PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 17-2092
AIRFACTS, INC.,
Plaintiff – Appellant,
v.
DIEGO DE AMEZAGA,
Defendant – Appellee.
Appeal from the United States District Court for the District of Maryland, at Greenbelt.
Deborah K. Chasanow, Senior District Judge. (8:15-cv-01489-DKC)
Argued: September 27, 2018 Decided: November 20, 2018
Before AGEE and FLOYD, Circuit Judges, and John A. GIBNEY, Jr., United States
District Judge for the Eastern District of Virginia, sitting by designation.
Affirmed in part, vacated in part, and remanded by published opinion. Judge Agee wrote
the opinion, in which Judge Floyd and Judge Gibney joined.
Nicholas Hantzes, HANTZES & ASSOCIATES, McLean, Virginia, for Appellant. Jerry
R. Goldstein, JERRY R. GOLDSTEIN, P.C., Silver Spring, Maryland, for Appellee.
AGEE, Circuit Judge:
AirFacts, Inc. (“AirFacts”) appeals from the district court’s judgment after a bench
trial in favor of Diego de Amezaga on AirFacts’ breach of contract and misappropriation
of trade secrets claims. AirFacts, Inc. v. de Amezaga, No. DKC 15-1489, 2017 WL
3592440 (D. Md. Aug. 21, 2017). For the following reasons, we affirm the judgment in
part, vacate it in part, and remand to the district court for further proceedings consistent
with this opinion.
I.
A.
Diego de Amezaga worked for AirFacts, a developer and licenser of revenue
accounting software, from 2008 to 2015. AirFacts’ primary product is TicketGuard, an
auditing software that analyzes ticket fares for airlines and travel agencies to ensure
tickets are sold for the appropriate price. TicketGuard’s algorithms compare a ticket price
to commissions, taxes, and airline industry rules like those collected by the Airline Tariff
Publishing Company (“ATPCO”). 1 An AirFacts employee conducts an automated audit
by inputting ticket data into TicketGuard, running the software, and recording the ticket’s
proper price. If that price differs from the price for which the ticket sold, AirFacts issues
a debit memo to the airline or travel agency that sold the ticket, and the airline or travel
1
ATPCO, a private company, collects public fare data and makes it available to
subscribers for a monthly fee.
2
agency under audit handles the refund process. AirFacts also audits ticket refunds for
airlines and travel agencies, but it does not process ticket refunds for them.
At AirFacts, Mr. de Amezaga rose from a product development analyst to a
director responsible for managing programmers and coders, developing analytical
software, and managing client relationships. He worked under an Employment
Agreement with AirFacts (“Agreement”), two paragraphs of which are at issue here.
First, Paragraph 4.2 required Mr. de Amezaga to return all AirFacts property, including
documents, upon leaving the company:
Upon termination of his engagement with AirFacts for any reason, the
Employee shall promptly deliver to AirFacts all equipment, computer
software, drawings, manuals, letters, notes, notebooks, reports, and all other
material and records of any kind, and all copies thereof (including copies
on written media, magnetic storage or other computer storage media), that
may be in the possession of, or under the control of, the Employee,
pertaining to Confidential Information acquired and Inventions developed
by the Employee during the term of his engagement with AirFacts. The
Employee further agrees to fully disclose and deliver any of the above
described materials in his possession and, at AirFacts’s request, execute,
upon his own (or his counsel’s) review, any and all documents reasonably
necessary to ensure and verify compliance with the terms of the Agreement.
J.A. 1213. On February 6, 2015, Mr. de Amezaga gave AirFacts his notice of resignation.
Before he departed the company, Mr. de Amezaga’s supervisors informed him that they
might contact him if they had questions about his work after he left. On February 13, Mr.
de Amezaga’s final day at AirFacts, he emailed a spreadsheet outlining a proration
3
framework and a database model (collectively, “Proration Documents”), both relating to
AirFacts’ upcoming proration software product, to his personal email account. 2
Prior to the end of his employment with AirFacts, the company had allowed Mr.
de Amezaga and “a few” other employees to set up Lucidchart accounts to store and
access company documents. J.A. 830. Lucidchart is an online document storage provider.
About a month after his AirFacts employment ended, Mr. de Amezaga used his
AirFacts employee credentials to remotely log in to his AirFacts account on Lucidchart.
From the Lucidchart account, Mr. de Amezaga downloaded two flowcharts displaying
ticket price rules derived from the ATPCO and its Fare By Rule system (“Flowcharts”).
