Tagalong torts: How have courts applied the Minnesota Uniform Trade Secret Act’s displacement provision?

The Uniform Trade Secrets Act (“UTSA”) contains a displacement provision designed to preempt noncontractual claims and remedies that conflict with the UTSA. Given the ever-common assertion of tagalong claims like tortious interference, conversion, unfair competition, and unjust enrichment in trade secret actions, the breadth of displacement under a state’s adoption of the UTSA can have material consequences in litigation. This article examines how courts have applied the Minnesota Uniform Trade Secret Act’s (“MUTSA”) displacement provision to common law claims founded on the misuse of confidential information.

The MUTSA includes a standard displacement provision that “displace[s] conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret,” with the usual exceptions for contract claims, as well as other civil remedies “that are not based upon misappropriation of a trade secret.”[1] As a baseline rule, courts interpreting the MUTSA have long said that, to avoid displacement, separate causes of action must have “more to their factual allegations than the mere misuse or misappropriation of trade secrets.”[2] In practice, this rule can be applied straightforwardly to claims founded on allegations of conduct that clearly transcends the wrongful use or possession of the plaintiff’s proprietary information.

A different question arises, however, when trade-secret plaintiffs assert common law claims centered on the alleged misuse or wrongful possession of confidential information—including information that may not qualify as a trade secret or that is synonymous with the plaintiff’s alleged trade secrets. Most courts have interpreted UTSAs to displace all noncontractual claims stemming from the same acts as the alleged misappropriation—whether or not the information qualifies as a trade secret.[3] This “majority view” is meant to achieve the UTSA’s goals of “uniformity, predictability, and clarity” among the states[4] and accepts that a core aim of the UTSA is to eliminate noncontractual recovery for misappropriation of information falling short of the statutory definition of a trade secret.[5] Permitting common law claims for misuse of confidential information, the majority reasons, would further subvert these goals by forcing courts to re-analyze trade secret claims under any number of conflicting common law theories, “forbid[ding] preemption of state law claims until a final determination has been made with respect to whether the confidential information at issue rises to the level of a trade secret.”[6]

In Minnesota, courts interpreting the MUTSA’s displacement provision have diverged from the majority approach. Neither the Eighth Circuit Court of Appeals, nor Minnesota’s appellate courts, has issued binding precedent clarifying precisely when common law claims for misuse of confidential information are displaced.[7] Nonetheless, among the state and (predominantly) federal district courts to have addressed the issue, two methods have emerged.

First, a handful of state and federal decisions have applied MUTSA displacement to claims premised on information that is synonymous with the plaintiff’s alleged trade secrets. In these cases, courts found that plaintiffs’ tagalong claims were displaced for failure to identify any information that was not also claimed as a trade secret.[8] The majority view would dispose of such claims for misuse of confidential information without regard to whether it was also claimed as comprising alleged trade secrets. Under this application, by contrast, a MUTSA plaintiff could avoid displacement of its common law claims by simply identifying additional confidential information that is distinguishable from its alleged trade secrets.[9]

A second branch of decisions has taken an even more liberal approach to MUTSA displacement. These courts have allowed plaintiffs to plead noncontractual claims for misuse of confidential information in the alternative to the trade secret claims—even where those tort claims are predicated on the same information alleged to comprise the plaintiff’s trade secrets.[10] Under this alternative pleading approach, the court reserves a decision on displacement until it has decided whether the plaintiff’s information is deserving of trade secret protection. It’s difficult to imagine a scenario when claims subject to this standard would be displaced before summary judgment. Defendants subject to this alterative pleading approach may also face the eventual paradox that, by successfully persuading the Court that a plaintiff’s information does not qualify as trade secrets, they may also be establishing that plaintiff’s tagalong claims are not preempted.[11]

Practice Tip: As things stand, courts interpreting the MUTSA have eschewed the majority approach to displacement, showing varying degrees of reluctance to preempt noncontractual causes of action concerning the misuse or possession of a plaintiff’s confidential information. MUTSA plaintiffs are therefore well-positioned to assert companion claims grounded on the misuse of their proprietary information. To maximize their odds of avoiding displacement, plaintiffs asserting tagalong tort or equitable claims would be well served to (1) clearly allege that any overlapping confidential information supporting these claims is pleaded in the alternative; (2) take thorough inventory of any additional confidential information that can be asserted to support the non-trade secret claims besides that which comprises the alleged trade secrets; and (3) incorporate any factual allegations and theories going beyond the mere misuse or alleged trade secrets and/or assertedly confidential information.

