IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
CHERYL WIGGINS,
Plaintiff/Counterclaim
Defendant,
V,.. C.A. No. N15C-01-186 CLS
PHYSIOLOGIC ASSESSMENT
SERVICES, LLC, and
Defendant/Counterclaim
Plaintiff,
JORDAN KLEAR,
\./\./\_/\J§/\J£\_/\./§/\J§/&&&§
Defendant...
Date Submitted: March 2, 2016
Date Decided: June 3, 2016
On Plaintiff/Counterclaim Defendant Cheryl Wiggins’s Motion to Dismiss
Counts II-V of Defendant/Counterclaim Plaintiff s Amended Counterclaims
Pursuant to Superior Court Civil Ru1e 12(b)(6).
GRANTED IN PART; DENIED IN PART.
.QRD_LR_
John G. Harris, Esquire, Berger Harris LLP, Wilmington, Delaware, Attorney for
Plaintiff/Counterclaim Defendant.
Lauren E.M. Russell, Esquire, Margaret M. DiBianca, Esquire, Young, Conaway,
Stargatt & Taylor, LLP, Wilmington, Delaware, Attorneys for
Defendant/Counterclaim Plaintiff Physiologic Assessment Services, LLC.
SCOTT, J.
Plaintiff/Counterclaim Defendant, Cheryl Wiggins ("Wiggins"), has moved
to dismiss Counts II-V of Defendant/Counterclaim Plaintiff Physiologic
Assessment Services, LLC’s ("PAS") amended counterclaims pursuant to Superior
Court Civil Rule l2(b)(6). For the following reasons, Wiggins’s Partial Motion to
Dismiss is GRANTED, IN PART, AND DENIED, IN PART.
__,Background_r_
This action arises from the termination of Wiggins’s employment at PAS in
December of 2014. Wiggins filed her initial complaint on January 23, 2015, solely
against PAS, asserting claims for breach of contract, promissory estoppel, and
violation of Pennsylvania’s Wage Payment and Collection Law ("WPCL"). On
July 22, 2015, Wiggins filed an amended complaint, adding PAS’s CEO, Jordan
Klear, as a co-defendant to the action and alleging personal liability against him for
the WPCL claims only. On August, 18, 2015, PAS filed its answer, affirmative
defenses, and counterclaims to the amended complaint__,
PAS is in the business of providing intraoperative neurophysiologic
monitoring ("IONM") services to physicians and medical facilities and employed
Plaintiff to provide clinical IONM services on its behalf. Wiggins entered into an
Employment Agreement with PAS on November 26, 2013, which contains, inter
alia, the following clauses that are now implicated by PAS’s counterclaims: an
prospective customers.z° As with PAS’s unfair competition claim, absent any
allegations that Wiggins’s alleged conduct went beyond the restrictive covenant in
the Employment Agreement or that her alleged conduct violated a greater societal
duty, this Court is compelled to find that, under the circumstances, Count III is also
barred by the gist of the action doctrine and is, thus, DISMISSED.Z‘
C. Misappropriation of Trade Secrets
In support of its claim for misappropriation of trade secrets, PAS alleges that
Wiggins had access to its confidential, proprietary information, which she
misappropriated when she disclosed it to and discussed it with other employees
without PAS’s consent and used it to form a new company.zz PAS iiarther alleges
that the Employment Agreement expressly prohibits disclosure of confidential
inforrnation.” Wiggins argues in a footnote that, to the extent PAS’s
misappropriation of trade secrets claim is grounded on the confidentiality clause or
2° Bmwn & Bmwn, lnc_, er al_ v. cola, er az., 745 F.supp.zd 588, 621-22 (E.D. Pa. oct 4, 2010).
21 Again, even if the Court were to interpret PAS’S general reference to Karpfv. Massachusetts
Mutual Life Insurance as an argument that it is analogous to the case at bar and, thus, provides a
basis for this Court not to apply the gist of the action doctrine to bar its tortious interference
claim, such an argument also fails for the same reasons as the Skola' argument fails. The district
court in Karpf found that the gist of the action doctrine did not bar the plaintiffs tortious
interference claim, because he alleged that the tortious conduct took place after the termination
of his career contract. 2014 WL 1259605, at *5 (E.D. Pa. Mar. 27, 2014). Here, again, PAS’s
counterclaims cannot fairly be read as including any factual allegations regarding Wiggins’s
actions after she was terminated for allegedly breaching her Employment Agreement. Thus,
PAS’s tortious interference claims are not unique under the circumstances.
