United States: Examining Ex Parte Pre-Trial Seizures Under DTSA

Brandon H. Elledge is a Partner in Holland & Knight's Tysons office

Kevin M D'Olivo is an Associate in Holland & Knight's Tysons office

The Defend Trade Secrets Act (DTSA) provides for remedies in the form of damages, an injunction, and fees. 18 U.S.C. § 1836(b)(3). In addition to these remedies, DTSA provides for an ex parte pre-trial seizure of property. This potential remedy is what helped make DTSA unique compared to other Uniform Trade Secrets Act (UTSA)-based claims. The statute provides: "Based on an affidavit or verified complaint satisfying the requirements of this paragraph, the court may, upon ex parte application but only in extraordinary circumstances, issue an order providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action." 18 U.S.C. § 1836(b)(2)(A)(i). This DTSA provision goes beyond Fed. R. Civ. P. 65 in affording plaintiffs temporary pre-trial relief. Indeed, it allows plaintiffs to petition a federal court—without notice to defendants—for an order for the U.S. Marshal to seize trade secret material, including the mediums on which alleged trade secret information resides. The circumstances warranting such extraordinary relief typically involve egregious and evasive conduct by a defendant.

There are several requirements for obtaining this seizure remedy. They include the normal preliminary injunction/TRO factors, plus others:

(ii) Requirements for issuing order.—The court may not grant an application under clause (i) unless the court finds that it clearly appears from specific facts that—

(I) an order issued pursuant to Rule 65 of the Federal Rules of Civil Procedure or another form of equitable relief would be inadequate to achieve the purpose of this paragraph because the party to which the order would be issued would evade, avoid, or otherwise not comply with such an order;

(II) an immediate and irreparable injury will occur if such seizure is not ordered;

(III) the harm to the applicant of denying the application outweighs the harm to the legitimate interests of the person against whom seizure would be ordered of granting the application and substantially outweighs the harm to any third parties who may be harmed by such seizure;

(IV) the applicant is likely to succeed in showing that—

(aa) the information is a trade secret; and

(bb) the person against whom seizure would be ordered—

(AA) misappropriated the trade secret of the applicant by improper means; or

(BB) conspired to use improper means to misappropriate the trade secret of the applicant;

(V) the person against whom seizure would be ordered has actual possession of—

(aa) the trade secret; and

(bb) any property to be seized;

(VI) the application describes with reasonable particularity the matter to be seized and, to the extent reasonable under the circumstances, identifies the location where the matter is to be seized;

(VII) the person against whom seizure would be ordered, or persons acting in concert with such person, would destroy, move, hide, or otherwise make such matter inaccessible to the court, if the applicant were to proceed on notice to such person; and

(VIII) the applicant has not publicized the requested seizure.

18 U.S.C. § 1836(b)(2)(A)(ii)(VII).

Only a handful of cases have dealt with DTSA's seizure remedy since the statute's enactment in May 2016. Some courts have rejected or side-stepped the ex parte request for seizure, opting for other avenues to provide relief. See, e.g., Brunswick Rail Management v. Sultanov, 2017 WL 67119, at *2 (N.D. Cal. Jan. 6, 2017) (rejecting seizure in favor of a Rule 65 order for defendant to deliver certain devices to the court without being accessed or modified); Magnesita Refractories Co. v. Mishra, 2017 WL 365619, at *2 (N.D. Ind. Jan. 25, 2017) ("[T]he seizure of Mishra's personal laptop by way of a Rule 65 was still appropriate because the DTSA's seizure provision would only apply if seizure could not be accomplished by way of Rule 65. Obviously, in this case, Rule 65 did the trick."); Center for Advancing Innovation, Inc. v. Bahreini, 2018 WL 2100279, at *3 (D. Md. May 4, 2018).

Other courts have granted the remedy, noting the importance of the stolen material and the evasiveness of the misappropriator. See Mission Capital Advisors LLC v. Romaka, No. 16-cv-5878 (LLS), Dkt. 7 (S.D.N.Y. July 29, 2016); Blue Star Land Servs. v. Coleman, No. Civ-17-931, Dkt. 10 (W.D. Okla. Aug. 31, 2017). In Mission Capital Advisors, the court limited the U.S. Marshal's seizure to a contacts lists downloaded without authority by a former executive officer of the Plaintiff to his personal computer, and it denied without prejudice plaintiff's application for seizure of other certain proprietary information because "such information and related facts such as confidentiality and irreparable harm are not described with sufficient particularity in the moving papers." Seizure Order, Dkt. 7 at 3, 5. As to the downloaded contacts list—a list of more than 65,000 entries that plaintiff demonstrated was "a critical business tool [it] has compiled over more than a decade at great time and expense"—plaintiff was able to make a showing, among other things, that defendant downloaded the data while absent from work for several weeks, he falsely represented that he had deleted the data, and he permitted a computer forensic examiner to copy and review the data on his personal computer, where the same contacts list and other information of plaintiff were found but under a different name and masked file type. Id. at 3.

Notably, the defendant in Mission Capital Advisors failed to appear at the hearing following the court's initial TRO ruling and stopped responding to Plaintiff's attempts to contact him following its discovery of his download. Id. at 2-3. The court in Blue Star Land similarly found that the defendants' actions "demonstrate[d] a willingness to evade or ignore the law," and that a Rule 65 order would be insufficient given the ease with which the defendants could copy the relevant trade secret data onto an external storage device. The defendants there had plotted to form a new company to compete with their current employer. They downloaded over 20,000 confidential documents, including a document containing the company's "IP addresses, user names, and passwords for authorized users across its entire electronic system." Blue Star Land Servs., LLC v. Coleman, 2017 WL 6210901, at *2 (W.D. Okla. Dec. 8, 2017). They took further steps to conceal their intentions, with one defendant lying to the company about her reasons for resigning and another Google searching how to delete email records and "is it ethical to delete work emails" before attempting to delete said emails. Id.

With respect to the mechanics of the actual seizure, the court in Mission Capital Advisors did not order the U.S. Marshal to actually take the defendant's computer away for the pre-trial period, but rather that they, with the assistance of a recommended neutral technical expert, "copy onto a storage medium and delete the file(s)" on Defendant's computer" at issue and return the storage medium to the court. Id. at 5. The seizure order in Blue Star Land is more broad. The court there ordered the U.S. Marshal to seize any device at the defendants' business location that "may contain the Blue Star Trade-Secret Information downloaded to Defendants' personal devices and accounts," along with any passwords to access such devices. Dkt. 10 at 3(emphasis added). The order also required the Marshal to temporarily change the passwords to any cloud storage locations housing plaintiff's trade secret information. Id. at 4.

In sum, there is still little authority on DTSA's ex parte seizure remedy. So far, it has been limited, as intended, to "only ... extraordinary circumstances." 18 U.S.C. 1836(b)(2)(A)(i). Mission Capital Advisors demonstrates that the elusiveness of the defendant can be a key factor. The few cases addressing DTSA's pre-trial seizure suggest a reluctance to employ this remedy if a similar injunctive remedy under Rule 65 is just as effective. But, as Blue Star Land demonstrates, certain courts may be willing to issue broad and aggressive seizure orders where a defendant's duplicitous and defiant behavior warrants such relief.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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