BlueEarth Biofuels, LLC v. Hawaiian Electric Co.

LAW L!BYRARY

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lN THE SUPREME COURT OF THE STATE OF HAWAlT

---@0@---

BLUEEARTH BlOFUELS, LLC, Plaintiff-Appellee,
VS.
HAWAIIAN ELECTRlC COMPANY, lNC.; MAUl ELECTRlC

COMPANY, LTD.; ALOHA PETROLEUM, LTD.; and
KARL E. STAHLKOPF, lndividually, Defendants-Appellants.

NO. 30l44

CERTlFlED QUESTION FROM THE UNlTED STATES DlSTRl
FOR THE DlSTRICT OF HAWAl‘l
(ClV. NO. 09-OOl8l)

JULY 20, 2010

E§! m
MOON, C.J., NAKAYAMA, ACOBA, DUFFY, AND RECKTENWALD, JJT4

OPlNlON OF THE COURT BY DUFFY, J.
The United States District Court for the District of
HawaiU_(District Court) certified the following questions of law

to the HawaiH_Supreme Court:

l. When are “tort, restitutionary, and other law[s] of
this state” displaced because they “conflict” with [the
Hawafi Uniform Trade Secrets Act (HUTSA)], Hawaii Revised
Statutes (“HRS”) § 482B?

2. When a claim is found to “conflict” with HUTSA, what
is the scope of the preemption, or displacement, of that
claim under HRS § 482B~8?

3. May a claim that is found not to “conflict” with HUTSA
still be preempted, or displaced, under HRS § 482B-8?

4. Does HUTSA also preempt, or displace, claims based
upon the alleged misuse of “confidential information,” which
is determined, before or during trial, not to meet the
definition of “trade secret” under HRS § 482B-2?

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l. BACKGROUND
A. Factual Background
This case involves plans to create and construct a
biodiesel production facility on Maui. Plaintiff-Appellee
BlueEarth Biofuels, LLC (BlueEarth) specializes in the production
of biodiesel production facilities. ln or around March 2006,
BlueEarth began talks with Hawaiian Electric Company, lnc. (HECO)
and Maui Electric Company, Ltd. (MECO) to “jointly and
exclusively develop a biodiesel production facility to be located
on the lsland of Maui[(the Project).]”
ln furtherance of their discussions regarding the
Project, BlueEarth executed a Mutual Non-Circumvention and Non*
Disclosure Agreement (NDA) with both HECO and MECO.1 BlueEarth,
HECO, and MECO also signed a confidential memorandum of
understanding (Project Agreement), which set forth how the
Project would be planned, developed, permitted, funded,
constructed, maintained, and operated.
ln 2007, BlueEarth, HECO, and MECO began discussions

related to potential fuel subcontractors who would manage and run

1 The NDAs established, inter alia, that: l) confidential
information given by one party to another would remain the property of the
originating party; 2) confidential information of the originating party would
be kept confidential by the receiving party and would not be disclosed or used
for any purpose other than evaluating the Project; 3) any contacts revealed by
one party to the other would be the exclusive contacts of the disclosing
party; 4) the receiving party would not enter into direct negotiations or
transactions with contacts revealed by the disclosing party; and 5) neither
party would solicit or accept any business from sources made available by one
party to the other without the express written permission of the party who
made the source available.

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logistics for a fuel terminal, which would be used to store raw
materials and fuel in connection with the Project. BlueEarth
approached Aloha Petroleum, Ltd. (Aloha) as a potential
subcontractor. ln furtherance of their discussions, BlueEarth
and Aloha executed a NDA on January 28, 2008. As with the HECO
and MECO NDAs, the Aloha NDA contained a provision that
information furnished by one of the parties would be kept
confidential by the receiving party and its representatives. On
July l4, 2008, BlueEarth and Aloha also executed a Mutual
Confidentiality Agreement (Confidentiality Agreement), which
provided that neither party shall use or disclose each other’s
confidential information to third parties or solicit business
from each other’s clients.

BlueEarth alleges that, contrary to the terms of the
previously described Project Agreement, NDAs, and Confidentiality
Agreement, HECO2, MECO and Aloha engaged in undisclosed
negotiations with each other concerning the development,
investment, and ownership of the Project with the intent to cut
BlueEarth out of the Project altogether. Though the Project has
yet to be built, BlueEarth claims that it expended in excess of
$l.2 million working to develop the Project pursuant to the

Project Agreement.

2 HECO was allegedly represented in these negotiations by its Senior
Vice President and Chief Technology Officer Karl Stahlkopf (Stahlkopf), who is
named as an individual defendant in the action.

3

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B. Procedural Background

In October of 2008, BlueEarth filed suit in the
Northern District of Texas. On April 2l, 2009, the case was
transferred to the District of HawaiUd On May 29, 2009,
BlueEarth filed its Second Amended Complaint (SAC), alleging the
following causes of action: l) breach of contract against HECO
(HECO NDA); 2) breach of contract against MECO (MECO NDA);
3) breach of contract against HECO and MECO (Project Agreement);
4) quantum meruit/unjust enrichment against HECO and MECO; 5)
breach of contract against Aloha (Aloha NDA and Confidentiality
Agreement); 6) unfair competition against under HawaiH_Revised
Statutes (HRS) § @80-2, et §eg; against HECO, MECO, Stahlkopf,
and Aloha; 7) tortious interference with existing contracts
against HECO, MECO, Stahlkopf, and Aloha (all NDAs and the
Confidentiality Agreement); 8) tortious interference with
existing contract against Aloha (Project Agreement); 9)
misappropriation of trade secrets against HECO, MECO, Stahlkopf,
and Aloha; lO) conversion against HECO, MECO, Stahlkopf, and
Aloha; and ll) breach of fiduciary duty against HECO and MECO.

On June 29, 2009, Aloha moved to dismiss the Sixth
through Tenth causes of action. On the same day, HECO, MECO, and

Stahlkopf (collectively the HECO defendants) moved to dismiss

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BlueEarth’s SAC.3 On September l7, 2009, BlueEarth filed
oppositions to both motions. Aloha and the HECO defendants filed
their respective reply briefs on September 24, 2009. A hearing
was held on the motions to dismiss on October 5, 2009. The
District Court issued its Certified Questions on November 2,
2009. This court issued its Order On Certified Question on
November 9, 2009, allowing the parties to file briefs regarding
the Certified Questions in accordance with Hawafi Rules of
Appellate Procedure (HRAP) Rule 28.
Aloha filed its opening brief on January 27, 20lO. The
HECO defendants also filed their opening brief on January 27,
20lO. BlueEarth filed its answering brief on April'5, 20lO.
Aloha and the HECO defendants filed their respective reply briefs
on April 29, 20lO.
lI. STANDARDS OF REVIEW
A. Certified Question
“The supreme court shall have jurisdiction and powers
[t]o answer, in its discretion . . . any question or

proposition of law certified to it by a federal district or

3 As observed by the District Court,

[a]lthough the motion was styled as moving for dismissal of
the SAC in its entirety, the arguments set forth in the
motion only sought dismissal of [BlueEarth's] Fourth, Sixth,
Ninth, Tenth, and Eleventh causes of action, the tort- and
restitutionary-based causes of action.