MUTSA defendants, on the other hand, should be prepared to endure tagalong tort claims seeming to repackage allegations of misappropriation—at least through discovery or until such other time as the court is willing to more closely scrutinize the trade-secret status of the plaintiff’s information. Still, there remains no binding precedent on MUTSA displacement, and the “majority view” arms defendants with ample persuasive authority to argue, at the motion-to-dismiss stage, for a more forceful application. If successful, defendants may meaningfully limit the scope or method of plaintiffs’ recovery absent the ability to prove the existence of a trade secret, cut off certain avenues of discovery, and, perhaps, establish a new trend in MUTSA displacement.

[1] Minn. Stat. § 325C.07.

[2] Micro Display Sys., Inc. v. Axtel, Inc., 699 F.Supp. 202, 205 (D. Minn. 1988).

[3] E.g., Ethypharm S.A. France v. Bentley Pharms., Inc., 388 F.Supp.2d 426, 433 (D. Del. 2005); Hauck Mfg. v. Astec Industries, Inc., 375 F.Supp.2d 649, 655 (E.D. Tenn. 2004) (“[T]he UTSA’s preemption provision has generally been interpreted to abolish all free-standing alternative causes of action for theft or misuse of confidential, proprietary, or otherwise secret information falling short of trade secret status.”).

[4] Atl. Med. Specialists, LLC v. Gastroenterology Assocs., P.A., 2017 WL 1842899, at *14 (Del. Super. Ct. Apr. 20, 2017).

[5] E.g., PHA Lighting Design, Inc. v. Kosheluk, 2010 WL 1328754, at *11 (N.D. Ga. Mar. 30, 2010).

[6] Firetrace USA, LLC v. Jesclard, 800 F.Supp.2d 1042, 1049 (D. Ariz. 2010) (quoting Thomas & Betts Corp. v. Panduit Corp., 108 F.Supp.2d 968, 972–72 (N.D. Ill. 2000)).

[7] Neither the Eighth Circuit Court of Appeals nor the Minnesota Supreme Court has interpreted the MUTSA’s displacement provision. See Hagen v. Burmeister & Assocs., Inc., 633 N.W.2d 497, 503 n.3 (Minn. 2001).

[8] See R. L. Mlazgar Assocs., Inc. v. Focal Point, L.L.C., 2024 WL 4544097, at *6 (D. Minn. June 14, 2024); Protègè Biomedical, LLC v. Z-Medica, LLC, 394 F.Supp.3d 924, 940–41 (D. Minn. 2019); Oberfoell v. Kyte, 2018 WL 492629, at *8 (Minn. Ct. App. Jan. 22, 2018); Superior Edge, Inc. v. Monsanto Co., 964 F.Supp.2d 1017, 1040 (D. Minn. 2013); CHS, Inc. v. PetroNet, LLC, 2011 WL 1885465, at *11 (D. Minn. May 18, 2011); Lutheran Ass’n of Missionaries & Pilots, Inc. v. Lutheran Ass’n of Missionaries & Pilots, Inc., 2005 WL 629605, at *13 (D. Minn. Mar. 15, 2005); SL Montevideo Tech., Inc. v. Eaton Aerospace, LLC, 292 F.Supp.2d 1173, 1179 (D. Minn. 2003).

[9] See, e.g., Schwan’s Co. v. Cai, 2021 WL 5745791, at *9 (D. Minn. Dec. 2, 2021) (denying motion to dismiss unjust enrichment claim concerning “recipes and methods” that were not alleged in trade secret counts).

[10] E.g., Polaris Indus., Inc. v. Mangum, 690 F.Supp.3d 966, 972–75 (D. Minn. 2023); TE Connectivity Networks, Inc. v. All Sys. Broadband, Inc., 2013 WL 6827348, at *5 (D. Minn. Dec. 26, 2013).

[11] See, e.g., TE Connectivity Networks, 2013 WL 6827348, at *5 n.3 (“If ASB is ultimately correct that TE’s alleged trade secrets are not trade secrets, then granting ASB’s motion to dismiss for TE’s common law claims on the basis that the allegations are only rooted in trade secret claims would be counterintuitive.”).