22 Def.’s Counterclaims 1111 65-68.
23 1a at 11 21 .
ll
other terms set forth in the Employment Agreement, such claim is barred by the
gist of the action doctrine, and this Court agrees.24
The confidentiality clause in the Employment Agreement not only provides
a specific definition of what constitutes "confidential information"_including
proprietary information, trade secrets, business or financial information, business
development information, customer lists, customer contacts, and any other non-
public information generated by PAS-but also expressly prohibits certain
actions_including any disclosure, any use that benefits anyone except PAS, and
any use or attempted use that has the possibility of injuring or causing loss to
PAS_taken with regard to such confidential information taken "during and after
the term of [the Employment] Agreement-_;,-"z$
PAS’s allegations that Wiggins disclosed, discussed and otherwise used its
billing methods, customer lists and contact information, and insurance
relationships to form a new company, on their face, fall squarely within the scope
of the Employment Agreement’s confidentiality clause. Therefore, and because
PAS failed to address this argument in any way in its Response, this Court is
_n
24 The Court’s application here of the gist of the action doctrine assumes that PAS’s claim for
misappropriation of trade secrets adequately states a claim pursuant to Rule l2(b)(6), which
Wiggins argues it does not. Because the Court finds that the gist of the action doctrine bars
PAS’s claim in any event, its decision need not reach such an analysis.
25 Ex. A to Def.’s Counterclaims §§ lO(a), (c).
12
compelled to find that, under the circumstances, Count IV is also barred by the gist
of the action doctrine and is, thus, DISMISSED.%
II. Misappropriation of Conf`ldential Inf0rmati0n (Count V)
The Court, now having determined that the gist of the action doctrine bars
PAS’s claims for unfair competition (Count II), tortious interference with
contractual relationships (Count III), and misappropriation of trade secrets (Count
IV), moves to discuss whether PAS has pled sufficient factual allegations that
conceivably state a claim to relief for misappropriation of confidential information
(Count v).”
Wiggins argues that PAS’s claim for misappropriation of confidential
information should be dismissed because it does not (l) specify the nature of the
information that forms the basis of the claim, (2) generally describe the
confidential character of the information at issue, or (3) generally describe the
means by which Wiggins allegedly misappropriated that information. PAS argues
that it adequately described the confidential information at issue when it devoted
an entire section of its counterclaim to do so, that it specifically described the great
lengths it went to protect the confidentiality of this information, and that it further
26 See Bohler-Uda’eholm Am., Inc. v. Ellwooa' Grp., Inc., 247 F.3d 79, 106-07 (3rd Cir. Apr. ll,
2001) (finding that the gist of the action doctrine barred claim for misappropriation of trade
secrets and confidential information covered by the Know-How Agreement but not the plaintiff" s
client lists, pricing information, ship-to lists and customer profiles, which constituted
confidential information and/or a trade secret not covered by the Know-How Agreement).
27 Cambzum, 2012 wL 172844, ar *1.
13
pled that Wiggins used (and continues to use) this information to create a new,
competing company. Furthermore, PAS cites to CertainTeea' Ceilings Corporation
v. Aiken for support of its argument that misappropriation was adequately pled
here. The Court agrees.
First, because PAS’s counterclaims include a section titled "Plaintiff’ s
Access to Defendant’s Confidential, Proprietary Information" in which it defines
its confidential, proprietary information and trade secrets as, inter alia, billing
methods, processes and practices, customer lists and contact information, services
ordered, ordering patterns, insurance company relationships, and other billing and
collections inforrnation, as well as the names of all of its physician and hospital
customers, the contact information of its customers’ payers, and billing codes, PAS
has, in fact, specified the nature of the information that forms the basis of its
claim.zg
Second, in that same section of its counterclaims, PAS alleges that (l) it "has
spent its time, money, and other resources developing its confidential information
and has undertaken substantial efforts to protect its confidential, proprietary
information from disclosure;"” (2) it "restricts access of certain information to
limited categories of employees, requires employees to use login credentials to
--28 De_f.’s Counterclaims 1111 l5_.-l7; see Bohler-Udcz'eholm, 247 F.3d at 107 (citing Robinson Elec.
Supervisory C0. v. Johnson, 154 A.2d 494, 496 (Pa. 1959)) (finding that "information like client
lists and profiles, pricing information, and shipping-to information . . . can be a trade secret
because such information is highly confidential and constitutes a valuable asset).
