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The GWO Litigation Trust v. Sprint Solutions, Inc.

Superior Court of Delaware

October 25, 2018

THE GWO LITIGATION TRUST, Plaintiff/Counterclaim Defendant,
v.
SPRINT SOLUTIONS, INC., Defendant/Counterclaim Plaintiff. SPRINT EWIRELESS, INC., Third-Party Plaintiff,
v.
THE GWO LITIGATION TRUST, Third-Party Defendant.

          Submitted: July 19, 2018

         Upon Defendant Sprint Solutions, Inc.'s Motion to Dismiss Counts Three through Seven of the Amended Complaint, DENIED in part; GRANTED in part.

         Upon Plaintiff GWO Litigation Trust's Partial Motion to Dismiss Defendant's Amended Counterclaims and Sprint eWireless, Inc.'s Third-Party Claim, DENIED in part; GRANTED in part.

          Richard M. Beck, Esquire, Sean M. Brennecke, Esquire, Klehr Harrison Harvey Branzburg LLP, Wilmington, Delaware, John D. Byars, Esquire (pro hac vice), Joseph C. Smith, Jr., Esquire (pro hac vice) (argued), Bartlit Beck Herman Palenchar & Scott LLP, Chicago, Illinois, Attorneys for Plaintiff.

          Steven L. Caponi, Esquire, Matthew B. Goeller, Esquire, K&L Gates LLP, Wilmington, Delaware, David I. Swan, Esquire (pro hac vice) (argued), McGuireWoods LLP, Tysons, Virginia, Brian A. Kahn, Esquire (pro hac vice) (argued), McGuireWoods LLP, Charlotte, North Carolina, Attorneys for Defendant and Third-Party Plaintiff.

          MEMORANDUM OPINION AND ORDER

          Paul R. Wallace, Judge

         I. INTRODUCTION

         Sprint Solutions, Inc. ("Sprint") entered into a series of contracts with General Wireless Operations, Inc. ("General Wireless") in early 2015 for the purpose of revitalizing the bankrupt RadioShack Corporation ("RadioShack") through unified Sprint/RadioShack store locations, referred to in the agreements as the "Store-Within-A-Store" ("SWAS") model.

         The General Wireless Organization Litigation Trust ("GWO Trust"), the successor-in-interest to General Wireless, now brings suit against Sprint on seven counts: two counts of breach of contract; and one count each of breach of the implied covenant of good faith and fair dealing, misappropriation of trade secrets, conversion, unfair competition, and tortious interference with prospective business relations. Sprint moves to dismiss all but the breach-of-contract claims.

         Sprint brings five counterclaims against GWO Trust: two counts of breach of contract; one for declaratory relief regarding limitation of liability; an attorney's fees request under the Delaware Uniform Trade Secret Act ("DUTSA") for a bad faith claim of trade secret misappropriation; and an indemnification claim. Third-party plaintiff Sprint eWireless, Inc. ("eWireless") also claims breach of contract against GWO Trust. GWO Trust moves to dismiss three of Sprint's counterclaims and eWireless's third-party claim.

         II. FACTUAL AND PROCEDURAL BACKGROUND

         The essential facts are undisputed in this action. While GWO Trust and Sprint each present its version of the story in its respective pleadings, the basic facts are as follows.

         A. RadioShack Bankruptcy and the Parties Involved.

         RadioShack, founded around 1920, was once an iconic name with a nationwide retail footprint in electronics, computer, and cellphones.[1] From 2011 to its bankruptcy filing in 2015 ("First RadioShack Bankruptcy Case"), RadioShack's revenue declined due to increasingly competitive market conditions.[2]

         General Wireless, an entity formed by New York-based hedge fund Standard General LP, was created to acquire the strongest parts of RadioShack's business from bankruptcy and to revitalize the retailer.[3] General Wireless, Inc. ("GWI") is the ultimate parent entity of General Wireless.[4]

         Sprint, controlled by the Japanese wireless and internet conglomerate SoftBank Corp. since June 2013, is incorporated in Delaware and sought to expand its business in the United States' wireless market which had been predominated by AT&T and Verizon.[5] eWireless, an affiliate of Sprint, is a Kansas corporation.

