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Elsevier Inc. v. Doctor Evidence, LLC

United States District Court, S.D. New York

January 23, 2018

ELSEVIER INC., Plaintiff,

          OPINION & ORDER


         On July 7, 2017, plaintiff Elsevier Inc. (“Elsevier”) filed a suit against Doctor Evidence, LLC (“DRE”) for breach of contract. (ECF No. 1, Compl.) With its Answer, DRE filed four counterclaims for breach of contract, unjust enrichment, conversion, and misappropriation of trade secrets under the Defend Trade Secrets Act, 18 U.S.C. § 1836 et seq. (ECF No. 22, Answer and Counterclaims.) On November 8, 2017, Elsevier filed a motion to dismiss DRE's second, third, and fourth counterclaims for unjust enrichment, conversion, and violation of the federal Defense of Trade Secrets Act. (ECF No. 28, Mot. to Dismiss.)

         With leave of the Court-and Elsevier's consent-DRE simultaneously submitted amended counterclaims and its opposition to Elsevier's motion. (See ECF Nos. 33, 35, 36.) The Amended Counterclaims add some specificity to DRE's allegations and replaced the conversion claim with a New York common law trade secrets misappropriation claim. DRE's opposition memorandum and Elsevier's subsequent reply memorandum were both addressed to the Amended Counterclaims. As such, the Court treats the instant motion to dismiss as addressed to the Amended Counterclaims.

         For the reasons stated below, Elsevier's motion to dismiss Claims II, III, and IV (the trade secrets and unjust enrichment claims) is GRANTED.

         I. BACKGROUND[1]

         On July 18, 2014, Elsevier and DRE entered into a Professional Services Agreement (the “PSA”), under which DRE agreed to use its proprietary software to perform data analysis on individual articles identified by Elsevier. (ECF No. 35-1, PSA.) Under the PSA, Elsevier is obligation to hold information provided by DRE, “including, but not limited to, specifications, drawings, data, computer programs, know-how, designs, source code, technical information, concepts, reports, methods, processes, techniques, operations, devices, customer information, sales and operations information, cost and pricing information, marketing and financial or other technical and business information, in whatever form . . . in the strictest confidence.” (Am. Counterclaims ¶ 6.) Elsevier agreed to use the Information “‘only for the purposes of providing or receiving the benefit of' the services provided under the PSA.” (Id. ¶ 8 (quoting PSA at 1, 12).)

         After the PSA went into effect, Elsevier and DRE engaged in “regular teleconferences to discuss . . . questions relating to activity pursuant to the PSA.” (Id. ¶ 9.) DRE alleges that these conversations were a “pretext to gain access to DRE personnel, resources, servers, and systems” and that Elsevier “then used the DRE Confidential Information for purpose of developing its own products and services.” (Id. ¶ 10.) DRE alleges that Elsevier's questions were “intended to elicit trade secrets which DRE had continually protected by various means including written non-disclosure agreements.” (Id. ¶ 11.)

         DRE's Amended Counterclaims list nine general categories of confidential information that it asserts it disclosed to Elsevier. For example, it provided information relating to its “Guideline and Research Organizations Worldwide for Transparency and Harmonization (“GROWTH”) initiative, which is an innovative set of initiatives launched by DRE to improve communication among disparate segments of the health ecosystem.” (Id. ¶ 13.) Elsevier allegedly used this information to “develop its own proposed services with technology and features that are substantially similar to DRE's GROWTH initiative.” (Id.) Another alleged general example of confidential information is DRE's method of assessing risk of bias based on a study's funding source. (Id. ¶ 20.) DRE claims that “Elsevier representatives again spent a significant amount of time discussing this topic with the DRE team, reviewing, and rereviewing DRE's technology and the underlying programming . . . [and] then employed a clinician to conduct the risk of bias assessment.” (Id. ¶ 20.) Throughout its Amended Counterclaims, DRE alleges that it provided information to Elsevier in reliance “on the confidentiality clause of the PSA or in the alternative on the [nondisclosure agreement (‘NDA')], ” which had been signed prior to the PSA. (Id. ¶¶ 11, 17, 25.)

