Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

AlixPartners, LLP v. Benichou

Court of Chancery of Delaware

May 10, 2019

ALIXPARTNERS, LLP, and ALIXPARTNERS HOLDINGS, LLP, Plaintiffs,
v.
DAVID BENICHOU, Defendant.

          Date Submitted: January 31, 2019

          Bradley R. Aronstam, Eric D. Selden, R. Garrett Rice, ROSS ARONSTAM & MORITZ LLP, Wilmington, Delaware; Robert S. Berezin, Nicholas J. Pappas, WEIL, GOTSHAL & MANGES LLP, New York, New York; Counsel for Plaintiffs AlixPartners, LLP and AlixPartners Holdings, LLP.

          John P. DiTomo, Matthew R. Clark, Barnaby Grzaslewicz, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Counsel for Defendant David Benichou.

          OPINION

          McCORMICK, V.C.

         The plaintiffs operate a global corporate restructuring advisory firm. The defendant was the managing partner of the plaintiffs' Paris office. As a partner, the defendant had access to the plaintiffs' confidential information. When he became a partner, the defendant also became party to a limited liability partnership agreement that contained confidentiality obligations. The defendant resigned from his position in early 2017. Shortly before his resignation, the defendant connected a personal data drive to his work-issued computer and accessed the plaintiffs' business files. Shortly after his resignation, the defendant repeated this act.

         After his resignation, the defendant began working for one of the plaintiffs' competitors. Concerned that defendant may use their confidential information to benefit the competitor, the plaintiffs sought assurances from the competitor regarding the defendant's confidentiality obligations. The plaintiffs were dissatisfied with the competitor's response and initiated an investigative proceeding in Paris courts seeking targeted data searches of certain devices. The plaintiffs then sued in this court for breach of the confidentiality provisions of the limited liability partnership agreement. They also asserted three non-contractual claims for relief: for violating the Delaware Uniform Trade Secrets Act (or "DUTSA"), for common law conversion, and for violating the federal Computer Fraud and Abuse Act (or the "CFAA"). The defendant moved to dismiss each of the non-contractual claims.

         The defendant's motion to dismiss the CFAA claim raises an issue of first impression for this Court. The provision of the CFAA on which the plaintiffs rely renders liable a person who "intentionally accesses a computer without authorization, or exceeds authorized access, and thereby obtains . . . information from any protected computer[.]"[1] The plaintiffs argue that the defendant "exceeded authorized access" by using information in violation of the plaintiffs' limited partnership agreement and policies. The defendant argues that this language provides a narrow cause of action under which he can be liable for unauthorized access of protected computers only, not for misuse of information that he was authorized to access.

         Federal courts split on the interpretation of the CFAA disputed by the parties, the Third Circuit has not weighed in, and district courts in the Third Circuit diverge. Relying on principles of statutory construction, this decision adopts the narrow approach first set forth by the Ninth Circuit in LVRC Holdings LLC v. Brekka.[2]Under the narrow approach, the defendant's actions while he was employed by the plaintiffs and had authorized access to the plaintiffs' confidential information do not support a claim under the CFAA. By contrast, it is reasonably conceivable that the defendant did not have authorized access to the documents he allegedly transferred after his resignation. As to the defendant's post-resignation conduct, the plaintiffs' CFAA claim is legally viable. The motion to dismiss the CFAA claims is thus granted, but only in part.

         The Court denies dismissal for the remainder of the plaintiffs' non-contractual claims. Because all of the alleged acts of misappropriation occurred in France, the defendant moves to dismiss the plaintiffs' claim under DUTSA based on the presumption against extraterritoriality. The parties' extraterritoriality analysis involves a fact-intensive inquiry. Nearly all states have adopted the Uniform Trade Secrets Act. It is reasonably conceivable that some state's Uniform Trade Secrets Act applies given the plaintiffs' global brand. Under Delaware's liberal pleading standard, the plaintiffs need not identify which law applies at the pleadings stage.

