IP Law Daily, TRADE SECRETS—M.D. Ga.: Dismissal denied in McDonald’s charity trade secret dispute, (Jan 30, 2024)

By Kevin M. Finson, J.D.

A motion to dismiss several counterclaims was denied because the counter-plaintiff had plausibly alleged an outright theft of trade secrets and a breach of license agreement.

The West Georgia chapter of the Ronald McDonald House Charities stated claims for trade secret misappropriation and breach of contract against its global partner organization, the U.S. District Court in Columbus has held. The global entity had allegedly obtained and distributed a password-protected donor list without authorization (Ronald McDonald House Charities, Inc. v. Ronald McDonald House Charities of West Georgia, Inc., January 26, 2024, Land, C.).

Ronald McDonald House Charities, Inc. (RMHC Global) is a charity organization which licensed the McDonald’s trademarks to Ronald McDonald House Charities of West Georgia, Inc. (RMHC West Georgia), a charity that maintained temporary housing for ill children and their families while receiving treatment at hospitals in Columbus, Georgia. The parties operated under two license agreements over the relevant years, one dated 1993 and the other dated 1998. Eventually the parties’ relationship soured and RMHC West Georgia alleged that a consultant hired by RMHC Global gained unauthorized access to RMCH West Georgia’s password-protected donor list and distributed it to other McDonald’s charities. RMHC Global then attempted to terminate the 1993, but not the 1998, license agreement, withdrew its consent for RMHC West Georgia to continue using the McDonald’s marks, and then brought suit for infringement against RMHC West Georgia. RMHC West Georgia counterclaimed for misappropriation of trade secrets, breach of contract, and for bad faith and attorney’s fees. RMHC Global moved to dismiss the counterclaims.

Trade secrets. RMHC Global argued that the donor list was not a trade secret because RMHC West Georgia had not alleged that it derived value from secrecy. The court held that RMHC West Georgia had plausibly alleged the list derived value from secrecy because it was password-protected with access only given to limited people and had improved the organization’s fundraising success over the years it was cultivated.

Breach of contract. RMHC Global argued that it was not in breach of the 1998 agreement because the parties understood its termination of the 1993 agreement to cover all agreements, based on communications between counsel. The court held that this was a factual matter not suitable for resolution at the motion to dismiss stage but would have to wait for summary judgment. The court also noted briefly that it was dismissing claims for breach of the duty of good faith and fair dealing inasmuch as they were pleaded as independent claims rather than part of the breach of contract claim and that RMHC West Georgia had acknowledged that under the applicable Illinois law such a claim could not have an independent existence.

Bad faith and attorneys’ fees. RMHC Global argued that RMHC West Georgia failed to allege facts to support a claim for attorney’s fees and expenses under a state statute creating penalties for claims brought in bad faith or stubborn litigiousness. The court held that dismissal of these claims was premature as they were questions for the trier of fact.

The court denied the motion to dismiss all counterclaims except the claim for breach of duty of good faith and fair dealing, which was dismissed by agreement.

The Case is No. 4:22-cv-00207-CDL.

Attorneys: Daniel F. Diffley (Alston & Bird LLP) for Ronald McDonald House Charities Inc. William Privette (Waldrep, Mullin, & Callahan Law Firm) for Ronald McDonald House Charities of West Georgia Inc.

Companies: Ronald McDonald House Charities Inc.; Ronald McDonald House Charities of West Georgia Inc.

Cases: TradeSecrets GeorgiaNews