Pub. 9 2019 Issue 2

11 ISSUE 2. 2019 injury not remediable by damages if the requested relief is not granted.” 8 Pleading Standards . Arizona state courts apply the liberal notice pleading standard, which merely requires a plaintiff to “give the opponent fair notice of the nature and basis of the claim and indicate generally the type of litigation involved.” 9 Plaintiffs in federal court, on the other hand, must satisfy the more stringent Twombly/Iqbal standard. Federal courts applying this standard have dismissed DTSA claims for failing to adequately allege that the plaintiff took reasonable steps to ensure the secrecy of trade secrets. For example, in Raben Tire Co. v. Mc - Farland, 10 the U.S. District Court for the Western District of Kentucky dismissed a DTSA claim with prejudice because the plaintiff failed to allege any specific steps taken to maintain the secrecy of its trade secrets, including the DTSA’s require- ment that employees sign confidentiality agreements. Federal courts have similarly dismissed DTSA claims for failing to specifically identify the actual trade secrets allegedly misappropriated. Accordingly, in pleading DTSA claims, counsel should be sure to allege specific facts to support each element of a DTSA claim and should avoid relying on concluso- ry statements and labels. This best practice applies equally to DTSA claims brought in Arizona state court, as such claims are subject to removal. Jury Unanimity. Another factor that often is not considered is the different jury unanim - ity requirements in Arizona state court and federal court. In federal court, a plaintiff must convince each and every juror that it is entitled to relief under the DTSA (and any other pleaded claims). 11 In Arizona state court, on the other hand, only six of eight jurors are necessary to render a verdict in a civil case. 12 2. Trade Secret and Interstate Com- merce Nexus One of the DTSA’s unique features that distinguishes it from Arizona’s and other states’ trade secret laws is the requirement that the alleged misappropriated trade secret be “related to a product or service used in, or intended for use in, interstate or foreign commerce.” 13 Although this provision may seem straightforward, courts have varied in their interpretation of the signif- icance of this requirement at the pleading stage. Specifically, courts have diverged in determining whether this language creates a jurisdictional pleading requirement, a nonjurisdictional pleading requirement, or whether a plaintiff must affirmatively plead it at all. For example, certain federal district courts have required that a plaintiff affirmative - ly allege a relationship between the trade secret and interstate or foreign commerce, but have not couched the pleading require- ment as one vesting the federal courts with jurisdiction. 14 In Hydrogen Master Rights, Ltd. v. Weston , the district court dismissed the plaintiff’s DTSA claim without prejudice due to the plaintiff’s failure to assert any nexus between interstate or foreign com- merce and the alleged trade secret. 15 The court emphasized that the “the DTSA cre- ates a private cause of action for the owner of a trade secret ‘ if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.’” 16 Other federal district courts have express- ly held that the failure to plead a nexus between the trade secret and interstate or foreign commerce divests the court of sub- ject matter jurisdiction. 17 The U.S. District Court for the Federal District of Pennsylva - nia, in Gov’t Employees Ins. Co. v. Nealey , 18 dismissed the plaintiff’s DTSA claim with - out prejudice due to the plaintiff’s failure to allege any nexus demonstrating that the trade secret was used or intended to be used in interstate or foreign commerce. In finding this requirement to be jurisdictional, the court looked to the DTSA’s legislative history, which provides: The new S 1836(b) in paragraph (1) authorizes the owner of a trade secret that is misappropriated to bring a civil action in Federal court if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. This jurisdictional nexus to interstate or foreign commerce is identical to the existing language required for Federal jurisdiction over the criminal theft of a trade secret under S 1832(a). 19 Relying on the legislative history, the court determined it did not have subject matter jurisdiction and dismissed the claim. 20 Despite Congress’ fairly express announce- ment of the provision’s jurisdictional signifi - cance, other courts have explicitly refrained from deciding whether the requirement is in fact jurisdictional. 21 For example, in Complete Logistical Services LLC v. Rulh, the court held that, “to the extent Plaintiffs are required to plead a jurisdictional nexus in order to invoke the DTSA’s protections, Plaintiffs have adequately done so.” 22 The court concluded that the plaintiffs’ assertion that they are headquartered in Louisiana but operate and regularly do business in other states – and, as such, their trade secrets are used in interstate commerce – was sufficient to survive a motion to dismiss. 23 The U.S. District Court for the Northern District of Illinois has gone so far so as to question whether a plaintiff is even required to plead a relationship between the trade secret and interstate or foreign commerce. In Wells Lamont Industry Group LLC v. Richard Mendoza and Radians, Inc. , 24 the court held that the plaintiff had adequately alleged the nexus, but expressed that, “[b] ecause the DTSA was enacted only recently, there is limited case law relating to whether pleading this specific aspect of a DTSA claim is required.” Because courts have varied in their inter- pretation of the DTSA’s interstate or foreign commerce provision, practitioners should err on the side of caution and affirmatively allege sufficient facts to demonstrate a nex - us between the alleged trade secret and in- terstate or foreign commerce. Counsel will want to ensure such an allegation is included particularly because, if a federal court does interpret the provision to be jurisdictional, Continued on Page 12