IP Law Daily, TRADE SECRETS—E.D. Cal.: Maker of fire retardants misappropriation claims fail for lack of specificity, (Feb 21, 2025)

By Linda O’Brien, J.D., LL.M.

The manufacturer failed to sufficiently allege misappropriation of trade secrets based on allegations that a former employee shared proprietary information.

In a misappropriation of trade secrets suit by a manufacturer of aerial phosphate-based fire retardant against a competitor, the allegations in the complaint were circumstantial, conclusory, and impermissibly vague, the federal district court in Sacramento, California has ruled. The manufacturer failed to allege sufficient facts to support its claim that a former employee who started working for the competitor provided the competitor with its proprietary information, which allowed the competitor to shortcut the development process for a phosphate-based fire retardant. Thus, the defendant company’s motion to dismiss was granted (Perimeter Solutions L.P. v. Fortress North America, L.L.C., No. 2:24-cv-01276-DAD-CSK (E.D. Cal. Feb. 19, 2025)).

Chemical company Perimeter Solutions L.P. produces an aerial phosphate-based fire retardant used in fighting forest fires that has been fully qualified by the U.S. Forest Service for sale to the U.S. government. Until recently, Perimeter was the only producer of phosphate-based fire retardant. Perimeter formerly employed Thomas Davis as its Vice President of Operations with the responsibility for all aspects of the design, formulation, and manufacture of its phosphate-based fire retardant. Davis signed a confidentiality agreement, which was required for all employees who had access to company trade secrets, confidential, sensitive, and proprietary information.

California chemical company Fortress North America, L.L.C. developed a magnesium chloride-based fire retardant. Its fire retardant was conditionally qualified by the U.S. Forest Service, although magnesium-based fire retardant had experienced issues with corrosion. In January 2022, Fortress hired Davis, who then contacted the third-party engineer who had helped design Perimeter’s production line. Trials of Fortress’s magnesium chloride fire retardant continued and, in March 2024, the U.S. Forest Service informed Fortress that it was unable to offer Fortress a contract for the magnesium chloride fire retardant due to safety concerns. Subsequently, Fortress announced that it was working to achieve full qualification of a non-magnesium chloride-based fire retardant.

In May 2024, Perimeter filed suit against Fortress, asserting claims for violations of the Defend Trade Secrets Act (DTSA), Missouri Uniform Trade Secrets Act (MUTSA), and California Uniform Trade Secrets Act (CUTSA). Fortress’s development of its new non-magnesium chloride-based fire retardant started around the time when Davis was hired by Fortress and Davis provided the trade secrets of Perimeter to Fortress to allow Fortress to shortcut the development process for a phosphate-based fire retardant. Before the court was Fortress’s motion to dismiss Perimeter’s claims.

Ownership of trade secrets. The court found that Perimeter failed to plead its alleged trade secrets with sufficient particularity. A trade secret is defined as information, including a formula, pattern, compilation, program, device, method, technique, or process that “(1) derives independent economic value, actual or potential, from not being generally known to the public and (2) the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Its trade secrets are defined in Perimeter’s complaint as “includes the formulations for phosphate-based fire retardants, the production and blending processes, demand planning, distribution channels, vendors, and suppliers from whom Perimeter Solutions purchases materials and services, and the raw material specifications which are crucial to the retardant’s performance.” Although a plaintiff is not required to define every detail of its claimed trade secret at the outset of the litigation, the categories listed in the complaint were too vague and instead were more descriptive of types of information that generally may qualify as a protectable trade secret than any kind of particular trade secret that a plaintiff has a basis to believe were actually misappropriated.

Misappropriation. Perimeter’s allegations of what Fortress allegedly misappropriated was impermissibly vague, the court determined. The complaint alleged that “Perimeter Solutions believes that Davis has provided Perimeter Solutions’ Trade Secrets to allow his new employer, Fortress, to shortcut the development process for a phosphate-based aerial fire retardant system.” Those allegations provide no specificity instead appear to assume that because Fortress purportedly took some unspecified shortcut to develop its phosphate-based fire retardant, Fortress must have made use of Perimeter’s laundry list of trade secrets. The broad assertion regarding the particular trade secrets that Fortress misused was too conclusory to sufficiently allege misappropriation.

Perimeter relied on circumstantial allegations to support its claim that Fortress must have used its trade secrets to shortcut development of its phosphate-based fire retardant. Specifically, Davis was a former employee who had access to Perimeters’ trade secrets and started working for Fortress, Fortress developed a product very similar to Perimeter’s very quickly, only Perimeter managed to develop a phosphate-based fire retardant until Fortress developed such a product, and Davis contacted the third-party engineer who build Perimeter’s production line after he joined Fortress. However, Davis’s mere knowledge of Perimeter’s alleged trade secrets and decision to pursue employment with Fortress were both insufficient to constitute misappropriation. Perimeter’s allegation that Fortress developed its product quickly was conclusory and relied without a factual basis that Fortress started developing its phosphate-based fire retardant around the time David joined Fortress. Perimeter’s allegation that it had been the only producer of phosphate-based fire retardants until recently did not plausibly allege that no competitor could ever through independent means develop a competing product. The bare allegation that Davis contacted the third-party engineer that helped design Perimeter’s production line did not constitute wrongful conduct but instead described a market competitor, the court explained.

Leave to amend. The court granted Perimeter leave to amend the pleadings. Leave to amend should be granted “when justice so requires” and it was possible that the pleading deficiencies that were identified could be cured by alleging additional facts, the court concluded.

The Case is No. 2:24-cv-01276-DAD-CSK.

Judge: Drozd, D.

Attorneys: Kyle Walter Owen (Medina McKelvey LLP) for Perimeter Solutions, L.P. Daisy Manning, PHV (Husch Blackwell LLP) for Fortress North America, L.L.C.

Companies: Perimeter Solutions, L.P.; Fortress North America, L.L.C

Cases: TradeSecrets CaliforniaNews