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Unum Group v. Loftus

United States District Court, D. Massachusetts

December 6, 2016

UNUM GROUP, Plaintiff,
v.
TIMOTHY P. LOFTUS, Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS AND FOR COSTS AND FEES (DOCKET NO. 10) AND PLAINTIFF'S MOTION FOR INJUNCTIVE RELIEF (DOCKET NO. 4)

          TIMOTHY S. HILLMAN DISTRICT JUDGE

         Plaintiff Unum Group brings this action against a former employee, Timothy Loftus, after Loftus removed numerous company documents from Unum's facility without authorization, and refused to return them. Unum asserts claims for misappropriation of trade secrets in violation of the Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1836(b)(1) (Count I) and the Massachusetts Trade Secrets Act (Count II), and for conversion (Count III). Unum filed the present motion for injunctive relief seeking to i) enjoin Loftus from copying the documents, ii) compel Loftus and his counsel to return all of the documents and any of Unum's other trade secret or confidential information in his possession, and iii) enjoin Loftus from receiving a mirrored copy of the hard drive of his company laptop[1] until Unum has removed or redacted files containing trade secrets or confidential information. Loftus opposes the preliminary injunction on the grounds that his actions are exempted under § 1836(b) of the DTSA, which provides immunity under any federal and state trade secret laws to individuals who disclose trade secrets in confidence to an attorney, “solely for the purpose of reporting or investigating a suspected violation of law.”[2]Loftus also moves to dismiss the complaint for the same reason, and argues that dismissal of the DTSA claim, which provides the basis for this court's subject matter jurisdiction under 28 U.S.C. § 1331, extinguishes the court's supplemental jurisdiction over the remaining state law conversion claim under 28 U.S.C. § 1367. For the reasons detailed below, Loftus's motion to dismiss the complaint (Docket No. 10) is denied, and Unum's motion for a preliminary injunction (Docket No. 4) is granted.

         Background

         Plaintiff Unum Group is a provider of financial protection benefits, including disability benefits, life insurance, and accident coverage. Loftus began his employment with Unum in 1985, and, in 2004, was promoted to Director of Individual Disability Insurance (“IDI”) Benefits. Within that role, Loftus had access to confidential information regarding Unum's employees and customers, including customer health information, and various trade secrets related to Unum's business. Unum maintains numerous practices to protect the security of its trade secrets and client and employee confidential information, including confidentiality agreements and policies, employee training, and data encryption. Loftus executed numerous confidentiality agreements throughout his tenure at Unum.

         On September 21, 2016, Loftus was interviewed by Unum's in-house counsel as part of an internal investigation into claims practices. The following Sunday afternoon, September 25th, Loftus entered Unum's Worcester facility, and was captured on surveillance video leaving the building with two boxes and a briefcase. On Tuesday, September 27th, after leaving work in the afternoon, Loftus was seen on video returning to Unum's offices around 7:45pm, and exiting the building an hour later with a shopping bag full of documents.

         An Unum officer investigating Loftus's removal of documents telephoned Loftus on Thursday morning, September 29th, but Loftus refused to respond to questions regarding the printing and removal of documents from Unum's office. Shortly thereafter, Loftus was seen leaving Unum's office with his company laptop and a shopping bag which appeared to be full. Less than an hour after his departure, Unum “Employee Relations” representatives called Loftus and asked him to return the laptop, and he agreed to do so that day. At 3pm on the same day, counsel for Loftus notified Unum that the laptop would be returned the same day, however, the laptop was not returned.

         Unum made numerous requests to Loftus's attorney throughout October for the return of the laptop and documents. While the company laptop was returned to Unum on October 24, 2016, the documents Loftus removed from the Unum office have not been returned. In addition, counsel for Loftus has made copies of the documents in counsel's possession. Unum maintains that it is highly likely that the documents removed by Loftus contain confidential customer and employee information, and or trade secrets, including protected health information, and that Unum may now be required by law to notify all individuals whose private health information was contained in the documents of an unauthorized disclosure.[3]

         Discussion

         A. Loftus's Motion to Dismiss the Complaint

         Loftus asks this court to dismiss Unum's federal and state law claims for trade secret misappropriation on the grounds that he turned over the documents he removed from Unum to his attorney to report and investigate a violation of law, and is therefore immune from any liability for trade secret misappropriation pursuant to 18 U.S.C. § 1833(b). Section 1833(b) shields individuals from liability under any federal or state trade secret law for disclosure of a trade secret made “in confidence . . . to an attorney . . . solely for the purpose of reporting or investigating a suspected violation of law.” “As a general rule, a properly raised affirmative defense can be adjudicated on a motion to dismiss so long as (i) the facts establishing the defense are definitively ascertainable from the complaint and the other allowable sources of information, and (ii) those facts suffice to establish the affirmative defense with certitude.” Rodi v. Southern New England School of Law, 389 F.3d 5, 12 (1st Cir. 2004).

         Loftus does not deny that the documents he removed contain trade secrets. While Loftus contends that he is entitled to immunity under the DTSA because he handed Unum's documents over to his attorney to pursue legal action against Unum for alleged unlawful activities, the record lacks facts to support or reject his affirmative defense at this stage of litigation. There has been no discovery to determine the significance of the documents taken or their contents, and Loftus has not filed any potential lawsuit that could be supported by information in those documents. Further, it is not ascertainable from the complaint whether Loftus turned over all of Unum's documents to his attorney, which documents he took and what information they contained, or whether he used, is using, or plans to use, those documents for any purpose other than investigating a potential violation of law. Taking all facts in the complaint as true, and making all reasonable inferences in favor of Unum, the court finds the complaint states a plausible claim for trade secret misappropriation and declines to dismiss Counts I and II.

         Loftus seeks dismissal of the claim for conversion on the grounds that disposal of the federal trade secret misappropriation claim that forms the basis for this court's jurisdiction renders dismissal of the state law claim appropriate. However, as the trade secret misappropriation claims have survived dismissal, this argument fails. Accordingly, the motion to dismiss the complaint is denied.

         B. Unum's Motion for Preliminary Injunction

         The court weighs four factors in determining whether to grant a preliminary injunction: “(1) the likelihood of success on the merits; (2) the potential for irreparable harm if the injunction is denied; (3) the balance of relevant impositions, i.e., the hardship to the nonmovant if enjoined as contrasted with the hardship to the movant if no injunction issues; and (4) the effect (if any) of the court's ruling on the public interest.” Charlesbank Equity Fund II, Ltd. P'ship v. Blinds To Go, Inc., 370 F.3d 151, 158 (1st Cir. 2004). “The sine qua ...


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