriation” for
purposes of the Defend Trade Secrets Act. In the statute, the term has two
alternative meanings: (A) knowing acquisition of a trade secret by improper means;
or (B) disclosure or use of a trade secret in certain circumstances. 18 U.S.C. § 1839
(5).
The immunity of Section 1833(b) relates to disclosure (not use), offering apparent
support for Plaintiff’s argument that they may state a claim against Mr. Pircio for his
acquisition of trade secrets by exceeding the scope of his permission to access it.
But misappropriation under the acquisition theory requires “that the trade
secret [be] acquired by improper means.” Id.
§ 1839(5)(A). While treating acquisition
of trade secrets by exceeding one’s permissions as “improper means” makes a certain
amount of sense, that term—improper means—has a specific definition and meaning
in the statute. It “includes theft, bribery, misrepresentation, breach or inducement
of a breach of a duty to maintain secrecy, or espionage through electronic or other
means.” Id. § 1839(6)(A). Notably absent from this definition is the theory on which
Plaintiffs proceed against Mr. Pircio—namely, that he exceeded the scope of his
authorized access. (The complaint does not include the word theft, which (as
discussed below) does not embrace the concept of misusing access to trade secrets.
Nor does Plaintiffs’ briefing.) To the extent Plaintiffs maintain that Mr. Pircio
breached a duty to maintain secrecy, the allegations of the complaint fail to bear that
out because the pleadings show that Mr. Pircio only made limited disclosure to his
12
counsel and, through counsel, to the government (ECF No. 1-3, PageID #24)—a
disclosure for which the statute confers immunity.
Accordingly, the definition of “improper means” excludes the conduct at issue
from its scope, and in so doing avoids a potentially nonsensical interpretation where
a whistleblower would have immunity for disclosure of a trade secret to counsel or
the government but not for the acquisition of that information. In this way, the plain
language of the statute rationalizes the statutory aim of protecting trade secrets
while offering a limited immunity for whistleblowers.
I.A.2.b. Other Authorities
Plaintiffs’ argument might make sense on a different set of facts. But the
statutory text accounts for that too. For example, this case does not involve
allegations of a current or former employee who complies with Section 1833(b) but
also uses trade secrets against their owner. In such a case, Section 1839(5)(B) would
interact with Section 1833(b) to immunize the disclosure of trade secrets to the
government, but not their use beyond that. Such was the case in Sorensen v. Polukoff,
No. 2:18-CV-67 TS-PMW, 2020 WL 1692815
, at *6,2020 U.S. Dist. LEXIS 61795
, at
*15 (D. Utah Apr. 7, 2020). There, the plaintiffs alleged misappropriation of trade
secrets under the Defend Trade Secrets Act, and the court ruled that the statutory
immunity provision protected disclosure of the materials at issue to counsel and the
Department of Justice. Beyond this whistleblowing of potential health care fraud,
the allegations involved use of misappropriated trade secrets to compete against their
source, both by soliciting patients and encouraging the filing of medical malpractice
13
claims. Because the allegations went beyond the disclosure protected under
Section 1833(b), the court declined to extend immunity to these alleged uses of the
trade secrets at issue, but in doing so did not analyze the text of the statute. On
appeal, the Tenth Circuit reversed and remanded on other grounds, but did not
address the question of immunity. Sorensen v. Polukoff, 784 F. App’x 572
, 573 (10th
Cir. 2019). Here, the pleadings make clear that nothing similar allegedly occurred.
Plaintiffs rely on Softketeers, Inc. v. Regal W. Corp., No. SACV19519JVSJDEX,
2020 WL 1164680
, at *4 (C.D. Cal. Jan. 7, 2020). (See ECF No. 19, PageID #197.)
There, at the pleading stage, the court allowed a claim for misappropriation of trade
secrets to proceed. That ruling did not provide reasoning for the decision and rested
on the concession that the counterclaim there stated a claim for misappropriation of
trade secrets under the Defend Trade Secrets Act. With that concession, the court
allowed the counterclaim to proceed as an alternative theory of liability, without
specifically providing reasoning for the scope of immunity under the statute.
Accordingly, Softketeers does not compel a different result here.
Though one court allowed limited disclosure of trade secrets, that case has
limited application, at best. In Christian v. Lannett Co., No. 16-963, 2018 U.S. Dist. LEXIS 52793
, at *13 (E.D. Pa. Mar. 29, 2018), disclosure of trade secrets occurred
pursuant to a discovery order of the court where the documents were misappropriated
before enactment of the Defend Trade Secrets Act. It too does not offer guidance on
the immunity provision. Beyond these cases, the parties’ briefs and the Court’s
14
research uncover no authorities directly speaking to how Section 1833(b)(1) interacts
with claims of misappropriation.