Mr. de Amezaga had spent about four months at AirFacts creating the Flowcharts to
display the rules, relevant processing information, and “things from [his] head” to make
auditing tickets more systematic and easier for AirFacts employees. J.A. 827. After
downloading the Flowcharts, he submitted them as a part of his job application to a travel
agency. Except as noted, Mr. de Amezaga never accessed the Proration Documents or
Flowcharts or disclosed them to anyone. AirFacts claims Mr. de Amezaga breached
Paragraph 4.2 by retaining these documents after he resigned and misappropriated
AirFacts’ trade secrets by sending the Flowcharts to the travel agency. 3
2
The proration issues are discussed below.
3
AirFacts alleged in the Complaint that Mr. de Amezaga misappropriated two
other sets of trade secrets by sending one to a potential employer and printing the other.
The district court held those documents were not trade secrets under the Maryland
Uniform Trade Secrets Act, and AirFacts does not appeal those rulings.
4
The second paragraph of the Agreement at issue, Paragraph 8.1, imposed a non-
compete restriction on Mr. de Amezaga’s employment for a year after he left AirFacts. In
Paragraph 8.1, Mr. de Amezaga agreed not to
(d) [p]erform services for, own, work for, consult, be employed by,
or become financially interested in any the [sic] employer’s customers (as
defined below) unless the services being performed is [sic] not in
competition with, or similar to, either (i) the services or products provided
by the employer during the term of the employee’s employment or (ii)
anticipated services or products of the employer of which the employee has
material knowledge.
J.A. 1213. In 2014, American Airlines (“American”) obtained a license from AirFacts to
use TicketGuard as part of American’s in-house ticket auditing process. American’s
Travel Agency Audit department audits domestic flight tickets sold by travel agencies
and is the only department at American that uses TicketGuard.
Three months after leaving AirFacts, Mr. de Amezaga began working at American
in the Refunds department, but only after he informed his future supervisors of the
Agreement and its prohibitions on the types of work he could perform. American assured
AirFacts that Mr. de Amezaga’s work would not violate the Agreement and informed Mr.
de Amezaga’s new coworkers of his legal obligations to AirFacts. 4 At American, Mr. de
Amezaga manages approximately 100 ticket refund employees whose task is to process
ticket refunds directly to passengers. When passengers seek refunds directly from
American, the airline uses proprietary software to analyze tickets under industry fare
4
Mr. de Amezaga’s future supervisor at American called AirFacts’ CEO and
informed her that Mr. de Amezaga’s work would not violate the Agreement and that Mr.
de Amezaga had signed a document for American to that effect.
5
rules and then issues refunds to passengers when appropriate. On one occasion, Mr. de
Amezaga helped American’s Travel Agency Audit department process a backlog of
international flight ticket refunds. AirFacts contends Mr. de Amezaga has breached the
Agreement through his work at American.
AirFacts also alleges Mr. de Amezaga breached the Agreement’s restriction on
providing services which are similar to AirFacts’ anticipated products. Specifically, while
at AirFacts, Mr. de Amezaga helped to develop customized proration software for
airlines. Proration occurs when a passenger buys a multi-airline ticket for a trip and the
ticket revenue must be prorated among each airline pursuant to negotiated airline
agreements and industry standards. AirFacts developed its proration product to help an
airline recoup the revenue due for its leg of the trip. Mr. de Amezaga helped to develop
and market the proration software to American and Alaska Airlines (“Alaska”), but only
Alaska purchased the customized product. Although the software was unfinished when
Mr. de Amezaga left, he spent about fifty percent of his final months at AirFacts working
on the proration product.
Since joining American, Mr. de Amezaga has, among his duties, attended weekly
staff meetings that included senior employees of American’s Proration department,
received intra-company emails addressed to him as well as Proration department
employees, and coordinated between the Revenue Accounting department (the Refunds
department’s parent) and the Proration department on an accounting project. AirFacts
claims Mr. de Amezaga’s interaction with American’s Proration department employees
6
constitutes a breach of the Agreement in light of his intimate prior knowledge of the
proration software AirFacts was developing when he resigned.
B.
AirFacts sued Mr. de Amezaga in the District of Maryland 5 for breach of contract
under Paragraphs 4.2 and 8.1 of the Agreement (Count One); misappropriation of trade
secrets under the Maryland Uniform Trade Secrets Act (“MUTSA”) (Count Two); and
conversion (Count Three). AirFacts also sought injunctive relief to protect the documents
Mr. de Amezaga took, and the district court entered a temporary restraining order
prohibiting Mr. de Amezaga from destroying any AirFacts documents. Later, the Parties
consented to a preliminary injunction requiring Mr. de Amezaga to return all AirFacts
documents and allowing AirFacts to forensically search his electronic devices. The
forensic searches confirmed that Mr. de Amezaga did retain the documents integral to the
claims on appeal after his termination of employment with AirFacts.
