United States District Court, D. Hawaii
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANTS' MOTION TO DISMISS, ECF NO. 113
MICHAEL SEABRIGHT CHIEF UNITED STATES DISTRICT JUDGE
February 28, 2019, Plaintiff WHIC LLC dba Aloha Toxicology
(“Plaintiff” or “Aloha Toxicology”)
filed an eight-count Second Amended Verified Complaint
(“SAC”) alleging claims against Defendants
NextGen Laboratories, Inc. (“NextGen”), Ohana
Genetics, Inc. (“Ohana Genetics”),  Heidi Maki
(“Maki”), and Stephanie Simbulan
“Defendants”). SAC, ECF No. 110.
before the court is Defendants' Motion to Dismiss the
SAC. ECF No. 113. Defendants move to dismiss with prejudice
Count V (unfair competition, Count VI (tortious interference
with business relations), and Count VII (conversion) for
failure to state a claim upon which relief can be granted.
Id. at PageID #1767. Defendants also move to dismiss
the SAC for lack of subject matter jurisdiction. Id.
on the following, the Court GRANTS IN PART and DENIES IN PART
Defendants' Motion to Dismiss the SAC, ECF No. 113, and
Counts V and VI are dismissed with prejudice. Plaintiff's
request to amend the SAC is DENIED.
factual allegations in the SAC are as follows: Aloha
Toxicology is a drug testing lab formed in 2006. SAC ¶
11, ECF No. 110. Aloha Toxicology's clients include
physicians, clinics, substance abuse treatment programs,
rehabilitation facilities, and individuals across Hawaii.
Id. ¶ 19. To obtain and serve those clients,
Aloha Toxicology has invested “time, skill, and
resources” into “gathering, developing, and
compiling [client] information, ” such as services
requested, financial data, and history of client accounts.
Id. ¶ 21, 22. Aloha Toxicology's client
lists are only accessible on Aloha Toxicology computers after
logging in with a password. Id. ¶ 24. Under
Aloha Toxicology's Employee Handbook, trade secrets are
to remain confidential, trade secrets are expressly defined,
and client lists are included in the definition. Id.
¶¶ 26-28. Maki and Simbulan were aware of this
provision of the employee handbook. Id. ¶¶
29-30. Maki was paid a full-time salary to work as the sales
and operations manager of Aloha Toxicology from April 2014
until June 2018. Id. ¶¶ 31, 33. Simbulan
was paid a full-time salary to work as a clinical laboratory
specialist at Aloha Toxicology from October 2017 to June
2018. Id. ¶¶ 32-33. While being paid to
work full-time at Aloha Toxicology, Maki and Simbulan began
working for a competitor, Ohana Genetics. Id. ¶
34. Neither Maki nor Simbulan informed Aloha Toxicology's
owners that they were working for a competitor. Id.
¶¶ 36-37. While setting up a new lab at Ohana
Genetics, Maki and Simbulan came to work as little as one day
per week at Aloha Toxicology and lied to its employees by
saying that they were working on a research project at a
partner (not a competitor) lab. Id. ¶¶
2018, Maki told Aloha Toxicology employees that Aloha
Toxicology could be shut down by an accreditation agency for
up to six months, employees would be laid off during that
shutdown, and the owners did not want to continue the
business because of the issues with the accreditation agency.
Id. ¶¶ 47, 48. Maki told Simbulan and
Ronald Li, an Aloha Toxicology employee, to resign to protect
their licenses and future job prospects from the stigma of a
“bad lab” being attached to them. Id.
¶ 49. Maki told another employee, Andee Okamura, who was
not yet certified, that she could state that she was laid off
by Aloha Toxicology in order to obtain unemployment benefits.
Id. Maki told Aloha Toxicology employees that she
had found another company, Ohana Genetics, to take on Aloha
Toxicology's clients and directed employees to send
samples for testing to Ohana Genetics. Id. ¶
50. In actuality, the owners had no intention to shut down
the lab or to send samples to a competitor lab. Id.
¶ 51. Shortly thereafter, Maki resigned from Aloha
Toxicology, telling the owners that the lab was no longer a
'viable business” because of the failure of a
proficiency test, loss of key personnel, and the inability to
test samples. Id. ¶ 53. After resigning, Maki
never returned several computers, printers, a hotspot, and
related equipment that she had purchased with Aloha
Toxicology funds. Id. ¶¶ 54-55.
result of Maki's actions, the lab at Aloha Toxicology was
temporarily shut down and “all or a substantial
number” of its clients were now doing business with
Ohana Genetics. Id. ¶¶ 57-58.
5, 2018, Plaintiff filed a nine-count Verified Complaint,
seeking damages and injunctive relief. ECF No. 1. On July 23,
2018, Plaintiff filed a Motion for Preliminary Injunction,
ECF No. 10, and hearings were held on that motion on August
22 and September 4, 11, 12, 2018. See WHIC LLC v. NextGen
Labs., Inc., 341 F.Supp.3d 1147, 1157 (D. Haw. 2018).
“The court heard testimony from eight witnesses,
reviewed the declarations of three witnesses, and admitted
numerous exhibits into evidence.” Id. On
September 17, 2018, the court granted the preliminary
injunction. Id. at 1168.
Plaintiff filed the First Amended Complaint
(“FAC”) on September 12, 2018, solely to clarify
and allege that conduct occurred in interstate commerce. ECF
No. 54. The FAC contained the following claims: Violation of
Defend Trade Secrets Act (“DTSA”), 18 U.S.C.
§ 1836 (Count I); Violation of Hawaii Uniform Trade
Secrets Act (“HUTSA”), HRS chapter 482B (Count
II); Violation of Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1962
(Count III); Breach of the Duty of Loyalty (Count IV); Unfair
Competition, HRS chapter 480 (Count V); Tortious Interference
with Existing Contractual Relations (Count VI); Conversion
(Count VII); Unjust Enrichment (Count VIII); and Spoliation
of Evidence (Count IX). ECF No. 54.
September 26, 2018, Defendants filed a Motion to Dismiss the
FAC. ECF No. 63. On January 31, 2019, the court granted in
part and denied in part the Motion to Dismiss the FAC, with
leave to amend (“January 31 Order”). ECF No. 102.
The January 31 Order ruled that:
Counts V, VI, and IX are dismissed without prejudice in their
entirety. Count VIII is dismissed without prejudice as to
NextGen and Ohana Genetics. Accordingly, Counts I, II, and
III remain as to all Defendants, Counts IV and VIII remain as
to Maki and Simbulan, and Count VII remains as to Maki.
Id. at PageID #1688.
February 28, 2019, Plaintiff filed the SAC. ECF No. 110. The
SAC contains the following claims: Violation of DTSA, 18
U.S.C. § 1836 (Count I-brought against all Defendants);
Violation of HUTSA, HRS chapter 482B (Count II-brought
against all Defendants); Violation of RICO, 18 U.S.C. §
1962 (Count III-brought against all Defendants); Breach of
the Duty of Loyalty (Count IV-brought against Maki and
Simbulan); Unfair Competition, HRS chapter 480 (Count
V-brought against all Defendants); Tortious Interference with
Existing Business Relations (Count VI-brought ...