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GeoMetWatch Corp. v. Hall

United States District Court, D. Utah

March 27, 2017

GEOMETWATCH CORPORATION, a Nevada corporation, Plaintiff,
GEOMETWATCH CORPORATION, a Nevada corporation, Counterclaim Defendant. UTAH STATE UNIVERSITY RESEARCH FOUNDATION, Third-Party Plaintiff,
DAVID CRAIN, an individual, Third-Party Defendant.


          Jill Parrish, United States District Court Judge

         Before the court are the following motions: Debbie Wade's Motion to Dismiss [Docket 271], Mark Hurst's Motion to Dismiss [Docket 288], Brent Keller's Motion to Dismiss [Docket 289], Erin Housley's Motion to Dismiss [Docket 290], and Alan Hall's, Island Park Investments' (“Island Park”), and Tempus Global Data, Inc.'s (“Tempus”) Motion to Dismiss [Docket 296]. The court heard oral argument on the motions on December 20, 2016[1], after which the court took the motions under advisement. After considering the parties' written submissions, oral argument, and relevant legal authority, the court issues this Memorandum Decision and Order Granting Debbie Wade's Motion to Dismiss; Granting Mark Hurst's Motion to Dismiss; Granting Brent Keller's Motion to Dismiss; Granting Erin Housley's Motion to Dismiss; and Granting in Part and Denying in Part Alan Hall, Island Park Investments, and Tempus Global Data, Inc.'s Motion to Dismiss.


         Because the factual allegations of the Complaint are to be “taken as true, ” the facts recited here are the relevant facts as alleged in the Complaint. Kansas Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011).

         GeoMetWatch Corporation (“GMW”) is a global weather services company. GMW's business model is to provide unique and proprietary earth observation and weather data from an array of state-of-the-art hyperspectral sensors in orbit around the earth. Hyperspectral imaging/sounding technology utilizes sophisticated technology to simultaneously collect thousands of atmospheric “soundings” every minute. The technology was initially developed by the U.S. National Oceanic and Atmospheric Administration (NOAA) and National Atmospheric and Space Administration (NASA), but was abandoned after an investment of more than $400 million. In September 2010, GMW obtained the first-ever license from NOAA to use the technology in the private sector. Through the efforts of GMW, the hyperspectral sounder program was reborn commercially as the Sounding and Tracking Observatory for Regional Meteorology (“STORM”).

         In 2009, GMW approached Utah State University (“USU” or the “University”) as a potential contractor to build STORM-1, the first of a planned network of sensors. USU agreed to work with GMW through the Utah State University Research Foundation (“USURF”). On January 28, 2010, GMW and USURF entered into a nondisclosure agreement (“GMW-USURF 2010 NDA”) for the purpose of keeping confidential GMW and USURF's proprietary information related to the STORM project and associated business model and partnering discussions. On July 20, 2010, GMW and USURF signed a two-year, extendible preferred provider agreement to develop the STORM-1 sensor (“GMW-USURF 2010 PPA”). Under the GMW-USURF 2010 PPA, GMW agreed to exert all reasonable efforts to obtain title to a sensor prototype to assist USURF in developing and building the STORM-1 sensor and to obtain a license from NOAA to launch, fly, and operate a satellite. The GMW-USURF 2010 PPA cited the GMW-USURF 2010 NDA and noted that the parties would be exchanging proprietary technical and other information as necessary to fulfill the purposes of the agreement, and that both parties would keep that information confidential. On April 23, 2012, GMW and USURF signed another preferred provider agreement (“GMW-USURF 2012 PPA”) for contract work on the STORM project, setting forth additional terms relating to exclusivity and commercialization performance.