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appellate court if the supreme court shall so provide by rule[.]”
HRS § 602-5(a)(2) (Supp. 2009).

“When a federal district or appellate court certifies
to the Hawafi Supreme Court that there is involved in any
proceeding before it a question concerning the law of Hawafi
that is determinative of the cause and that there is no clear
controlling precedent in the Hawafi judicial decisions, the
HawaiH.Supreme Court may answer the certified question by
written opinion.” HRAP l3(a) (2000).

“An issue of law presented by a certified question is
reviewed by this court de nQvQ under the right/wrong standard of
review.” Lee v. HSBC Bank USA, l2l Hawaifi 287, 289, 2l8 P.3d
775, 777 (2009) (citing Francis v. Lee Enter., lnc., 89 HawaiH
234, 236, 971 P.2d 707, 709 (l999)).`

B. StatutorV Construction §

lt is a well-established rule of statutory construction that
this court's

foremost obligation is to ascertain and give effect to
the intention of the legislature, which is to be
obtained primarily from the language contained in the
statute itself. And [this court] must read statutory
language in the context of the entire statute and
construe it in a manner consistent with its purpose.

Aluminum Shake Roofinq, Inc. v. Hirayasu, ll0 HawaFi 248,
25l, l3l P.3d l230, l233 (2006) (citation omitted) (format
altered).

Kahdohanohano v. Dep't of Human Servs., State of Haw.,

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ll7 HawaiH_262, 288, l78 P.3d 538, 564 (2008) (braCketS in
original).
lll. DlSCUSSlON
In answering the Certified Questions, this court is
required to determine the preemptive4 scope of the HawaiYi
Uniform Trade Secrets Act (HUTSA) in HRS section 482B~l et seg.,
which is an issue of first impression in this jurisdiction. The
HUTSA’s preemption provision reads as follows:
Effect on other law. (a) Except as provided in subsection
(b) this chapter displaces conflicting tort, restitutionary,
and other law of this State providing civil remedies for
misappropriation of a trade secret.
(b) This chapter does not affect:
(l) Contractual remedies, whether or not based upon
misappropriation of a trade secret;
(2) Other civil remedies that are not based upon
misappropriation of a trade secret; or

(3) Criminal remedies, whether or not based upon
misappropriation of a trade secret.

HRS § 482B-8 (2008).

0 In order to answer the Certified Questions, it is
necessary to first review the background of the Uniform Trade
Secrets Act (UTSA) and HUTSA and analyze the decisions of other
jurisdictions that have considered the scope of the UTSA’s

preemptive effect.

4 Courts that have considered this issue use the terms “preempt” and
“displace” interchangeably. This opinion uses the terms interchangeably as

`well.

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A. Background of the UTSA and HUTSA
The UTSA was drafted by the National Conference of

Commissioners on Uniform State Laws (Commissioners) in 1979 and
amended in 1985. UTSA (amended l985) 14 Uniform Laws Annotated
(U.L¢A.) 529, 530 (historical notes) (2005). The Commissioners
gave the rationale behind drafting the UTSA as follows:

Notwithstanding the commercial importance of state trade
secret law to interstate business, this law has not
developed satisfactorily. In the first place, its
development is uneven . . . Secondly, even in states in
which there has been significant litigation, there is undue
uncertainty concerning the parameters of trade secret
protection, and the appropriate remedies for
misappropriation of a trade secret. One commentator
observed:

“Under technological and economic pressures, industry
continues to rely on trade secret protection despite
the doubtful and confused status of both common law

and statutory remedies, Clear, uniform trade secret
protection is urgently needed ”

Comment, “Theft of Trade Secrets: The Need for a Statutory
Solution”, 120 U. Pa. L. Rev. 378, 380-81 (1971).

ld. at 53l.
To this end, the UTSA created a model statutory cause
of action for misappropriation of trade secrets. ld. The UTSA

defined “trade secret”5 and “misappropriation”6, id. § 1 at 537-

5 The UTSA defines “trade secret” as follows:
(4) “Trade secret” means information, including a formula,
pattern, compilation, program, device, method, technique, or

process, that:

(i) derives independent economic value, actual or

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38, established a three~year statute of limitations, id. § 6 at
649, and provided for damages, id. § 3 at 633-34, and injunctive

relief, id. § 2 at 619. The Commissioners intended that the UTSA

5...continue
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

(ii) is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.

14 U.L.A. § 1 at 538.

6 The UTSA defines “misappropriation” as follows:

(2) “Misappropriation” means:

(i) 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

(ii) disclosure or use of a trade secret of another without
express or implied consent by a person who

(A) used improper means to acquire knowledge of the
trade secret; or

(B) at the time of disclosure or use, knew or had
reason to know that his knowledge of the trade secret
was

(l) derived from or through a person who had
utilized improper means to acquire it;

(II) acquired under circumstances giving rise to
a duty to maintain its secrecy or limit its use;
or

(Ill) derived from or through a person who owed
a duty to the person seeking relief to maintain
its secrecy or limit its use; or

(C) before a material change of his [or her] position,
knew or had reason to know that it was a trade secret
and that knowledge of it had been acquired by accident
or mistake.

14 U.L.A. § 1 at 537 (brackets in original).

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“be applied and construed to effectuate its general purpose to
make uniform the law with respect to the subject of this Act
among states enacting it.” lee § 8 at 656 (brackets omitted).

The HUTSA became law in 1989. _ee 1989 Haw. Sess. Laws
Act 221, § 1 at 523-25. The HUTSA incorporates nearly verbatim
the UTSA's definitions of “trade secret” and “misappropriation”,
as well as its remedies, statute of limitations and preemption
provisions. HRS §§ 482B-2 to -4, ~7, -8 (2008). Though the
HUTSA does not contain a uniformity provision of its own, HRS
section 1-24 states that

[a]ll provisions of uniform acts adopted by the State shall

be so interpreted and construed as to effectuate their

general purpose to make uniform the laws of the states and
territories which enact them.

lee § 1-24 (2009).
B. The Scope of Preemption

Courts that have considered the UTSA’s preemption
provision have “uniformly interpreted [it] to preempt previously
existing misappropriation of trade secret actions, whether
statutory or common law.” Hauck Mfg. Co. v. Astec lndus., lnc.,
375 F. Supp. 2d 649, 654 (E.D; Tenn. 2004); eee elee Allied
Erectinq & Dismantling Co., lnc. v. Genesis Equip. & Mfg., lnc.,
649 F. Supp. 2d 702, 720 (N.D. Ohio 2009) (citing §eeek). All
the parties agree that HUTSA displaces Hawafi’s existing

statutory and common law causes of action for misappropriation of

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a trade secret. Two questions regarding the scope of preemption
remain: (l) whether the HUTSA displaces non-contract civil
claims, where such claims are based on allegations of
misappropriation of a trade secret; and (2) whether a non-
contract civil claim is preempted when it is based on the
misappropriation of confidential information that does not rise
to the level of a statutorily-defined trade secret.

