Case 1:19-cv-04873-AJN Document 36 Filed 06/01/20 Page 1 of 8
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`Smart Team Global, LLC,
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`Plaintiff,
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`–v–
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`HumbleTech LLC, et al.,
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`Defendants.
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`19-cv-4873 (AJN)
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`OPINION & ORDER
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`ALISON J. NATHAN, District Judge:
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`Plaintiff Smart Team Global, LLC (“STG”), a software consulting firm, brings this suit
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`against Lin Li, a former employee, and HumbleTech, LLC, a limited liability company formed
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`by Li and of which Li was the only member, alleging unfair competition (Count 1), breach of the
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`common law duty of loyalty (Count 2), tortious interference with prospective economic
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`advantage (Count 3), violation of the Virginia Uniform Trade Secrets Act (Count 4), common
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`law misappropriation of confidential information and trade secrets (Count 5), misappropriation
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`of trade secrets under 18 U.S.C. § 1836 (Count 6), unjust enrichment (Count 7), and forfeiture of
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`salary and benefits (Count 8). Before the Court is Defendant HumbleTech’s partial motion to
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`dismiss Counts 1, 2, 3, 5, 6, 7, and 8 of the Amended Complaint.1 For the reasons that follow,
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`this motion is DENIED.
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`I.
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`BACKGROUND2
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`1 Defendant Lin Li has not yet been served in this action. STG’s motion to serve by alternate means, Dkt. No. 25, is
`pending and will be decided by the Court in due course.
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`2 The following facts are drawn from STG’s Amended Complaint (Dkt. No. 16) and are assumed to be true for
`purposes of HumbleTech’s motion to dismiss. See McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir.
`2007).
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`1
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`6/1/20
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`Case 1:19-cv-04873-AJN Document 36 Filed 06/01/20 Page 2 of 8
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`STG is a software consulting firm that specializes in advanced enterprise solutions and
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`provides its clients with various products and services. Am. Compl. ¶¶ 11–12. STG also offers a
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`software consulting service that assists its clients with system integration across its and others’
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`software and services. Id. ¶ 13. Defendant Li began working at STG as a consultant in 2012.
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`Id. ¶ 17. Through Li’s positions at STG, he acquired intimate and detailed knowledge about
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`STG’s business, including but not limited to current and proposed products and services,
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`business plans, software and other technology, client lists and information, and marketing and
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`sales strategies. Id. ¶ 23. STG alleges that this information constitutes trade secrets and/or
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`confidential and proprietary business information belonging to STG. Id. As an employee of
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`STG, Li also had access to STG’s password-protected computer system. Id. ¶ 24.
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`On February 25, 2018, Li abruptly announced his resignation from STG, effective March
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`1, 2018. Id. ¶ 25. Unbeknownst to STG, he had formed a competing entity in China in January
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`2018 and HumbleTech in New York on February 1, 2018. Id. While he was still employed by
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`STG, Li began laying the groundwork to pursue two former STG clients and started to perform
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`information governance support services through HumbleTech for both former STG clients upon
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`his resignation from STG. Id. ¶¶ 29–31. According to STG, Defendants misappropriated source
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`code for its software in order to benefit HumbleTech’s clients. Id. ¶¶ 32–36.
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`Since his resignation from STG, Li has been misleading STG’s potential business
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`partners and clients, and STG’s former and current employees, into believing that HumbleTech
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`is a successor to STG, and Defendants have continued in their efforts to divert additional clients
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`and projects away from STG. Id. ¶¶ 40, 43.
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`On May 24, 2019, STG initiated this action by filing a Complaint. See Dkt. No. 1. On
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`July 3, 2019, HumbleTech moved to dismiss the Complaint, Dkt. No. 11, and on July 24, 2019,
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`2
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`Case 1:19-cv-04873-AJN Document 36 Filed 06/01/20 Page 3 of 8
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`STG filed an Amended Complaint, Am. Compl. (Dkt. No. 16). HumbleTech subsequently
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`moved to dismiss the Amended Complaint on August 7, 2019. Dkt. No. 19. This motion was
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`fully briefed on August 28, 2019. See Dkt. Nos. 19–24.
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`II.
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`LEGAL STANDARD
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`In deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts the
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`allegations in the complaint as true and draws all reasonable inferences in favor of the non-
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`moving party. McCarthy, 482 F.3d at 191.
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`To survive a motion to dismiss, the complaint must include “enough facts to state a claim
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`to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A
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`claim has facial plausibility when the plaintiff pleads factual content that allows the court to
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`draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
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`v. Iqbal, 556 U.S. 662, 678 (2009). In other words, “the complaint’s factual allegations must be
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`enough to raise a right to relief above the speculative level, i.e., enough to make the claim
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`plausible.” Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) (internal citations
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`and alterations omitted) (quoting Twombly, 550 U.S. at 555, 570). “Threadbare recitals of the
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`elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal,
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`556 U.S. at 678.
