Hardwire LLC v. Ebaugh (Maryland U.S.D.C.)

Filed: August 25, 2021

Opinion by: J. Bredar

 

Holding: The court held that Hardwire’s claim of ongoing misappropriation of its trade secrets by the defendants that began prior to the amendment of the federal RICO statute to include the misuse of trade secrets as a racketeering activity in 2016 could not sustain personal jurisdiction over the Freyssinet defendants, and that alternative theories of personal jurisdiction were insufficient to prevent dismissal of the Freyssinet defendants from the action against Ebaugh.

 

Facts: Ebaugh was a former employee of Hardwire LLC, who was terminated in February, 2013 and formed a competitive business, Infrastructure Armour, LLC, allegedly using Hardwire’s trade secrets and confidential information to obtain a multi-million-dollar bridge contract from Freyssinet International. Hardwire’s theory of the case is that Freyssinet was using Hardwire’s confidential proposals for a bridge project in New York to seek a proposal from Ebaugh through his company that would undercut Hardwire’s bid. After learning about this information sharing arrangement, Hardwire amended its complaint to add Freyssinet International and Freyssinet USA as defendants on the theory that the defendants had engaged in a violation of the RICO statute, federal and state trade secrets laws, fraud, civil conspiracy, and violations of the federal Sherman anti-trust statute.

 

At issue in the case is whether Hardwire properly stated a claim under the RICO statute at 18 U.S.C. § 1965(d), which such claim permits nationwide service of process on a defendant and the exercise of personal jurisdiction in any federal district court under Rule 4(k)(1)(C).

 

Analysis: A plaintiff must plausibly allege four elements to state a claim under the RICO statute: (1) conduct causing injury to business or property, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity. “Racketeering activity” includes numerous criminal violations including the theft of trade secrets under 18 USC § 1832(a) as amended by Congress under the “Defense of Trade Secrets Act” (DTSA) on May 11, 2016. However, courts presume that amendments to RICO do not apply retroactively absent continued engagement by a defendant after the effective date of the amendment.

 

Hardwire alleged that the use and disclosure by Freyssinet USA of Hardwire’s trade secrets that began in 2013 continues to the present is “continued engagement” under DTSA. The court, however, found that the initial theft of trade secrets that occurred before the amendment of DTSA, was separate from the ongoing use of those same trade secrets before and after the amendment, resulting in Hardwire failing to state a claim under the RICO statute.

 

The court evaluated alternative bases for the exercise of personal jurisdiction over Freyssinet, including civil conspiracy under the Maryland long arm statute and the “100-Mile Bulge Rule.” As to the former, the court found that the plaintiff had failed to allege what overt acts were taken in Maryland by Ebaugh and Infrastructure Armour LLC with Freyssinet, given that the bridge project at issue here occurred in New York for a New York bridge, or would have occurred where Freyssinet USA had incorporated and located its principal place of business in Virginia.  As to the latter, the court found that the plaintiff had failed to demonstrate how the 100-Mile Bulge Rule in Rule 4(k)(1)(B) would apply to Freyssinet, as the defendants were joined under Rule 20(a)(2), but the Rule applies to joinder under Rules 14 or 19 of the FRCP.

 

Full opinion here.