         B. Strategic Alliance Agreement; Investor Rights Agreement

         In 2015, Sprint was seeking to expand its footprint in the American market. And RadioShack, while owning many retail stores nationwide, was suffering from weakened finances and the on-going proceeding in the First RadioShack Bankruptcy Case.[6] So the parties negotiated various mutually beneficial agreements as part of the first bankruptcy case.

         On April 1, 2015, General Wireless and Sprint entered into the Amended and Restated Master Strategic Retail Alliance Agreement (the "Alliance Agreement") under which the parties would establish co-branded retail stores-using the SWAS format-to sell RadioShack products and Sprint products exclusively.[7] A week later, the parties entered into the Operation, Management, and Staffing Agreement ("OMS Agreement"), as well as numerous other related agreements, including but not limited to master leases and subleases, a distribution agreement, a retailer agreement, and an Investor Rights Agreement (the "Investor Rights Agreement" or "IRA," collectively, the "Related Agreements").[8] The OMS Agreement detailed matters not specified in the Alliance Agreement.[9]

         Under the SWAS model, the parties were to use commercially reasonable efforts to meet an agreed-upon schedule in opening co-branded stores, setting up joint signage, staffing and training employees, and maintaining inventory.[10]Specifically, with respect to the cost of signage, Sprint would be responsible for 60% and General Wireless for 40%.[11]

         The SWAS model didn't produce the expected market results.[12] Four months into the Alliance Agreement, only about one-quarter of the SWAS model locations were completed.[13] Progress stalled due to the parties' failure to provide funding, collaborate on signage, and maintain adequate inventory.[14]

          As mentioned, along with the Alliance Agreement, eWireless, GWI, and certain GWI affiliates entered into the Investor Rights Agreement.[15] The IRA was meant to protect eWireless as an investor and shareholder by granting eWireless the rights to receive stock warrants, observe the board, and have General Wireless maintain minimum levels of capital and liquidity.[16] In addition, eWireless would have a claim against GWI[17] in the amount of $60 million less the amount of commissions General Wireless earned from the ongoing sale of Sprint products (the "Sprint Investor Reimbursement"), referred to as the "Threshold" under Schedule 4.2 of the Alliance Agreement.[18] Schedule 4.2 set forth a fees and payment arrangement that required the parties to "negotiate in good faith to modify the application of the Threshold" if General Wireless experienced a negative cash flow.[19]

          For the eight months before February 2016, General Wireless did suffer continuous monthly negative cash flow.[20] The parties negotiated and hired outside consultants between December 2015 and March 2016 in an attempt to address that cash flow problem.[21] And in April 2016, General Wireless and Sprint executed an amendment to the Alliance Agreement (the "Fourth Amendment").[22] Thereunder, Sprint was to increase its cash payment to General Wireless and provide additional support to SWAS locations.[23]

         C. Termination of the Alliance Agreement and the Second Bankruptcy Case.

         The RadioShack/Sprint SWAS model didn't take off. And so, around February 2017, General Wireless and Sprint commenced negotiations to wind down the Alliance Agreement.[24] On March 5, 2017, General Wireless and Sprint executed a Mutual Settlement and Release, Operations Wind Down, and Bankruptcy Cooperation Agreement (the "Settlement Agreement").[25] Three days later, General

          Wireless filed for bankruptcy (the "Second Bankruptcy Case").[26] The Bankruptcy Court appointed a statutorily required committee of unsecured creditors (the "Committee") to act in the jointly-administered First RadioShack Bankruptcy Case and the Second Bankruptcy Case.[27]