         DRE alleges that Elsevier “offers its own evidence-based medicine analytics tools and services, such as ClinicalKey. On information and belief, Elsevier wrongfully used the DRE Confidential Information for the purpose of developing new features that it included, or intended or intends to include, into ClinicalKey and potentially other products and services as well . . . .” (Id. ¶ 28.) Since July 2014, Elsevier has allegedly used DRE's Confidential Information to “introduce[] new features into ClinicalKey, such as GRADE Summary of Finding Tables, Forest Plots, and Funnel Plots.” (Id. ¶ 29.)


         A. Standard for a Motion to Dismiss

         The standard to dismiss a counterclaim is the same as that for any affirmative claim. Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a defendant may move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must provide grounds upon which their claim rests through “factual allegations sufficient ‘to raise a right to relief above the speculative level.'” ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, the complaint must allege “‘enough facts to state a claim to relief that is plausible on its face.'” Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         In applying that standard, the Court accepts as true all well-pled factual allegations, but it does not credit “mere conclusory statements” or “threadbare recitals of the elements of a cause of action.” Id. Furthermore, the Court will give “no effect to legal conclusions couched as factual allegations.” Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007) (citing Twomblv, 550 U.S. at 555). If the Court can infer no more than the mere possibility of misconduct from the factual averments-in other words, if the well-pled allegations of the complaint have not “nudged [plaintiff's] claims across the line from conceivable to plausible”-dismissal is appropriate. Twombly, 550 U.S. at 570.

         B. Unjust Enrichment

         To state a claim for unjust enrichment under New York law, a plaintiff must allege that “(1) defendant was enriched, (2) at plaintiff's expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover.” Briarpatch Ltd., L.P v. Phoenix Pictures, Inc., 373 F.3d 296, 306 (2d Cir. 2004) (citing Clark v. Daby, 751 N.Y.S.2d 622, 623 (N.Y.App.Div. 2002)).

         Generally, “a claim for unjust enrichment may be pleaded in the alternative to other claims.” Barnet v. Drawbridge Special Opportunities Fund LP, No. 14-cv-1376, 2014 WL 4393320, at *22 (S.D.N.Y. Sept. 5, 2014) (citations omitted); see also Fed. R. Civ. P. 8(d)(2) (“A party may set out 2 or more statements of a claim or defense alternatively or hypothetically, either in a single count or defense or in separate ones. If a party makes alternative statements, the pleading is sufficient if any one of them is sufficient.”); Fed.R.Civ.P. 8(d)(3) (“A party may state as many separate claims or defenses as it has, regardless of consistency.”) However, unjust enrichment “is not available where it simply duplicates, or replaces, a conventional contract or tort claim.” Corsello v. Verizon, Inc., 18 N.Y.3d 777, 790 (2012) (citations omitted); see also Mahoney v. Endo Health Solutions, Inc., No. 15-cv-9841, 2016 WL 3951185, at *11 (S.D.N.Y. July 20, 2016). If a “valid and enforceable” contract governs the dispute, a party may not recover under unjust enrichment. Beth Israel Med. Ctr. v. Horizon Blue Cross & Blue Shield, 448 F.3d 573, 587 (2d Cir. 2006). Rather, unjust enrichment “is available only in unusual situations when, though the defendant has not breached a contract nor committed a recognized tort, circumstances create an equitable obligation running from the defendant to the plaintiff.” Corsello, 18 N.Y.3d at 790; see also Mahoney, 2016 WL 3951185, at *11. “Typical cases are those in which the defendant, though guilty of no wrongdoing, has received money to which he or she is not entitled.” Corsello, 18 N.Y.3d at 790 (citations omitted); see also Mahoney, 2016 WL 3951185, at *11.

         C. Federal and New York Trade Secret Law

         1. Gen ...

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