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Adelos, Inc. v. Halliburton Energy Services, Inc.

United States District Court, D. Montana, Missoula Division

December 11, 2017

ADELOS, INC., Plaintiff,
v.
HALLIBURTON ENERGY SERVICES, INC, Defendant.

          ORDER

          DANA L. CHRISTENSEN, CHIEF JUDGE UNITED STATES DISTRICT COURT.

         Before the Court is Defendant Halliburton Energy Services, Inc.'s ("Halliburton") Partial Motion to Dismiss Adelos, Inc.'s ("Adelos") conversion claim in its First Amended Complaint. The Court held a hearing on the motion on December 5, 2017. For the reasons explained below, the Court denies the motion.

         BACKGROUND

         Because the parties are familiar with the general facts of this case, the Court will not restate them here. (See Doc. 60 at 1-4.)

         Adelos filed its First Amended Complaint (Doc. 68) on July 28, 2017. Halliburton now brings this Motion for Partial Dismissal of Adelos's Amended Complaint under Fed.R.Civ.P. 12(b)(6), seeking to dismiss Adelos's amended conversion claim for failure to state a claim upon which relief can be granted. (Doc. 69.)

         LEGAL STANDARD

         Under Rule 12(b)(6), the Court is generally limited to the allegations of the complaint, "which are accepted as true and construed in the light most favorable to the plaintiff." Lazy YRanch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008). Nonetheless, the plaintiff must allege sufficient facts "to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 697 (2009) (citation omitted). These facts need not be overly specific, but they must "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curium) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The Twombly/Iqbal plausibility standard is not "akin to a probability requirement, " but it "asks for more than a sheer possibility that a defendant has acted unlawfully ...." Iqbal, 556 U.S. at 678 (internal quotation marks and citation omitted).

         DISCUSSION

         As an initial matter, Adelos claims that Halliburton waived all arguments presented in its motion to dismiss because they were omitted from its first motion to dismiss. (Doc. 71 at 10.) Under Federal Rule of Civil Procedure 12(g)(2), Adelos argues that a when a party makes a motion under Rule 12, it must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion. (Id.) Halliburton counters that Adelos's new conversion claim relates to alleged information that falls outside of Adelos's patents and patent applications. Thus, it is a new theory of liability and Halliburton could not have raised these defenses under the original conversion claims and first motion to dismiss. The Court agrees. In the Court's July 7, 2017 Order, it invited Adelos to file an Amended Complaint in order to cure the deficiencies related to the conversion claim. The Court found that federal law preempts state law claims related to patents and patent infringement. (Doc. 67 at 6 ("If Adelos chooses to amend its Complaint, its claim may survive the pleadings phase to the degree that it plausibly alleges [Halliburton's] misappropriation of technical information other than that disclosed in the patents and patent applications.").) Therefore, the Court anticipated a new conversion claim related to Adelos's business proprietary information. This is an entirely new claim. Therefore, Halliburton did not waive any defenses under Rule 12(g)(2).

         Regarding the merits of the amended conversion claim, Halliburton presents four arguments in favor of dismissal. First, it contends that the claim fails as a matter of law because Adelos has not and cannot allege a recognized property interest in the information allegedly converted. Second, it claims that Adelos did not sufficiently plead "specific technical information." Third, it argues that the Montana Uniform Trade Secrets Act ("MUTSA") preempts common law causes of action that are premised on the alleged misappropriation of "technical information." Finally, it claims that Adelos did not plead a contractual relationship and that Adelos volunteered the alleged "technical information" to Halliburton.

         As a preliminary matter, the Court notes that the amended conversion claim may be subject to MUTSA preemption. NetApp, Inc. v. Nimble Storage, Inc., No. 5:13-CV-05058-LHKHRL, 2015 WL 400251, at *16 (N.D. Cal. Jan. 29, 2015) (finding that "although [plaintiffs] allegations are decidedly vague, they may still be subject to [California Uniform Trade Secret Act] preemption"). However, at this stage of the proceeding it is unclear what information is contained in the documents listed in paragraph 81 of the Amended Complaint. It may very well be trade secrets.[1] But without the benefit of discovery in this case, the Court is unable to conclude that the conversion claim is preempted in whole or in part by MUTSA. Thus, the Court is left to determine whether Adelos has sufficiently pled a common law claim for conversion under Montana law.

         Halliburton claims that Adelos failed to plead any property right that is subject to conversion under Montana law. Halliburton contends that Adelos must allege a legal basis for the property right, and cannot state a mere conclusory recitation of the elements of conversion to satisfy the pleading standard at the motion to dismiss stage. (Doc. 70 at 6-8.) Adelos claims that it accurately set forth the elements of a conversion claim under Montana law in its Amended Complaint, and named specific documents in which the information Halliburton allegedly converted is merged.

         "A plaintiff alleging a claim of conversion must establish the following four elements: (1) property ownership by the plaintiff; (2) plaintiffs right of possession of the property; (3) defendant's unauthorized control over the property; and (4) damages." Feller v. First Interstate Bancsystem, Inc.,299 P.3d 338, 343 (Mont. 2013). "Conversion is 'a distinct act of dominion wrongfully exerted over one's property in ...


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