The court held a five-day bench trial during which AirFacts abandoned its
conversion claim, admitting that it “ha[d]n’t been able to establish” that Mr. de Amezaga
deprived AirFacts of any documents. J.A. 1010; see 2017 WL 3592440, at *3. In its
memorandum opinion, the court concluded that AirFacts had also abandoned its
Paragraph 4.2 breach of contract claim. The court thus analyzed Count One only as to
Paragraph 8.1 of the Agreement and found that Mr. de Amezaga’s work at American was
neither similar to AirFacts’ work nor in competition with AirFacts’ proration product. On
5
The district court had diversity jurisdiction because AirFacts is a Delaware
corporation headquartered in Maryland and Mr. de Amezaga is a Virginia citizen.
7
Count Two, the court found that the Flowcharts contained public information and were
widely available to AirFacts’ employees, and it concluded those documents were not
trade secrets under the MUTSA. And while the court held the Proration Documents were
MUTSA trade secrets, the court found that Mr. de Amezaga did not misappropriate those
documents because he accessed them with authorization while he was an AirFacts
employee. Consequently, the court entered judgment for Mr. de Amezaga on all counts.
AirFacts timely appealed, and this Court has jurisdiction under 28 U.S.C. § 1291.
II.
“We review a judgment following a bench trial under a mixed standard of
review—factual findings may be reversed only if clearly erroneous, while conclusions of
law . . . are examined de novo.” Roanoke Cement Co. v. Falk Corp., 413 F.3d 431, 433
(4th Cir. 2005).
III.
We first address AirFacts’ two breach of contract challenges, applying Maryland
law under the Agreement’s choice of law provision. J.A. 1213 (“This Agreement shall be
subject to and governed by the internal laws of the State of Maryland . . . .”).
A.
The district court found that AirFacts “narrowed its [breach of contract] claim
during trial to a breach of [P]aragraph 8, the non-solicitation of clients provision,”
thereby abandoning its claim under Paragraph 4.2 for Mr. de Amezaga’s retention of
8
documents. 2017 WL 3592440, at *3. This statement was the district court’s only
mention of the Paragraph 4.2 claim. On appeal, AirFacts contends that it never
abandoned the claim and that the district court was therefore required to address the
claim. Mr. de Amezaga responds that AirFacts did “expressly” abandon the Paragraph
4.2 claim in closing argument when the district court requested a summary of Count One
and AirFacts did not specifically mention Paragraph 4.2 in response. Response Br. 15.
1.
Because an order failing to address all claims is not a final, appealable order, we
must first ensure that we have jurisdiction over this appeal. See Harrington v. Carlough,
No. 97-2710, 1999 WL 92419, at *2 (4th Cir. Feb. 24, 1999) (unpublished table decision)
(per curiam). Since the district court did not rule on the merits of the Paragraph 4.2 claim,
we directed the Parties to provide supplemental briefs on the issue of whether, if AirFacts
did not abandon its Paragraph 4.2 claim, the district court’s order was a final order over
which we have jurisdiction under 28 U.S.C. § 1291. See ECF No. 35. The Parties both
contended that appellate jurisdiction does exist. Having carefully examined the record
and relevant case law, we agree.
This is not a case in which a court entirely overlooked a party’s claim. Cf.
Harrington, 1999 WL 92419, at *2. Rather, the court addressed AirFacts’ Paragraph 4.2
claim, albeit summarily, in deeming it abandoned. Furthermore, the district court’s order
lacks any indication that the court intended it to be anything but final: “[J]udgment will
be entered in favor of [Mr. de Amezaga] on all counts in the complaint.” 2017 WL
3592440, at *15; see Martin v. Duffy, 858 F.3d 239, 246 (4th Cir. 2017) (“[A]n order that
9
fails to explicitly address or dispose of all claims presented to the court may nevertheless
qualify as a final, appealable order if [its] language . . . is calculated to conclude all the
claims before the district court . . . .” (internal quotation marks omitted)). We therefore
conclude there is a final, appealable order.
2.
Satisfied that we have jurisdiction, we turn to the court’s determination that
AirFacts abandoned its Paragraph 4.2 claim. Upon review of the record, particularly the
closing argument transcript and AirFacts’ filings, we cannot “fairly draw[ ]” an inference
of abandonment. See Jackson v. Fed. Express, 766 F.3d 189, 196 (2d Cir. 2014).
Accordingly, we reverse the district court’s finding that AirFacts abandoned its Paragraph
4.2 claim and vacate its judgment in that regard.