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`Generally, “the facts alleged in the complaint, documents attached to the complaint as
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`exhibits, and documents incorporated by reference in the complaint” may be considered in
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`assessing whether a claim is sufficient to survive a Rule 12(b)(6) motion. DiFolco v. MSNBC
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`Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010).
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`3
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`Case 1:19-cv-04873-AJN Document 36 Filed 06/01/20 Page 4 of 8
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`III. DISCUSSION
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`A. STG’s Common Law Claims Are Not Preempted by the Virginia Uniform Trade
`Secrets Act
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`The Amended Complaint asserts six common law claims, one claim under the Virginia
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`Uniform Trade Secrets Act, and one federal statutory claim under the Defend Trade Secrets Act,
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`18 U.S.C. § 1836. HumbleTech argues that the six common law claims asserted in the Amended
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`Complaint are preempted by the Virginia Uniform Trade Secrets Act—a violation of which STG
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`pleads in Count 4 of the Amended Complaint—and thus must be dismissed. 3 The Court
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`disagrees.
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`The VUTSA contains a preemption provision which provides:
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`A. Except as provided in subsection B of this section, this chapter displaces conflicting
`tort, restitutionary, and other law of this Commonwealth providing civil remedies for
`misappropriation of a trade secret.
`B. This chapter does not affect:
`1. Contractual remedies whether or not based upon misappropriation of a trade secret; or
`2. Other civil remedies that are not based upon misappropriation of a trade secret; or
`3. Criminal remedies, whether or not based upon misappropriation of a trade secret.
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`VA Code Ann. § 59.1-341.
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`HumbleTech argues that the common law claims asserted in the Amended Complaint are
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`preempted by this provision because they are based on the misappropriation of trade secrets
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`alleged in the VUTSA claim. See Dkt. No. 21 at 5. However, the cases HumbleTech cites in
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`support of this argument make clear that the VUTSA’s preemption provision “is intended to
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`preclude only those common law claims . . . premised entirely on a claim for misappropriation of
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`a trade secret.” See, e.g., Space Sys./Loral, LLC v. Orbital ATK, Inc., 306 F. Supp. 3d 845, 856
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`(E.D. Va. 2018) (quoting Smithfield Ham and Prods. Co., Inc. v. Portion Pac, Inc., 905 F. Supp.
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`3 Because neither party has raised any dispute as to what law applies, the Court assumes for purposes of this Opinion
`and Order that Virginia law applies to the state-law claims alleged.
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`346, 348 (E.D. Va. 1995)). Indeed, “[c]ivil remedies not exclusively based on the
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`misappropriation of a trade secret are not preempted.” Id.
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`Here, it is clear that the common law claims asserted in the Amended Complaint are not
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`premised entirely on the alleged misappropriation of trade secrets. Indeed, the unfair
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`competition claim (Count 1) is premised on allegations that Li—alleged to be the sole member of
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`HumbleTech4—has been misleading STG’s potential business partners and clients into believing
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`HumbleTech is STG’s successor and appropriating STG’s name and goodwill for HumbleTech’s
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`benefit. Am. Compl. ¶¶ 40, 48. The breach of the common law duty of loyalty claim (Count 2)
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`is premised on allegations that Li prepared to compete with STG and divert STG’s business
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`opportunities to HumbleTech while still working at STG, convinced another STG employee to
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`do substandard work for an STG client to enable HumbleTech to later take over the provision of
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`services for that client, and arranged for a different STG client to begin receiving services from
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`HumbleTech immediately upon Li’s resignation from STG. Id. ¶¶ 52–54. The tortious
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`interference with prospective economic advantage claim (Count 3) is premised on allegations
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`that Li formed HumbleTech to compete directly with STG while still employed by STG,
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`convinced the above-mentioned STG employee to perform substandard work for an STG client
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`to enable HumbleTech to later take over the provision of that client’s services, and arranged for a
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`different STG client to begin receiving services from HumbleTech immediately upon Li’s
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`resignation from STG. Id. ¶ 58. The unjust enrichment claim (Count 7) is premised on
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`allegations that Defendants wrongfully usurped STG’s corporate opportunities and business
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`4 The Court does not consider HumbleTech’s argument, made for the first time in its reply, see Dkt. No. 24 at 7, that
`“Plaintiff’s allegations and arguments as to Defendant Li individually have no bearing on HumbleTech’s instant
`Motion,” see Knipe v. Skinner, 999 F.2d 708, 711 (2d Cir. 1993) (“Arguments may not be made for the first time in
`a reply brief.”).
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`relationships. Id. ¶ 90. And the forfeiture of salary and benefits claim (Count 8) is premised on
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`allegations that Li acted disloyally as set forth in the allegations above and, as a result, forfeited
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`any entitlement to compensation STG paid to him during the relevant period. Id. ¶¶ 93–97.