I.A.2.c. Section 1833(b)(5)
Finally, Section 1833(b)(5) does not pare back the immunity of Section 1833(b).
Subsection (b)(5) does not limit the statutory immunity provided in the Defend Trade
Secrets Act. Instead, it provides a rule of construction that, “[e]xcept as expressly
provided for under this subsection, nothing in this subsection shall be construed to
authorize, or limit liability for, an act that is otherwise prohibited by law, such as the
unlawful access of material by unauthorized means.” Textual reference to
unauthorized means—not “improper means” defined in Section 1839(6)—suggests
these terms have different meanings. Indeed, this subsection coordinates the
immunity provision of the Defend Trade Secrets Act with, for example, the Computer
Fraud and Abuse Act. Put another way, Section 1833(b)(1) does not foreclose an
action under the Computer Fraud and Abuse Act.
* * *
Section 1833(b) does not provide for immunity “except in cases of improper
acquisition of a trade secret,” contrary to Plaintiffs’ contention. Nothing in the plain
language of the statute affords immunity only where a person otherwise had proper
access to trade secrets that he discloses pursuant to Section 1833(b)(1).
I.A.3. Immunity as a Defense
Plaintiffs argue that the statutory immunity of the Defend Trade Secrets Act
constitutes an affirmative defense not available on a motion under Rule 12(b)(6).
15
(ECF No. 19, PageID #196; ECF No. 21, PageID #246.) Without question, immunity
constitutes an affirmative defense. See, e.g., Garcia v. Vertical Screen, Inc., No.
19-3184, 2020 WL 2615624
, at *5,2020 U.S. Dist. LEXIS 90193
, at *12 (E.D.Pa. May 22, 2020) (citing Leveto v. Lapina,258 F.3d 156, 161
(3d Cir. 2001)). Courts “are reluctant to dismiss complaints based on affirmative defenses at the pleading stage and before any discovery has been conducted.” Lockhart v. Holiday Inn Express Southwind,531 F. App’x 544, 547
(6th Cir. 2013). “Courts generally cannot grant motions to dismiss on the basis of an affirmative defense unless the plaintiff has anticipated the defense and explicitly addressed it in the pleadings.” Pfeil v. State St. Bank & Trust Co.,671 F.3d 585, 599
(6th Cir. 2012).
In fact, courts will not dismiss a claim based on an affirmative defense unless
“the plaintiff's own allegations show that a defense exists that legally defeats the
claim for relief.” Lockhart, 531 F. App’x at 547
(quoting Marsh v. Genentech, Inc.,693 F.3d 546, 554-55
(6th Cir. 2012) (quoting 5B Charles Alan Wright & Arthur Miller,
Federal Practice & Procedure § 1357 at 713 (3d ed. 2004))). This case presents the
unusual circumstance where Plaintiffs’ own pleadings demonstrate the applicability
of the immunity defense asserted under the Defend Trade Secrets Act. Plaintiffs
attached to and incorporated into the complaint materials anticipating the defense
and establishing its availability as a matter of law. (See ECF No. 1-3, PageID #24.)
Plaintiffs’ briefing acknowledges as much. (ECF No. 19, PageID #197.) Indeed,
counsel for Mr. Pircio, whose letter Plaintiffs incorporated into the pleadings, tracked
the language of Section 1833(b). (ECF No. 1-3, PageID #24.)
16
To resist this judgment, Plaintiffs point to three cases. Each is distinguishable
from the record before the Court at the pleading stage.
First, Plaintiffs rely on Unum Group v. Loftus, 220 F. Supp. 3d 143
(D. Mass. 2016). There, the plaintiff brought suit against a long-time former employee who had received a promotion to the role of director in charge of individual disability claims. About a decade later, in-house counsel interviewed the employee as part of an investigation about claims processes. Following the interview, surveillance video showed the employee leaving work on nights and weekends with boxes of documents, many of which contained confidential information with personally identifiable information of policyholders and others given the nature of the company’s business in addition to trade secrets. In response to the company’s claims, the former employee invoked the immunity provision of the Defend Trade Secrets Act. In denying the employee’s motion to dismiss the lawsuit, the court noted that the record contained no information to support or refute his claimed status as a whistleblower and whether he turned over all or only a portion of the information at issue to his counsel.Id. at 147
. In contrast, the pleadings here show that Mr. Pircio turned over the documents
at issue to his counsel and does not leave open the questions that prevented
determination of the issue at the pleading stage in Unum Group. (ECF No. 1-3,
PageID #24.)