Whether a claim was abandoned is “a primarily factual finding” we review for
clear error. Ellis v. United Airlines, Inc., 73 F.3d 999, 1003 (10th Cir. 1996), overruled on
other grounds by Smith v. City of Jackson, Miss., 544 U.S. 228 (2005). If not express,
abandonment must be clear and unambiguous. See Santos v. Frederick Cty. Bd. of
Comm’rs, 725 F.3d 451, 463 (4th Cir. 2013) (“The defendants cite no authority, nor can
we find any, holding that an ambiguous statement made during oral argument waives an
argument clearly raised in a brief.”); Lemmons v. Georgetown Univ. Hosp., 241 F.R.D.
15, 32 (D.D.C. 2007) (noting the complaint controls “in the absence of an express and
explicit indication that the plaintiff intended to leave one or more of [its] claims by the
wayside”). To determine whether acts constitute clear and unambiguous abandonment,
we weigh several commonsense factors: whether the party failed to advance the claim on
10
appeal, failed to argue that the district court erred in not addressing it, or otherwise
represented that it did not intend to pursue the claim. See, e.g., Duberry v. Postmaster
Gen., 652 F. App’x 770, 772 n.2 (11th Cir. 2016) (per curiam) (holding a party
abandoned a claim when it failed to advance it on appeal or argue the district court erred
in dismissing it); NAACP v. City of Kyle, Tex., 626 F.3d 233, 236 & n.2 (5th Cir. 2010)
(holding a party abandoned a case theory when it agreed its case would “rise or fall” on
another theory and did not correct opposing counsel’s characterization that the first
theory was waived); Harrington, 1999 WL 92419, at *2 (holding a party did not abandon
a claim it had briefed in its proposed Conclusions of Law in the trial court, argued was
still in play on appeal, and “disclaim[ed] any intention” to abandon).
AirFacts’ consistent representations preclude a finding of abandonment. First, the
Paragraph 4.2 claim was clearly pled in Count One of the Complaint, specifically in
Paragraph 40. Second, AirFacts briefed and pursued the Paragraph 4.2 claim in the trial
court, including by outlining the Paragraph 4.2 contentions in a joint pretrial order and
expressly stating it was “not abandon[ing] any issue set forth in its pleadings.” No. 8:15-
cv-01489-DKC, ECF No. 49 at 4–8, 21; see Harrington, 1999 WL 92419, at *2.
Third, in its factual summary at closing, AirFacts reviewed the document retention
evidence that supports the Paragraph 4.2 claim. Though it did not expressly tie that
evidence to the Paragraph 4.2 claim, AirFacts explained that evidence in relation to the
MUTSA claims, both of which depend on the alleged trade secret documents that Mr. de
Amezaga retained (contrary to his duties under Paragraph 4.2) after he left AirFacts.
Compare J.A. 958–59 (factual summary) with J.A. 994–95 (MUTSA claims argument).
11
Fourth, while AirFacts did not specifically argue the Paragraph 4.2 claim at
closing, neither did it expressly abandon the claim. In arguing AirFacts abandoned the
claim, Mr. de Amezaga relies on AirFacts’ failure to include a specific Paragraph 4.2
reference in response to the court’s request for a summary of Count One. Indeed, neither
Party mentioned the Paragraph 4.2 claim at closing. And when Mr. de Amezaga in his
closing characterized AirFacts’ argument as “just talking about section—[P]aragraph 8 of
the contract,” J.A. 1029, AirFacts did not refute that characterization. However, Mr. de
Amezaga never specifically argued to the district court that AirFacts abandoned the
Paragraph 4.2 claim.
These facts do not constitute abandonment because AirFacts’ failure to address
Paragraph 4.2 was at most ambiguous, not a clear and express abandonment of the claim.
See Santos, 725 F.3d at 463 (“[A]n ambiguous statement made during oral argument
[does not] waive[ ] an argument clearly raised in a brief.”). And on appeal, AirFacts has
directly challenged the district court’s ruling on the Paragraph 4.2 claim and briefed the
claim on its merits. Contra Duberry, 652 F. App’x at 772 n.2 (“Because [the plaintiff]
makes no argument that she did not abandon her contract claim or that the district court
otherwise erred in implicitly disposing of it, any breach-of-contract argument has been
abandoned on appeal.”).
