No Dismissal of Claim Against Defendant Accused of Transferring Company Info to Dropbox Account: eDiscovery Case Law

by CloudNine

In Abbott Labs. v. Finkel, No. 17-cv-00894-CMA (D. Colo. Nov. 17, 2017), Colorado District Judge Christine M. Arguello denied the defendant-movant’s motion to dismiss the plaintiff-respondent’s conversion claim that the defendant disclosed the plaintiff’s confidential information and trade secrets to a third party and transferred that information to his personal online cloud storage Dropbox account.

Case Background

In December 2014, the plaintiff hired the defendant as a General Manager for its Nutrition Division, where he received access to its confidential information and trade secrets.  To protect its confidential information and trade secrets, the plaintiff required the defendant to sign confidentiality and non-disclosure agreements and its Electronic Messages policy prohibited the defendant from backing up or storing digital information on personal devices and also prohibited sharing info with outside parties.  Despite that, during the defendant’s employment, he both disclosed plaintiff confidential information and trade secrets to a third party and transferred that information to his personal online cloud storage Dropbox account and was fired, in part, for that.  On the date of his termination, the plaintiff’s IT personnel (with the defendant’s consent) deleted its confidential information that he transferred to his personal Dropbox account.

However, the plaintiff later discovered that “Dropbox has a feature that allows a user to restore any file or folder removed from an active user account in the past 30 days or longer, depending on the version of Dropbox.”  As a result, the plaintiff asked the defendant 1) to certify that all its information was deleted from any electronic or physical storage location owned or used by the third party, 2) that it be allowed to monitor his Dropbox account activity and ensure that the deletion restoration feature was not activated and 3) to allow a third-party forensic consultant to examine his Dropbox account to ensure that all of the plaintiff’s information was deleted and not re-downloaded or transferred.  When the defendant refused, the plaintiff sued, asserting claims of breach of contract, conversion, and misappropriation of trade secrets.  The defendant filed a motion to dismiss the conversion claim, arguing that the claim is preempted by the Colorado Uniform Trade Secrets Act (“CUTSA”) and the allegations showed that the defendant was authorized to access and use the information and that he returned it to the plaintiff upon request.

Judge’s Ruling

Judge Arguello stated: “To assert a claim of conversion, Plaintiff must show: (1) Plaintiff has a right to the property at issue; (2) Defendant has exercised unauthorized dominion or ownership over the property (3) Plaintiff has made a demand for possession of the property; and (4) Defendant refuses to return it.”  In her analysis, Judge Arguello addressed elements two and four (as one and three were undisputed) and found that the defendant still has unauthorized “dominion or ownership” over the documents and concluded that “Plaintiff has sufficiently pled the fourth element” with regard to defendant’s refusal to allow it to re-access his Dropbox account.

As for the defendant’s contention that the plaintiff’s claim is preempted by CUTSA, Judge Arguello rejected that argument, stating: “At this stage in the litigation, the Court is without a sufficient record to determine whether some, part, or all of Plaintiff’s conversion claim depends on a finding of trade secret status and is, therefore, preempted by the CUTSA. Indeed, none of the allegedly converted information has been presented to the Court, nor has it been described in much detail.”  As a result, she denied the defendant’s motion to dismiss the claim.

So, what do you think?  Should the plaintiff have the right to re-access the defendant’s Dropbox account?

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