         The defendant's other dismissal arguments likewise fail. The defendant argues that the plaintiffs have not adequately alleged the elements of a trade secrets claim, but the complaint easily meets the plaintiff-friendly pleading standard. The defendant argues that the plaintiffs' conversion claim is duplicative of the contractual claim, but those claims arise from different obligations and appropriately stand alone. The defendant argues that DUTSA preempts the plaintiffs' conversion claim, but that conclusion depends on which state's trade secrets laws-if any- apply. Such a determination is premature and as a result, dismissal of the plaintiffs' conversion claim is inappropriate.

         I. FACTUAL BACKGROUND

         The facts are drawn from the complaint[3] and matters not subject to reasonable dispute.

         A. Defendant's Employment by Plaintiffs

         AlixPartners, LLP and AlixPartners Holdings, LLP (collectively, "Plaintiffs"), are a corporate restructuring advisory firm and its holding company parent, respectively. Both entities are organized as Delaware limited liability partnerships. Plaintiffs were founded in 1981 and now have a "global reputation" built through work with "multinational clients" in a range of industries.[4]

         Defendant David Benichou ("Defendant") joined Plaintiffs on February 27, 2006. He served as Managing Director in Plaintiffs' Paris offices from January 1, 2013 to October 25, 2017. In that position, Defendant was responsible for: building and maintaining client relationships; leading complex engagements; recruiting top talent; and developing intellectual property for the firm. In carrying out these responsibilities, Defendant had access to Plaintiffs' confidential and proprietary information.

         When Defendant became a Partner, he signed as a party to Plaintiffs' January 12, 2017 Second Amended and Restated LLP Agreement (the "LLP Agreement"). The LLP Agreement includes confidentiality requirements protecting Plaintiffs' non-public information. Plaintiffs also have a written data policy on the acceptable use of Plaintiffs' "data, networks, systems, devices, and applications."[5]

         B. Defendant Accesses Plaintiffs' Confidential Information

         During his employment with Plaintiffs, Defendant kept thousands of Plaintiffs' confidential documents on the local C drive of his work-issued computer in a folder titled "BatDocuments."[6] These documents included "numerous PowerPoint presentations related to Defendant's work on behalf of [Plaintiffs], reports, revenue assessments, studies prepared by [Plaintiffs], notes from meetings, pricing analyses, and other strategic documents," Plaintiffs allege.[7]

         The complaint sets out in granular detail facts from which this Court can infer that Defendant transferred these confidential documents to a personal data device before and after his resignation. The complaint alleges that, around March 8, 2017, "Defendant connected a Western Digital 250 GB personal external hard drive to his Computer."[8] Then,

[a]t approximately 7:31 AM CEST (Paris local time), Defendant accessed the subfolder "Presentation" within a matter-named subfolder in the "BatDocuments" folder on the C drive of Defendant's Computer with the pathname C:\Users\dbenichou\Documents\Batdocuments\39-[Matter Name]\Presentation.
. . . [O]ne minute later, at 7:32 AM CEST, Defendant accessed a subfolder on his personal external hard drive, with the identically named pathname D:\Batdocuments\39-[Matter Name]\Presentation.[9]

         Defendant resigned from his position with Plaintiffs in 2017, providing notice on May 1, 2017. Plaintiffs dismissed Defendant from his duties on July 25, 2017, and he stopped performing work for Plaintiffs around that time. Three days later, on July 28, 2017, "Defendant again connected his personal external hard drive to his Computer."[10] The complaint alleges:

At 8:22 AM (CEST) on July 28, 2017, [Defendant] created the folder entitled "Personnel et confidentiel 2" on the local C drive of his Computer. Defendant then copied folders containing hundreds of files from the "BatDocuments" folder on the C drive of his Computer into the "Personnel et confidentiel 2" folder on his Computer. At or around 10:54 AM local time, Defendant cut and pasted the "Personnel et confidentiel 2" folder- which then contained those hundreds of files-from his Computer onto his personal external hard drive. Defendant proceeded to review other files on his Computer, and placed some files in the Recycle Bin on the Computer.
. . . Defendant also accessed another folder on his Computer entitled "Personnel et confidentiel," which he had created on or around April 13, 2017 and accessed a number of times between then and July 28, 2017. He deleted the "Personnel et confidentiel" folder at or after 12:40 PM CEST on July 28, 2017.[11]

         Defendant never informed Plaintiffs of his personal data drive, disclosed that he had transferred these documents to it, or returned any confidential information it contained.

