District of Connecticut Addresses Trade Secret Act Preemption

The Uniform Trade Secrets Act preempts tort and other claims providing civil remedies for trade-secret misappropriation. But it does not preempt breach-of-contract claims (whether or not based on misappropriation) or other civil remedies not based on misappropriation. Essentially, the UTSA and the parties’ contracts are the only mechanisms for remedying trade-secret misappropriation.

This preemption issue often becomes tricky, as it’s not easy to determine whether another claim is truly based on misappropriation. In Allstate Ins. Co. v. Sawicki, 2013 WL 2300757 (D. Conn. May 23, 2013), the court dealt with UTSA preemption.

Here, the defendants included individuals who worked for Allstate as exclusive agents and agreed not to disclose Allstate’s confidential information. Allstate alleged that these defendants transferred “an ownership interest or operating authority of their Exclusive Allstate Agencies” to another defendant, who operated a competing insurance agency. Allegedly, the defendant agents also gave the competing agency their login info, which provided unfettered access to Allstate’s confidential databases and servers.

Allstate brought claims for violations of Connecticut’s Uniform Trade Secret Act and Unfair Trade Practices Act, and for civil conspiracy. The defendants moved to dismiss the unfair-practices and conspiracy claims, arguing that they were preempted by the UTSA.

The court denied the motion to dismiss, noting that facts unrelated to the UTSA claim support the unfair-practices and civil conspiracy claims. Specifically, the unfair-practices claim is based on the competitor defendant requiring the agents to provide it with their login info. And the conspiracy claim is based on an agreement to conceal the agents’ relationship with the competitor, and an agreement to cause the agents to breach their exclusive agent agreement.

This case is a good example of how tricky the preemption issue can be. At their core, the trade-practices act and conspiracy claims are based on providing access to Allstate’s proprietary systems and client relationships, yet they still survived a motion to dismiss.

Before bringing other non-contractual claims alongside a UTSA claim, make sure that you can plead—and prove—that those claims are based on conduct independent of  the misappropriation. Here, even though Allstate got past a motion to dismiss, it may have difficulty distinguishing the factual basis for the various claims.

Be particularly careful about unfair-trade-practices claims under state statutes. There is often a willingness to “throw in” such a claim. But think twice before doing so, particularly if the statute at issue provides for prevailing-party attorney’s fees.

4 responses

  1. Pingback: Can Confidential Info That’s Not a Trade Secret Be Misappropriated? | Protecting Trade Secrets

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