         In January 2013, USU formed the Utah State University Advanced Weather Systems Foundation (“AWSF”) to assist USURF with the STORM project. On Feb 25, 2013, GMW and AWSF entered into a nondisclosure agreement (“GMW-AWSF 2013 NDA”). At the request of USU and USURF officials, GMW and USURF entered into a Mutual Termination Agreement (“GMW-USURF 2013 Termination”) formally terminating the GMW-USURF 2012 PPA for the purpose of having GMW enter into a new Preferred Provider Agreement with AWSF. The termination did not affect the GMW-USURF 2010 NDA. GMW and AWSF entered into a preferred provider agreement (“GMW-AWSF 2013 PPA”), which became effective April 19, 2013. Through this agreement, AWSF became the sole preferred provider to build the STORM-1 sensor.

         On June 19, 2013, GMW signed an agreement with NASA to provide it with data from GMW's first STORM mission in return for a sensor prototype that AWSF could use to develop and complete the STORM-1 sensor. After obtaining the prototype, GMW was still in need of a partner that could get the STORM-1 sensor into orbit. GMW approached a number of commercial satellite operators over several years, until it was introduced to Asia Satellite Telecommunications Co. (“AsiaSat”) in the summer of 2011. After a prolonged relationship-building process and extensive negotiations, GMW and AsiaSat executed a Cooperation Agreement ("AsiaSat Agreement"). Through the AsiaSat Agreement, AsiaSat obtained the rights to become an equity and strategic partner in GMW and agreed to join GMW as an applicant and guarantor on a U.S. Export - Import (EXIM) Bank loan. AsiaSat agreed to finance, on a reimbursable basis, construction and integration of the STORM-1 sensor and to share in the revenue generated. STORM-1 was slated to be launched on the AsiaSat-9 rocket in 2016.

         With the sensor prototype from NASA and the AsiaSat Agreement in hand, GMW still faced significant hurdles for the STORM project. The overall expected cost of the STORM project was about $170 million. GMW developed a funding model that relied on securing loans from EXIM Bank. AsiaSat agreed to guarantee the payments on these loans but, to reduce its risks, also required GMW to obtain “backstop” funding for these payments-financial guarantees equivalent to AsiaSat's total STORM investment. Beginning in early 2013, University officials repeatedly represented to GMW and AsiaSat that USU could provide this backstop. In an effort to reduce USU's financial exposure, GMW continued to work with USU to seek financial commitments related to the backstop from other investors and financial institutions.

         On or about September 20, 2013, GMW's attorney introduced GMW to Alan Hall, a potential large-scale investor. USU, USURF, and AWSF strongly encouraged GMW to meet with Hall as someone who could potentially provide the backstop funding himself or who could bring investors to do so. USU, USURF, and AWSF also represented to GMW that Hall had already signed a non-disclosure agreement with them and pressured GMW to share "everything" with Hall, including all of its confidential information, and to introduce him to persons of interest in connection with GMW's business, including AsiaSat, so that Hall could evaluate a potential investment.

         GMW was initially encouraged that Hall could provide the backstop funding needed to keep the STORM project moving forward. Based on assurances from USU, USURF, and AWSF and pressure from Hall, GMW made numerous “advocacy introductions” of Hall to key players in the market, including business, government and academic contacts that had taken GMW years to develop.

         In early October 2013, USU and AWSF asked GMW to sign a new GMW-AWSF Contract for STORM Fabrication (“STORM 001 Contract”) that included an automatic termination provision if the EXIM funding did not close by January 6, 2014. USURF and AWSF employees also repeatedly represented that AWSF would extend the dates for termination if the EXIM funding was pushed back. Relying on these representations, GMW signed the new STORM 001 Contract.

         Beginning on October 11, 2013, relying on representations by USU, USURF, and AWSF that Hall had signed an NDA with USU, and Hall's own assurances that he would sign an additional NDA with GMW, GMW made dozens of highly sensitive and confidential business and technical files available to Hall and his due diligence team members at Island Park. These files were loaded into a folder on a secure, web-based file sharing-site (the “GMW Data Room”), and only a very limited number of immediate employees of Hall and/or Island Park, USURF, and AWSF were “invited” to access the site. Specifically, Hall, Housley, Hurst, Wade, and Keller were provided access to the GMW Data Room. These individuals downloaded, accessed and studied GMW's confidential documents to evaluate a potential investment.