Second, in 1-800 Remodel, Inc. v. Bodor, No. CV 18-472-DMG (Ex), 2018 WL 6340759
,2018 U.S. Dist. LEXIS 225000
(C.D. Cal. Oct. 17, 2018), an employee
threatened to file a sex discrimination claim based on incidents she reported to her
17
employer. When the employer refused to settle that threatened claim, the employee
filed a charge of discrimination. Shortly later, the employee filed complaints with a
state agency using confidential and proprietary information the employee obtained
from her employer. At some point, which is unclear from the opinion, the employer
suspected the employee was falsifying the hours she worked—a fact the employer
confirmed using video surveillance. When the employee learned of this investigation,
she forwarded dozens of confidential and proprietary documents to her personal email
account, deleted information from her work email account, and used her personal cell
phone to take pictures of confidential and proprietary information. Denying the
employee’s motion to dismiss on the basis of Section 1833(b), the court found that the
state of the record foreclosed dismissal on the basis of the statutory immunity in the
Defend Trade Secrets Act. 2018 WL 6340759
, at *6,2018 U.S. Dist. LEXIS 225000
,
at *16–17. Specifically, the court could not determine at the pleading stage the
nature of the employee’s complaints to the state agency or whether she made these
complaints in confidence. Again, the record here does not leave similar questions.
(See ECF No. 1-3, PageID #24.)
Third, in Garcia, the parties disputed the reason for the termination of a
former employee, who alleged wrongful termination in violation of the Americans
with Disabilities Act, among other statutes. For its part, the employer asserted trade-
secret claims based on the employee sending confidential and proprietary documents
to his personal email account from work. On the former employee’s motion to dismiss
based on the statutory immunity of the Defend Trade Secrets Act, the court
18
determined that the face of the pleadings did not establish the defense, requiring
discovery. 2020 WL 2615624
, at *5. In particular, the record did not establish whether the former employee turned over the documents to his attorney, what documents he took, or that he took the documents to investigate unlawful conduct by his former employer.Id.
For the reasons already explained, the pleadings here
present different circumstances such that Garcia is unavailing for Plaintiffs.
* * *
No authority to which Plaintiffs have directed the Court leads to a
determination other than that the immunity of Section 1833(b) applies based on the
pleadings before the Court, even on a motion to dismiss. There is no allegation that
Mr. Pircio has disclosed confidential information except as set forth in the
correspondence between the parties made a part of the pleadings. That is, there is
no allegation (at least a non-speculative, plausible one) that Mr. Pircio did anything
other than provide the FirstEnergy documents he took from Clearsulting to his
counsel, who in turn provided them to government officials. Accordingly, based on
the plain language on the face of the statute, Mr. Pircio has immunity for allegations
under the federal and State trade-secret laws Plaintiffs assert in Counts IV and V of
the complaint.
I.B. Computer Fraud and Abuse Act
Mr. Pircio does not argue that the immunity of the Defend Trade Secrets Act
extends to the private right of action Plaintiffs assert under the Computer Fraud and
Abuse Act, 18 U.S.C. § 1030
(a). That statute allows for a lawsuit against a person
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who “intentionally accesses a computer without authorization or exceeds authorized
access, and thereby obtains . . . information from any protected computer.” Id.
§ 1030(a)(2)(C). The Sixth Circuit reads this statutory language narrowly as “aimed at preventing the typical consequences of hacking, rather than the misuse of corporate information.” Royal Truck & Trailer Sales & Serv., Inc. v. Kraft,974 F.3d 756, 760
(6th Cir. 2020); see also American Family Mut. Ins. Co. v. Rickman,554 F. Supp. 2d 766, 771
(N.D. Ohio 2008) (“The statute was not meant to cover the disloyal employee who walks off with confidential information. Rather, the statutory purpose is to punish trespassers and hackers; Defendant is neither.”). In reaching this result, the Sixth Circuit waded into a Circuit split the Supreme Court may resolve shortly. See United States v. Van Buren,940 F.3d 1192
(11th Cir. 2019), cert. granted,140 S. Ct. 2667
(2020) (argued Nov. 30, 2020).
Under the Sixth Circuit’s reading of the statute, the Computer Fraud and
Abuse Act does not reach the conduct at issue Plaintiffs allege. Taking their
allegations as true, as the Court must, Mr. Pircio did not hack into the network or
workspace of FirstEnergy or Clearsulting. To the contrary, the complaint alleges that
Mr. Pircio used authorizations he had and exceeded their scope to take data and use
it for unauthorized purposes. (See, e.g., ECF No. 1, ¶¶ 15, 17, PageID #4.) Against
the backdrop of the Sixth Circuit’s interpretation of the Computer Fraud and Abuse
Act, the complaint notably contains no allegation—directly or by inference—that
Mr. Pircio hacked into the network or ShareFile workspace. Indeed, Clearsulting
conceded at argument that Mr. Pircio is not a hacker. According to Plaintiffs’
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allegations, Mr. Pircio exceeded his authorization and allegedly misused corporate
information, but was not a hacker. The Sixth Circuit’s interpretation of the statute
places such conduct beyond the reach of the statute. Royal Truck & Trailer Sales &
Serv., 974 F.3d at 760
. Accordingly, Plaintiffs fail to state a claim in Count II on
which the Court may grant relief.
