Starbucks Trade Secret Case Decision Serves Up Timely Reminder About Statutes of Limitation

In a July 26 decision, the U.S. District Court for the Western District of Washington dismissed a highly-publicized trade secret misappropriation lawsuit that had been filed against Starbucks Corporation by Balmuccino LLC, ruling that Balmuccino filed its lawsuit too late, in view of a 3-year statute of limitations under Washington (and federal) law.

Balmuccino's amended complaint asserted claims against Starbucks for: (1) breach of implied-in-fact contract; (2) breach of oral contract; (3) breach of confidence; (4) trade secret misappropriation under California's Uniform Trade Secrets Act (UTSA); (5) trade secret misappropriation under Washington's UTSA; and (6) trade secret misappropriation under the federal Defend Trade Secrets Act (DTSA).

Starbucks moved to dismiss the amended complaint as time-barred, contending that Balmuccino filed its claims too late under applicable statutes of limitation. 

The court first assessed which state's law would govern, California or Washington. It concluded that the law of the forum state, Washington, presumptively applied and that Balmuccino had not advanced sufficient reasons to rebut that presumption.

Proceeding to the merits of the dismissal motion, the court first found that all of Balmuccino's claims bore a three-year statute of limitation, and that the parties did not dispute that "Balmuccino filed suit in this Court more than three years after learning of Starbucks's alleged trade secret misappropriation." It then found that Balmuccino failed to establish sufficient reasons for tolling the statutes of limitation, e.g., for suspending the running of the 3-year time period.

The court therefore granted Starbucks's dismissal motion.

The linked article reports a statement by Balmuccino's attorney "that the company will appeal the ruling and refile the case in New York." However, like Washington, New York also follows a three-year statute of limitation for trade secret misappropriation cases. Uni-Systems, LLC v. United States Tennis Ass'n, 350 F. Supp. 3d 143, 178 (E.D.N.Y. 2018). Balmuccino might perceive a more lenient set of exceptions under New York law. For instance, the Uni-Systems decision quoted and applied precedent that each new unauthorized use of another's trade secret "constitutes a new actionable tort for purposes of the statute of limitations."

Not all states adopting the UTSA impose a 3-year statute of limitations. For instance, Georgia's statute of limitations (O.C.G.A. § 10-1-766) provides that a trade secret misappropriation action under state law must be brought within 5 years “after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." Unlike New York law, however, Georgia's statute also recites: "For the purposes of this Code section, a continuing misappropriation by any person constitutes a single claim against that person . . . ." (emphasis added). Thus, under Georgia law, one cannot argue that each new unauthorized use of a trade secret constitutes grounds for a new cause of action.

The Starbucks decision provides a timely reminder about the importance of statutes of limitation in attempting to litigate trade secret claims, as well as other claims. One contemplating bringing federal and/or state law trade secret misappropriation claims must be aware of not only the DTSA's 3-year statute of limitations (18 U.S.C. § 1836(d)), but also the statute of limitations of the particular state law being considered, as well as that state's leniency (or lack thereof) concerning tolling and "continuing tort" theories.