         Under the Settlement Agreement, Sprint was to: make a "wind-down payment" of $17 million to General Wireless, of which $12 million was to be paid before General Wireless commenced the Second Bankruptcy Case, and set aside a $5 million holdback ("Holdback") during an "investigation period" if General Wireless's creditors agreed to the mutual releases between Sprint and General Wireless.[28] But if the creditors filed a claim against Sprint, Sprint forfeited the Holdback.[29] The Settlement Agreement also contemplated a joint release of claims between General Wireless and Sprint.[30] An estimated $18 million of the Sprint Investor Reimbursement owed to eWireless was excepted from the release of claims.[31]

         General Wireless sought approval of the Settlement Agreement from the Bankruptcy Court.[32] And on May 11, 2017, the Bankruptcy Court approved the Settlement Agreement (the "Settlement Approval Order").[33]

         GWO Trust filed the original Complaint in this case in June 2017, asserting two counts of breach of contract and one count of misappropriation of trade secrets.[34]GWO Trust's Amended Complaint with additional claims was filed nine months later, [35] followed the next day by Sprint's Amended Counterclaims and Third-Party Claims.[36]

         Now before the Court are the parties' cross-motions to dismiss. Sprint moves to dismiss Counts Three through Seven of GWO Trust's Amended Complaint. GWO Trust seeks to dismiss Counts I, II and VI of Sprint's Amended Counterclaims. GWO Trust also seeks dismissal of Count V-eWireless's third-party claim.

         III. STANDARD OF REVIEW

         When considering a Civil Rule 12(b)(6) motion to dismiss for failure to adequately state a claim, the Court will:

(1) accept all well pleaded factual allegations as true, (2) accept even vague allegations as "well pleaded" if they give the opposing party notice of the claim, (3) draw all reasonable inferences in favor of the non-moving party, and (4) [not dismiss the claims] unless the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances.[37]

         The Court must accept as true all well-pleaded allegations.[38] And every reasonable factual inference will be drawn in the non-moving party's favor.[39] But the Court will "ignore conclusory allegations that lack specific supporting factual allegations."[40] Dismissal is warranted when a party either fails to plead facts supporting an element of its claim (or counterclaim), or where under no reasonable interpretation of the facts alleged could its complaint (or answer) be read to state a claim (or counterclaim) for which relief might be granted.[41] If the Court engages these well-accepted standards and finds the claimant (or counter-claimant) may recover, the Court must deny the motion to dismiss.[42]

         IV. DISCUSSION

         A. Sprint's Motion to Dismiss Counts Three through Seven of the Amended Complaint.

         GWO Trust asserts: in Count Three-breach of the implied covenant of good faith and fair dealing; in Count Four-misappropriation of trade secrets; in Count Five-conversion; in Count Six-unfair competition; and, in Count Seven-tortious interference with prospective business relations. Sprint moves to dismiss them all on multiple grounds. Upon careful consideration of each argument raised, the Court GRANTS, in part, and DENIES, in part, Sprint's motion as to Count Three; GRANTS its motion as to Counts Five, Six, and Seven; and DENIES its motion as to Count Four.

         1. Counts Three, Five, Six, and Seven Are Not Time-Barred.

         Sprint's first argument rests on its attempt to interpret the Settlement Approval Order. According to Sprint, the Settlement Approval Order preserves only those pre-bankruptcy claims against GWO Trust that are "timely" filed (each a "Timely Challenge"). A pre-bankruptcy claim, or "pre-petition" claim, is one that was or is deemed to have been filed prior to the bankruptcy petition. Sprint contends that because Counts Three, Five, Six, and Seven were not "timely" filed, they are time-barred.[43]

         Under the Settlement Approval Order, a Timely Challenge is defined as "a claim [filed] against any Sprint … prior to July 1, 2017."[44] That definition has import to the release of liabilities under the Settlement Agreement, and accordingly, General Wireless's right to receive the $5 million Holdback.[45] In the event of a Timely Challenge, GWO Trust "shall be deemed to forfeit and [will] not receive any portion of the Holdback."[46]