         On November 6, 2013, Hall and GMW entered into a Mutual Non-Disclosure Agreement (“GMW-Hall NDA”). The GMW-Hall NDA states that it is "between" Alan Hall and GMW, and bears the signature of Hall as Chairman of Island Park Investments. The NDA memorialized GMW's prior understanding with Hall and expressly protected against the unauthorized use and disclosure of GMW's confidential information.

         Hall made a series of informal investment proposals to GMW. Hall's proposed investment was to be through a new business entity, SkyStar. Even though GMW reduced some of these proposals to writing, Hall never signed a written offer or contract. Instead, he requested access to more of GMW's confidential documents to continue his investigation of the project.

         Beginning at least as early as October 2013, GMW alleges that Hall and his representatives began privately meeting with GMW's commercial partners, without GMW present. These meetings included representatives of AsiaSat, USU, AWSF, USURF and possibly others. By early November of 2013, if not sooner, Hall began to discuss methods and actions with USU and AsiaSat that would harm GMW, including forcing GMW into a desperate bargaining position, and leveraging the automatic termination provision of the STORM 001 Contract against GMW as a way to dilute GMW's financial interest in its business or to destroy GMW altogether.

         In response to these actions by Hall, Wade, Keller, Housley, and Hurst sent a memorandum (the “Ethics Memorandum”) to Hall outlining their concerns that Hall had met with AsiaSat and USU without GMW being present. The Ethics Memorandum stated the following:

GMW is being left out of the conversations you are having with AsiaSAT and AWS[F]. While this perhaps has been necessary in the short-term while you feel things out, we believe that negotiating a deal behind their back is not ethical. The reason we feel this way is that GMW has divulged confidential information to us and is helping us (without even an NDA in place) to have conversations with those they have relationships with believing that doing so is in their best interest and will help them. However, if you do this while waiting for the time to elapse for them to default on the loan, and then come forward with a different deal to save them, they will perceive you as a predator that unethically used their information to capitalize on your own purposes. Even if you don't take a dime from them, they could come after you legally for misuse of their information, and they could rightfully make this claim.

         Hall did not respond to the Ethics Memorandum by email and claims to have no memory of it or any conversation related to it.

         On November 14, 2013, Hall told GMW that he had an investor (or investors) that were willing to backstop the STORM project for $150 million and requested further details of GMW's specific use of funds. GMW sent Hall two highly confidential documents in response, entitled “Use of Funds” and “GMW Revenue Model.” On or around November 22, 2013, after Hall threatened to interfere with GMW's shareholders to undermine GMW's management, GMW unshared the GMW Data Room and removed access to its confidential files. This effectively blocked Hall, his due diligence team, and anyone else from those files, but could not keep anyone from using either the information that they had already seen, or from using files that they had downloaded during the approximately six weeks that the confidential Data Room was accessible.

         On December 20, 2013, Hall formed a new company, Tempus, in Ogden, Utah. On January 7, 2014, AWSF sent GMW a Notice of Termination, citing the EXIM funding deadline in the STORM 001 Contract. Based on the contested provision of the STORM 001 Contract, AWSF purported to terminate both the STORM 001 Contract and the GMW-AWSF 2013 PPA, even though GMW had been promised extensions as necessary to get the full EXIM funding for the AsiaSat-9 deal. On March 31, 2014, Tempus announced via a press-release on its website that it had “opened its operations in Utah to deliver next generation weather data to commercial and government customers.”

         On April 1, 2014, Tempus announced that it was in the final stages of securing a Remote Sensing License from the Department of Commerce. On April 14, 2014, AsiaSat formally notified GMW that the GMW-AsiaSat Cooperation Agreement was terminated. Tempus announced an agreement with AsiaSat and acknowledged on its website that AsiaSat “originally signed its sensor hosting agreement with GMW.”