1. A non-contract civil claim conflicts with the HUTSA,
and is therefore displaced, to the extent that it is
based upon misappropriation of a trade secret.

a. BlueEarth’s argument

BlueEarth argues that the HUTSA applies only to “the
duty not to improperly acquire, use, or disclose commercially
valuable secret information.” Thus, “[b]ecause BlueEarth’s non-
contract causes of action remedy the breach of duties that are
not dependent upon the existence of competitively significant
secret information, none are affected by the [HUTSA].”
BlueEarth bases its argument on the comment to the UTSA’s “Effect
on Other Law” section, which states as follows:

This Act does not deal with criminal remedies for trade

secret misappropriation and is not a comprehensive statement

of civil remedies. lt applies to a duty to protect

competitively significant secret information that is imposed

by law. lt does not apply to a duty voluntarily assumed

through an express or an implied-in-fact contract. The

enforceability of covenants not to disclose trade secrets

and covenants not to compete that are intended to protect

trade secrets, for example, is governed by other law. The

Act also does not apply to a duty imposed by law that is not
dependent upon the existence of competitively significant

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secret information, like an agent's duty of loyalty to his
or her principal.

14 U.L.A. § 7 at 651 (comment). BlueEarth claims that the
comment is “dispositive” and that it “indicat[es] the clear
answer to the questions before the Court.”

For these reasons, BlueEarth encourages this court to
apply the “elements test” to determine whether a claim is
preempted by the HUTSA. That is, claims are only preempted if
they have the Ysame elements or same underlying duty as a
misappropriation of trade secrets claim.” Thus, BlueEarth
argues, its non-contract claims are not preempted because they
“provide civil remedies for breaches of other duties and
accordingly have qualitatively different elements describing a
breach of those duties.” BlueEarth further notes that, “this is
a legal test inquiring into the nature of rights, duties, and
remedies, not a factual test inquiring into the details of a
plaintiff’s notice pleading.”

b. the defendants’ arguments

ln contrast, Aloha and the HECO defendants argue that a
factual inquiry into the pleadings is necessary to determine
whether the plaintiff’s various non-contract claims seek remedy
for misappropriation of a trade secret, regardless of how the
plaintiff has labeled these claims. Aloha points to the

preemption provision of the UTSA, which states:

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This Act does not affect:

(l) contractual remedies, whether or not based upon
misappropriation of a trade secret;

(2) other civil remedies that are not based upon
misappropriation of a trade secret; or

(3) criminal remedies, whether or not based upon
misappropriation of a trade secret.[H

14 U.L.A. § 7 at 651 (brackets omitted). Given the conditional

\\

language that applies to [o]ther civil remedies”, as opposed to
the total exclusion of contractual and criminal remedies, Aloha
argues that non-contract civil remedies which are based upon a

misappropriation of a trade secret are preempted. ln turn, the

'phrase “based upon” suggests a factual inquiry into the

allegations underlying the claim. lf those allegations reveal
that the underlying injury is the misappropriation of a trade
secret, then the claim should be preempted.

Similarly, the HECO defendants argue for application of
the “same proof” test as articulated in §eeek, in which the court
concluded that

perhaps a better formulation of the UTSA preemption standard
would be a “same proof” standard under which a claim will be
preempted when it necessarily rises or falls based on
whether the defendant is found to have “misappropriated” a
“trade secret” as those two terms are defined in the UTSA.
Stated another way, if proof of a non-UTSA claim would also
simultaneously establish a claim for misappropriation of
trade secrets, it is preempted irrespective of whatever
surplus elements or proof were necessary to establish it.
The UTSA defines “misappropriation” broadly enough to cover
a wide range of conduct, including the sort of conduct

7 The HUTSA's preemption provision contains_the same language. See

HRS § 482B-8(b) (2008).

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contemplated by the various claims which are often involved

in preemption disputes. lf a proven claim, whether in whole

or in part, constitutes misappropriation of a trade secret,

it is that and that alone . . . The UTSA explicitly exempts

from preemption only those claims “not based upon

misappropriation of a trade secret,” implying the UTSA's

preemptive force reaches more than just claims ef or for

misappropriation of a trade secret. Thus, Plaintiff’s non-

UTSA claims against [defendant] will be preempted if, as

plead, they would succeed or fail dependent on proof

[defendant] acquired, disclosed, or used Plaintiff’s trade

secrets or otherwise confidential information
Hauck, 375 F. Supp. 2d at 658 (footnote and internal citations
omitted) (emphases in original).

c. analysis

The preemption provision of the HUTSA, like that of the
UTSA, states that “[t]his chapter does not affect . . . [o]ther
civil remedies that are not based upon the misappropriation of a
trade secret[.]” HRS § 482B-8(b)(2) (2008). We agree with the
Hauck court’s analysis that the phrase “based upon” implies that
“the UTSA’s preemptive force reaches more than just claims ef or
for misappropriation of a trade secret.” Hauck, 375 F. Supp. 2d
at 658 (emphases in original). Otherwise, a plaintiff could
state multiple different claims, all stemming from the same
misappropriation of trade secret injury. This would undermine
the purpose of the UTSA, which was to resolve the “uncertainty

concerning the parameters of trade secret protection” and create

a uniform law to remedy trade secret misappropriation. See 14

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U.L.A. at 531 (prefatory note); see also iee § 8 at 656; HRS § 1-
24 (2009).

The “elements” test advocated by BlueEarth faces
precisely the problem stated above. lt would allow a party to
raise multiple different claims based on the same trade secret
misappropriation injuryi Only a minority of courts apply the
“elements” test to determine preemption. See Nucor Corp. v.
§ell, 482 F. Supp. 2d 714, 725 (D.S.C. 2007) (“To determine
whether a particular cause of action involves rights equivalent
to those protected by the Trade Secrets Act, the elements of the
causes of action should be compared, not the facts pled to prove
them.”); see also Powell Products, lnc. v. Marks, 948 F. Supp.
1469, 1474 (D. Colo. 1996) (“[H]ere, plaintiff alleges that
defendants conspired to misappropriate its trade secrets, which
requires an agreement, which is not an element of a
misappropriation claim under the UTSA. This claim . . . does not

conflict with the UTSA and will not be preempted.”).8

8 Some courts have employed the language of the “elements” test, but
have then gone on to analyze the underlying factual basis for each claim to
determine whether it is based on misappropriation of a trade secret. For

example, in Mortgage Specialists, lnc. v. DaveV, 904 A.2d 652, 665 (N.H.
2006), the court stated that it “agree[d] with the courts that have concluded
that a claim is not preempted where the elements of the claim require some
allegation or factual showing in addition to that which forms the basis for a
claim of misappropriation of a trade secret.” lee However, the court went on
to find plaintiff’s claim for breach of fiduciary duty, which required
different elements than a trade secret misappropriation claim, to be
preempted. lee at 667. §ee Powell, 948 F. Supp. at 1475 (holding
plaintiff’s conversion claim was preempted to the extent it sought recovery
for misappropriation of a trade secret, but was not preempted to the extent it
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The majority of courts, however, have rejected the
“elements” test and have instead examined the factual allegations
underlying each claim to determine whether a claim, whatever its

label, is based upon misappropriation of a trade secret.9

8...continue
sought recovery for physical items stolen); see also LaFrance Corp. v.
Werttemberger, No. C07-1932Z, 2008 WL 5068653, *4 (W.D. Wash. Nov. 24, 2008)

(“Conspiracy requires an element in addition to that required to make out a

UTSA cause of action. ln addition, LaFrance alleges facts that are not
necessary to the UTSA claim . . . Therefore, this claim cannot be dismissed at
this time.”) As the court in Hauck observed

[t]he variations in language employed by courts to
articulate a test for UTSA preemption can be misleading when
considered in the abstract . . . ln the end, all of these
cases turn on their respective factual circumstances as
reflected by the plaintiff’s pleadings. ln fact, in several
instances courts have stated the law in divergent manners
but proceeded to apply those seemingly contrary standards in
similar, if not identical, fashion.