         The Settlement Approval Order expressly provides "[n]otwithstanding anything to the contrary in the Motion or the Settlement Agreement, all Chapter 5 and state law claims related to any Sprint Party's prepetition acts or omissions are fully preserved, if any such claims as to any Sprint Party are included in a Timely Challenge . . ."[47] Sprint reads this language to mean "… state law claims … are preserved, [only if] such claims are included in a Timely Challenge."[48] So, Sprint says, because Counts Three, Five, Six, and Seven were not asserted prior to July 1, 2017, as Timely Challenges, they are time-barred.[49]

         GWO Trust counters that under the Settlement Approval Order so long as "any" claim is filed as a Timely Challenge, "all" prepetition and state law claims are preserved.[50] Hence, Counts Three, Five, Six, and Seven could be added anytime because the original Complaint was filed prior to July 1, 2017, and preserved GWO Trust's right to bring any and all new claims.[51]

         So the Court must determine whether only specific claims filed as Timely Challenges are preserved, or if the filing of a single Timely Challenge sufficed to preserve the right to add the new claims thereafter. To resolve this contract construction question, the Court must "interpret clear and unambiguous terms according to their ordinary meaning."[52]

         Here, the Court finds no ambiguity in the terms of either the Settlement Agreement or the Settlement Approval Order. Section 8 of the Settlement Approval Order reads "all prepetition and state law claims are preserved, if any such claims are included in a Timely Challenge." This language clearly provides that if any claim is filed as a Timely Challenge, all claims are preserved and can be subsequently asserted.

         The parties don't dispute that the initial Complaint, filed on June 28, 2017, is a Timely Challenge. And the Settlement Approval Order in plain language provides that the filing of the initial Complaint preserved General Wireless's right to assert additional prepetition and state law claims, as it has done in Counts Three, Five, Six, and Seven of the Amended Complaint. Accordingly, Sprint's time-bar argument fails.

         2. Count Three-Breach of the Implied Covenant Claim Must Be Dismissed.

         Sprint moves to dismiss Count Three-Breach of the Implied Covenant of Good Faith and Fair Dealing-contending that the conduct complained-of is covered by the express terms of the Alliance Agreement and the OMS Agreement. Thus, Sprint says, GWO Trust cannot assert an "implied" contract claim in lieu of or in addition to those based on express contract provisions.[53]

         According to GWO Trust, the conduct alleged to have breached the implied covenant includes: (i) opening competing Sprint stores in close proximity, (ii) diverting customers away from co-branded stores to Sprint stores, and (iii) failing to adequately train its employees working in the co-branded stores.[54] GWO Trust complains that Sprint's breach caused reduced customer traffic, and decreased sales, revenue, and cash flow at the co-branded stores.[55]

         Under Delaware law, the implied covenant of good faith and fair dealing attaches to every contract.[56] However, implying a covenant not contracted for by the parties is a "cautious enterprise" that "should be [a] rare and fact-intensive" exercise, governed solely by "issues of compelling fairness."[57]

         The baseline in these matters-existing contract terms control.[58] The implied covenant cannot be used to re-write the agreement, [59] "to circumvent the parties' bargain, or to create a free-floating duty unattached to the underlying legal document."[60] When a sophisticated party "could have easily drafted the contract to expressly" provide a specific contractual protection, the failure to do so cannot be remedied by employing the implied covenant.[61]

         The Court will resort to the implied covenant only when a contract is truly silent with respect to the contested issue. And then only when the Court finds that the parties' expectations on the issue were so fundamental that they clearly would not need to negotiate about nor memorialize them.[62] Recognizing the "occasional necessity" of implying contract terms to ensure the parties' "reasonable expectations" are fulfilled, [63] the Court "must assess the parties' reasonable expectations at the time of contracting and not rewrite the contract to appease a party who later wishes to rewrite a contract he now believes to have been a bad deal."[64]

