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Hays v. VDF Futureceuticals, Inc.

United States District Court, D. Hawaii

September 28, 2016

JOHN T. HAYS, III, Plaintiff,
v.
VDF FUTURECEUTICALS, INC., R.J. VAN DRUNEN & SONS, INC., AND VAN DRUNEN FARMS, CORP, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' RULE 12(B)(6) MOTION TO DISMISS

          Leslie E. Kobayashi, United States District Judge.

         On June 13, 2016, Defendants VDF FutureCeuticals, Inc. (“VDF FC”), R.J. Van Drunen & Sons, Inc. (“Van Drunen & Sons”), and Van Drunen Farms (“VDF, ” all collectively, “Defendants”) filed their Rule 12(b)(6) Motion to Dismiss (“Motion”).[1] [Dkt. no. 13.] Pro se Plaintiff John T. Hays, III (“Plaintiff”) filed his memorandum in opposition on August 1, 2016, and Defendants filed their reply on August 8, 2016. [Dkt. nos. 21, 22.] On August 15, 2016, this Court issued an entering order finding this matter suitable for disposition without a hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawai`i (“Local Rules”). [Dkt. no. 23.] After careful consideration of the Motion, supporting and opposing memoranda, and the relevant legal authority, Defendants' Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

         BACKGROUND

         Plaintiff filed his Complaint on December 23, 2015. According to the Complaint, Plaintiff and Dr. Dusan Miljkovic (“Dr. Miljkovic”) met with Jeffrey Van Drunen (“Van Drunen”), Defendants' chief executive officer (“CEO”), in 2000. Plaintiff shared with Van Drunen “certain research that he and [Dr.] Miljkovic were doing related to by products and derivatives from coffee and coffee pulp, ” and Plaintiff provided Defendants with “written materials . . . regarding research on antioxidants in coffee pulp which had been done at” Plaintiff's direction. [Complaint at ¶¶ 6-7.] Plaintiff states that he provided the materials to Defendants “on a ‘proprietary' and ‘strictly confidential' basis, ” and that all materials were clearly marked as such. [Id. at ¶¶ 7-8.] At an unspecified time, Plaintiff learned that Defendants obtained at least six United States patents for “coffee by products [sic] and derivatives of coffee pulp” using the research Plaintiff provided them. [Id. at ¶ 9.]

         Plaintiff states that he has received no benefit from the information that he provided to Defendants, and the Complaint asserts that Defendants have been unjustly enriched because they have retained all of the income and benefits from the use of the confidential information Plaintiff provided them. [Id. at ¶¶ 10-11.] He seeks the imposition of a constructive trust on the income that Defendants are deriving from the confidential information that Plaintiff provided them, as well as damages for the unauthorized use of the confidential information. [Id. at ¶¶ 13-14.]

         In the instant Motion, Defendants ask this Court to dismiss Plaintiff's Complaint with prejudice because: 1) his unjust enrichment claim is preempted by the Hawai`i Uniform Trade Secrets Act (“HUTSA”), Haw. Rev. Stat. Chapter 482B; 2) any HUTSA claim Plaintiff had is now barred by the three-year statute of limitations; 3) even if HUTSA does not preempt Plaintiff's unjust enrichment claim, it is barred by either the laches doctrine or the six-year statute of limitations applicable to unjust enrichment claims; and 4) even if Plaintiff's unjust enrichment claim is not time-barred, Plaintiff fails to state a plausible claim for relief. Defendants therefore ask this Court to dismiss Plaintiff's Complaint, with prejudice, pursuant to Fed.R.Civ.P. 12(b)(6).

         DISCUSSION

         I. Preemption of Plaintiff's Unjust Enrichment Claim

         In response to certified questions from this district court, the Hawai`i Supreme Court held that “the HUTSA preempts non-contract, civil claims based on the improper acquisition, disclosure or use of confidential and/or commercially valuable information that does not rise to the level of a statutorily-defined trade secret.” BlueEarth Biofuels, LLC v. Hawaiian Elec. Co., 123 Hawai`i 314, 327, 235 P.3d 310, 323 (2010). The Hawai`i Supreme Court also held that, because it is not necessary for a court to find that the allegedly misused information was a trade secret, it can conduct the preemption analysis at the motion to dismiss stage. Id.

         After the Hawai`i Supreme Court answered the certified questions, this district court granted the defendants' motion to dismiss the plaintiffs' unjust enrichment claim because, although the plaintiffs argued that the claim was not based upon the unlawful retention of trade secrets or other confidential information, the district court found that there were “insufficient facts to state a claim for relief that is plausible on its face - Plaintiffs have not stated what precisely it conferred upon the . . . Defendants which they unlawfully retained.” BlueEarth Biofuels, LLC v. Hawaiian Elec. Co., 780 F.Supp.2d 1061, 1073 (D. Hawai`i 2011).

         In the instant case, the only basis for Plaintiff's unjust enrichment claim is the allegedly improper use of the confidential information and research that Plaintiff provided to Defendants. Thus, Plaintiff's unjust enrichment claim is a non-contract, civil claim that alleges the improper use of “confidential and/or commercially valuable information, ” and this Court CONCLUDES that the claim is preempted by the HUTSA. This Court therefore DISMISSES Plaintiff's unjust enrichment claim because it fails to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(6).

         Defendants' Motion gave Plaintiff notice of this defect in his unjust enrichment claim, and there is no indication in either the Complaint or Plaintiff's memorandum in opposition that it would be possible for him to amend his unjust enrichment claim to allege that he conferred on Defendants - and they unlawfully retained - other benefits besides the confidential information described in the Complaint. This Court therefore CONCLUDES that it is absolutely clear that no amendment can cure the defect in Plaintiff's unjust enrichment claim. See Lucas v. Dep't of Corr., 66 F.3d 245, 248 (9th Cir. 1995) (“Unless it is absolutely clear that no amendment can cure the defect . . . a pro se litigant is entitled to notice of the complaint's deficiencies and an opportunity to amend prior to dismissal of the action.”). The dismissal of Plaintiff's unjust enrichment claim is WITH PREJUDICE, in other words, Plaintiff cannot amend his unjust enrichment claim in this case.[2]

         II. HUTSA Claim

         This Court must liberally construe Plaintiff's pleadings because he is proceeding pro se. See, e.g., Eldridgev. Block, 832 F.2d 1132, 1137 (9th Cir. 1987) (“The Supreme Court has instructed the federal courts to liberally construe the ‘inartful pleading' of pro se litigants.” (citing Boag v. MacDougall, 454 U.S. 364, 365, 102 S.Ct. 700, 701, 70 L.Ed.2d 551 (1982) (per curiam))). This Court will therefore liberally construe Plaintiff's Complaint as alleging a HUTSA claim that Defendants' improper use of the confidential information and research that Plaintiff provided to them in 2000 constitutes misappropriation of trade ...


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