375 F. Supp. 2d at 657-58.

9 See, e.g., Hauck, 375 F. Supp. 2d at 657 (surveying cases and
concluding that “[i]n the end, all of these cases turn on their respective
factual circumstances as reflected by the plaintiff’s pleadings”); Allied
Erecting, 649 F. Supp. 2d at 721 (“the appropriate scope of displacement
should be defined by the ‘same facts' or ‘same proof' standard”); Auto
Channel, lnc. v. Speedvision Network, LLC, 144 F. Supp. 2d 784, 789 (W.D. Ky.
2001) (“[the] Court must first examine each of Plaintiffs' noncontractual
claims and determine whether the claim seeks a remedy for the misappropriation
of trade secrets”); Thomas & Betts Corp. v. Panduit Corp., 108 F. Supp. 2d
968, 972 (N.D. lll. 2000) (“[W]e must review the challenged counts of T&B's
complaint to determine whether they are based on a misappropriation of trade
secrets, or on something more.”); Mortgage Specialists, 904 A.2d at 666 (“to
determine whether a plaintiff’s claims are preempted by the NHUTSA, a court
must examine the facts alleged in support of each claim to determine the
extent to which the claim is based upon the misappropriation of trade secrets
or other information.”); Weins v. Sporleder, 605 N.W.2d 488, 491 (S.D. 2000)
(“the court is to look beyond the label to the facts being asserted in support
of the claims”); Chatterbox, LLC v. Pulsar Ecoproducts, LLC, No. CV
06-512-S-LMB, 2007 WL 1388183, *4 (D. ldaho May 9, 2007) (“Plaintiff’s claims
for unjust enrichment and unfair competition are based on the same nucleus of
facts as its trade secrets claim and, therefore, these should be dismissed as

preempted by the ldaho Trade Secrets Act.”); Bliss Clearing Niagara, lnc. v.
Midwest Brake Bond Co., 270 F. Supp. 2d 943, 949-51 (W.D. Mich. 2003) (court
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BlueEarth’s arguments to the contrary are not supported
by the comment to the UTSA’s preemption provision. BlueEarth
contends that the comment’s statement that “[t]his Act . . . is
not a comprehensive statement of civil remedies[,]” means that
“[b]eyond displacing previously existing common law actions for
trade secret misappropriation . . . the Act does not displace
other civil remedies.” However, it appears that the comment is
merely restating the substance of the preemption provision. The
UTSA is not a comprehensive statement of civil remedies because
“[i]t does not apply to a duty voluntarily assumed through an
express or implied-in-fact contract.” 14 U.L.A § 7 at 651

(comment); see also id. § 7(b) at 651 (“This Act does not affect

contractual remedies, whether or not based upon
misappropriation of a trade secret[.]”) (brackets omitted).

The comment further states that “[t]he Act also does
not apply to a duty imposed by law that is not dependent upon the
existence of competitively significant secret information, like
an agent’s duty of loyalty to his or her principal.” lee § 7 at
651 (comment) (emphasis added). BlueEarth argues that the

comment’s reference to “duties” implies a legal, rather than a

9...continue
analyzed factual allegations underlying each claim to determine if claim was
based upon misappropriation of a trade secret); Ethypharm S.A. France v.

Bentlev Pharm., lnc., 388 F. Supp. 2d 426, 434-35 (D. Del. 2005) (same);
Diamond Power lnt’l, lnc. v. Davidson, 540 F. Supp. 2d 1322, 1345-47 (N.D. Ga.
2007) (same).

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factual, inquiry, and that the duty to refrain from
misappropriating trade secrets is unrelated to and independent
from, for example, the duty not to intentionally interfere with
the contracts of others. Contrary to BlueEarth’s argument, the
language of the comment implies that the UTSA_eeee apply to
duties that ere dependent upon the existence of competitively
significant secret information, whatever their label. ln
analyzing whether a claim is preempted by the UTSA, “the court is
to look beyond the label to the facts being asserted in support
of the claims.” Welne, 605 N.W.2d at 491; see also Mortgaqe
Specialists, 904 A.2d at 665 (“The majority of courts that have
examined this issue have not relied upon the label attached to
the claim, but have examined the facts underlying the claim to
determine whether it is preempted by the UTSA.”).

B1ueEarth states that, “[d]espite its obvious
importance, no case reviewed by counsel for BlueEarth has
discussed or even noted this comment” to the UTSA’s preemption
provision. Respectfully, it is unlikely that this “dispositive”
comment has been simply overlooked by every court to have
considered the scope of the UTSA’s preemption. lnstead, it is
more likely that these courts found that the comment did not
support arguments similar to those made by BlueEarth.

Though the majority of courts agree that an analysis of

the plaintiff’s allegations is necessary to determine whether a

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claim is based upon misappropriation of a trade secret, courts
have differed on how the presence of facts relating to the
improper acquisition, disclosure, or use of trade secrets within
non-UlSA claims affects preemption. Some courts have imposed
broad preemption, going so far as to wholly preempt claims that
include trade secret misappropriation allegations. eee Thomas &
Betts Corp. v. Panduit Corp., 108 F. Supp. 2d 968, 972-73 (N.D.
lll. 2000) (holding that claims for conversion and breach of
fiduciary duty for theft of computers, disks and documents were
preempted by the lllinois Trade Secrets Act because “these
physical items have little value apart from the information
contained therein[.]”); see also Learning Curve Toys, L.P. v.
PlaVwood Toys, lnc., No. 94 C 6884, 1999 WL 529572, *3 (N.D. lll.
July 20, 1999) (“[l]f the operative facts are arguably cognizable

under the lTSA, any common law claim that might have been

available on those facts in the past now no longer exists in

lllinois.”). Other courts suggest that the mere presence of
facts in a claim that go beyond trade secret misappropriation

prevents preemption. See Micro Display SVs.e lnc. v. Axtel1

&lnc., 699 F. Supp. 202, 205 (D. Minn. 1988) (“[T]he court will

allow plaintiff to go forward and maintain its separate causes of
action to the extent that the causes of action have ‘more’ to
their factual allegations than the mere misuse or

misappropriation of trade secrets . . . lf the facts at trial

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disclose that the whole of plaintiff’s case involves the
misappropriation of trade secrets, those counts will be dismissed
which are merely duplicative of the MUTSA.” (Emphasis added.));
see also LaFrance Corp. v. Werttemberqer, No. C07-1932Z, 2008 WL
5068653, *3 (W.D. Wash. Nov. 24, 2008) (“LaFrance alleges facts
that are not necessary to the UTSA claim. Therefore, this common
law claim is not dismissed.” (lnternal citation omitted.)).