         A claimant may only invoke the protections of the covenant when it is clear from the underlying contract that the contracting parties would have agreed to proscribe the act later complained of.[65] To maintain an implied covenant claim, the factual allegations underlying the implied covenant claim must differ from those underlying an accompanying breach-of-contract claim.[66] If the contract at issue expressly addresses a particular matter, "an implied covenant claim respecting that matter is duplicative and not viable."[67]

         Here, the Court finds Sprint's conduct purportedly giving rise to GWO Trust's implied covenant claim is, in part, governed by express contractual terms negotiated by the parties, and in part, not duplicative of the parties' express contractual obligations.

         i. Sprint's Opening of Nearby Competing Stores.

         GWO Trust's first complaint is that Sprint opened competing stores proximate to co-branded stores.[68] Sprint posits that the Alliance Agreement and OMS Agreement-heavily negotiated contracts between sophisticated commercial parties-extensively and comprehensively detail the operations and locations of the co-branded SWAS stores.[69] According to Sprint, there can be no undefined non- compete zone written in via the implied covenant.[70] And so, Sprint says, because the conduct in this regard is governed by express contract terms, the implied covenant claim must be dismissed.

         GWO Trust concedes that the Alliance Agreement did deal with SWAS locations, but argues that the allegation here arises from Sprint's implied duty not to open nearby competing stores; not from Sprint's express duty to open (or to cooperate in opening or re-tooling) stores at designated SWAS locations.[71]

         The Court is mindful that the implied covenant cannot be used to inflict free-floating obligations on a party simply because the claimant fails to secure a protection through contract during the negotiations.[72] Disfavor of the implied covenant shall not, however, preclude the claim when a contract is truly silent on a matter, and when the expectations of the parties thereon were so fundamental that one would expect the alleged offending behavior would need be neither negotiated over nor scrivened.[73] Thus, to determine whether the implied covenant applies, the Court must employ a factual inquiry into the conduct complained-of and discern the parties' "reasonable expectation" given the factual backdrop of the case.

         The Court finds that the Alliance Agreement and the OMS Agreement, taken as a whole, do indeed address the locations of the co-branded stores, and are silent as to any restrictions on Sprint opening competing stores. But when assessing the parties' expectations, the Court must consider the totality of the convoluted factual background of these agreements: General Wireless and Sprint entered into a strategic business relationship, executed a series of agreements to materialize the details, and implemented-albeit unsuccessfully-the SWAS model. Under the SWAS model, the co-branded stores would sell RadioShack and Sprint products exclusively. Implicit to this exclusivity was RadioShack/General Wireless's forbearance from selling Sprint competitors' products. Commercial profitability is achieved, in many instances, by increasing the competitiveness, and/or limiting the competition. Taking these commonsensical business considerations and the unique facts of this case, the Court finds General Wireless would reasonably expect Sprint to forbear from opening competing Sprint-stores carrying the exact same products in proximity to the co-branded stores.

         The Court finds that, though indeed absent from the express terms of the Alliance Agreement and Related Agreements, the reasonable expectation here was sufficiently fundamental for the Court to infer such an obligation derived from the parties' relationship, and such inference does not override or conflict with the contracts' express terms: Sprint's duty to open co-branded stores at the agreed-upon locations is sufficiently different from Sprint's implicit duty to refrain from opening nearby competing Sprint-alone stores. Under the specific facts alleged here, the implied covenant claim is not foreclosed as being duplicative of the express breach-of-contract claim.

         ii. Diverting Customers.

