United States District Court, D. Utah
ULTRADENT PRODUCTS, INC., a Utah corporation; ORATECH, LLC, a Nevada limited liability company; Plaintiffs;
SECTRUM SOLUTIONS LLC, a Utah limited liability company; and NEIL J. JOHNSON, an individual; Defendants.
B. Pead, Magistrate Judge.
ORDER GRANTING DEFENDANTS' MOTION TO
N. Parrish, United States District Court Judge.
the court is Defendant Spectrum Solutions and Defendant Neil
J. Johnson's motions to dismiss (ECF Nos. 13, 18). They
both argue that Plaintiffs have failed to state a claim under
the federal Defend Trade Secrets Act. For the reasons below,
the court GRANTS the motions and DISMISSES Plaintiffs'
fifth claim for relief. The court will hold open the case for
ten days should Plaintiffs wish to file a motion to amend. In
the event an amendment is not sought or allowed, the court
will dismiss the remaining claims.
The Spectrum/Oratech Dispute
is Ultradent's wholly-owned subsidiary. In 2012, Spectrum
and Oratech entered into an agreement wherein Oratech would
manufacture DNA test kits for Spectrum. In 2015, Spectrum and
Oratech modified their agreement. Under the modified terms,
the agreement would run through September 24, 2017 but would
automatically be extended for additional two-year terms
absent notice of non-renewal provided in writing at least
ninety days before the agreement's expiration. That
ninety-day deadline was June 26, 2017, but Spectrum did not
provide written notice of non-renewal before that date.
on June 29, 2017, Spectrum sent Oratech an email indicating
that the contract was nearing an end and signaling that
Spectrum would not renew the agreement. The next day, Oratech
responded with an email of its own indicating that the
agreement had automatically been extended for two years
because the ninety-day deadline had passed.
2017, Spectrum told Oratech that it intended to manufacture
DNA test kits itself. And despite Spectrum's contractual
obligation to pay Oratech royalties if it “enter[ed]
into an agreement with any person or entity (other than
Oratech or a Referred Manufacturer) to manufacture Covered
Products or Competitive Products, ” Spectrum also
indicated that it would not pay Oratech royalties for
manufacturing DNA test kits itself.
Mr. Johnson's Involvement
Johnson was an Ultradent employee from 2002 until his
termination on November 2, 2015. When he was terminated,
Johnson was the Manager of Production and oversaw assembly of
the DNA test kits Oratech manufactured for Spectrum.
signed employment agreements with Ultradent that prohibited
him from disclosing Ultradent trade secrets or confidential,
proprietary, technical, or business information during or
after his employment with Ultradent. The employment
agreements also prohibited him from competing, directly or
indirectly, with the business of Ultradent for two years.
state courts, federal courts “are courts of limited
jurisdiction.” Kokkonen v. Guardian Life Ins. Co.
of Am., 511 U.S. 375, 377 (1994). “They possess
only that power authorized by Constitution and statute, which
is not to be expanded by judicial decree.” Id.
(citations omitted). Therefore, this court begins with the
presumption that a cause of action lies outside of its
limited jurisdiction, and the burden of establishing the
contrary rests upon the party asserting jurisdiction.
Rule of Civil Procedure 12(b)(6) permits defendants to test
the legal sufficiency of a complaint prior to discovery.
Therefore, the court accepts all well-pleaded allegations of
the complaint as true. McDonald v. Kinder-Morgan,
Inc., 287 F.3d 992, 997 (10th Cir. 2002). The court also
draws reasonable inferences from the allegations and views
those in the light most favorable to the plaintiff. Dias
v. City and Cty. of Denver, 567 F.3d 1169, 1178 (10th
Cir. 2009). “However, conclusory allegations or legal
conclusions masquerading as factual conclusions will not
suffice to prevent a motion to dismiss.”
Fernandez-Montes v. Allied Pilots Assoc., 987 F.2d
278, 284 (5th Cir. 1993); see also Ruiz v.
McDonnell, 299 F.3d 1173, 1181 (10th Cir. 2002)
(“All well-pleaded facts, as distinguished from
conclusory allegations, must be taken as true.”),
cert. denied, 538 U.S. 999 ...