COURT NEWS: Compass fires back in brief to Court of Appeals, states errors made by District Court in dismissing the lawsuit against Judge Michael White, Daniel White, Lt. George White, James “Chip” DiPaula, Flywheel Digital, and Ascential

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SUMMARY OF ARGUMENT

The following is the summary of the argument filed by Compass Marketing to the United States Fourth Circuit Court of Appeals to reverse the decision by the District Court Judge dismissing the lawsuit. At the end of the summary is the full brief filed in the COA Fourth Circuit. An answer from the defendants is due soon.

BE SURE to read the latest in the TRADE SECRETS THEFT SAGA, where Lt. George White brought a defamation suit against former Anne Arundel County Sheriff Ronald Bateman, which was ruled against by Circuit Court Judge Elizabeth Morris when she found that George White failed to prove his allegations against Bateman and she also ruled that George White was defrauding the taxpayers of Maryland when he billed the State of Maryland for duty while he was performing duties for Compass Marketing. The Commission on Judicial Disabilities reprimanded Judge Michael White for his failure to cooperate with an investigation and failing to file Ethics reports properly.

In dismissing the DTSA and RICO claims on statute of limitations grounds,
the district court effectively created and applied a new standard of inquiry notice,
unsupported by the law, for a company with employees who resign. According to
the district court, such a company has an affirmative duty to assume and investigate
specifically, whether departing employees have misappropriated trade secrets, even
though the company disclaims any knowledge or suspicion of trade secret
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misappropriation. The law imposes no burden on a company to assume and inquire
into torts or other claims of misconduct that it does not reasonably suspect. Even
assuming a company might suspect a departed employee is competing with it in
violation of an employment agreement, which might give rise to investigating the
employee’s potential breach of competition provisions, it does not require the
company to assume and investigate the potential theft of trade secrets. The error in
imposing such a burden is even more obvious when such departing employees
engage in fraudulent concealment of their actions, either on their own or in a
conspiracy with others.
To reach its conclusion in this case, the district court disregarded Compass’s
express allegations, made inferences in favor of the Flywheel Defendants, failed to
draw all reasonable inferences in Compass’s favor, and even made express
credibility determinations against Compass. Compass expressly alleged that it did
not know its trade secrets had been stolen by the Flywheel Defendants, either when
DiPaula and Miller left in 2014, when other employees left in 2016, or at any time
until January 2020 following its investigation into the White Defendants. And it
expressly alleged that it could not have known its trade secrets were stolen due to
the pervasive and ongoing concealment by both the Flywheel Defendants and White
Defendants acting in concert together. By finding to the contrary – at the pleading
stage – that Compass could have and should have known of its trade secret claims
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sooner, the district court disregarded the standard under Rule 12(b)(6), misapplied
the inquiry notice standard, imposed an untenable burden on Compass (and other
companies), and failed to alternatively toll the statute of limitations under the
fraudulent concealment doctrine.
Similarly, having declined to dismiss the RICO claims against the White
Defendant on limitations grounds (for substantially similar reasons they should not
have been dismissed as to the Flywheel Defendants), the district court misconstrued
the law governing RICO claims in concluding that Compass failed to sufficiently
plead the “enterprise” element. The Complaint, however, more than adequately pled
the requisite collaboration or agreement for the “enterprise” element. In addition,
the court erred in holding that George White did not engage in a pattern of
racketeering.
Lastly, each of the purported deficiencies the district court found to plague the
Complaint could have been cured with leave to amend, and the district court erred
by failing to even consider Compass’s alternative request to amend the Complaint.
STANDARD OF REVIEW
This Court reviews de novo the district court’s grant of a motion to dismiss.
Cruz v. Maypa, 773 F.3d 138, 143 (4th Cir. 2014). Pursuant to FED. R. CIV. P.
12(b)(6), a district court may dismiss a complaint for failure to state a claim upon
which relief can be granted, but “only if it appears beyond doubt that the plaintiff
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can prove no set of facts that would entitle him to relief.” Lambeth v. Bd. of
Comm’rs, 407 F.3d 266, 268 (4th Cir. 2005).
Importantly, this Court has recognized that that “[w]hen ruling on a motion to
dismiss, courts must accept as true all of the factual allegations contained in the
complaint and draw all reasonable inferences in favor of the plaintiff.” Hall v.
DIRECTV, LLC, 846 F.3d 757, 765 (4th Cir. 2017) (internal citations omitted); see
also Anderson v. Found. for Advancement, 155 F.3d 500, 505 (4th Cir. 1998) (“[T]he
complaint [should] be read liberally in favor of the plaintiff.”) (citations omitted).