We liken these facts to those in Ellis, an age discrimination case, in which the
plaintiffs at summary judgment stressed their disparate impact claim over their disparate
treatment claim and stated that success on the latter in light of recent case law “might be
difficult.” 73 F.3d at 1004. Though the plaintiffs expressly declined to abandon their
12
disparate treatment claim, the district court relied on the summary judgment statements to
hold it was abandoned. Id. at 1003–04. On appeal, the Tenth Circuit weighed the
plaintiffs’ concession of difficulty against their “articulat[ion of] the legal and factual
basis for their disparate treatment claim” in their briefs and concluded the concession did
not constitute abandonment. Id. at 1004. Similarly, in Hunt v. City of Los Angeles, the
Ninth Circuit remanded a statutory claim the plaintiffs had not abandoned despite their
assertion that their case “center[ed]” on two other statutory provisions they were
“primarily challenging.” 638 F.3d 703, 718–19 (9th Cir. 2011). Because the plaintiffs
“asserted only that they were primarily challenging the other two ordinances, not that
they were dropping their claims regarding [the third],” the Ninth Circuit held that the
district court incorrectly deemed the claim abandoned. Id. at 719.
Just as those lower courts could not fairly construe the plaintiffs’ oral argument
statements as abandonment, the district court could not do so here. While AirFacts’
failure to address the Paragraph 4.2 contentions in closing may have been sloppy
advocacy, that failure did not rise to a clear and unambiguous abandonment of a claim it
had consistently pursued throughout the case. Consequently, applying our commonsense
standards for claim abandonment, we hold the district court clearly erred in holding
AirFacts abandoned its Paragraph 4.2 contentions. We thus vacate the district court’s
judgment on the Paragraph 4.2 claim and remand for consideration on the merits. 6
6
AirFacts broadly alleged Count One of the Complaint as “Breach of Contract,”
incorporating by reference citations to Paragraphs 2, 4.2, 7.2, and 8.1 of the Agreement.
J.A. 16. On appeal, AirFacts challenges the district court’s conclusion that all claims but
(Continued)
13
B.
Turning to AirFacts’ breach of contract claim for violation of the Paragraph 8.1(d)
non-compete clause, the Agreement prohibits Mr. de Amezaga from performing any
services for an AirFacts “customer” which are “in competition with, or similar to, either
(i) the services or products provided by the employer during the term of the employee’s
employment or (ii) anticipated services or products of the employer of which the
employee has material knowledge.” J.A. 1213. It is undisputed that American was an
AirFacts customer while Mr. de Amezaga worked at AirFacts. 7
1.
For one year after his departure from AirFacts, Mr. de Amezaga was prohibited
from providing services to a new employer “in competition with, or similar to” the
services “provided by [AirFacts]” during his employment with AirFacts. J.A. 1213.
According to the plain language of Paragraph 8.1(d)(i), in this inquiry we must compare
Mr. de Amezaga’s work at American to the services AirFacts provided to any customer
during his employment at AirFacts. We accept the trial court’s credibility assessments
the Paragraph 8.1 claim were abandoned, but it mentions only Paragraphs 2 and 4.2.
Thus, AirFacts has waived any Paragraph 7.2 claim. See Fed. R. App. P. 28(a)(8)(A). The
Parties mainly analyze the Paragraph 4.2 claim on appeal, but to the extent the district
court’s erroneous abandonment conclusion affected Paragraph 2, that claim is also live.
On remand, the district court should address the merits of both the Paragraph 2 and 4.2
claims.
7
Paragraph 8.2 of the Agreement defines “customer” as a “customer who within
the twelve months prior to the date of employee’s termination has been a customer of the
employer.” J.A. 1213. Because American began using TicketGuard in late 2014 and Mr.
de Amezaga resigned in February 2015, American was an AirFacts “customer” during
the relevant time period. See 2017 WL 3592440, at *2 n.4, *3.
14
and address only the legal question of whether Mr. de Amezaga’s work at American and
AirFacts’ services are competing or similar.
As a manager in American’s Refunds department, Mr. de Amezaga’s main
responsibilities are processing refunds, managing processing employees, and advising
other departments how to optimize procedures. To process passenger refunds, Mr. de
Amezaga uses American’s proprietary software, but he does not use TicketGuard because
he does not audit tickets. Only American’s Travel Agency Audit department uses
TicketGuard. Even when Mr. de Amezaga assisted that department with a ticket backlog,
it was to process refunds, not to conduct audits.
AirFacts, on the other hand, conducts its contract audits using TicketGuard or
licenses TicketGuard to an airline to audit its own tickets. The record reflects that
AirFacts does not process refunds, offer managerial services, or advise its customers
about optimizing their internal processes. And even though AirFacts does use
TicketGuard to audit ticket refunds, AirFacts presented no evidence that Mr. de Amezaga
or American “processes refunds in a way that is at all similar to the TicketGuard process
for auditing refunds.” 2017 WL 3592440, at *5 (emphases added).
