Court Rejects Defendant’s Motion to Dismiss In Trade Secret Theft via Dropbox Account Case

12 Jan 2018

Follow our blog for future updates on eDiscovery topicsIn Abbott Laboratories v. Finkel, No. 17-cv-00894-CMA, Dist. Court, (D. Colo. 2017), a dispute arose after Defendant transferred company information and documents into a Dropbox account.

On December 8, 2014, Plaintiff Abbott Laboratories (“Abbott”) hired Defendant Dustin Finkel as a General Manager for its Nutrition Division. While Defendant worked for Plaintiff, he had access to confidential information and trade secrets, including communications, financial analyses, market proposals, and strategic presentations. To protect its confidential information and trade secrets, Plaintiff required Defendant to sign confidentiality and non-disclosure agreements. In addition, Abbott’s Electronic Messages policy prohibited Defendant from backing up or storing digital information on his personal storage devices or any websites or systems that are not managed or approved for use by Abbott. The policy also prohibited any sharing of Plaintiff’s electronic media with anyone outside of Abbott, including family, friends, or business partners. During the course of Defendant’s employment, Defendant both disclosed Abbott’s confidential information and trade secrets to a third party and transferred that information to his personal online cloud storage Dropbox account.

On February 19, 2016, Abbott terminated Defendant, citing Defendant’s misuse of Abbott’s confidential and proprietary information as a reason for termination. Abbott’s IT personnel deleted all the confidential information from Defendant’s Dropbox account. Abbott later discovered that Dropbox has a feature that allows a user to restore any file or folder removed from an active user account in the past 30 days or longer, depending on the version of Dropbox. Because of that, Abbott requested that Defendant certify that all Abbott documents were destroyed or deleted from Dropbox and allow Abbott to monitor Defendant’s Dropbox account. Defendant refused.

Plaintiff alleges that Defendant’s refusal to allow Plaintiff to monitor his Dropbox account and ensure the deletion of Plaintiff’s information potentially contained therein or transferred elsewhere, creates a risk that Defendant will further disclose its confidential information and trade secrets.

Plaintiff initiated this suit on April 12, 2017, asserting claims of breach of contract, conversion, and misappropriation of trade secrets. On August 30, 2017, Defendant filed a motion to dismiss Abbott’s conversion claim under Federal Rule of Civil Procedure 12(b)(6), arguing that the claim is preempted by the Colorado Uniform Trade Secrets Act (“CUTSA”), and the allegations in the complaint show that Defendant was authorized to access and use Plaintiff’s proprietary information and that he returned it to Plaintiff upon its request.

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. To assert a claim of conversion, Plaintiff must show: Plaintiff has a right to the property at issue, Defendant has exercised unauthorized dominion or ownership over the property, Plaintiff has made a demand for possession of the property, and Defendant refuses to return it. First, it is undisputed that Abbott has a right to the property at issue and that Abbott has made a demand for possession of the property. The Court therefore addresses only elements two and four. Abbott alleges that Defendant exercised dominion or ownership over Plaintiff’s trade secrets and confidential information when Defendant transferred the information to his personal Dropbox account. Although Plaintiff authorized Defendant to access the information, Plaintiff argues that it did not authorize Defendant to transfer the information to his Dropbox account and share it with third parties. Plaintiff asserts that, despite Plaintiff’s previous attempts to delete the information, Defendant can still restore the trade secrets and confidential information at any time and therefore has “dominion or ownership” over the documents. Taking these allegations as true, the Court finds that they are sufficient to state a plausible cause of action with respect to element two of Abbott’s conversion claim.

With respect to element four, Plaintiff argues that Defendant’s refusal to allow Plaintiff access to his Dropbox account to delete any potentially restored information constitutes a refusal to return Plaintiff’s property for the purpose of Plaintiff’s conversion claim. Accordingly, the Court holds that Plaintiff has proved element four and denies Defendant’s Motion to Dismiss Plaintiff’s Conversion Claim.

ILS–Plaintiff ESI Discovery Experts