United States District Court, D. Hawaii
ORDER GRANTING MOTION TO DISMISS
Derrick K. Watson, United States District Judge.
September 17, 2018, Plaintiff DLMC, Inc., dba Kama'aina
Health Care Services (DLMC), initiated this action against
Benedicta Flores and Loving Care Health Provider, Inc.
(LCHP), alleging claims for violation of the Defend Trade
Secrets Act (DTSA), 18 U.S.C. § 1836(b)(3), and the
Hawai‘i Uniform Trade Secrets Act (HUTSA). Complaint,
Dkt. No. 1 (Compl.). On November 9, 2018, Flores filed a Motion
to Dismiss (Motion), in which LCHP joined, challenging this
Court's subject matter jurisdiction. Dkt. No. 18; Dkt.
No. 20. DLMC did not file an Opposition, and the hearing
scheduled for January 18, 2019 was vacated. Dkt. No. 26.
Because DLMC has not opposed the Motion and, more
particularly, has not alleged facts to support the existence
of a protected trade secret in interstate commerce under the
DTSA, as required for this Court to exercise jurisdiction,
the Motion is granted with leave to amend.
a Hawai‘i-based corporation providing healthcare
services to elderly and infirm residents of Hawai‘i.
Compl. ¶8. DLMC's services are overseen in part by
Medicare and Medicaid or otherwise regulated by the federal
government. Reply in Motion for TRO, Dkt. No. 22, at 2. DLMC
receives most of its income from federal funding and receives
insurance payouts from insurance companies located outside of
Hawai'i. Id. LCHP, also a Hawai‘i-based
corporation, was started by a former DLMC employee in 2016
and provides healthcare services similar to those provided by
DLMC. Compl. ¶2.
in August 2013, Flores was an office manager for DLMC and, as
a condition of her employment, signed HIPAA confidentiality
agreements regarding patient information as well as an
employee non-disclosure agreement. Compl. ¶¶4,
13-14. DLMC terminated Flores' employment on June 30,
2017 for “misappropriat[ing] confidential, proprietary
information…” Compl. ¶18. Flores is now
employed by LCHP. Id. ¶22.
argues that DLMC has not established this Court's subject
matter jurisdiction under 28 U.S.C. § 1331 because DLMC
did not sufficiently allege a cause of action under the DTSA,
the only federal claim in the Complaint. Motion at 2.
Specifically, Flores argues that DLMC fails to identify
"…any nexus between interstate or foreign
commerce and the alleged trade secret…[, ]"
thereby failing to establish a DTSA claim.
party invoking the federal court's jurisdiction has the
burden of proving the actual existence of subject matter
jurisdiction.” Thompson v. McCombe, 99 F.3d
352, 353 (9th Cir. 1996) (citing Trentacosta v. Frontier
Pac. Aircraft Indus., Inc., 813 F.2d 1553, 1559
(9th Cir. 1987)). At the pleading stage, a plaintiff must
allege sufficient facts to show a proper basis for the court
to assert subject matter jurisdiction over the action.
McNutt v. Gen. Motors Acceptance Corp., 298 U.S.
178, 189 (1936); Johnson v. Columbia Props. Anchorage,
L.P., 437 F.3d 894, 899 (9th Cir. 2006). As part of a
jurisdictional evaluation, courts may consider evidence
outside the pleadings and should not presume that the
allegations of the complaint are true. White v. Lee,
227 F.3d 1214, 1242 (9th Cir. 2000); McCarthy v. United
States, 850 F.2d 558, 560 (9th Cir. 1988).
only basis for federal jurisdiction over this case is
DLMC's DTSA claim. The DTSA cause of action requires that
"a trade secret is related to a product or service used
in, or intended for use in, interstate or foreign
commerce." 18 U.S.C.A. § 1836(b)(1). DLMC's
only argument in support of the existence of the required
nexus is that "all [DLMC's] clients, including the
ones Defendants are accused of taking, have federal patient
identification numbers so as to allow for their receipt of
federal funds for the services provided to them by
Plaintiff." Reply at 3. Without further specification,
DLMC also asserts that "Plaintiff is an entity whose
very existence relies on and is conditioned upon federal
application, certification and approval. Plaintiff's
services…are subject to federal law relating to
receipt of federal funds." Id. These
allegations beg the question of whether and how the trade
secrets defendants are alleged to have misappropriated are
somehow related to the provision of interstate services
offered by DLMC. These dots are neither connected in the
Complaint nor in any of DLMC's other submissions to the
Court, and, indeed, it appears that DLMC does not offer any
interstate services. The same is true with regard to
defendants. On this record, then, which includes DLMC's
failure to offer opposition specific to the Motion to
Dismiss, the Court can only surmise that DLMC's failure
to do so is because it has no facts illustrating the
requisite nexus. See e.g., Gov't Employees Ins. Co.
v. Nealey, 262 F.Supp.3d 153, 173 (E.D. Pa. 2017)
(dismissing a DTSA claim on a motion to dismiss because the
"complaint does not allege any nexus between interstate
or foreign commerce and the alleged trade secrets…This
deficiency, in itself, warrants dismissal of plaintiffs'
DTSA claim."). Absent at least an argument articulating
how the "client lists" that Flores allegedly stole
on behalf of LCHP relate to the provision of interstate
commerce, and facts in support of that argument, the Court
cannot conclude that it has jurisdiction over the DTSA claim
or, hence, over this case.
Fed.R.Civ.P. 15(a)(2), leave to amend a party's pleading
“should [be] freely give[n] ... when justice so
requires.” See Lopez v. Smith, 203 F.3d 1122,
1127 (9th Cir. 2000) (en banc) (explaining that “the
underlying purpose of Rule 15 ... [is] to facilitate decision
on the merits, rather than on the pleadings or
technicalities”) (quoting Noll v. Carlson, 809
F.2d 1446, 1448 (9th Cir. 1987)). Further, the Ninth Circuit
has explained that “a district court should grant leave
to amend even if no request to amend the pleading was made,
unless it determines that the pleading could not possibly be
cured by the allegation of other facts.” Cook,
Perkiss & Liehe, Inc. v. N. Cal. Collection Serv.
Inc., 911 F.2d 242, 247 (9th Cir. 1990) (citing
Bonanno v. Thomas, 309 F.2d 320, 322 (9th Cir.
1962); Erlich v. Glasner, 352 F.2d 119, 122 (9th
Cir. 1965)). Nonetheless, leave to amend may be denied for
“undue delay, bad faith or dilatory motive on the part
of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment,
futility of amendment, etc.” Mayes v.
Leipziger, 729 F.2d 605, 608 (9th Cir. 1984) (quoting
Foman v. Davis, 371 U.S. 178, 182 (1962)).
there is no evidence of undue delay, bad faith, or dilatory
motive on the part of DLMC. Additionally, the case is still
in its infancy, and the Court finds that allowing DLMC one
opportunity to amend its claims will not unduly prejudice
Defendants. Accordingly, the Court GRANTS leave to amend and
allows Plaintiff an opportunity to allege a DTSA, or other
federal, claim by February 8, 2019. The failure to do so will
result in the ...