AirFacts argues that because ticket audits and ticket refunds both compare a
ticket’s price to industry rates and rules, the processes are similar. In AirFacts’ view,
when Mr. de Amezaga processes refunds at American, he is mimicking his audit work at
AirFacts, despite the differences in his new title and department. Nonetheless, AirFacts
concedes that the audit and refund functions have distinct purposes and end recipients:
the ticket seller under an audit versus the passenger in a refund claim. These distinctions
15
are significant and confirm that Mr. de Amezaga’s work at American is not “in
competition with” or “similar to” AirFacts’ services. Consequently, he has not breached
Paragraph 8.1(d)(i).
2.
We likewise conclude that Mr. de Amezaga did not breach Paragraph 8.1(d)(ii) by
working at American despite his knowledge of AirFacts’ anticipated proration product.
The Agreement prohibits Mr. de Amezaga from providing services “in competition with,
or similar to” the “anticipated services or products of the employer of which the
employee has material knowledge.” J.A. 1213. Again, we must compare Mr. de
Amezaga’s work at American to the services AirFacts anticipated providing through its
proration product during the time of his employment.
Mr. de Amezaga had material knowledge of AirFacts’ proration product because
he assisted in marketing it to American and Alaska on AirFacts’ behalf. In his final
months at AirFacts, he spent half of his time developing Alaska’s customized proration
software.
However, Mr. de Amezaga offers no proration services at American, and
American informed his coworkers that he was prohibited from doing so. Mr. de Amezaga
does no work for the Proration department and offers no proration services at American
because proration is outside his Refunds department job duties. AirFacts’ evidence of any
tasks even tangential to proration is scant: Mr. de Amezaga attends staff meetings that
sometimes include Proration department employees, reads company emails sent to him
and Proration employees, and once coordinated an accounting project between the
16
Revenue and Proration departments. The district court properly considered that work at
American insufficiently similar to or in competition with AirFacts’ proration software
and thus correctly held Mr. de Amezaga did not breach Paragraph 8.1(d)(ii).
Consequently, we affirm the district court’s judgment on Count One as to the
Paragraph 8.1 claim.
IV.
We now turn to AirFacts’ Maryland trade secrets claims. “To prove
misappropriation of a trade secret [under the MUTSA], a plaintiff must show (1) that it
possessed a valid trade secret, (2) that the defendant acquired its trade secret, and (3) that
the defendant knew or should have known that the trade secret was acquired by improper
means.” Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655, 660 (4th Cir. 1993) (citing
Md. Code Com. Law § 11-1201(c)(1)).
Under the MUTSA, a “trade secret” is
information, including a formula, pattern, compilation, program, device,
method, technique, or process, that:
(1) Derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from
its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.
Md. Code Com. Law § 11-1201(e). Before the MUTSA was codified, Maryland applied
the Restatement’s factor-based definition of “trade secret,” which remains useful in a
17
MUTSA analysis. Trandes, 996 F.2d at 661. Under the Restatement, a trade secret can be
identified by:
(1) the extent to which the information is known outside of his business; (2)
the extent to which it is known by employees and others involved in his
business; (3) the extent of measures taken by him to guard the secrecy of
the information; (4) the value of the information to him and to his
competitors; (5) the amount or effort or money expended by him in
developing the information; (6) the ease or difficulty with which the
information could be properly acquired or duplicated by others.
Restatement (First) of Torts § 757 cmt. b.
After demonstrating an item is a trade secret, a plaintiff must show that the
defendant has misappropriated it. Trandes, 996 F.2d at 660. “Misappropriation” under the
MUTSA is, in relevant part, “(1) Acquisition of a trade secret of another by a person who
knows or has reason to know that the trade secret was acquired by improper means; or (2)
Disclosure or use of a trade secret of another without express or implied consent by a
person who” improperly acquired it or knew another person improperly or mistakenly
acquired it. Md. Code Com. Law § 11-1201(c).
AirFacts contends Mr. de Amezaga misappropriated its trade secrets by taking the
Flowcharts and Proration Documents.
A.
Addressing the first element of the MUTSA claim, the district court concluded
that the Flowcharts are not trade secrets because they are simply an “overview” of
publicly available ATPCO information that AirFacts did not own. 2017 WL 3592440, at
*10. As a consequence, the district court held there was no MUTSA claim regarding the
retained Flowcharts. We disagree.
