8th Circuit lets suit stand on ‘information and belief’

Despite a lack of hard facts in the petition, the 8^th U.S. Circuit Court of Appeals on Feb. 7 reinstated a lawsuit by a construction equipment rental company alleging two competitors misappropriated its trade secrets.

In a suit initially filed in the Eastern District of Missouri, Ahern Rentals alleged that EquipmentShare.com and a newer company with which it had a business relationship, EZ Equipment Zone, had engaged a conspiracy to misappropriate trade secrets from Ahern to gain an unfair competitive advantage.

The suit was transferred to the Western District of Missouri, where a series of separate suits Ahern brought against EquipmentShare and several former Ahern employees have been consolidated into multidistrict litigation.

Chief Judge Beth Phillips, who is overseeing the MDL, ruled that the allegations of EZ’s conspiratorial actions all were based merely upon “information and belief.” She said it wasn’t enough to demonstrate that the claims were plausible, rather than just conceivable, so she dismissed EZ from the suit.

As a result, she later held, the remaining claims against EquipmentShare duplicated the existing actions in the MDL, so they were dismissed as well.

The 8^th Circuit, however, said basing a claim “upon information and belief” isn’t necessarily deficient, at least in this kind of a suit. Judge Bobby E. Shepherd wrote for the panel that “we cannot always expect plaintiffs to provide robust evidentiary support for their allegations at the pleading stage because, in some contexts, that information may not be available to them before discovery.” Judges Steven M. Colloton and L. Steven Grasz concurred.

Although it was a ruling of first impression in the 8^th Circuit, the court noted that at least six other appellate circuits have reached a similar conclusion.

“We adopt this prevailing standard today and hold that allegations pled on information and belief are not categorically insufficient to state a claim for relief where the proof supporting the allegation is within the sole possession and control of the defendant or where the belief is based on sufficient factual material that makes the inference of culpability plausible,” Shepherd wrote.

With the claims against EZ back on the table, the 8^th Circuit remanded the case to the Western District to freshly determine if the suit against EquipmentShare should be reinstated as well.

Joseph M. Wientge Jr. of Littler, an attorney for Ahern, said in an email that he was pleased with the ruling.

“It has been Ahern’s contention from the beginning of the case that it has plausibly plead Defendants’ exploitation of Ahern’s confidential and proprietary trade secret information through their improper business relationship,” he wrote. “With the Court of Appeals’ decision, Ahern now looks forward to moving this matter into discovery and vigorously pursuing its rights related to the damages it incurred, as a result of Defendants’ improper actions.”

Alexander David Burch of Baker McKenzie in Houston, Texas, and Philip C. Graham of Sandberg Phoenix & von Gontard in St. Louis, who represented the defendants, declined to comment, citing the ongoing litigation.

The case is Ahern Rentals Inc. v. EquipmentShare.com Inc. et al.,

Despite a lack of hard facts in the petition, the 8^th U.S. Circuit Court of Appeals on Feb. 7 reinstated a lawsuit by a construction equipment rental company alleging two competitors misappropriated its trade secrets.

In a suit initially filed in the Eastern District of Missouri, Ahern Rentals alleged that EquipmentShare.com and a newer company with which it had a business relationship, EZ Equipment Zone, had engaged a conspiracy to misappropriate trade secrets from Ahern to gain an unfair competitive advantage.

The suit was transferred to the Western District of Missouri, where a series of separate suits Ahern brought against EquipmentShare and several former Ahern employees have been consolidated into multidistrict litigation.

Chief Judge Beth Phillips, who is overseeing the MDL, ruled that the allegations of EZ’s conspiratorial actions all were based merely upon “information and belief.” She said it wasn’t enough to demonstrate that the claims were plausible, rather than just conceivable, so she dismissed EZ from the suit.

As a result, she later held, the remaining claims against EquipmentShare duplicated the existing actions in the MDL, so they were dismissed as well.

The 8^th Circuit, however, said basing a claim “upon information and belief” isn’t necessarily deficient, at least in this kind of a suit. Judge Bobby E. Shepherd wrote for the panel that “we cannot always expect plaintiffs to provide robust evidentiary support for their allegations at the pleading stage because, in some contexts, that information may not be available to them before discovery.” Judges Steven M. Colloton and L. Steven Grasz concurred.

Although it was a ruling of first impression in the 8^th Circuit, the court noted that at least six other appellate circuits have reached a similar conclusion.

“We adopt this prevailing standard today and hold that allegations pled on information and belief are not categorically insufficient to state a claim for relief where the proof supporting the allegation is within the sole possession and control of the defendant or where the belief is based on sufficient factual material that makes the inference of culpability plausible,” Shepherd wrote.

With the claims against EZ back on the table, the 8^th Circuit remanded the case to the Western District to freshly determine if the suit against EquipmentShare should be reinstated as well.

Joseph M. Wientge Jr. of Littler, an attorney for Ahern, said in an email that he was pleased with the ruling.

“It has been Ahern’s contention from the beginning of the case that it has plausibly plead Defendants’ exploitation of Ahern’s confidential and proprietary trade secret information through their improper business relationship,” he wrote. “With the Court of Appeals’ decision, Ahern now looks forward to moving this matter into discovery and vigorously pursuing its rights related to the damages it incurred, as a result of Defendants’ improper actions.”

Alexander David Burch of Baker McKenzie in Houston, Texas, and Philip C. Graham of Sandberg Phoenix & von Gontard in St. Louis, who represented the defendants, declined to comment, citing the ongoing litigation.

The case is Ahern Rentals Inc. v. EquipmentShare.com Inc. et al., 22-1399.