         GWO Trust next claims Sprint, directly or indirectly, diverted customers away from co-branded stores.[74] Sprint argues that the complained-of conduct is covered by the Alliance Agreement's Section 7.2(b) and, therefore, warrants dismissal.[75]

         Section 7.2 of the Alliance Agreement says that each party will "maintain a commercially reasonable" inventory level of their respective products, and ensure their products at the co-branded stores are substantially similar to their own branded stores.[76] And Section 4.3 of the OMS Agreement allows personnel in a co-branded store to set up appointments in other Sprint locations when need be.[77] In other words, some "diversion" of customers was anticipated. Accordingly, the Court finds the alleged wrongdoing-"diverting" customers away from co-branded stores-is the subject of the contracts' express terms. The Court declines to infer some other implied contractual obligation into the well-delineated, bargained-for exchange between the parties on this "diversion" claim.

         iii. Training of Store Personnel.

         Last, GWO Trust argues that Sprint breached the implied covenant by failing to adequately train those working in the co-branded stores.[78] Again, Sprint says the issue of employee training is governed by specific contractual terms.[79]

         Section 7.5 of the Alliance Agreement provides that" . . . each [party] will be responsible for staffing and managing such [p]arty's respective operations in each [co-branded store]."[80] And OMS Agreement Section 4.3 explicitly states that each party is responsible for training its respective employees regarding its own products and services.[81] To the extent Sprint assists or provides training to RadioShack/General Wireless employees, such assistance and training is limited to "accessing Sprint.com, the store locator and information on appointment setting for customers at other Sprint locations."[82]

         Again, express contract terms cover the complained-of conduct. Thus, GWO Trust's implied covenant claim on lack of employee training must be dismissed.

         In sum, Sprint's motion to dismiss Count Three for Breach of the Implied Covenant of Good Faith and Fair Dealing is GRANTED with respect to the alleged diversion of customers and failure to adequately train employees; it is DENIED on the proximate-competing-stores allegation.

         3. Count Four-Misappropriation of Trade Secrets.

         GWO Trust alleges in Count Four that Sprint misappropriated its trade secrets, including store-level data, retail tickets, and gross margin for RadioShack products.[83] Sprint seeks dismissal of Count Four, on three grounds: (i) it is merely duplicative of Count Two;[84] (ii) it is not subject to DUTSA;[85] and (iii) it violates Delaware law's well-settled principle of honoring contracts.[86]

         Given that GWO Trust alleges the trade secrets misappropriation under the DUTSA, the Court first addresses its applicability. The Court then considers Sprint's remaining arguments.

         i. DUTSA is Applicable-Count Four Will Not Be Dismissed as Duplicative.

         Sprint first asserts that the "trade secret" alleged in Count Four is no different than the "Confidential Information" referenced in Count Two, a breach-of-contract claim.[87] And, Sprint posits, a DUTSA claim for trade secret misappropriation must be dismissed when duplicative of a contractual claim for breach of confidentiality.[88]

         DUTSA expressly provides that it displaces conflicting tort, restitutionary and other Delaware law that may provide civil remedy for misappropriation of a trade secret.[89] The statute does not, however, affect:

(1) Contractual remedies, whether or not based upon misappropriation of a trade secret;
(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.[90]

         The statute unequivocally provides that the existence of a contract claim does not preclude or otherwise affect a DUTSA claim, whether or not the contract claim arises from alleged misappropriation of a trade secret. Thus, that aspect of Sprint's argument is meritless.

         With respect to other civil remedies, however, the statute does provide preemption to the extent those other remedies are based upon misappropriation of a trade secret. The determinant is whether "the same facts are used to establish all elements" of the common law claim and the DUTSA trade secret claim.[91]

         GWO Trust, in asserting Count Four, seems to base its claim on both the common law[92] and DUTSA.[93] Inferring facts favorably to GWO Trust, as the Court must, [94] to the extent GWO Trust alleges misappropriation under both common law and DUTSA, the common law claim might be preempted by DUTSA; but any misappropriation-of-trade-secret claim is still preserved under DUTSA. Accordingly, GWO Trust's DUTSA trade secret claim is not foreclosed merely because GWO Trust simultaneously asserts a contract-based breach-of-confidentiality claim.