18
A trade secret both derives independent economic value from being secret—at
least not readily ascertainable by third parties—and enjoys reasonable efforts to maintain
its secrecy. Md. Code Com. Law § 11-1201(e); see EndoSurg Med., Inc. v. EndoMaster
Med., Inc., 71 F. Supp. 3d 525, 545 (D. Md. 2014). The evidence at trial demonstrated the
Flowcharts are independently valuable and AirFacts preserved them as such.
First, the Flowcharts are valuable because they contain information not readily
ascertainable to outsiders. Though anyone with a subscription can access the ATPCO
data, Mr. de Amezaga spent months compiling it in particular groupings and applying his
ATPCO expertise to display that compiled information in a useful format. Courts have
long recognized that “a trade secret can exist in a combination of characteristics and
components, each of which, by itself, is in the public domain, but the unified process,
design and operation of which, in unique combination, affords a competitive advantage
and is a protectable secret.” Imperial Chem. Indus. v. Nat’l Distillers & Chem. Corp., 342
F.2d 737, 742 (2d Cir. 1965) (collecting cases); see also Comprehensive Techs. Int’l, Inc.
v. Software Artisans, Inc., 3 F.3d 730, 736 (4th Cir. 1993) (“[A]lthough a trade secret
cannot subsist in information in the public domain, it can subsist in a combination of such
information, as long as the combination is itself secret.”), vacated pursuant to settlement.
Mr. de Amezaga’s painstaking, expert arrangement of the ATPCO data made the
Flowcharts inherently valuable separately and apart from the publicly available contents.
It is the value Mr. de Amezaga added by incorporating “things from [his] head” that
establishes the Flowcharts as unique items of economic value in AirFacts’ field of
endeavor. J.A. 827; see Motor City Bagels, L.L.C. v. Am. Bagel Co., 50 F. Supp. 2d 460,
19
473–79 (D. Md. 1999) (noting the trade secrets at issue “include[d] personal insights and
analysis brought to bear through diligent research and by marshaling a large volume of
information” and “an attempt to independently duplicate the plaintiffs’ efforts . . . would
be an onerous task”); Mettler–Toledo, Inc. v. Acker, 908 F. Supp. 240, 247 (M.D. Pa.
1995) (“The fact that individual pieces of information claimed to be confidential are
available to the general public does not defeat a claim of confidentiality if the value of the
information stems from its compilation or collection in a single place or in a particular
form which is of value.”); ISC-Bunker Ramo Corp. v. Altech, Inc., 765 F. Supp. 1310,
1322 (N.D. Ill. 1990) (“[T]he effort of compiling useful information is, of itself, entitled
to protection even if information is otherwise generally known.”); Space Aero Prods. Co.
v. R. E. Darling Co., 208 A.2d 74, 79 (Md. 1965) (“The subject-matter capable of
protection may be an industrial secret like a machine, process, or formula, or it may be
industrial know-how [or] information of any sort [or] the product of work, or expenditure
of money, or of trial and error, or the expenditure of time.”); Restatement (First) of Torts
§ 757 cmt. b (5)–(6) (noting value can be imputed by effort and time expended and
difficulty of replication). The Flowcharts fit these descriptions as trade secrets.
Second, the Flowcharts are valuable because they would improve AirFacts’
efficiency in the performance of its contractual obligations. AirFacts’ CEO testified that
auditors using the Flowcharts would be able to analyze Fare by Rule tickets faster than
they could unaided. That the Flowcharts “did not contain information or processes unique
to [AirFacts],” 2017 WL 3592440, at *10, confirms that the Flowcharts would be useful
to any AirFacts competitor conducting Fare by Rule audits because they succinctly
20
display the vast amounts of ATPCO data required for that type of audit. See Motor City
Bagels, 50 F. Supp. 2d at 479 (holding documents were valuable because of the effort
expended to compile publicly available information). Contra Diamond v. T. Rowe Price
Assocs., 852 F. Supp. 372, 412 (D. Md. 1994) (“While these documents may have some
utility to T. Rowe Price, there is no evidence that they have any independent economic
value for anyone else.”). For these two reasons, the Flowcharts have independent
economic value.
