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Xavian Insurance Co v. Boeing Capital Corp.

United States District Court, N.D. Illinois, Eastern Division

September 30, 2019

Xavian Insurance Company and Xavian Holdings, Inc. Plaintiffs,
v.
Boeing Capital Corporation and The Boeing Company Defendants.

          MEMORANDUM OPINION AND ORDER

          Honorable Thomas M. Durkin, United States District Judge

         Plaintiffs Xavian Insurance Company and Xavian Holdings, Inc. (together, “Xavian”) seek to disgorge billions of dollars in profits and recover millions of dollars in royalty payments from defendants Boeing Capital Corporation and the Boeing Company (respectively, “BCC” and “Boeing, ” and together “Defendants”) for their alleged misappropriation of trade secrets under the Defend Trade Secrets Act, 18 U.S.C. § 1836 (“DTSA”), and Washington Uniform Trade Secrets Act, Wash. Rev. Code § 19.108 (“WUTSA”). Defendants moved to dismiss for failure to state a claim. R. 50. For the following reasons, Defendants' motion is denied.

         Standard

         A Rule 12(b)(6) motion challenges the “sufficiency of the complaint.” Berger v. Nat. Collegiate Athletic Assoc., 843 F.3d 285, 289 (7th Cir. 2016). A complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.' ” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “ ‘A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.' ” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 366 (7th Cir. 2018) (quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. Tobey v. Chibucos, 890 F.3d 634, 646 (7th Cir. 2018).

         Background

         Xavian was formed in 2007 to explore a potential business model for the private insurance of aircraft purchases by foreign airlines with poor credit ratings. At that time, the Export-Import Bank of the United States (the “Ex-Im Bank”) had been providing government-backed all-risk export credit guarantees to encourage lenders to finance such purchases; there were no private insurance options. But transactions with the Ex-Im Bank were subject to certain restrictions imposed pursuant to an international agreement, and the Ex-Im Bank's future was uncertain, including because of political opposition. Xavian's founders believed it possible to provide a more flexible approach to financing by offering longer loan terms and lower principal payments. But they needed capital and an investment-grade credit rating in order to be viable. Accordingly, Xavian's founders sought to raise $300 million, and developed: (1) an actuarial analysis defining the loss for given default rates for foreign airlines with below investment grade credit (“actuarial analysis”); and (2) a ratings analysis that credit agencies would use in the event Xavian was successful in entering the private insurance business (“ratings analysis”).

         Xavian retained an actuarial firm to analyze its risk profile in an effort to obtain an investment-grade credit rating, and ultimately persuaded a major credit rating agency to change its rating model for aircraft financing. According to Xavian, this confirmed the viability of a single-A credit rating for its business, provided Xavian could raise enough capital.

         To that end, in September 2007, Xavian approached BCC-which provides financing for Boeing customers-as a potential investment partner. Xavian knew that the Ex-Im Bank had provided billions of dollars in financial support for Boeing's sales to foreign airlines with non-investment grade credit ratings, and that Defendants might be interested in an alternative. Xavian and BCC entered into a proprietary information agreement governed by the laws of the state of Washington (the “PIA”). Under the PIA, both parties agreed to “preserve in confidence, not disclose to others, and not use [except for purposes not applicable here] any and all Proprietary Information received from the other” (the “PIA”). R. 44 ¶ 36; id., Ex. 1 at 1. The PIA defined “Proprietary Information” as:

all proprietary, confidential, and/or trade secret information disclosed by either Party to the other and pertaining to business, marketing, operational, and financial matters.

Id., Ex. 1 at 1. The PIA further provided that Proprietary Information:

when first received . . . must be either (i) in written form and marked with an appropriate restrictive legend or (ii) not in written form but initially identified to the receiving Party as proprietary and/or confidential and thereafter promptly confirmed, in writing to the receiving Party, as being Proprietary Information.

Id. At a meeting in 2008, [1] Xavian gave BCC multiple hard copies of its business plan, which included several attachments. Among the attachments were Xavian's actuarial and ratings analyses. R. 44 ¶¶ 39-40. The first page of Xavian's business plan was prominently marked at the top and bottom: “Confidential - for Company Disclosure Only”-a designation that was repeated on each page of the plan. Id. ¶ 40. Additionally, a section titled “Confidential Undertaking - Must Read” stated:

This document contains business secrets, trade secrets, confidential information and proprietary data owned, licensed to or created by Xavian Holdings Inc. (“Xavian”). It is supplied exclusively to the reader with the express understanding that (A) it shall be kept completely confidential, and (B) no portion of the contents of this five year plan (the “Plan”) shall be disclosed to any person, firm or entity that is not an employee of the reader, except professionals who have a need to know the material contained herein, receive it in a professional capacity, agree in writing to keep it confidential, and return it to the reader when such professional's work is completed.

Id. Per its terms, the PIA automatically expired in September 2009, but Proprietary Information shared before then remained protected indefinitely. Id. at 2.

         Xavian also developed a “Plan B” as an alternative to its original plan (“Plan A”). Under Plan B, aircraft sales would be guaranteed through a consortium of three or four large insurance companies. Unlike Plan A, Plan B did not call for establishing a new, free-standing entity and did not require a new credit rating. Instead, existing insurers (with existing credit ratings and capital) would collectively guarantee financing for a sale in order to pool the risk of default.

         Xavian disclosed to BCC that it “had developed its Plan B” in February 2009, and the parties engaged in discussions “related to the written materials that Xavian had already designated in writing as confidential.” Xavian also “made plans to discuss [Plan B] with BCC in more detail.” Id. ¶ 46.

         Xavian did not share specifics about Plan B with BCC until 2011. According to the amended complaint, the 2011 discussions also “related to Xavian's written business plan and attachments that were properly designated as confidential” under the PIA. Id. At that time, Boeing told Xavian that it would consider a $50 million investment. Id. But ultimately Boeing did not invest in Xavian, and Xavian was only able to raise a small fraction of its capital ...


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