The UTSA’s unitary definitions of “trade secret” and
“misappropriation”, its statutory remedies and statute of
limitations for misappropriation of a trade secret, and its
uniformity provision all evince the goal of eliminating
uncertainty and creating a single action for misappropriation of
a trade secret. See Burbank Grease Servs., LLC v. Sokolowski,
693 N.W.2d 89, 98 (Wis. Ct. App. 2005), rev’d in part by 717
N.W.2d 781 (Wis. 2006) (hereinafter Burbank Grease l) (“[T]he
purpose of the preemption provision is to preserve a single tort
action under state law for misappropriation of a trade secret as
defined in the statute[.]”); see also Auto Channel, 144 F. Supp.
2d at 789 (The UTSA “arose to create a uniform business
environment that created more certain standards for protection of
commercially valuable information.”). The HUTSA was adopted by
the Hawafi State Legislature in furtherance of these goals, as

evidenced by the fact that the language of the HUTSA is virtually

identical to the UTSA. See KahoEmanohano, 117 HawaiH_at 288,

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178 P.3d at 564 (stating that “this court must read statutoryj
language in the context of the entire statute and construe it in
a manner consistent with its purpose” (brackets omitted)); eee
also Bateman Constr., lnc. v. Haitsuka Bros., Ltd., 77 Hawafi
48l, 485, 889 P.2d 58, 62 (1995) (finding that because the
pertinent language of certain Hawafi arbitration statutes was
“virtually identical to the language of the federal arbitration
statute . . . we review federal authority for guidance.”); HRS §
1-24 (2009). We find that the best approach to preemption,
consistent with the goals of the UTSA and HUTSA, is the “same
proof” standard articulated in §eeek. Under this standard, “if
proof of a non-UTSA claim would also simultaneously establish a
claim for misappropriation of trade secrets, it is preempted
irrespective of whatever surplus elements of proof were necessary
to establish it.” §eeek, 375 F. 8upp. 2d at 658. To the extent,
however, that the claim is “based upon wrongful conduct[,]
independent of the misappropriation of trade secrets[,]” it will

not be preempted by the HUTSA.w Bliss Clearing, 270 F. Supp. 2d

w §ee, e.g., Hauck, 375 F. Supp. 2d at 659-60 (holding that
plaintiff’s tortious interference with contract claim survived to the extent
that it did not rely on allegations that defendant misappropriated plaintiff’s
trade secrets); see also Smithfield Ham & Prods. Co. v. Portion Pac, lnc., 905
F. Supp. 346, 350 (E.D. Va. l995) (“The question is not whether success on the
misappropriation claim would provide the relief sought by the common law
counts, but whether failure of the misappropriation claim would doom the
remaining counts as well."); Mortgage Specialists, 904 A,2d at 666-67 (holding
that claims for tortious interference with advantageous relations and breach
of the New Hampshire Consumer Protection Act were not preempted to the extent
that they were supported by more than the misuse of plaintiff’s customer

continue...

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at 950. ln this way, the HUTSA will be the sole noncontractual
civil remedy for misappropriation of a trade secret, while
preserving “tort, restitutionary, and other law[s,]” HRS § 482B-
8, that “seek[] to remedy an injury caused not by the
misappropriation of proprietary information, but by separate

ll

conduct[.] Diamond Power, 540 F. Supp. 2d at 1345.

2. A non-contract civil claim that is based upon
“confidential” information which does not rise to the
level of a statutorily-defined trade secret is
preempted.

a. BlueEarth’s argument

BlueEarth argues that

the plain language of the preemption provision . . . refers
only to “trade secrets” as defined by the Act. The
preemption provision nowhere refers to “other confidential
information.” lt follows, then, that the statute only
anticipates preemption of common law claims involving trade
secrets. Since there is no statutory language regarding
preemption of other confidential information not rising to

”...continue

information); Glynn v. Edo Corp., 641 F. Supp. 2d 476, 484 (D. Md. 2009)
(holding that a conversion claim “survives as to any claim for tangible items
and property that is not based on improper use of information or trade
secrets.”); Allied Erectine, 649 F. Supp. 2d at 724 (“where a claim for breach
of fiduciary duty has an independent factual basis, which is not solely
dependent on misappropriation-of-trade-secret facts, courts have concluded

there is no preemption.”); Lucini ltalia Co. v. Grappolini, 231 F. Supp. 2d
764, 771 (N.D. lll. 2002) (“MG Capital v. Sullivan{, No. 01 C 5815, 2001 WL
1609382, at *4 (N.D. lll. Dec. 17, 2001)] is a good example of how to resolve
these issues. There, the court struck only the portion of a fraud claim
relying on the misappropriation of trade secrets; any portion independent of
the trade secret was retained.”); Diamond Power, 540 F. Supp. 2d at 1345 (“if
a claim seeks to remedy an injury caused not by the misappropriation of
proprietary information, but by separate conduct - such as the

misappropriation of physical property or the improper interference with
contractual relationships respecting something other than proprietary
information - such a claim cannot be said to be ‘in conflict’ with the GTSA”
(emphasis in original)).

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the level of trade secrets, there is no reason to think such
preemption was intended.

For this reason, BlueEarth contends that determination of whether
its claims are preempted by the HUTSA is not proper on a motion
to dismiss. Rather, BlueEarth argues, the court should delay the
preemption inquiry until sufficient discovery has occurred, after
which the court may properly determine whether the information at
issue rises to the level of a statutorily-defined trade secret.

b. the defendants’ arguments

Aloha argues that the relief provided by the HUTSA “is
the sole noncontractual remedy when the underlying injury is the
improper acquisition, disclosure or use of commercially valuable
information; if the information does not constitute a trade
secret, there is no remedy.” This is so because “there is no
property right in information [that] is already generally known,
readily ascertainable or not the subject of reasonable efforts to
maintain its secrecy.” Defining the scope of the HUTSA's
preemption in this manner is, according to Aloha, “[t]he only way
to accord the Uniform Act its intended scope, preserve uniformity
and avoid duplicative results[.]”

