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BFV Perspectives, Noncompete & Trade Secrets, | Feb 16, 2012

Northern District of Georgia Judge Denies Twombley Motion and Allows Trade Secrets Claims to Proceed

The claims in Cartel Asset Mgmt, Inc. v. Altisource Portfolio Solutions, S.A., 2011 WL 6015024, *2 (N.D. Ga. Dec. 1, 2011), arose out of actions by the Defendants’ predecessors.  In 2000, Ocwen Federal Bank (“OFB”) was a customer of the Plaintiff, Cartel Asset Management, Inc. (“CAM”).  CAM had developed a confidential list of experienced, responsive and competent realtors who produced high-quality broker price opinions at reasonable prices.  As OFB purchased opinions from CAM, it began to copy the names and contact information of realtors identified on opinions it purchased.  OFB then inputted this information into its own incomplete database of realtors who provided these opinions.  OFB therefore had the names and contact information for CAM’s realtors in its database.  OFB also found the names of additional realtors through referrals from CAM’s realtors.

CAM sued OFB in Colorado for violation of the Colorado Uniform Trade Secrets Act.  In 2004, CAM obtained a jury verdict in its favor.  While the verdict was on appeal, OFB’s parent dissolved OFB and transferred the database to a wholly-owned subsidiary.  The parent and the subsidiary then continued to use and profit from the theft of CAM’s trade secrets.

After the Tenth Circuit remanded the case for a new trial on damages, the subsidiary was added as a defendant.  In September 2010, a jury returned a verdict for CAM for almost thirteen million dollars in damages.  The verdict covered damages through August 10, 2009.  On August 10, 2009, OFB transferred the database to Altasource Portfolio Solutions, SA. (“APS”).

In August of 2011, CAM filed a Complaint in the Northern District of Georgia against APS and two of its subsidiaries, asserting that they were misappropriating CAM’s trade secret.  APS’ subsidiaries moved to dismiss CAM’s claims on the grounds that CAM’s Complaint had failed to state a plausible claim for relief against them.  Judge Thrash rejected their argument.  Judge Thrash noted that CAM had alleged that OFB, its parent, and its wholly-owned subsidiary had misappropriated CAM’s trade secret by using it to develop their own database and continuing to use it even after a jury found their actions to be in violation of the Colorado Uniform Trade Secrets Act.  CAM also alleged that OFB’s parent had transferred the database to APS.

Considering CAM’s allegations in light of these circumstances, Judge Thrash found that it is possible that APS and its subsidiaries were continuing to derive use from the infringing database.  Judge Thrash therefore found that although CAM’s Complaint “does not state which subsidiaries did what and when”, it states enough facts to state a claim for relief that is plausible on its face.  Judge Thrash stated further that CAM’s lack of knowledge regarding which subsidiary is using the database was not fatal to its case at the pleading stage.

Accordingly, Judge Thrash denied the Defendants’ Motion to Dismiss.  This case illustrates how in trade secrets cases, a plaintiff may sometimes be hampered in its ability to make specific factual allegations, given that the evidence supporting such allegations may be in the hands of the infringing parties.  In such circumstances, the Twombley standard should perhaps not necessarily bar claims from getting past the pleading stage.

BFV Perspectives, Noncompete & Trade Secrets, | Feb 16, 2012
Neal F. Weinrich
Neal F. Weinrich

Neal Weinrich knows noncompetes and trade secrets inside and out. A shareholder at Berman Fink Van Horn, Neal counsels clients in all industries on matters involving restrictive covenants, trade secrets and other competition-related issues.