## Facts

- ExpertConnect, L.L.C. operated a consulting business that connected clients with outside consultant candidates for paid consultations.
- ExpertConnect alleged it spent substantial time and money compiling business information including (among other things) lists of consultant candidates, sales and marketing methods, and customer preferences.
- ExpertConnect alleged this information provided a competitive advantage and would lose value if disclosed to competitors.
- ExpertConnect alleged it treated the information as confidential and took steps to protect it, including storing it on secure, password-protected servers and requiring employees to sign nondisclosure agreements and comply with confidentiality obligations.
- Mayokia Fowler and Dipali Parmar worked for ExpertConnect and had access to the asserted confidential information.
- After leaving ExpertConnect, Fowler and Parmar allegedly helped form Strafluence, L.L.C., a competing business.
- ExpertConnect alleged Fowler and Parmar took (and Strafluence used) ExpertConnect’s confidential information to benefit the new competing business.
- ExpertConnect sued Fowler, Parmar, and Strafluence in the Southern District of New York, asserting (among other claims) misappropriation of trade secrets under the Defend Trade Secrets Act (DTSA) and related New York-law claims.
- Defendants moved to dismiss the complaint under Rule 12(b)(6).

## Issues

1. Whether the complaint plausibly alleged the existence of protectable trade secrets under the DTSA based on ExpertConnect’s lists and business methods, including adequate allegations of economic value and reasonable secrecy measures.
2. Whether the complaint plausibly alleged DTSA “misappropriation” by Fowler and Parmar (and derivative liability for Strafluence) through improper acquisition, disclosure, or use.
3. Whether the related New York-law claims grounded in the same alleged conduct were adequately pleaded or had to be dismissed in whole or in part.

## Decision

- The court granted the motion to dismiss in part and denied it in part.
- The court held that ExpertConnect plausibly alleged trade secrets under the DTSA, including that the information derived value from not being generally known and that ExpertConnect used reasonable measures to keep it secret (such as secure servers and nondisclosure agreements).
- The court held that ExpertConnect plausibly alleged misappropriation, including allegations that Fowler and Parmar took ExpertConnect’s confidential information when departing and that the information was used to benefit Strafluence in competing with ExpertConnect.
- Because the DTSA claim was sufficiently pleaded, the court allowed overlapping state-law claims based on the same core allegations (including trade-secret and unfair-competition theories) to proceed to the extent they were supported by the pleaded facts.
- The court dismissed certain other claims or portions of claims that were inadequately pleaded (for example, where required elements were not supported by nonconclusory factual allegations or where allegations did not sufficiently connect a particular defendant to the specific cause of action).

## Legal Principles

- On a Rule 12(b)(6) motion, the court accepts well-pleaded factual allegations as true and determines whether the complaint states a plausible claim for relief; labels and legal conclusions are not enough.
- Under the DTSA, a “trade secret” is information that (i) derives independent economic value from not being generally known or readily ascertainable and (ii) is subject to reasonable measures to keep it secret.
- Allegations that a company compiled valuable lists or methods at significant cost, treated them as confidential, restricted access, used password-protected systems, and required nondisclosure agreements can support a plausible DTSA trade-secret claim at the pleading stage.
- DTSA “misappropriation” can be pleaded by alleging improper acquisition, disclosure, or use of trade-secret information, including facts supporting an inference that departing employees took protected information and used it in a competing venture.
- When state-law claims track the same alleged conduct as a plausibly pleaded DTSA trade-secret claim, those state-law theories may also survive a motion to dismiss, while claims missing required elements (such as specific disrupted contracts or relationships for certain tort claims) may be dismissed.

## Conclusion

In ExpertConnect v. Fowler, the Southern District of New York largely refused to dismiss ExpertConnect’s suit at the pleading stage, holding that the complaint plausibly alleged the existence of DTSA-protected trade secrets and their misappropriation by two former employees and their new competing company, while trimming other claims that were not supported by sufficiently specific factual allegations.


ExpertConnect v. Fowler, 2019 WL 3004161 (2019)