Similarly, the HECO defendants argue that “the ‘weight
of authority' holds that the UTSA’s preemption provision
eliminates non-contract claims founded on the alleged misuse of
confidential information, regardless of whether that information

is a statutory trade secret.” The HECO defendants contend that

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this is because the UTSA was intended to preserve a single tort
action for allegations of misappropriation of information.

c. analysis

Courts holding that non-UTSA, non-contract claims based

”H information are

upon “confidential” or “commercially valuable
not preempted have generally stated that their analysis is based
on the “plain language” of the UTSA’s preemption provision. §ee,
e.g., Stone Castle Fin., lnc. v. Friedman, Billings, Ramsey &
Qee, 191 F. Supp. 2d 652, 656-59 (E.D. Va. 2002) (holding that
the “plain reading” of the Virginia UTSA compelled a decision
that claims based on information not determined to be a trade
secret were not preempted); Combined Metals of Chicago Ltd.
P’ship v. Airtek, lnc., 985 F. Supp. 827, 830 (N.D. lll. 1997)
(“By its plain language . . . the [lllinois ]TSA preemption
provision applies only if the claim is based on the
‘misappropriation of a trade secret’ . . . Thus, if the Airtek

die and specifications is not a trade secret or secrets, the lTSA

preemption provision is inapplicable.”); Nucor, 482 F. Supp. 2d

n “Confidential” information has been described as “data,
technology, or know-how that is known by a substantial number of persons in a
particular industry (such that its status as a technical ‘trade secret’ is in
doubf) but that, nonetheless, retains some economic and/or competitive value
by virtue of the fact that it is unknown to certain industry participants.”
Robert Unikel, Bridging the “Trade Secret” Gap: Protecting “Confidential
lnformation” Not Rising to the Level of Trade Secrets, 29 Loy. U. Chi. L.J.
841, 844 (Summer l998). Courts have used the term “commercially valuable” as
well as “confidential” to describe this type of information. This opinion
uses these terms interchangeably as well.

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at 726 (“The causes of action at issueU", unlike a cause of
action under [South Carolina ]TSA, are not dependant upon a
finding that the misappropriated information constitutes ‘trade
secrets.’”).

ln Burbank Grease Services, LLC v. Sokolowski, 717
N.W.2d 781, 788 (Wis. 2006) (hereinafter Burbank Grease ll), for
example, the Wisconsin Supreme Court noted at the outset that the
allegedly misappropriated information underlying the plaintiff’s
claims did not qualify as a trade secret under the WUTSA’s
definition. The preemption provision of the WUTSA, similar to
that of the HUTSA, states that it does not affect “[a]ny civil
remedy not based upon misappropriation of a trade secret.” lee
(quoting Wis. Stat. § 134.90(6)(b)2.). The Wisconsin Supreme
Court held that the plain language of the WUTSA's preemption
provision

excepts from the class of unaffected remedies only those
remedies based on the misappropriation of a statutorily-

defined trade secret. lt leaves available all other
remaining civil remedies for the protection of confidential
information.

ld. at 789. The court added that in order to hold that the WUTSA
preempts claims based on confidential information which does not

rise to the level of a statutorily-defined trade secret, it would

w The causes of action at issue were: breach of duty of loyalty,
tortious interference with relations, unfair trade practices, conspiracy,
conversion, unjust enrichment, and imposition of constructive trust. Nucor,
482 F. Supp. 2d at 726-27.

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have to read the following underlined language into the statute:
“This section does not affect . . . [a]ny civil remedy not based
upon misappropriation of a trade secret and not based on
confidential business information.” lee at 790 (emphasis in
original). The court declined to so interpret the statute. lee
The court acknowledged that uniformity with other jurisdictions
was one of the goals of the WUTSA; however, the court found that
its plain meaning interpretation of the preemption provision was
more persuasive than jurisdictions which had determined that the
UTSA preempted claims based on allegations of non-trade secret
confidential information. lee at 792-94.
The purported “plain language” approach, exemplified in

8urbank Grease ll, has been criticized for disregarding the

UTSA’s uniformity directive. The dissent in Burbank Grease ll
described the majority's analysis as

pay[ing] lip service to UTSA's uniformity goal and the
corresponding legislative directive. lt fails to engage in
the necessary analysis to determine what is the uniform
interpretation of the preemption provisions in UTSA or how
cases decided by courts in other UTSA jurisdictions analyze
the language in these provisions.

Burbank Grease ll, 717 N.W.2d at 799 (Bradley, J., dissenting);

eee elee lee (quoting Wis. Stat. § 134.90(7), which provides:
“This section shall be applied and construed to make uniform the
law relating to misappropriation of trade secrets among states
enacting substantially identical laws.”). The dissent found

that, in contrast, the Wisconsin Court of Appeals analyzed the

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decisions of other jurisdictions to have considered the question
and determined that “the prevailing rule in most UTSA
jurisdictions is that UTSA is meant to replace tort claims for
unauthorized use of confidential information with a single
statutory cause of action.” Burbank Grease ll, 717 N.W.2d at 800
(Bradley, J., dissenting) (citing Burbank Grease l, 693 N.W.2d at
101).

ln Mortgage Specialists, the court noted that although
the Wisconsin Supreme Court overturned the Court of Appeals’
decision in Burbank Grease l, it still found Burbank Grease l

well-reasoned, particularly for its adherence to the

principles of uniformity and clarity that motivated the

creation of the UTSA, in light of the legislative directive

that the UTSA be construed to make uniform the law among the

jurisdictions enacting it. We find the opinion of the

Wisconsin Court of Appeals persuasive.
Mortgage Specialists, 904 A.2d at 664 (internal citations
omitted). Commentators have also criticized the Burbank Grease
ll decision for failing to conduct a uniformity analysis.

The view of the dissenting opinion in Burbank Grease

Services and [similar opinions] may be regarded as the most

restrictive approach to preemption. ln spite of the

majority's protestations to the contrary, it is also the

most reasonable . . . refusing to preempt claims for the

misappropriation of confidential information “effectively

negate{s] the UTSA’s goal of promoting uniformity” and

“render[s] the statutory preemption provision effectively

meaningless.”
Michael Ahrens, Wisconsin Confidential: The Mystery of the

Wisconsin Supreme Court’s Decision in Burbank Grease Services v.

Sokolowski and lts Effect Upon the Uniform Trade Secrets Act,

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Litigation, and Employee Mobility, 2007 Wis. L. Rev. 1271, 1302

(2007) (footnotes omitted) (quoting Unikel, Bridging the “Trade

JSecret” Gap, 29 Loy. U. Chi. L.J. at 888); see also Sarah

Gettings, Burbank Grease Services, LLC v. Sokolowski: Frustrating
Uniformity in Trade Secret Law, 22 Berkeley Tech. L.J. 423, 438-
39 (2007) (“The Burbank majority is dangerously misguided
lndeed, the plain language of the WUTSA's uniformity clause
directs the court to conduct a uniformity analysis . . . The
majority of courts interpreting the preemption provision have
found that the UTSA must preempt some claims involving the
protection of confidential, but not trade secret, information.”
(Footnotes omitted)).

The majority of the courts to have considered the issue
have held that the UTSA’s preemption provision

abolish[es] all free-standing alternative causes of action

for theft or misuse of confidential, proprietary, or

otherwise secret information falling short of trade secret

status (eege idea misappropriation, information piracy,

theft of commercial information, etc.).

Hauck, 375 F. Supp. 2d at 655.U The rationale for these

w See also, e.g., Mortgage Specialists, 904 A.2d at 664 (holding
that the “NHUTSA preempts claims that are based upon the unauthorized use of
information, regardless of whether that information meets the statutory
definition of a trade secret.”); Auto Channel, 144 F. Supp. 2d at 789 (“KUTSA
replaces other law relating to the misappropriation of trade secrets,
regardless of whether the Plaintiffs demonstrate that the information at issue
qualifies as a trade secret.”); Burbank Grease l, 693 N.W.2d at 98 (“[T]he
purpose of the preemption provision is to preserve a single tort action under
state law for misappropriation of a trade secret as defined in the statute and
thus to eliminate other tort causes of action founded on allegations of
misappropriation of information that may not meet the statutory standard for a

continue...

