As previously noted in this blog (see here and here) , New Jersey recently joined the vast majority of the country in enacting a version of the Uniform Trade Secret Act (“UTSA”) effective on January 5, 2012. Now, in an opinion dated December 7, 2012, a New Jersey Superior Court Judge became the first court to rule on the extent to which the New Jersey Trade Secrets Act, N.J.S.A. 56:15-1, (“NJTSA”) preempts common law causes of action based on the same set facts as a claim for trade secret misappropriation under the NJTSA. Despite the fact that the courts in most states have ruled that the UTSA does preempts common law causes of action, the New Jersey court concluded that the NJTSA does not
In SCS Healthcare Marketing LLC v. Allergan USA Inc. et al., Superior Court Of New Jersey, Chancery Division: Bergen County, Docket No. C-268-12, the plaintiff Healthcare Marketing, LLC provided promotional marketing services to the healthcare industry entered into an agreement with Allergan USA, Inc. to provide services including managing Allergan’s speakers bureau program for its eye care products. The parties’ agreement is scheduled to expire on December 31, 2012. In or about April 2012, Allergan decided to engage one of SCS’s competitors, Call, Inc. d/b/a MedForce at the conclusion of the Allergan contract. SCS alleges that Allergan subsequently revealed SCS’s proprietary and confidential information to Medforce.
SCS filed suit against Allergan and Medforce asserting claims for misappropriation of trade secrets in violation of the NJTSA. The complaint also asserted common law causes of action including misappropriation of confidential information, trespass to chattels, tortious interference, unfair competition and civil conspiracy.
The defendants moved to dismiss various common law claims for failure to state a claim upon which relief can be granted. Allergan argued that these claims were preempted because they were based on the same common set of facts and occurrences on which SCS based its claim for misappropriation under the NJTSA.
Noting that no other New Jersey court had yet addressed what effect enactment of the NJTSA has on common law claims directed to misappropriation of trade secrets or confidential information, the court considered the language of the NJTSA, the Act’s legislative history, and decisions of courts of other states that have adopted versions of UTSA.
The Judge noted that the New Jersey Legislature had modified the language of the UTSA relating to preemption when it adopted the NJTSA. The UTSA provides at §7 that:
- Except as provided in subsection (b), this [Act] displaces conflicting tort, restitutionary, and other law of this State providing civil remedies for misappropriation of a trade secret.
- This [Act] does not affect:
- contractual remedies, whether or not based upon misappropriation of a trade secret; or
- other civil remedies that are not based upon misappropriation of a trade secret; …
Courts in jurisdictions which have enacted the same or substantially similar versions of section 7 of the UTSA have uniformly interpreted it to preempt previously existing misappropriation of trade secret actions, whether statutory or common law In addition, the majority of courts in other jurisdictions have concluded that (1) the UTSA displaces other non-contract civil claims, regardless of how the plaintiff has labeled them, when they are based on allegations of misappropriation of a trade secret; and (2) other non-contract civil claims are preempted when they are based on the misappropriation of confidential information that does not rise to the level of a statutorily-defined trade secret.
By contrast, to section 7 of the UTSA, subsection (a) of N.J.S.A. 56:15-9 in the NJTSA provides that the rights, remedies and prohibitions of the NJTSA are “in addition to and cumulative of” any other right, remedy or prohibition provided under the common law or statutory law of this state and that “nothing within its provisions shall be construed to deny, abrogate or impair such a right, remedy or prohibition…” Subsection (b) more closely resembles the UTSA provision and provides that “This act shall supersede conflicting tort, restitutionary, and other law of this State providing civil remedies for misappropriation of a trade secret." N.J.S.A. 56:15-9(b).
In SCS Healthcare Marketing, the Superior Court Judge noted that neither the UTSA, nor the law of any other state that have adopted the UTSA, contains a provision comparable to N.J.S.A. 56:15-9(a). The Judge also stated that the available legislative history from the Law Revision Commission reveals that the modification that the UTSA section was “altered to make the language consistent with other New Jersey statutory language, now providing for a cumulative remedy unless rights or remedies are specifically superseded.” The Judge concluded the statutory scheme reflects the New Jersey Legislature’s intent that the rights and remedies afforded under the NJTSA are cumulative, rather than restrictive, of the rights and remedies provided under the common law. Accordingly, the Court rejected the argument that the claims are preempted by the NJTSA.
If this ruling is followed by other courts in New Jersey it will mean that plaintiffs who claim that their trade secrets or confidential information has been misappropriated will not only assert claims under the NJTSA, they will also continue to assert a multitude of traditional common law causes of action.