Spreading the Secret: Early “Defend Trade Secrets Act” Decision Shows that Businesses Have the Choice of Pursuing Misappropriation of Trade Secret Claims in Either State or Federal Court
In one of the first cases filed in Florida under the new Federal Defend Trade Secrets Act (“DTSA”), a federal court relied on precedent under Florida’s own Uniform Trade Secrets Act (“FUTSA”) to dismiss a complaint for misappropriation of trade secrets that sought relief under both statutes.[i] In M.C. Dean, Inc. v. City of Miami Beach, a subcontractor for the Miami Beach Convention Center renovation project sued the City of Miami Beach and a local labor organization for misappropriation under the DTSA and FUTSA after the labor organization obtained the subcontractor’s certified payroll records from the City through a public records request.[ii] The M.C. Dean decision offers useful insights into the DTSA’s future impact on forum selection.[iii]
Congress passed the DTSA “to provide Federal jurisdiction for the theft of trade secrets,” and it became law on May 11, 2016.[iv] Most provisions of the DTSA are very similar to the uniform trade secret laws adopted by the states, such as the FUTSA.[v] The DTSA has additional features, however, such as specific provisions governing the civil seizure and criminal forfeiture of the instruments of misappropriation.[vi] The law further provides that the DTSA will not preempt state remedies for misappropriation of trade secrets.[vii]
The complaint in M.C. Dean was filed in federal court on May 16, 2016—mere days after enactment of the DTSA.[viii] On August 8, 2016, Judge Altonaga of the Southern District of Florida dismissed the complaint, finding that the plaintiff failed to reasonably protect its trade secrets.[ix] In reaching its decision, the court highlighted the close similarities between the DTSA and FUTSA, even calling certain requirements “identical.”[x] Accordingly, the court relied on both federal and Florida precedent under the FUTSA in support of its ruling under the DTSA.[xi]
Based on existing precedent under the FUTSA, Judge Altonaga held that the plaintiff first failed to protect its trade secrets—information contained within its certified payroll records—by entering into a subcontract that expressly obligated it to disclose that information to the City and allowed the City to use the information without restriction.[xii] The plaintiff further failed to protect its trade secrets when it furnished the payroll information without labeling it as a trade secret, because the failure to “identify information furnished to a state agency as putatively exempt from public disclosure effectively destroys any confidential character it might otherwise have enjoyed as a trade secret.”[xiii]
On the merits, M.C. Dean serves as a warning for businesses to ensure that government contracts do not effectively require them to put their trade secrets into the public record. More significantly, however, M.C. Dean indicates the extent to which the DTSA has changed the playing field for Florida businesses needing to take legal action to protect their trade secrets. Since Judge Altonaga’s decision determines that the standard for a FUTSA claim and a DTSA claim are effectively the same, it will be incumbent on commercial litigators going forward to consider whether federal or state court is the better forum for their client’s misappropriation of trade secrets claims.
James Jeffrey Burns and Christopher L. DeCort are business and commercial litigation attorneys with Johnson P.A. in Tampa, Florida. The Firm’s practice includes representing employers and former employees in cases involving misappropriation of trade secrets, breach of restrictive covenants, other contractual breaches, and related business torts. Jeff and Chris can be reached by phone at (813) 699-4859 or on the web at www.jnd-law.com.
[i] M.C. Dean, Inc. v. City of Miami Beach, No. 16-21731-CIV-ALTONAGA/O’Sullivan, 2016 WL 4179807, at *1 (S.D. Fla. Aug. 8, 2016).
[ii] Id. at *1-2.
[iii] Id. at *3.
[iv] Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, 130 Stat. 376.
[v] Compare definitions of “trade secret” and “misappropriation” in 18 U.S.C. § 1839 (2016) with those in § 688.002, Fla. Stat. (2016).
[vi] See 18 U.S.C. §§ 1834, 1836(b)(2).
[vii] Id. at § 1838.
[viii] Complaint, M.C. Dean, Inc. v. City of Miami Beach, No. 16-21731-CIV-ALTONAGA/O’Sullivan (S.D. Fla. May 16, 2016), available at http://business.cch.com/ipld/MCDeanCityMiamiBeachComplaint20160517.pdf.
[ix] M.C. Dean, Inc., 2016 WL 4179807, at *8.
[x] Id. at *5.
[xi] Id. at *6 (citing Laing v. BP Exploration & Prod., Inc., No. 8:13-cv-1041-T-23TGW, 2014 WL 272846, at *4 (M.D. Fla. Jan. 23, 2014); Sepro Corp. v. Fla. Dep’t of Env. Prot., 839 So. 2d 781, 783 (Fla. 1st DCA 2003)).
[xii] Id. at *7.
[xiii] Id. at *6 (quoting Sepro Corp., 839 So. 2d at 783) (internal quotation marks omitted).