I.C. Civil Liability for Criminal Acts
Ohio law provides a civil cause of action for any person injured by a criminal
act, even where the defendant has not been convicted of a crime. Ohio Rev. Code
§ 2307.60(A); Buddenberg v. Weisdack, 2020-Ohio-3832
, ¶ 1 (Ohio July 29, 2020). In
Count III, Plaintiffs assert a claim under this statute based on alleged violations of
the federal Computer Fraud and Abuse Act and Section 2913.04(B) of the Ohio
Revised Code, which makes it a crime to access a computer network without consent
or beyond one’s authority. In light of the foregoing analysis, Plaintiffs fail to state a
claim to the extent they base this claim on the Computer Fraud and Abuse Act (or
the Defend Trade Secrets Act).
I.D. Breach of Contract
Mr. Pircio seeks dismissal of Clearsulting’s breach of contract claim based on
the employment agreement’s incorporation of the immunity provision of the Defend
Trade Secrets Act. Clearsulting acknowledges this language appears in the
employment agreement, but argues that it did not fire Mr. Pircio for disclosing
information to governmental officials but because he accessed and downloaded client
information without authorization. (ECF No. 21, PageID #243.) In the Court’s view,
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based on the statutory text discussed above, Section 1833(b) forecloses Clearsulting
from asserting a claim for breach of contract to the extent Mr. Pircio engaged in
protected activity. Nor may Clearsulting somehow employ the Computer Fraud and
Abuse Act as a predicate for a breach of contract claim given the Sixth Circuit’s
narrow interpretation of that statute. Put another way, because Mr. Pircio’s
employment contract incorporates Section 1833(b), Clearsulting may only pursue a
breach of contract claim to the extent a claimed breach falls outside these areas of
federal law and rests on conduct these statutes do not cover—a determination that
remains to be made.
II. Supplemental Jurisdiction
In addition to Count III (civil liability for criminal acts under Ohio law), which
both Clearsulting and FirstEnergy assert and which remains pending to the extent
it alleges a claim under Section 2913.04(B) of the Ohio Revised Code, Clearsulting
has a remaining (partial) claim for breach of contract (Count I). Mr. Pircio has two
counterclaims that remain pending against Clearsulting that allege violations of Ohio
law.
Under 28 U.S.C. § 1367
(a), district courts may exercise supplemental
jurisdiction over all other claims that are so related to those in the action within the
Court’s original jurisdiction that they form part of the same case or controversy.
Further, Section 1367(c)(3) provides that a district court may decline to exercise
supplemental jurisdiction where, as here, the district court has dismissed all claims
over which it has original jurisdiction.
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In deciding whether to exercise supplemental jurisdiction, the district court
should consider factors such as “comity, judicial economy, convenience, and fairness.”
Pinney Dock & Transp. Co. v. Penn Cent. Corp., 196 F.3d 617
, 620–21 (6th Cir. 1999).
After reviewing the record in this matter, the Court declines to exercise its discretion
to retain supplemental jurisdiction over the parties’ respective claims alleged under
State law. In this matter, in the Court’s view, these factors weigh in favor of declining
supplemental jurisdiction. None of the remaining claims asserted under State law
presents novel issues. Ohio courts have equal or greater familiarity with these causes
of action, so there are no benefits in terms of judicial economy to proceeding in federal
court. And the State courts will be at least as convenient as this forum.
CONCLUSION
For all the foregoing reasons, the Court GRANTS IN PART Defendant’s
motion to dismiss. The Court dismisses Counts IV and V of the complaint for failure
to state a claim. Also, the Court dismisses Count I, except to the extent Plaintiffs
allege breaches of contract unrelated to the Defend Trade Secrets Act or the
Computer Fraud and Abuse Act, and Count III to the extent it alleges a violation of
the federal Computer Fraud and Abuse Act. Because these claims provide the basis
for federal jurisdiction, the Court DISMISSES WITHOUT PREJUDICE the
balance of the action.
SO ORDERED.
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Dated: March 8, 2021
J. Philip Calabrese
United States District Judge
Northern District of Ohio
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