         But, while GWO Trust may legally assert a DUTSA-grounded trade secret claim, it still must do so under the applicable pleading standard. In Section IV.A.3.iii, infra, the Court addresses the sufficiency of GWO Trust's allegations. ii. Sprint's Policy Argument is Groundless.

         Sprint additionally argues that Count Four should be dismissed because it violates the long-standing policy of honoring well-negotiated contracts between sophisticated commercial parties.[95]

         Sprint's assertion, however, is predicated on its previous argument of DUTSA's inapplicability and is just as unpersuasive.

         iii. GWO Trust Sufficiently Alleges a Trade Secret Misappropriation Claim.

         Having concluded that GWO Trust's trade secret misappropriation claim is not preempted, the Court now addresses whether GWO Trust sufficiently alleges that claim.[96]

         To survive a motion to dismiss a DUTSA claim under Rule 12(b)(6), the complaint must plead four elements:

(i) A trade secret exists;
(ii) The plaintiff communicated the trade secret to the defendant;
(iii) The communication was made pursuant to an express or implied understanding that the defendant would maintain the secrecy of the information; and
(iv) The trade secret has been misappropriated within the meaning of that term as defined in the DUTSA.[97]

         To make out a DUTSA trade secret misappropriation claim, the claimant must show the subject information qualifies as a "trade secret." DUTSA defines a trade secret as "information" that "[d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use," and that "[i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy."[98] Information can be confidential and protected by a contractual provision, yet fail to be considered a "trade secret" under DUTSA.[99] The reverse is also true: a trade secret can be protected by DUTSA absent any express contract provision.[100]

         On a motion to dismiss, the Court accepts as true all well-pleaded allegations, [101] and draws all factual inferences in favor of the non-moving party.[102]But the Court need not accept "conclusory allegations that lack specific supporting factual allegations."[103]

         GWO Trust has pleaded sufficient facts to allege a claim for misappropriation of trade secrets. The information relating to store-level data on traffic, retail tickets, and gross margins are conceivably of independent economic value for General Wireless, and/or its competitors in the industry, to be used for competition purposes such as determining pricing and marketing strategies, or for other business-related uses. Such information is not readily available to one outside this SWAS partnership, or one who is not otherwise privileged to its access.

          GWO Trust, by entering into the Alliance Agreement, undertook sufficient reasonable measures to keep the information confidential. The "reasonable efforts" requirement for a trade secret claim is not a high bar. Bare legally conclusive assertions are inadequate;[104] confidentiality provisions or policies intended to prevent unauthorized disclosure are sufficient.[105]

         In the Alliance Agreement, the Confidentiality provision sets forth, in detail: the definition of the subject information; the restriction and limitation on its disclosure and use; and the remedies available when a breach occurs. That satisfies DUTSA.

         Lastly, GWO Trust must also plead facts demonstrating Sprint's "misappropriation." Under DUTSA, "misappropriation" is defined as "disclosure or use . . . without express or implied consent by a person who . . . at the time of disclosure or use, knew or had reason to know … that [his] use … derived from [a] person who owed a duty [to] maintain its secrecy or limit its use."[106] As confidentiality was consented to by the parties via the Alliance Agreement, Sprint knew or must have known the information was expected to be kept secret. GWO Trust has pleaded sufficient facts to allege a claim for misappropriation of trade secrets under DUTSA.

         4. Count Five-Conversion and Count Six-Unfair Competition.

         GWO Trust alleges in Count Five a claim for Conversion of proprietary confidential business information.[107] In Count Six, it brings a claim for Unfair Competition complaining that Sprint improperly used confidential business information, diverted customers away, and interfered with existing landlord relationships.[108]

         Sprint moves for dismissal on two grounds. First, Sprint argues-again, on the ground of duplication-that Counts Five and Six are mere repackaging of Count Two and not based on a duty independent of the contract.[109] Second, Sprint avers that Counts Five and Six are preempted by DUTSA.[110] GWO Trust maintains that the duties underlying Counts Five and Six do not derive solely from the contract, and are, therefore, not duplicative of Count Two.[111] i. Counts Five and Six Are Duplicative of Count Two.