         GMW brought this suit, filing its complaint on May 16, 2014. [Docket 2]. GMW filed its first amended complaint a month later. [Docket 16]. GMW moved to file a second amended complaint to add claims against Robert Behunin and USURF. [Docket 43]. The court granted the unopposed motion [Docket 46] and GMW filed its second amended complaint on December 12, 2014 [Docket 48]. In February 2016, GMW again sought leave to amend its complaint. [Docket 124]. The court granted GMW leave to amend and GMW filed its Third Amended Complaint on May 27, 2016, adding claims against Erin Housley, Mark Hurst, Debbie Wade, Brent Keller, Curtis Roberts, and Scott Jensen. [Docket 229 (the “Complaint”)]. The Complaint alleges twelve causes of action against twelve defendants, including misappropriation of trade secrets under the Utah Uniform Trade Secrets Act (“UTSA”), breach of contract, several federal and state statutory violations, fraud, and civil conspiracy.


         “[T]o withstand a [Rule 12(b)(6)] motion to dismiss, a complaint must have enough allegations of fact, taken as true, ‘to state a claim to relief that is plausible on its face.'” Kansas Penn Gaming, LLC, 656 F.3d at 1214 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Although the court must take the factual allegations of the complaint as true, the court is not required to take “mere labels and conclusions, ” or “formulaic recitation[s] of the elements of a cause of action” as true. Id. (quotations and citations omitted). Rather, “a plaintiff must offer specific factual allegations to support each claim.” Id.

         “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. “‘[P]lausibility' refers to ‘the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs have not nudged their claims across the line from conceivable to plausible.'” Id. at 1215 (quoting Robbins v. Okla. ex rel. Dep't of Human Servs., 519 F.3d 1242, 1247 (10th Cir. 2008)). This standard “may have greater bite” when dealing with “complex claims against multiple defendants.” Robbins, 519 F.3d at 1249. It is therefore “particularly important in such circumstances that the complaint make clear exactly who is alleged to have done what to whom, to provide each individual with fair notice as to the basis of the claims against him or her, as distinguished from collective allegations . . . .” Id. at 1249-50 (emphasis in original).

         Further, the Federal Rules of Civil Procedure require a plaintiff alleging fraud-based claims to “state with particularity the circumstances constituting fraud . . . .” Fed.R.Civ.P. 9(b). “At a minimum, Rule 9(b) requires that a plaintiff set forth the ‘who, what, when, where and how' of the alleged fraud and must set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726-27 (10th Cir. 2006) (internal quotations and citations omitted). When evaluating fraud-based claims under Rule 9(b), the court will accept as true “well-pleaded facts, as distinguished from conclusory allegations.” Id. at 726.

         Although the court normally will not consider any evidence beyond the pleadings in reviewing a Rule 12(b)(6) motion to dismiss, “the district court may consider documents referred to in the complaint if the documents are central to the plaintiff's claim and the parties do not dispute the documents' authenticity.” Alvarado v. KOB-TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007) (quoting Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir.2002)).

         Finally, when a motion to dismiss under Fed.R.Civ.P. 12(b)(6) is granted, dismissal with prejudice is appropriate only when granting leave to amend would be futile. Brereton v. Bountiful City Corp., 434 F.3d 1213, 1219 (10th Cir. 2006).


         I. The Law of the Case Doctrine

         GMW contends that the law of the case doctrine demands dismissal of each of defendants' motions. The law of the case doctrine permits a court, at its discretion, “to decline the invitation to reconsider issues already resolved earlier in the life of a litigation.” Entek GRB, LLC v. Stull Ranches, LLC, 840 F.3d 1239, 1240 (10th Cir. 2016). But the Tenth Circuit has held that the law of the case doctrine “only applies if there was a final judgment that decided that issue.” United States v. Phillips, 59 F.Supp.2d 1178, 1187 (D. Utah 1999) (first citing United States v. Bettenhausen, 499 F.2d 1223, 1230 (10th Cir. 1974); then citing Unioil v. Elledge (In re Unioil), 962 F.2d 988, 993 (10th Cir. 1992)). Indeed, “where a ruling remains subject to reconsideration, the doctrine is inapplicable.” Unioil, 962 F.2d at 993. See also Price v. Philpot, 420 F.3d 1158, 1167 n.9 (10th Cir. 2005) (“[E]very order short of a final decree is subject to reopening at the discretion of the district judge.”). GMW urges the court to apply the law of the case doctrine because defendants' arguments to dismiss the Complaint are strikingly similar to arguments that they previously presented to the Court in opposing GMW's motion to amend its complaint.

