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Millennium Laboratories, Inc v. Elab Consulting Services

July 9, 2012

MILLENNIUM LABORATORIES, INC.,
PLAINTIFF,
v.
ELAB CONSULTING SERVICES, DEFENDANT.



The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge

ORDER GRANTING MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

Defendant eLab Consulting Services, Inc. ("eLab") moves to dismiss the declaratory relief complaint filed by Plaintiff Millennium Laboratories, Inc. ("Millennium"). Millennium opposes the motion. For the reasons set forth below, the court grants the motion to dismiss and instructs the Clerk of Court to close the file.

BACKGROUND

On May 4, 2012, Millennium commenced this action alleging diversity jurisdiction pursuant to 28 U.S.C. §1332, seeking declaratory relief pursuant to 28 U.S.C. §2201. Millennium seeks a declaration regarding whether (1) eLab may use Millennium's alleged confidential information; (2) eLab must provide satisfactory evidence to Millennium that it has returned or destroyed the alleged confidential information; and (3) Millennium's confidential information is entitled to protection as a trade secret. (Compl. ¶28).

Millennium alleges that in March of 2008, the parties entered into an agreement whereby eLab agreed to provide "website hosting services to Millennium." (Compl. ¶8). Millennium is in the business of providing healthcare professionals with medication monitoring services, clinical tools, scientific data and education "to improve clinical outcomes and patient safety." (Compl. ¶5). eLab provided web-based storage solutions related to Millennium's laboratory customers and patients. At the time of entering into the agreements, "eLab fully understood and accepted the nature of this relationship and also understood that the provision of Millennium's confidential information to eLab was done under an agreement of trust and confidentiality." (Compl. ¶8).

During the parties' business relationship, Millennium provided eLab with information regarding customer lists, testing practices, preferences and in-office testing protocols, patient results, patient data covered by HIPAA, and other details "regarding its clients; sales data, products and/or services; and [other] information related to Millennium's scientific, technical, financial, research, operations, sales and marketing, employee and business strategies." (Compl. ¶9). Millennium characterizes the information provided as its "Confidential Information." Id.

In about August 2009, eLab's parent company, eLab Solutions, created a new company, eLab Clinical Laboratory, "which is now in direct competition with Millennium as a pain medication monitoring service that offers clinical laboratory drug testing." (Compl. ¶11). The creation of this potentially competing company is of concern to Millennium. Millennium alleges the Confidential Information, "if used by eLab," would provide eLab with "an unfair competitive advantage over Millennium" and permit it to target its customers "and tailor its pitches to Millennium's customers' unique preferences." (Compl. ¶12).

On March 28, 2012, Millennium terminated its relationship with eLab and requested that eLab preserve, return, or destroy its Confidential Information. (Compl. ¶¶13, 14). On April 17, 2012, Millennium made a second written request for the return or destruction of its Confidential Information. Millennium alleges that eLab made several inconsistent representations to the effect that eLab (1) had destroyed all Confidential Information; (2) never had possession of Millennium's Confidential Information; and (3) had maintained Confidential Information on a single hard drive that had been erased, by means of reformatting the disk. (Compl. ¶¶ 17-19). On April 27, 2012, Millennium requested that "eLab consent to an independent inspection of eLab's computers and other data storage devices/locations by an independent IT firm, with the inspection being entirely at Millennium's expense." (Compl. ¶20). eLab refused this request. Id.

In its final demand letter of May 1, 2012, Millennium requested that eLab (1) represent that all Confidential Information belongs exclusively to Millennium; (2) acknowledge that eLab has no right to the Confidential Information; (3) provide details about the reformatting of the hard drive; (4) provide a detailed description of its efforts to locate Confidential Information; (5) permit an independent inspection of eLab's computer system/network; and (6) provide a certification that all Confidential Information has been returned or destroyed. (Compl. ¶21).

On May 3, 2012, eLab declined to provide the requested information and responded that "Millennium has never designated any information as confidential or taken measures to protect anything as confidential, other than [in the HIPAA Business Associates Agreement]." (Compl. ¶22). eLab further responded that it is willing to certify that it complied with its obligations under the HIPAA Business Agreement. Id. eLab concluded the letter by indicating that the fee-shifting provisions of California's Trade Secret statutes and Federal Rule of Civil Procedure 11 may be appropriate under the circumstances. (Compl. ¶26).

In light of the above generally described conduct, Millennium seeks a declaration regarding (1) ownership and use of the Confidential Information; (2) the return or destruction of Confidential Information; and (3) the protectability of the Confidential Information as a trade secret. eLab moves to dismiss the complaint for lack of subject matter jurisdiction because Millennium seeks a declaration of the parties' rights based on a hypothetical state of facts.

DISCUSSION

Legal Standards

Federal Rule of Civil ...


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