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`Furthermore, STG makes clear in its opposition to HumbleTech’s motion to dismiss that
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`the only common law claim premised entirely on the misappropriation of trade secrets—the
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`common law misappropriation of confidential information and trade secrets claim (Count 5)—is
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`pleaded only in the alternative should the Court determine that the law of a state other than
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`Virginia applies to STG’s claims. See Dkt. No. 22 at 11. Accordingly, because none of the
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`common law claims to which the VUTSA might apply are premised entirely on the
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`misappropriation of trade secrets, the VUTSA does not preempt them. HumbleTech’s motion to
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`dismiss these claims on preemption grounds is therefore denied.
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`B. STG’s Defend Trade Secrets Act Claim is Adequately Alleged
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`HumbleTech further argues that the claim asserted under the federal Defend Trade
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`Secrets Act should be dismissed for failure to state a claim. The Court again disagrees.
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`The DTSA provides a private cause of action to the “owner of a trade secret that is
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`misappropriated.” 18 U.S.C. § 1836(b)(1). “To state a claim for trade secret misappropriation
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`under the DTSA, a plaintiff must plausibly allege that (1) it possessed a trade secret, and (2) the
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`defendant misappropriated the trade secret.” Medidata Sols., Inc., v. Veeva Sys. Inc., No. 17-cv-
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`589 (LGS), 2018 WL 6173349, at *3 (S.D.N.Y. Nov. 26, 2018). The DTSA defines “trade
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`secret” to include “all forms and types of financial, business, scientific, technical, economic, or
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`engineering information” if (1) “the owner thereof has taken reasonable measures to keep such
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`information secret” and (2) “the information derives independent economic value . . . from not
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`being generally known to, and not being readily ascertainable through proper means by, another
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`person who can obtain economic value from the disclosure or use of the information.” 18 U.S.C.
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`§ 1839(3). Courts in this Circuit “routinely require that plaintiffs plead their trade secrets with
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`sufficient specificity to inform the defendants of what they are alleged to have misappropriated.”
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`ExpertConnect, L.L.C. v. Fowler, No. 18-cv-4828 (LGS), 2019 WL 3004161, at *4 (S.D.N.Y.
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`July 10, 2019) (citing Elsevier Inc. v. Doctor Evidence, LLC, No. 17-cv-5540 (KBF), 2018 WL
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`557906, at *4 (S.D.N.Y. Jan. 23, 2018) (collecting cases)).
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`“Under the DTSA, a complaint must plead that the defendant misappropriated
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`a trade secret (1) by acquiring a trade secret by improper means, or (2) disclosing or using
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`the trade secret without consent.” ExpertConnect, 2019 WL 3004161, at *6 (quoting AUA
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`Private Equity Partners, LLC v. Soto, No. 17-cv-8035 (GHW), 2018 WL 1684339, at *4
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`(S.D.N.Y. Apr. 5, 2018) (citing 18 U.S.C. § 1839(5))). “Improper means” include “theft,
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`bribery, misrepresentation, [and] breach or inducement of a breach of a duty to maintain
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`secrecy,” but exclude “reverse engineering, independent derivation, or any other lawful means of
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`acquisition.” 18 U.S.C. § 1839(6).
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`The Amended Complaint plausibly alleges both that STG possessed a trade secret and
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`that HumbleTech misappropriated that trade secret. Specifically, it alleges that Defendants
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`misappropriated STG’s proprietary source code for its software, see Am. Compl. ¶ 32; that this
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`source code is stored in a password-protected “Bitbucket,” id. ¶ 34; that only employees with a
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`need to access the Bitbucket are provided with the Bitbucket password, id.; and that STG derives
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`substantial value from maintaining the confidentiality of its source code because competitors are
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`not able to easily replicate it, id. ¶ 35. It further alleges that Li and HumbleTech wrongfully
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`acquired and used the source code to provide services to their clients and specifies the improper
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`means STG believes they used. Id. ¶¶ 32–36. Accordingly, because STG has adequately alleged
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`a Defend Trade Secrets Act claim, HumbleTech’s motion to dismiss this claim is denied.
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`IV. CONCLUSION5
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`For the foregoing reasons, HumbleTech’s partial motion to dismiss Counts 1, 2, 3, 5, 6, 7,
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`and 8 of STG’s Amended Complaint is DENIED.
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`The parties are ordered to appear by telephone on June 26, 2020 at 3:30 p.m. for an initial
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`pretrial conference. They are directed to submit a joint letter and proposed case management
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`plan to the Court 7 days prior to that conference. In their joint letter, the parties should indicate
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`whether they can do without an initial pretrial conference altogether. If so, the Court may enter a
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`case management plan and scheduling order and the parties need not appear.
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`This resolves Dkt. No. 19. Because the Court resolves this motion on the papers,
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`HumbleTech’s request for oral argument is DENIED.
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`SO ORDERED.
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`Dated: June 1, 2020
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`New York, New York
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`__________________________________
` ALISON J. NATHAN
` United States District Judge
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`5 The Court does not consider HumbleTech’s final argument that STG’s claims should have been brought in China,
`see Dkt. No. 21 at 9, because HumbleTech does not seek dismissal of the Amended Complaint or any claims
`pleaded therein on this ground.
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`8
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