Finally, AirFacts took reasonable steps to maintain the Flowcharts’ secrecy. Even
if widespread use within the company was their “intended purpose,” we find no evidence
in the record for the district court’s conclusion that “the flowcharts themselves appear to
have been widely known to Plaintiff’s employees.” 2017 WL 3592440, at *10. 8 On the
contrary, AirFacts required all employees to sign confidentiality agreements, installed
monitoring software on every computer to track employees’ actions, and specifically
protected the Flowcharts by giving only “a few” employees access to AirFacts’
8
Even if the Flowcharts were widely known within the company and used by
AirFacts’ auditing employees, that factor alone would not necessarily thwart trade secret
status. What use is a trade secret if its owner cannot use it to its advantage in the
marketplace? And to do so, the owner’s employees must be able to use the advantageous
tool or information to serve customers better than their competitors. This principle
comports with weighing employee knowledge against the finding of a trade secret when
those employees do not need the knowledge to do their jobs. See Restatement (First) of
Torts § 757 cmt. b (including as a factor in trade secret status “the extent to which
[information] is known by employees”). If AirFacts published the Flowcharts to their
auditing employees but not to the cleaning staff, the Flowcharts’ secrecy would not
decrease. What matters is the efforts AirFacts took to preserve the Flowcharts’
confidential status outside of the normal scope of their restricted use within AirFacts’
business.
21
Lucidchart accounts. J.A. 830. We agree with the reasoning of the District of Maryland in
Albert S. Smyth Co. v. Motes, in which it recently found that a company’s imposing a
confidentiality policy and restricting access to electronic documents contributed to
finding the documents at issue were trade secrets. No. CCB-17-677, 2018 WL 3635024,
at *3 (D. Md. July 31, 2018) (noting the company prohibited employees from disclosing
company information, instructed employees how to keep information safe, and stored
records on encrypted servers to which few employees had access); see also Restatement
(First) of Torts § 757 cmt. b (2)–(3). Therefore, we conclude the district court erred in
holding the Flowcharts are not trade secrets and vacate and remand this claim for the
district court to address in the first instance whether Mr. de Amezaga misappropriated
these trade secrets.
B.
Finally, we address AirFacts’ trade secrets claim relating to the Proration
Documents. Mr. de Amezaga emailed the Proration Documents to his personal email
account on his last day of employment at AirFacts. The framework and database model,
which he had developed for AirFacts, condensed information from airline proration
agreements into a more concise format that AirFacts could use in developing its proration
product. AirFacts intended to use the Proration Documents to demonstrate to Alaska how
its custom proration product would work. The district court held that these documents are
trade secrets because they were part of AirFacts’ “proration engine under development,”
but that Mr. de Amezaga did not misappropriate the Proration Documents because he
22
accessed them in the scope of his employment and emailed them to himself only to
answer questions from AirFacts after he resigned. 2017 WL 3592440, at *11.
AirFacts appeals the district court’s misappropriation ruling. Because we follow
the district court’s credibility determination that Mr. de Amezaga accessed the Proration
Documents with authorization and did not intend to access, use, or send them to anyone
(but his AirFacts supervisors) after his last day at AirFacts, we affirm.
Even if an employee does not disclose trade secrets to a third party, he can
misappropriate those trade secrets if he knows or has reason to know he acquired them
“by improper means.” Md. Code Com. Law § 11-1201(c)(1); see LeJeune v. Coin
Acceptors, Inc., 849 A.2d 451, 465–66 (Md. 2004). Consequently, we must consider the
facts surrounding Mr. de Amezaga’s acquisition of the Proration Documents: he helped
to create them and worked on them through his final day at AirFacts; AirFacts employees
occasionally worked remotely and used their personal email accounts to send and save
company documents; Mr. de Amezaga’s superiors asked him to be available to answer
questions after he resigned; the AirFacts employees who contacted Mr. de Amezaga after
he resigned did not ask questions about the proration project; and Mr. de Amezaga never
accessed the Proration Documents in his personal email account after he resigned.
Relying on these facts, the district court found credible Mr. de Amezaga’s
testimony that he emailed the Proration Documents to himself so he could answer
AirFacts employees’ questions about the proration project. Even though AirFacts’
computer monitoring software revealed that Mr. de Amezaga deleted the email he sent to
himself from his company computer, the district court concluded that “this is not
23
convincing evidence that Defendant knew his actions were improper and intended to hide
those actions.” 2017 WL 3592440, at *12. In addition, the district court likened these
facts to those in Diamond, in which a former employee retained company documents at
her home that her employer had regularly sent to her during her employment because she
was authorized to work from home. 852 F. Supp. at 412 & n.193. Taking the facts as the
district court found them, we perceive no legal error in the district court’s conclusion that
Mr. de Amezaga did not misappropriate the Proration Documents in emailing them to
himself for continued AirFacts business. Accordingly, we affirm.
V.
For the foregoing reasons, we vacate the district court’s judgment on Count One as
to the Paragraph 4.2 breach of contract claim and on Count Two as to the Flowcharts
MUTSA claim and remand these claims for further proceedings consistent with this
opinion. We affirm the remainder of the district court’s judgment.
AFFIRMED IN PART, VACATED IN PART,
AND REMANDED
24