IP Law Daily, TRADE SECRETS—11th Cir.: Trade secrets misappropriation claims of tribe-owned business against competitor reinstated, (May 2, 2024)

By Saurabh Kashyap, B.A., LL.B., LL.M.

Appellate court reverses district court’s dismissal and remands case amidst doubts over designated tribal court's existence and ruling that the defendant waived its sovereign immunity.

The U.S. Court of Appeals for the Eleventh Circuit reversed and remanded a federal district court's decision dismissing a case involving trade secrets theft and breach of contract between two tribally owned businesses. The appellate court concluded that the defendant tribe, Kituwah Services LLC, was not immune from the plaintiff, AQuate II, LLC’s, lawsuit due to a waiver of sovereign immunity under the Small Business Administration's 8(a) Business Development Program. Additionally, the court found that the district court had erred in not evaluating the enforceability of a forum selection clause in the employment contract of Jessica Myers, a former employee of the plaintiff implicated in the dispute (Aquate II LLC v. Myers, May 1, 2024, Grant, B.).

Background. The dispute arose when AQuate II, LLC, accused its competitor, Kituwah Services LLC, and its former employee, Jessica Myers, of stealing trade secrets to enhance their bid for a federal contract under the 8(a) program. Initially, the district court granted Kituwah's motion to dismiss, citing sovereign immunity for the tribal-owned business and dismissing Myers based on a forum non conveniens argument, pointing to an employment contract clause that required disputes to be settled in a tribal court.

AQuate appealed the decision, arguing that Kituwah had waived its sovereign immunity and that the designated tribal court did not actually exist.

Sovereign immunity waiver. In addressing the waiver of sovereign immunity, AQuate argued that Kituwah's alleged theft of trade secrets to secure a federal contract directly engaged its participation in the Small Business Administration's 8(a) Business Development Program. This, AQuate contended, should trigger the express waiver of sovereign immunity included in Kituwah’s corporate documents as required by 13 C.F.R. § 124.109(c)(1). On the other hand, Kituwah maintained that its activities did not fall within the scope of activities covered by the waiver, asserting that the alleged actions were outside the direct parameters of the 8(a) program.

The appellate court turned to the regulation’s language, concluding that the waiver explicitly covered all disputes relating to the program. Referencing Furry v. Miccosukee Tribe of Indians of Florida, 685 F.3d 1224, 1234 (11th Cir. 2012), the court underscored that a clear and unmistakable waiver of sovereign immunity was evidenced in Kituwah's organizational documents, effectively subjecting them to federal jurisdiction for matters including contract performance under the 8(a) program.

Forum selection clause. The examination of the forum selection clause revealed disputes about its validity. AQuate contested the clause's enforcement, which designated a tribal court as the venue for all employment disputes, by arguing that the tribal court specified did not exist. Myers and Kituwah defended the clause's applicability, insisting on its legitimacy and the court's existence. The appellate court reviewed this claim critically, citing the need for concrete evidence of the court's existence.

Referencing Atlantic Marine Construction Co. v. U.S. District Court for the Western District of Texas, 571 U.S. 49 (2013), the appellate court highlighted the significance of forum selection clauses in contractual agreements and the rigorous scrutiny required to overturn such provisions. However, due to the district court's failure to conduct an evidentiary hearing on this matter, the appellate court found that it was a procedural error to dismiss the claim based solely on the clause without verifying the existence of the tribal court.

The appellate court criticized the lower judicial oversight, particularly its omission of an evidentiary hearing to verify the existence of the tribal court named in the forum selection clause. Given the allegations of a non-existent court, the appellate court deemed the lower court’s acceptance of the clause's enforceability without proof of the tribal court's existence as a significant oversight.

Interpretation of “related to.” The phrase "related to" was central to determining whether the alleged actions of Kituwah fell within the scope of activities covered by its sovereign immunity waiver, as outlined in the Small Business Administration's 8(a) Business Development Program. Utilizing dictionary definitions and previous judicial rulings to frame “related to” as encompassing any actions connected to or having a relationship with the subject at hand, the appellate court found that Kituwah’s actions in allegedly using stolen trade secrets for contract procurement were sufficiently connected to its 8(a) program activities.

Conclusion. Ultimately, the appellate court reversed the district court’s dismissal and remanded the case for further consideration. It instructed the district court to conduct a detailed review of the forum selection clause's validity and to properly assess all evidence regarding the existence of the tribal court before making any determinations related to the forum for resolving the dispute.

The Case is No. 22-12669.

Attorneys: Richard Scott Williams (Rumberger Kirk & Caldwell, PC) for Aquate II, LLC. Walter Brad English (Maynard Nexsen, PC) for Jessica Tedrick Myers.

Companies: Aquate II, LLC

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