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Med-Metrix, LLC v. Boyce

United States District Court, D. New Jersey

November 7, 2017

MED-METRIX, LLC, Plaintiff,
v.
SHEILA BOYCE et al., Defendants.

          OPINION & ORDER

          Stanley R. Chesler, U.S.D.J

         This matter comes before this Court on two motions to dismiss the First Amended Complaint (“FAC”), pursuant to Federal Rule of Civil Procedure 12(b)(6), by Defendants: 1) Quality Billing Service, Inc. (“QBS”); and 2) Sheila Boyce (“Boyce”) and Perry Santullo (“Santullo”). For the reasons that follow, the motions will be granted in part and denied in part.

         This case arises from a business dispute between Plaintiff Med-Metrix, LLC (“Metrix”) and the three Defendants. The FAC alleges that Boyce had been employed by Metrix, that Boyce and Santullo are married, and that Santullo is President of QBS. Metrix has filed the First Amended Complaint, which asserts thirteen claims, the first three of which are against Defendant Boyce only. QBS has moved to dismiss all claims against it. Boyce and Santullo have moved to dismiss all claims against them, except for the First Count.

         1. Second Count: breach of the covenant of good faith and fair dealing against Boyce

         Boyce moves to dismiss the Second Count, for breach of the implied covenant of good faith and fair dealing, on the ground that it “does not allege any distinct factual predicate” and is duplicative of the First Count for breach of contract. (Boyce Br. 2.)Boyce cites no controlling authority for the proposition that claims must be factually distinct. Federal Rule of Civil Procedure 8(d)(2) allows for pleading in the alternative, which generally involves pleading multiple claims based on the same nucleus of facts. The Second Count does not duplicate the First Count: having one claim for breach of contract and another claim for breach of the implied covenant of good faith and fair dealing is standard practice, as they are different causes of action. As to the Second Count, Boyce's motion to dismiss will be denied.

         2. Third Count: breach of the duty of loyalty against Boyce

         Boyce moves to dismiss the Third Count, for breach of the duty of loyalty, on the ground that it is barred by the economic loss doctrine and duplicative of the Second Count. As to the assertion that the Third Count is duplicative, again, breach of the implied covenant of good faith and fair dealing and breach of the duty of loyalty are legally distinct theories. As to the economic loss doctrine, Boyce relies on a quote out of context from State Capital Title & Abstract Co. v. Pappas Bus. Servs., LLC, 646 F.Supp.2d 668, 678 (D.N.J. 2009) (“If a plaintiff's harm is a result of a contractual breach, the economic loss doctrine bars those tort claims.”) Here is the quote in context:

Notwithstanding the lack of clear precedent on the issue, the focus of the inquiry as to whether the economic loss doctrine applies is not based on the general type of tort claim being asserted but rather whether the plaintiff's entitlement to economic losses flows directly from obligations set forth in a contract between the parties. If a plaintiff's harm is a result of a contractual breach, the economic loss doctrine bars those tort claims.

Id. Note the sentence that precedes Boyce's quote: the issue is “whether the plaintiff's entitlement to economic losses flows directly from obligations set forth in a contract between the parties.” Id. In the instant case, Plaintiff's entitlement to economic losses, under the legal theory of the Third Count, does not flow directly from contractual obligations, but from an employee's independent duty of loyalty to an employer. In State Capital, the complaint asserted that the “duty of loyalty is implicit in the agreement [between the parties], ” and is thus distinguishable. Id. The economic loss doctrine does not bar the Third Count. As to the Third Count, Boyce's motion to dismiss will be denied.

         3. Fourth Count: fraud and misrepresentation against all Defendants

         In both motions, Defendants move to dismiss the Fourth Count on the ground that it fails to plead fraud with the particularity required by Rule 9(b). In opposition, Plaintiff contends that the argument has no merit, but does not demonstrate that the Fourth Count pleads with specificity what false representations Boyce made and when she is alleged to have made them. This is not sufficient. Under Third Circuit law, Rule 9(b) requires that “the plaintiff must plead or allege the date, time and place of the alleged fraud or otherwise inject precision or some measure of substantiation into a fraud allegation.” Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007). As to the Fourth Count, both motions to dismiss will be granted, and the Fourth Count will be dismissed without prejudice.

         4. The three trade secrets claims

         In both motions, Defendants move to dismiss the claims for misappropriation of trade secrets (the Fifth Count, for common law misappropriation of trade secrets and confidential information; the Sixth Count, for violation of the New Jersey Trade Secrets Act; and the Thirteenth Count, for violation of the Defend Trade Secret Act), on the ground that the alleged trade secrets are not specifically identified. Defendants cite no authority for the proposition that there are any special pleading requirements for trade secret claims. Absent that, this Court applies the Twombly standard: in order to defeat a Rule 12(b)(6) motion, Plaintiff's “[f]actual allegations must be enough to raise a right to relief above the speculative level . . . .” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Defendants themselves cite Rohm & Haas Co. v. ADCO Chem. Co., 689 F.2d 424, 431 (3d Cir. 1982), for the proposition that a trade secret must “be the secret of a particular employer and not a matter of general knowledge in the ...


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