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decisions has been explained as follows:

States adopting statutory provisions analogous to the UTSA's
section 7 intend that at least some prior law relating to
the protection of commercial information be displaced.
Permitting litigants in UTSA states to assert common-law
claims for the misappropriation or misuse of confidential
data would reduce the UTSA to just another basis for
recovery and leave prior law effectively untouched.

Further, by expressly exempting “contractual remedies,
whether or not based upon misappropriation of a trade
secret” and “other civil remedies that are not based upon
misappropriation of a trade secret” from its preemptive
penumbra, the UTSA makes clear that only those claims
addressing or arising out of wrongs distinct from pure
information piracy survive passage of the trade secret
statute. lndeed, contrary interpretations of the UTSA’s
“Effect on Other Law” provision . . . effectively negate the
UTSA’s goal of promoting uniformity in “trade secrets” law.
Additionally, these contrary interpretations render the
statutory preemption provision effectively meaningless.

Unikel, Bridging the “Trade Secret” Gap, 29 Loy. U. Chi. L.J. at
887-88 (footnotes omitted). The UTSA creates a “two-tiered”
approach to protection of commercial knowledge, under which
“information is classified only as either a protected ‘trade
secret’ or unprotected ‘general skill and knowledge.’” lee at

867-68 (footnote omitted).

B...continue

trade secret.”); Composite Marine Propellers, lnc. v. Van Der Woude, 962 F.2d
1263, 1265 (7th Cir. 1992) (“lllinois has abolished all common law theories of
misuse of such [confidential] information. Unless defendants misappropriated
a (statutory) trade secret, they did no legal wrong.”); Thomas & Betts, 108 F.
Supp. 2d at 971 (holding that the lllinois TSA “was meant ‘to codify all the
various common law remedies for theft of ideas.'” (quoting Learning Curve

To s, 1999 WL 529572 at *3)); Diamond Power, 540 F. Supp. 2d at 1345 (“lf a

plaintiff could alternatively recover for misappropriation of non-proprietary
information or misappropriation of unguarded proprietary information, the
legislative judgment contained in the GTSA- that such information should
otherwise flow freely in the public domain- would be subverted.”); Ethypharm,
388 F. Supp. 2d at 433 (same); Allied Erecting, 649 F. Supp. 2d at 720 (same);
Bliss Clearing, 270 F. Supp. 2d at 948-49 (same).

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Courts and commentators have recognized the argument
that “[b]y adopting this approach, courts would be leaving
businesses without an effective remedy for the misappropriation
of information they viewed as valuable but that did not rise to
the level of a trade secret.” Ahrens, Wisconsin Confidential,
2007 Wis. L. Rev. at 1302; see also Mortgage Specialists, 904 A.
2d at 664 (noting that its holding that non-contract claims based
on confidential information are preempted “may seem harsh”).
However, the HUTSA does not preempt claims for the

misappropriation of such information when it is protected by

contract. ee HRS § 482B-8(b)(1) (2008) (“This chapter does not
affect . . . [c]ontractual remedies, whether or not based upon
misappropriation of a trade secret[.]”).

Further, commentators have cautioned that information
which is broader than the scope of information defined as a
“trade secret” by the UTSA, and not the subject of reasonable
efforts to maintain its secrecy does not deserve protection in
the form of non-contract tort claims, The UTSA’s definition of
“trade secret” is more inclusive than the previous definitions of
“trade secret” at common law. §ee 14 U.L.A. §1 at 538 (comment)
(noting that the UTSA’s definition of “trade secret” is broader
and more inclusive than the definition in the Restatement of
Torts (First)); eee elee James Pooley, Trade Secrets, §

2.03[2][a] (2009) (“The Uniform Act definition [of a trade

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secret] is thus considerably broader than that of Section 757 of
the original Restatement of Torts . . . .”). Professor Mark
Lemley, in discussing how courts should treat the overlap between
trade secret law and other torts such as breach of confidence,
unfair competition, unjust enrichment and interference with
contract, has stated that

[t]rade secret law should preempt these torts when they are
applied to protect information that would, if secret, have
been protected by trade secret law. That is, a plaintiff
who complains of the defendant’s use of its information, but
who cannot prove that the information is secret, should not
be able to rely on one of these torts (or any other common
law variants) to bypass the requirement that it prove
secrecy. lf trade secret law does not preempt these torts,
the point of the secrecy requirement will be lost, and with
it the benefits of dissemination of new inventions.
Companies will be unable to rely on the presence of ideas in
the public domain; any information might potentially be
subject to one of these torts. As a result, companies will
be less willing to compete vigorously on the merits.
Departing employees will be less willing to rely on
information in the public domain to start new companies, and
as a result more reluctant at the margins to start those
companies, As Jim Pooley notes, “there is arguably little
social utility” in allowing state claims based on
misappropriation of trade secrets to go forward if the
plaintiff cannot prove the elements of a trade secret claim.

Mark A. Lemley, The Surprising Virtues of Treating Trade Secrets
as lP Rights, 61 Stanford L. Rev. 311, 345-46 (Nov. 2008)
(footnotes omitted) (quoting Pooley, Trade Secrets, § 3.04[4],
3-43 1;@ -44>. '

Similar to the court in Burbank Grease ll, BlueEarth
argues that

the plain language of the preemption provision . . . refers
only to “trade secrets” as defined by the Act . . . Since

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there is no statutory language regarding preemption of other

confidential information not rising to the level of trade

secrets, there is no reason to think such preemption was

intended.
However, the HUTSA’s preemption provision should not be
considered “in a vacuum.” Burbank Grease ll, 717 N.W.2d at 798
(Bradley, J., dissenting). Rather, “this court must read
statutory language in the context of the entire statute and
construe it in a manner consistent with its purpose.”
Kahdohanohano, 117 HawaiH.at 288y 178 P.3d at 564 (brackets
omitted). Here, the Hawafi State Legislature has directed that
“[a]ll provisions of uniform acts adopted by the State shall be
so interpreted and construed as to effectuate their general
purpose and to make uniform the laws of the states and
territories which enact them.” HRS § 1-24 (2009). As the
foregoing analysis shows, courts in other jurisdictions have not
been absolutely uniform in deciding whether non-contract claims
based on information which does not rise to the level of a
statutorily-defined trade secret are preempted under the UTSA.
However, the conclusion that such claims are preempted, reached
by the majority of courts to have considered the issue, comports
with the HUTSA’s goal of uniformity in the area of trade secret
misappropriation.

The UTSA Commissioners made clear that the “general

purpose” of the UTSA was uniformity of trade secret law. 14

U.L.A § 8 at 656.