         In opposing GMW's motion to amend, the defendants argued that the amendment would be futile because the Complaint failed to sufficiently plead certain claims. [See, e.g., Dockets 146, 16; 142, 9; 145, 4]. Magistrate Judge Warner granted GMW's motion to amend its complaint. [Docket 224]. Defendants objected to Judge Warner's order [Dockets 241, 242, and 243], but the court overruled those objections. [Docket 257]. GMW argues that because “[t]he standards of review for determining whether a motion to amend should be denied for futility under Fed.R.Civ.P. 15(a) and determining whether a motion to dismiss should be granted under Fed.R.Civ.P. 12(b)(6) are identical, ” City of Charleston, SC v., LP, 520 F.Supp.2d 757, 775 (D.S.C. 2007), the law of the case doctrine compels denial of defendants' motions. But those previous rulings are not final.

         Neither Judge Warner's order granting GMW's motion to amend nor the Court's order overruling objections to Judge Warner's order are final. Thus, both remain subject to reconsideration. See McClendon v. City of Albuquerque, 630 F.3d 1288, 1292 (10th Cir. 2011) (“[A] final decision does not normally occur until there has been a decision by the District Court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” (quoting Van Cauwenberghe v. Biard, 486 U.S. 517, 521-22 (1988))); Fed.R.Civ.P. 54(b) (“[A]ny order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.”). Accordingly, the law of the case doctrine is inapplicable to the resolution of the current motions.

         II. Plausibility of GMW's Claims

         GMW asserts twelve causes of action against twelve Defendants. In the motions now before the court, Alan Hall, Island Park, and Tempus (the “Hall Defendants”), and Erin Housley, Mark Hurst, Debbie Wade, and Brent Keller (the “Individual Defendants” and together with the Hall Defendants, the “Moving Defendants”) seek dismissal of some or all of the claims against them.

         A. The Contract Claims

         Hall seeks dismissal of GMW's first and third claims against him for breach of contract and breach of implied covenant of good faith and fair dealing. Both of these claims require the existence of a contract between Hall and GMW. Bair v. Axiom Design, L.L.C., 20 P.3d 388, 392 (Utah 2001) (“The elements of a prima facie case for breach of contract are (1) a contract, (2) performance by the party seeking recovery, (3) breach of the contract by the other party, and (4) damages.” (citation omitted)).

         Hall argues that the contract-based claims against him should be dismissed under Rule 12(b)(6) because he was not a party to any contract with GMW. Hall maintains that the GMW-Hall NDA-upon which GMW bases these claims-is between GMW and Island Park, and not Hall in his personal capacity. Hall argues that although the GMW-Hall NDA recites that the agreement is between “Alan Hall” and GMW, it was executed by “Alan E. Hall” as “Chairman” and “duly authorized signatory” for Island Park Investments. He reasons that the Complaint fails to state a claim because an individual “can be held personally liable for a signed contract only if he executed the contract ‘in a manner clearly indicating that the liability was his alone.'” Daines v. Vincent, 190 P.3d 1269, 1280 (Utah 2008) (quoting Starley v. Deseret Foods Corp., 74 P.2d 1221, 1223 (Utah 1938)).