29 Def.’s Counterclaims 11 l9.
14
access specific types of information, and conducts regular reviews of its systems to
verify that information has not been accessed without authorization;"w and it
"requires high-level employees, including Plaintiff, to execute Employment
131
Agreements that expressly prohibit disclosure of confidential information.’
Therefore, it appears to the Court that PAS has more than generally described the
confidential character of the information at issue.
Finally, regarding the means by which Wiggins allegedly misappropriated
such information, PAS, in fact, alleged that Wiggins "used" its confidential
information to form a company to compete with PAS,” that Wiggins "sent" PAS’s
confidential information to herself using her personal email address,” and, again,
that it "requires high-level employees, including Plaintiff, to execute Employment
Agreements that expressly prohibit disclosure of confidential information."34
Furthermore, in Certaz'nTeed Ceilings Corporation v. Az`ken, the district court
found that the plaintiff had adequately alleged misappropriation, where it was
alleged that the defendant used the plaintiff’ s confidential information and trade
secrets in the regular performance of his duties and then left his job with the
plaintiff to take a job with identical or nearly identical job responsibilities at a
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15
direct competitor in substantially the same sales territory.” Therefore, it appears to
the Court that PAS’s claim for misappropriation of confidential information states
a claim that is provable under any reasonably conceivable set of circumstances
and, thus, Wiggins’s Motion as to Count V is DENIED,
Conclusion
Accordingly, for the foregoing reasons, Plaintiff/Counterclaim Defendant
Cheryl Wiggins’s Partial Motion to Dismiss is GRANTED, IN PART, AND
DENIED, IN PART.
IT IS SO ORDERED.
.,»z
The Honorabl alvin L. Scott, Jr.
cc: Prothonotary
35 2015 WL410029, ar *5.
l6
"Exclusivity of Service" clause (§ 3), a "Non-Competition; Non-Solicitation"
clause (§§ 9(c), (e)), and a "Confidentiality" clause (§ lO(c))R
PAS’s counterclaims are comprised of the following five counts against
Wiggins: (l) breach of contract (Count I); unfair competition (Count II); tortious
interference with contractual relationships (Count III); misappropriation of trade
secrets (Count IV); and, in the alternative, misappropriation of confidential
information (Count V). Wiggins moved to dismiss Counts II-V on September ll,
2015, and PAS replied in opposition on December 4, 2015. Finally, on March 2,
2016, Wiggins filed a reply in support of her motion to dismiss.
In support of her motion to dismiss, Wiggins argues that Pennsylvania’s gist
of the action doctrine bars Counts II (unfair competition), lII (tortious
interference), and, to the extent grounded on the confidentiality clause set forth in
the Employment Agreement, IV (misappropriation of trade secrets) of PAS’s
counterclaims, because they constitute tort claims that are predicated on the same
contract-based allegations that ground the breach of contract claim in Count I, and,
thus, they should be dismissed with prejudice In the alternative, Wiggins argues
that Count III (tortious interference) fails to state a claim based on PAS’s
allegation that Wiggins, as an agent-employee, interfered with PAS’s contractual
relationships with her fellow employees.
As to Counts IV and V, Wiggins argues that PAS has failed to state claims
for misappropriation of trade secrets and misappropriation of confidential
information, because it does not identify the alleged trade secrets or nature of the
confidential information that form the basis of the claims or the means by which
Wiggins allegedly misappropriated the trade secrets or confidential information;.;i_,_.
In response, PAS argues generally that claims for unfair competition are
based on non-contractual social duties and, thus, are not barred by the gist of the
action doctrine, citing to Skola' v. Galderma Laboratories, L.P. for support. PAS
also argues generally that claims for tortious interference with contractual
relationships are unique from claims for breach of contract and, thus, are also not
barred by the gist of the action doctrine.
