United States: Recent Federal Court Ruling Refuses To Expand The Scope Of Georgia Trade Secret Act's Preemption Clause

It is well established that the Georgia Trade Secret Act (“GTSA”) includes a preemption clause holding that the Act “supersede[s] conflicting tort, restitutionary, and other laws of this state providing civil remedies for misappropriation of a trade secret.” O.C.G.A. § 10-1-767(a). The GTSA does not, however, preempt (1) “[c]ontractual duties or remedies, whether or not based upon misappropriation of a trade secret”; (2) “[o]ther civil remedies that are not based upon misappropriation of a trade secret”; or (3) “[t]he definition of a trade secret contained in [another Georgia statute].” O.C.G.A. § 10-1-767(b). In other words, the GTSA preempts any non-contractual claims that allege the misappropriation of a trade secret. See Bd. of Regents of the Univ. Sys. Of Georgia v. One Sixty Over Ninety, LLC, 830 S.E.2d 503, 510 n.13 (Ga. Ct. App. 2019) (“[T]he Trade Secrets Act superseded the common law tort of misappropriation [of trade secrets].”)

Notwithstanding the plain language of the GTSA, Georgia courts have previously held that—in narrow instances—the Act's preemption clause actually goes further than what the Act explicitly states. More specifically, the Georgia Supreme Court has held that the GTSA also preempts “lesser and alternate” claims based upon the same factual allegations as a plaintiff's claim for trade secret misappropriation. Robbins v. Supermarket Equip. Sales, LLC, 722 S.E.2d 55, 58 (Ga. 2012).

In Robbins, the plaintiff asserted a single GTSA claim for misappropriation of its business drawings. The trial court determined that the drawings in question did not constitute trade secrets. Nevertheless, the trial court (acting sua sponte) awarded plaintiff equitable relief under another statute and held that the GTSA did not preempt this relief because “the drawings were not ultimately found to be trade secrets under the act.” Id. at 56, 58. On appeal, the Georgia Supreme Court overturned the trial court's ruling, holding that “the GTSA preempts claims that rely on the same allegations as those underlying the plaintiff's claim for misappropriation of a trade secret. [. . .] Since the trial court's award of general equitable relief under [the other statute] was based on the same conduct as the GTSA claim, i.e., the misappropriation of the drawings, such relief was preempted by the [GTSA].” Id.

A particularly insightful analysis of the GTSA's preemption clause occurred last month in Angel Oak Mortgage Solutions, LLC v. Victoria Mastronardi, et al., Northern District of Georgia, Atlanta Division, Case No. 1:20-cv-4583-MLB. In Angel Oak, several individual defendants previously worked for the plaintiff. After their departure, plaintiff filed suit against them, alleging, among other things, that the individual defendants unlawfully misappropriated plaintiff's business information by sending that information to their personal e-mail accounts. While plaintiff contended that some of this “business information” constituted trade secrets, it openly conceded that some of the information did not constitute trade secrets.

The defendants in Angel Oak moved to dismiss plaintiff's Georgia Computer Systems Protection Act (“GCSPA”), fiduciary duty, civil conspiracy, and aiding-and-abetting claims on the grounds that these claims were preempted by the GTSA. In its ruling on March 23, 2022 [DE 67], the Northern District of Georgia declined to extend the scope of GTSA's preemption clause as far as the defendants had requested and limited is reach to the statute's plain language and the Georgia Supreme Court's ruling in Robbins.

The court noted that “unlike in Robbins, where all the claims involved the same drawings, the GTSA and non-GTSA claims in this case involve different information. So, unlike Robbins, the non-GTSA claims are not simply backup theories that matter only if plaintiff's GTSA claim fails. They have independent force because they seek relief for the misappropriation of different material.” Angel Oak, p. 9. The court was also unpersuaded by defendants' argument that the GTSA is the sole remedy for the alleged taking of any propriety or confidential information, even if everyone agrees the information is not a trade secret and even if plaintiff does not assert a trade secret claim based on the same information.

The court acknowledged that while some previous rulings from federal courts in Georgia had supported defendants' position, no Georgia court had done so and, as such, the court was not going to do so here. Id. at pp. 9-10. In support of its position, the court relied heavily on the statute's plain language and cited the recent Georgia Supreme Court's opinion in Alston & Bird, LLP v. Hatcher Mgmt. Holdings, LLC, 862 S.E.2d 295, 301 (Ga. 2021), which held that if the Georgia legislature had intended for the GTSA to preempt claims for misappropriation for any information, “it could have and should have said so.” Id. at p. 11.

The court similarly observed that “[i]f Defendants are right about the GTSA's preemptive force, the misappropriation of non-trade-secret information is no longer actionable in Georgia (outside of contract law). It does not matter how egregious the misappropriation is or how significant the information might be. No remedy exists. That would be a dramatic development. [. . .] The ideas that the legislature effected such an important change through a statute that facially does not do so is in tension with the canon that lawmakers do not ‘hide elephants in mouseholes.'” Id. at pp. 12-13. The court acknowledged that “[i]n the future, Georgia courts may well decide to read GTSA's preemption clause more expansively than the Court does here. But, until they unambiguously do so, the Court elects to follow the plain language of the statute. That language bars trade-secret claims and, per Robbins, ‘lesser and alternate' claims based on the same facts.  Nothing more.” Id. at p. 14.

So, for the time being, an interesting “split” in authority appears to be developing in Georgia federal courts over the scope of the GTSA's preemption clause. We will continue to monitor future rulings and provide updates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.