         In Daines, the Utah Supreme Court upheld the district court's conclusion that an agent, Vincent, was not acting in his personal capacity when he signed an agreement with Daines. Id. The agreement at issue included a signature line for Vincent directly under the heading “ASC, ” the company for which Vincent worked. Id. Because the agreement expressly stated that Vincent would sign on behalf of ASC, “it [was] apparent that Daines recognized that he would be dealing with ASC through Vincent and not with Vincent in his individual capacity.” Id. The Utah Supreme Court agreed that Mr. Daines had no competent evidence that Vincent was acting in anything other than a representative capacity for ASC in his dealings with Daines. Id.

         GMW alleges that Hall, on behalf of himself and others on his team, entered into the GWM-Hall NDA. It further alleges that the GMW-Hall NDA lists Hall personally as a party to the agreement, and that Island Park is an alter ego of Hall. GMW argues that because the GWM-Hall NDA expressly states that it is between Hall and GMW, the allegations in its complaint must be taken as true and its claims against Hall should not be dismissed. GMW maintains that Daines is distinguishable from this case because the agreement at issue there unambiguously stated that it was between Daines and ASC, not Vincent personally. GMW argues that, at best, Hall's argument reveals an ambiguity as to which parties are bound by the GMW-Hall NDA and that the issue must be resolved by the trier of fact. GMW argues that this case is further distinguishable from Daines because of the allegation that Island Park was an alter ego of Hall. GMW also argues that Hall became bound by the GMW-Hall NDA by virtue of his performance when he received its confidential information under the agreement.

         The court concludes that Hall is not a party to the GMW-Hall NDA in his individual capacity. On its face, the GMW-Hall NDA[2] indicates that Hall did not “execute[] the contract in a manner clearly indicating that the liability was his alone.” Id. Rather, the manner in which the contract was executed indicates that it is Island Park that is party to the agreement, as witnessed by the signature of its authorized representative and chairman, Hall. GMW alleges that Hall executed the GMW-Hall NDA “on behalf of himself and others on his team, ” and the document itself states that the agreement is between Alan Hall and GMW. While it may be true that GMW intended for Hall to be subject to the terms of the agreement, the manner of execution shows that Hall agreed to its terms only in his capacity as an agent of Island Park Investments. Although GMW has alleged that Island Park is an alter ego of Hall, such an allegation is a mere label or legal conclusion that the court need not accept as true. And GMW has failed to make factual allegations sufficient to state a plausible claim that Island Park is, in fact, an alter ego of Hall.[3]See Jones & Trevor Marketing, Inc., 284 P.3d at 635-36 (setting out the two prong test and eight factors to be considered in determining whether the alter ego doctrine applies to impose personal liability for the debts and liabilities of a business entity).

         Furthermore, Hall's receipt of confidential information under the terms of the GMW-Hall NDA does not render him individually liable under the agreement. As an agent and representative of Island Park, Hall was able to receive and analyze GMW's confidential information in his capacity as an agent of Island Park, just like the Individual Defendants, without becoming a party to the GMW-Hall NDA.

         In short, Hall did not “execute[] the contract in a manner clearly indicating that the liability was his alone” and GMW makes no allegations that would give rise to personal liability for Hall under the GMW-Hall NDA. Accordingly, GMW's contract-based claims against Hall must be dismissed.

         B. The Misappropriation Claim

         The Individual Defendants move to dismiss GMW's second claim against them for misappropriation of trade secrets in violation of Utah Code § 13-24-1. A trade secret misappropriation claim requires three elements: (1) the existence of a trade secret, (2) communication of the trade secret under an express or implied agreement limiting disclosure of the secret, and (3) use of the secret that results in injury. USA Power, LLC v. PacifiCorp, 235 P.3d 749, 758 (Utah 2010). The Individual Defendants argue that GMW's allegations fail to satisfy the 12(b)(6) plausibility standard for each of these three elements.

         1. The Existence of a Trade Secret

         The Utah Uniform Trade Secret Act defines a “trade secret” as:

information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (a) derives 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 (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Utah Code § 13-24-2(4).

         Although the Individual Defendants argue generally that the Complaint fails to satisfy the plausibility standard for each of the elements of the trade secret misappropriation claim, none of them advance arguments specific to this first element. And it is clear from the Complaint ...

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