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A common law claim premised on information that fails to
qualify as a trade secret would seemingly undercut the
statute’s primary goal of uniformity, potentially render
parties liable for using information that is not secret when
the UTSA would not impose liability, and potentially pose
Supremacy Clause problems. Likewise, it is not clear if
such alternative claims would permit different results on
matters such as the statute of limitations, punitive
damages, attorneys’ fees, and the like. ”

Pooley, Trade Secrets, § 2.03[6] (footnote omitted). The court

in Mortgage Specialists noted that, along with the contribution
of unitary definitions of “trade secret” and “misappropriation”

[t]he UTSA “also arose to create a uniform business
environment that created more certain standards for
protection of commercially valuable information.” [Auto
Channel, 144 F. Supp. 2d at 789.] “[T]he purpose of the
preemption provision is to preserve a single tort action
under state law for misappropriation of a trade secret as
defined in the statute and thus to eliminate other tort
causes of action founded on allegations of misappropriation
of information that may not meet the statutory standard for
a trade secret.” [Burbank l, 693 N.W.2d at 98.] As such,
the UTSA “was meant to codify all the various common law
remedies for theft of ideas.” [Thomas & Betts, 108 F. Supp.
2d at 971 (quotation omitted)]; see also [Bliss Clearing,
270 F. Supp. 2d at 948]. With the enactment of the UTSA,
confidential information not rising to the level of a
statutory trade secret was left largely unprotected by the
law. §ee [N.H. Rev. Stat. §] 350-B:7, l. . . . “lf a common
flaw claim for unauthorized use of information that did not
meet the statutory definition of a trade secret were
permitted, the result ‘would undermine the uniformity and
clarity that motivated the creation and passage of the
[UTSA].'” Burbank Grease l, 693 N.W.2d at 99 (quoting §epe
Channel¢ 144 F. Supp. 2d at 789).

Mortgage Specialists, 904 A.2d at 663. The Mortgage Specialists

court’s analysis is persuasive and consistent with the Hawafi
State Legislature’s goals in adopting the HUTSA. ee HRS § 1-24

(2009); see also Kahdohanohano, 117 HawaiH_at 288, 178 P.3d at

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564. Accordingly, we hold that the HUTSA preempts non-contract,
civil claims based on the improper acquisition, disclosure or use
of confidential and/or commercially valuable information that
does not rise to the level of a statutorily-defined trade secret.

3. Preemption analysis is appropriate at the motion
to dismiss stage

ln BlueEarth's view, preemption is proper only when
allegations are based upon “trade secrets” as that phrase is
defined in the UTSA. Thus, BlueEarth argues that it is premature
to consider preemption at the motion to dismiss stage because the
court does not yet have sufficient information to determine
whether the allegations in the complaint rise to the level of
statutorily-defined trade secrets. However, as analyzed above,
we hold that the HUTSA preempts claims when the alleged injury is
based on the improper acquisition, disclosure, or use of
confidential and/or commercially valuable information, whether or
not that information rises to the level of a statutorily-defined
trade secret. As the court in Hauck stated:

Plaintiff argues, at least in part, certain of its non-UTSA

claims against [defendant] are not preempted because they do

not depend on the information at issue qualifying as a

“trade secret.” While some courts have employed language

seemingly indicating as much, a plaintiff surely cannot use

general tort causes of action to revive claims which would

otherwise not be cognizable in light of the UTSA (i.e.,

claims alleging theft of non-trade secret information). lt

is a legal non seguitor to suggest general tort causes may
be employed to protect legal rights which otherwise do not

exist . . . such an approach would be wholly inconsistent
with the UTSA’s goals of promoting uniformity and
predictability . . . A claim cannot be preempted or not

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preempted based entirely upon whether or not the information

-at issue qualifies as a trade secret. lf the information is

a trade secret, the plaintiff’s claim is preempted; if not,

the plaintiff has no legal interest upon which to base his

or her claim. Either way, the claim is not cognizable.
Hauck, 375 F. Supp. 2d at 656-57 (internal citations omitted).“
Accordingly, we hold that a court need not wait to determine if
the allegedly misappropriated confidential and/or commercially
valuable information constitutes a “trade secret”, as that term
is defined in the HUTSA, before considering preemption.

lV. CONCLUSlON

Based on the analysis above, we answer the certified

questions as follows,
1. When are “tort, restitutionary, and other law[s] of

this state” displaced because they “conflict” with

HUTSA, [HRS] § 482B-8? -

“Tort, restitutionary, and other law[s] of this state”
conflict with the HUTSA, are therefore displaced, to the extent

that they are based upon misappropriation of a trade secret.

That is, “if proof of a [non-HUTSA] claim would also

“ §ee also Ethypharm, 388 F. Supp. 2d at 433 (“Because all claims
stemming from the same acts as the alleged misappropriation are intended to be
displaced, a claim can be displaced even if the information at issue is not a
trade secret. Thus, a determination of whether the information at issue
constitutes a trade secret under the DUTSA need not be addressed prior to
making a determination of displacement.”); Bliss Clearing, 270 F. Supp. 2d at
948-49 (“[T]he Court concludes that the disputed status of information as a
trade secret does not preclude a court from determining whether a claim or
claims are displaced by the MUTSA.”); Allied Erectin , 649 F. Supp. 2d at 722
(“[T]he Court joins the majority view in finding that displacement of common-
law claims may precede the Court’s determination of whether the information at
issue constitutes a trade secret.”); Mortgage Specialists, 904 A.2d at 666-668
(finding that a preemption analysis was proper at the motion to dismiss
stage).

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simultaneously establish a claim for misappropriation of trade
secrets, it is preempted irrespective of whatever surplus
elements or proof were necessary to establish it.” eeeek, 375 F.
Supp. 2d at 658.

2. when a claim is found to “conflict” with HUTSA, what is
the scope of preemption, or displacement, of that claim
under HRS § 482B-8?

For those claims found to conflict with the HUTSA, the
scope of displacement is complete. However, a claim may survive
to the extent it alleges wrongful conduct independent of the

misappropriation of trade secrets.

3. May a claim that is found not to “conflict” with HUTSA
still be preempted, or displaced, under HRS § 482B-8?

Only claims that are found to conflict with the HUTSA
are preempted.

4. Does HUTSA also preempt, or displace, claims based upon
the alleged misuse of “confidential information,” which
is determined, before or during trial, not to meet the
definition of “trade secret” under HRS § 482B-8?

The HUTSA displaces non-contract civil claims based
upon the alleged acquisition, disclosure, or use of confidential
information that does not rise to the level of a statutorily-

defined trade secret. Accordingly, it is unnecessary to

determine whether or not the information at issue meets the

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definition of a trade secret before addressing displacement under

the HUTSA.

On the briefs:

Paul Alston and

Clyde J. Wadsworth

(of Alston Hunt Floyd & lng)
for Defendants-Appellants
Hawaiian Electric Company,
lnc.; Maui Electric Company,
Ltd.; and Karl E. Stahlkopf

C. Michael Heihre,
Calvert G. Chipchase,
and Teri-Ann E.S. Nagata
(of Cades Schutte) for
Defendant-Appellant
Aloha Petroleum, Ltd.

John S. Edmunds,

Ronald J. Verga,

and Joy S. 0monaka (of
Edmunds Verga & Omonaka),
Michael K. Hurst, Tonyaj
Parker, and Jaime Olin

(of Gruber Hurst Johansen &
Hail, LLP) for Plaintiff-
Appellee BlueEarth
Biofuels, LLC

37

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