         Defendant started working for the corporate restructuring division of Boston Consulting Group ("BCG") around October 2017. BCG's restructuring division directly competes with Plaintiffs, according to the complaint.

         Plaintiffs allege that BCG employees contacted Defendant in early 2017 before he resigned. Plaintiffs also allege that Defendant disclosed Plaintiffs' confidential information to BCG employees in the first half of 2017, and that Defendant "decided to take [Plaintiffs'] confidential information with him when he left in order to use that confidential information at [BCG] for his benefit and for the benefit of BCG . . . ."[12]

         C. Procedural Posture

         On August 10, 2018, Plaintiffs initiated this action. The complaint asserts four causes of action. Count I alleges that Defendant breached the confidentiality provisions of the LLP Agreement. Count II alleges that Defendant breached the Delaware Uniform Trade Secrets Act. Count III alleges that Defendant committed common law conversion. Count IV alleges that Defendant violated the federal CFAA.

         On September 28, 2018, Defendant responded by moving to dismiss Counts II through IV of the complaint. The parties completed briefing on the motion on January 22, 2019, [13] and the Court heard oral argument on January 31, 2019.[14]

         II. LEGAL ANALYSIS

         Defendant moves to dismiss pursuant to Court of Chancery Rule 12(b)(6). On a Rule 12(b)(6) motion, the Court "accept[s] all well-pleaded factual allegations in the [c]omplaint as true," and "draw[s] all reasonable inferences in favor of the plaintiff . . . ." [15] The Court denies the motion "unless the plaintiff could not recover under any reasonably conceivable set of circumstances susceptible of proof."[16] The Court neither "accept[s] conclusory allegations unsupported by specific facts, Court neither "accept[s] conclusory allegations unsupported by specific facts, nor . . . draw[s] unreasonable inferences in the plaintiff's favor."[17]

         A. Count II-Delaware Uniform Trade Secrets Act

         Count II asserts that Defendant misappropriated hundreds of Plaintiffs' documents, some of which contained trade secrets, in violation of the Delaware Uniform Trade Secrets Act (or "DUTSA"). Defendant argues that Count II should be dismissed because the complaint fails to plead a DUTSA claim, and because DUTSA does not apply extraterritorially to conduct alleged to have occurred solely in France.

         1. Plaintiffs adequately allege the elements of a trade secrets claim.

         A claim for misappropriation of trade secrets under DUTSA requires allegations sufficient to show: (1) the existence of a trade secret (i.e., information with commercial utility arising from its secrecy and reasonable steps to maintain this secrecy); (2) which the plaintiff communicated to the defendant; (3) under an express or implied understanding that the defendant would respect the secrecy of the matter; and that (4) the defendant used or disclosed the secret information in breach of that understanding to the injury of the plaintiff.[18]

         Defendant argues that Plaintiffs have not adequately pled the first element, the existence of a trade secret. To show the existence of a trade secret, a plaintiff must allege that the information "[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 the information is "the subject of efforts that are reasonable under the circumstances to maintain its secrecy."[19] "Trade secrets should be given an expansive meaning and interpretation."[20]

         The complaint sufficiently alleges the existence of a trade secret. According to the complaint, Plaintiffs have "developed numerous methods, techniques, and processes for conducting and marketing its consulting business that derive independent economic value from not being generally known to others who might use or disclose them for economic gain."[21] That information includes documents like "revenue assessments, studies prepared by [Plaintiffs], notes from meetings, pricing analyses, and other strategic documents."[22] The alleged categories of documents are not overly vague or so broad as to be meaningless.[23] It is reasonably conceivable that these documents have independent economic value.[24]

