IP Law Daily, TRADE SECRETS—M.D.N.C.: Filing of earlier complaint established knowledge of a wrong for statute of limitations, (Dec 15, 2021)

By Kevin M. Finson, J.D.

Misappropriation claims under federal law were time-barred, but claims under the North Carolina trade secrets law can proceed.

An individual can pursue a claim for misappropriation of trade secrets under North Carolina law because continuing wrongs constituted a new unlawful act each time the act was repeated, but the individual’s claims for invasion of privacy and misappropriation under the federal Defend Trade Secrets Act were time-barred, the federal district court in Greensboro has held. A magistrate judge’s recommendation that all claims were timely was rejected by the court because the magistrate erred by failing to consider an earlier related complaint the plaintiff filed against other defendants allegedly involved with the hack, establishing knowledge and the beginning of the running of the limitations period. Although motions to dismiss are generally limited to the face of the complaint, public records such as court filings were a well-recognized exception (Azima v. Rosso, December 10, 2021, Osteen, W.).

Farhad Azima brought suit against Nicholas del Rosso and Vital Management Services, Inc. (collectively, “Defendants”), alleging that they, with other parties, hacked his computer systems and published his data, including trade secrets. Defendants moved to dismiss based on the statute of limitations, asserting that Azima had actual knowledge of the alleged hack in 2016, because he filed suit that year against other people who were allegedly involved. The magistrate judge who considered the motion recommended against dismissal, refusing to consider the previous complaint filed by Azima because it did not appear within the four corners of the present case’s complaint. The court, on review, held that a trial court may take judicial notice of public records in ruling on a motion to dismiss. The court then reviewed each of the remaining claims and ruled on whether they should be dismissed in light of Azima’s knowledge of the hack dating back to 2016.

Invasion of privacy. The court noted that this claim by its allegations related only to the 2016 hacking and not to any subsequent conduct, and so was time-barred. The motion to dismiss was granted as to the invasion of privacy claim.

Federal trade secrets. Under Defend Trade Secrets Act (DTSA), the statute of limitations began to run when the misappropriation was discovered or ought to have been discovered. Because Azima had knowledge of the misappropriation in 2016, the Defendant’s continued use of the misappropriated material in 2018 and 2019 did not constitute the accrual of a new cause of action, so the motion to dismiss the federal trade secrets claim was granted.

State law trade secrets. North Carolina’s trade secrets law did not address continuing misappropriations. Applying North Carolina’s general law on statutes of limitation, the court held that continuing wrongs constituted a new unlawful act each time the act was repeated, so while the allegations of the original misappropriation in 2016 were time barred, conduct alleged to have taken place in 2018 and 2019 was not time barred, and the motion to dismiss was denied.

Civil conspiracy. The court also denied the motion to dismiss the state civil conspiracy claim because it was premised on and related to the misappropriation of trade secrets claim under North Carolina law, and held that it was likewise limited to 2018-2019 conduct, with all earlier allegations time barred.

The Case is No: 1:20-cv-00954-WO-JLW.

Attorneys: Christopher W. Jones (Womble Bond Dickinson [US] LLP) for Farhad Azima. Brandon S. Neuman (Nelson Mullins Riley & Scarborough, LLP) for Nicholas Del Rosso and Vital Management Services, Inc.

Companies: Vital Management Services, Inc.

Cases: TradeSecrets NorthCarolinaNews GCNNews