As to its claims for misappropriation of trade secrets and confidential
information, PAS argues that its claims should not be dismissed, because it
described the trade secrets and confidential information, which it protected, that
Wiggins used to create a new, competing company. Specifically, PAS argues that
it identified, inter alia, its billing methods, customer lists and contact information,
and insurance relationships, how it protected the confidentiality of its information,
that Wiggins accessed this information both by attending senior management
meetings and by using her login credentials, and that she used and continues to use
this information to create a new, competing company.,;
The test for sufficiency of a complaint challenged by a Rule l2(b)(6) motion
to dismiss is whether a plaintiff may recover under any reasonably conceivable set
of circumstances susceptible of proof under the complaint.l In making its
detennination, the Court must accept all well-pleaded allegations in the complaint
as true and draw all reasonable factual inferences in favor of the non-moving
party.z The complaint must be without merit as a matter of fact or law to be
dismissed.3 Therefore, if the plaintiff can recover under any conceivable set of
circumstances susceptible of proof under the complaint, the motion to dismiss will
not be granted/l
isc_ussion___
I,¢_, Pennsylvania’s Gist of the Action Doctrine
The Pennsylvania Supreme Court recently reaffirmed that the "touchstone
standard for ascertaining the true gist or gravamen of a claim pled by a plaintiff in
a civil complaint" requires a determination of whether the "nature of the duty"
upon which the breach of contract claim rests is the same as that which forms the
1 Spence v. Funk, 396 A.2d 967, 968 (l978); see Cambium Ltd. v. Trilantic Capital Partners 111
L.P., 2012 WL at *l (Del. Jan. 20, 201_2‘_) (citing Cem‘. Mortg. Co. v. Morgan Stanley
capz¢a§»£.ia§see§z§§ LLC, 27 A.zd 531, 537.=.=§@35§§1. 201 i)).
no v, _,;"?§05 A.2d 1029, 1034-36‘¢;}§§@1.1993); Nzx v. sawy@r, 466 A.2d 407, 410
(De1.super.cr.1933).' °
3 Diamond State Tel. Co. v. Universily ofDelaware, 269 A.2d 52 (Del.l970).
4 Ramunno, 705 A.2d at 1034; see Cambium, 2012 WL 172844, at *l (citing Cent. Mortg., 27
A.3d at 537).
basis of the tort claims. The nature of the duty alleged to have been breached is
"established by the underlying averments supporting the claim in a plaintiffs
complaint."$ A claim will be viewed as one for breach of contract if "the facts of a
particular claim establish that the duty breached is one created by the parties by the
terms of their contract."6 A contractual duty, as opposed to a broader social duty,
arises in conjunction with "a specific promise to do something that a party would
not ordinarily have been obligated to do but for the existence of the contract."7 On
the other hand, a claim will be viewed as one in tort if "the facts establish that the
claim involves the defendant’s violation of a broader social duty owed to all
individuals, which is imposed by the law of torts and, hence, exists regardless of
the contract."g Therefore, "the mere existence of a contract between two parties
does not, ipso facto, classify a claim by a contracting party for injury or loss
suffered as a result of actions of the other party in performing the contract as one
for breach of contract."g
The Court’s analysis, thus, must begin with the specific allegations that
comprise PAS’s claims against Wiggins in order to determine whether Counts ll
(unfair competition), III (tortious interference with contractual relationships, and
IV (misappropriation of trade secrets) each state a claim for Wiggins’s breach of a
.5Brun0, et al. v. Erie Ins. Co: et al., 106 A.3d 48, 68 (Pa. 2014).
"’ 1¢1.
7 Id_ ar 68-69.
3 1a at 6a
9 1a at 69.
contractual obligation created by the Employment Agreement or, rather, for a
breach of an independent social duty imposed by the law of torts.
PAS alleges in Count I that Wiggins breached the Employment Agreement
in the following ways: (l) by using PAS’s time, resources, and confidential
information to form a new, competing company, Wiggins breached Section 3;
(2) by soliciting, inducing, enticing, or attempting to solicit, induce, entice, hire or
employ PAS’s current or former employees for her new company, Wiggins breach
Section 9(c); (3) by soliciting, or attempting to solicit, PAS’s customers to cease
doing business with PAS, reduce the amount of business they do with PAS, or
otherwise interfere with the business relationship between PAS and its customers,
Wiggins breached Section 9(e); and (4) by using PAS’s confidential information
for her own purposes, and/or for the benefit of her new company, and/or in a
manner that had the possibility of injuring or causing loss to PAS, Wiggins
breaehed seeuee io(e).l°
A. Unfair Competition
In support of its claim for unfair competition in Count II, PAS alleges that it
had a reasonable expectation of entering into a valid business relationship with
Wiggins by virtue of the Employment Agreement.“ PAS further alleges that
Wiggins interfered with this relationship and defeated PAS’s legitimate
‘°_Def.:s_ c<;;itereieims 1111 41-44§,;
" 1a at 11 47.