         Plaintiffs also took reasonable steps to guard the secrecy of these documents. Under Delaware law, the existence of a confidentiality agreement satisfies this requirement.[25] The acceptable use policy provided an added layer of protection. Plaintiffs also protect their confidential information with passwords, restrict rights and access to those employees with a need to know, and include confidentiality provisions in their employment agreements.[26]

         Next, Defendant argues that Plaintiffs have not adequately pled the fourth element, that Defendant used or disclosed the trade secrets. It is the rare misappropriation case in which Plaintiffs have first-hand knowledge of this element at the pleadings stage.[27] Typically, the Complaint must rely on inferences or circumstantial evidence. Here, the Complaint alleges the following facts. Defendant transferred documents containing confidential information and trade secrets onto a personal hard drive right before and after he left to work for a competitor. Defendant never disclosed the hard drive to Plaintiffs. Defendant never accounted for the documents he transferred onto the hard drive when he began working at BCG. And Defendant refused to confirm his compliance with his contractual obligations despite Plaintiffs' requests. It is reasonable to infer, based on the facts alleged, and under a plaintiff-friendly standard, that Defendant has used or disclosed these documents.

         2. Defendant's extraterritoriality argument is not appropriately addressed at the pleadings stage.

         In the alternative, Defendant argues that Count II should be dismissed because DUTSA does not apply on its face to actions taken outside Delaware, and each of Defendant's alleged actions occurred in France.[28] Plaintiffs respond that "this case does not . . . require consideration of extraterritoriality, "[29] that the extraterritorial application of DUTSA is more appropriately framed as a choice-of-law question, [30] and that such an analysis is necessarily fact intensive so the Court should not conduct it on the pleadings. If the Court does conduct the choice-of-law analysis, Plaintiffs argue that the analysis should focus on the place of Plaintiffs' injury, which Plaintiffs say favors applying Delaware law, and not Defendant's conduct.

         This decision assumes that the presumption against extraterritoriality analysis applies, and that it precludes applying the DUTSA to the conduct at issue, as Defendant argues. Even assuming these premises, Count III survives Defendant's motion to dismiss. Delaware's liberal notice pleading rules require only "a short and plain statement of the claim showing that the pleader is entitled to relief[.]"[31]Consequently, a plaintiff need not identify the precise law on which it relies.[32]Plaintiffs operate in a global market, and nearly all of the states have adopted the Uniform Trade Secrets Act. The standard is "reasonable conceivability."[33] It is reasonably conceivable that the law of Plaintiffs' principal place of business (Michigan) or another state's law applies.

         B. Count III-Conversion

         Count III alleges that if any of the documents taken by Defendant do not rise to the level of a trade secret, they still constitute confidential and proprietary information.[34] Plaintiffs contend that Defendant took possession of these documents and never returned them.[35]

         As with Count II, Count III hinges on issues that are inappropriate to decide on a motion to dismiss. For example, Defendant argues that Count III should be dismissed because the DUTSA preempts Plaintiffs' conversion claim.[36] Some states interpret the Uniform Trade Secrets Act as preempting all common law claims for conversion of confidential information;[37] other states do not.[38] Whether Plaintiffs' trade secrets claim preempts the conversion claim will depend on what law applies. As discussed above, what law applies is not a pleadings-stage issue. Neither, therefore, is preemption.[39]

         As an independent basis for dismissal, Defendant argues that Count III should be dismissed because it is duplicative of Count I's breach of contract claim.[40] It is not clear that the "only confidentiality obligation" pleaded derives from the LLP Agreement, as Defendant contends.[41] It is reasonably conceivable that Plaintiffs have a separate property interest in the confidential information.[42] The Counts were asserted in the alternative, as permitted under Delaware law.[43]

         For these reasons, Defendant's motion to dismiss Count III is denied.

         C. Count IV-Computer Fraud and Abuse Act

         Count IV alleges that Defendant violated the CFAA.[44] Congress passed the CFAA in 1984 as the first piece of federal legislation directed solely at computer crime.[45] Originally, the CFAA was a criminal statute intended to protect a limited set of federal computers and financial institutions.[46] It was later expanded to include a broad category of computers "used in or affecting interstate or foreign commerce of communication"[47] and amended to add a ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.