Federal Judge Holds That DTSA Claims Are Not Barred by the Economic Loss Rule

In a recent holding, a federal judge in the United States District Court for the District of Colorado held that theft of trade secret claims brought under the federal Defend Trade Secrets Act (DTSA) are not barred by the economic loss rule, which mandates that a party who has suffered purely economic loss from a breach of contract is generally barred from bringing any tort claims that may arise from the breach.

On July 17, 2017, Great American Opportunities (GAO), a fundraising company, filed a complaint against a former employee, Jacob Kent. The claims included tortious interference with contracts, and a DTSA claim of misappropriation of trade secrets. Kent had previously worked as a sales representative at GAO. After he left the company, Kent allegedly interfered with contracts and misappropriated GAO’s trade secrets by soliciting business from GAO’s customers.

Kent argued that both the tortious interference claim and the DTSA claim were barred by the economic loss rule. He argued that because any alleged economic loss GAO may have suffered was due to the alleged breach of contract, the economic loss rule should preclude the claims. The court held that the economic loss rule did preclude the tortious interference claim but did not preclude the DTSA claim because Congress intended the DTSA to provide extra-contractual remedies for trade secret claims. Accordingly, the DTSA claim survived summary judgment while the tortious interference claim did not.

TIP: If a company is harmed by trade secret misappropriation, bringing claims under the DTSA may allow such claims to survive attack by the economic loss rule, even where related tort claims may fail.