expectations by: (l) "using company time, resources, and confidential information
to form a new company to compete with PAS;"lZ (2) "soliciting, inducing,
enticing, or attempting to solicit, induce, entire [sic], hire or employ [PAS]’S
current or former employees for her new company;"” (3) "soliciting, or attempting
to solicit [PAS]’s customers to cease doing business with [PAS], reduce the
amount of business they do with [PAS], or otherwise interfere with the business
relationship between [PAS] and its customers;"l" and (4) "using [PAS]’S
confidential information for her own purposes, and/or for the benefit of another
company, and/or in a manner that had the possibility of injuring or causing loss,
either directly or indirectly, to [PAS]."IS
Wiggins’s assertion that, through these allegations, PAS is merely recasting
the breach of contract claim in Count I is supported by the facts. Though PAS did
not cite to the specific clauses of the Employment Agreement in this Count, the
allegations are verbatim recitations of the contractual clauses referenced in the
breach of contract claim.m This, combined with the fact that PAS has not alleged
that such duties are implied by law regardless of the Employment Agreement,
l_u
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16 See Ex. A to Def.’s Counterclaims §§ 3, 9, 10§-_=
compels the Court to find that, under the circumstances, Count ll is barred by
Pennsylvania’s gist of the action doctrine and is, thus, DISMISSED.W
B. T0rti0us Interference with Contractual Relationships
PAS’s tortious interference claim refers to both its contractual relationships
with two former employees and its customers and alleges that Wiggins
collaborated, solicited, induced, attempted to solicit or induce, interfered with, and
contributed or caused those employees and customers to breach their respective
contractual agreements and/or cease doing business or reduce the amount of
business they did with PAS.'S
Wiggins argues that these allegations merely recast the breach of contract
claims and, again, this Court agrees. Notably absent from PAS’s allegations are
any claims that Wiggins’s actions went beyond the Non-Competition; Non-
17 Even if the Court were to interpret PAS’s general reference to Skold v. Galderma
Laboratorz`es, LP as an argument that it is analogous to the case at bar and, thus, provides a basis
for this Court not to apply the gist of the action doctrine to bar its unfair competition claim, such
an argument fails. Skold involved a claim of unfair competition in connection with the breach of
a licensing agreement, where the court held that the gist of the action doctrine barred the
plaintiffs claim where it was based on actions taken by the defendant founded on breach of the
specific executory promises which comprise the contract but not where it was based on actions
taken by the defendant after the contract between the parties had already terminated, i.e., "the
breach of a broader societal duty not to mislead him which does not relate to any provision of the
contract." 99 F.Supp.?>d 585, 592, 601-02 (E.D. Pa. Apr. l7, 20l5). Here, PAS’s counterclaims
cannot fairly be read as including any factual allegations regarding Wiggins’s actions after she
was terminated for allegedly breaching her Employment Agreement, particularly with regard to
the use of PAS’s confidential information, which would likely be the only viable allegations
underlying the unfair competition claim that could survive the gist of the action doctrine under
Skola'. Furthermore, regarding the non-competition/non-solicitation allegations, the restrictive
covenant in the Employment Agreement, which is presumed valid as Wiggins’s does not appear
to have challenged it, had not yet run at the time PAS filed its counterclaims.
18 Def.’s Counterclaims 1111 53-6l.
Solicitation restrictive covenant in the Employment Agreement, because the
restrictive covenant, by its terms, only restricted Wiggins’s interactions with "any
physician for whom [she] performed services at any time during the tenn of [her]
employment," "relationship between the Companies and any current or former
employee," "any transaction in which any Company was involved or which was
pending during the term of [her] employment or at the date on which [her]
employment with PAS or any other Company ends," and "any customer or
business relation."lg Therefore, it does not appear to the Court that PAS’s
allegations for tortious interference allege the breach of any greater duty than what
was agreed to and created by the Employment Agreement.
Furthermore, Wiggins asserts that the facts in Brown & Brown, Inc. v. Cola
are analogous and compel the Court to dismiss the tortious interference claim
under the gist of the action doctrine as the district court did. In Brown & Brown,
the plaintiffs alleged that the defendants tortiously interfered with plaintiffs’
contractual and business relationships with both its customers and its employees,
and the district court found that such conduct fell "squarely within the scope of
[the defendants]’ respective Employment Agreements," which contained non-
solicitation clauses prohibiting the solicitation of employees and existing and
19 Ex. A to Def.’s Counterclaims § 9.
10