         Both conversion and unfair competition are common law remedies. While a claim based entirely on the breach of contractual terms generally must be sued in contract, and not tort, [112] a tort claim can be sustained alongside a contract claim where the same conduct constitutes a breach of contract, and a violation of an independent duty imposed by law.[113] Thus, the crux of the question here is: whether GWO Trust's conversion and unfair competition claims are based entirely on a duty deriving from the contract, or is there a potential violation of a duty imposed by law separate and apart from the contractual obligations.

         Conversion is defined as "any distinct act of dominion wrongfully exerted over the property of another, in denial of his right, or inconsistent with it."[114] It is an intentional tort, hence, a general duty to refrain from converting another's property is implied under tort law.[115]

         In the present case, GWO Trust's conversion claim is based on Sprint's alleged exertion of dominion over the purported confidential business information discussed earlier-i.e., the data relating to store traffic, retail tickets, and gross margin for RadioShack products.[116] Again, that information was labeled and treated as "Confidential Information" in the Alliance Agreement, which not only defines, but also limits the use and disclosure of the information to limited persons for limited purposes.[117] In other words, that information would not have been entitled to confidential treatment by the parties had it not been for the Alliance Agreement. Sprint's duty, if any, to treat and keep such information confidential and not to wrongfully exert dominion over or misuse it, derives entirely from the Alliance Agreement. Absent the Alliance Agreement, Sprint had no separate duty with respect to that information. With no duty independent of that from the contract, GWO Trust's Count Five must be dismissed.

          The Court now turns to Count Six, a claim of unfair competition. Delaware law defines "unfair competition" with less clarity.[118] It has been said that the essential distinction between legitimate market participation and "unfair competition" is "unfair action" by a defendant that prevents "the plaintiff from legitimately earning revenue."[119] To state a claim for unfair competition, a plaintiff must allege "a reasonable expectancy of entering a valid business relationship, with which the defendant wrongfully interferes, and thereby defeats the plaintiff's legitimate expectancy and causes him harm."[120]

         GWO Trust alleges that Sprint's unfair action was Sprint improperly using the aforementioned confidential business information, diverting customers away, and interfering with landlord relationships.[121]

         Although General Wireless might conceivably claim to have reasonable expectations with respect to those business relationships, its unfair competition claim must fail for the same reason as Count Five. The duties purportedly giving rise to the claim derive entirely from the Alliance Agreement. GWO Trust pleads that Sprint interfered by improperly using "[GWO Trust's] Confidential Business information"[122]-a duty wholly imposed by and wholly arising from the Alliance Agreement. Thus, failing to allege a duty independent of those contract duties dooms GWO Trust's unfair competition claim and Count Six must be dismissed.

         ii. Preemption by DUTSA.

         With respect to Counts Five and Six, Sprint additionally argues for their dismissal based on preemption by DUTSA.[123] While this argument is moot given the Court's discussion above, the Court agrees that the conversion and unfair competition claims would also be dismissed because of DUTSA preemption.

         DUTSA expressly provides that a trade secret claim "displaces conflicting tort, restitutionary and other law of this State providing civil remedies for misappropriation of a trade secret."[124] The exceptions are criminal remedies, contractual remedies, and "other civil remedies that are not based on misappropriation of a trade secret . . ."[125]

         But the foundation of GWO Trust's conversion and unfair competition claims is that the information Sprint used comprised of trade secrets. The same as that grounding the DUTSA trade secret misappropriation claim. While the latter survived, the former must be dismissed.

         5. Count Seven-Tortious Interference with Prospective Business Relations.

         In Count Seven, GWO Trust alleges tortious interference with prospective business relations with retail customers and existing landlords.[126] Sprint argues that the claim should be dismissed because GWO Trust is a party to the contract ...


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