Surefox North America Inc v. Huls

In Surefox North America Inc v. Huls, Civ. No. 24-4492 (PAM/ECW), United States District Court Judge Paul A. Magnuson of the District of Minnesota denied cross-motions to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows a court to dismiss claims that fail to state a legally sufficient basis for relief.

Background Surefox is a group of related security services entities founded in 2016 by Army veterans Joshua Szott and Brian Sweigart. Wyatt Huls, also a veteran, was hired in 2018 and rose to Senior Director for Operations and Intelligence at Surefox North America Inc. (Surefox NA), one of the company's ten most senior roles. While employed, he signed three agreements: an Employment Agreement with Surefox NA, a Confidential Information and Non-Disclosure Agreement (NDA) with Surefox Consulting LLC, and a Conflict of Interest Disclosure Form with Surefox NA.

Beginning in 2022, Surefox developed a confidential mergers-and-acquisitions strategy, including a 'Strategic Pathways Timeline' identifying target companies and estimated purchase prices. Huls had access to this strategy. Surefox alleges that before resigning in December 2023, Huls secretly founded Vigilant North, LLC — a competing security services firm — and worked with Surefox's departing general counsel, David Murray, to replicate Surefox's acquisition strategy for a rival entity, Sciath Security, LLC. Surefox claims Huls and Vigilant North used its confidential information to contact investor Cold Bore Capital, pursue acquisition target StaffWizard (which Surefox ultimately acquired but with alleged delays), and help Sciath acquire Kellington and REDCON Solutions Group — companies on Surefox's confidential target list.

Huls tells a different story in his counterclaims. He alleges that after Surefox lost a major Google contract in August 2023, co-founder Szott directed him to bill clients for security personnel who were not actually staffing all posts — a so-called 'round robin' scheme. Huls claims he raised these concerns with upper management, Szott denied the conduct in front of others, Surefox retaliated against him, and he ultimately was constructively forced to resign.

Surefox's Claims — Motion to Dismiss Denied

Breach of Contract (Employment Agreement): The Employment Agreement contains a California choice-of-law provision. Under California Business and Professions Code § 16600, contracts restraining someone from engaging in a lawful trade are void, but courts recognize an exception where the agreement protects trade secrets or confidential information. Huls argued the agreement was a facially void non-compete. The court declined to resolve this at the pleading stage, finding it premature to parse the agreement's validity, and denied the motion.

Breach of Contract (Confidential Information and NDA): Surefox alleged Huls disclosed confidential acquisition strategies, target company information, and investor relationship details. The parties agreed Minnesota and California law lead to the same result. The court accepted the allegations as true and denied the motion.

Breach of Fiduciary Duty: Under Minnesota law, the four elements are duty, breach, causation, and damages. The parties did not dispute that Huls owed fiduciary duties to Surefox. The court denied the motion as to both the duty of loyalty (whether founding Vigilant North while employed was mere preparation to compete or an actual breach is fact-specific) and the duty of confidentiality (which continues after employment ends).

Misappropriation of Confidential Information: Under applicable law, a plaintiff must show the information is not generally known, provides a competitive advantage, and was subject to reasonable efforts to maintain secrecy. The court found Surefox adequately pleaded all three elements, including that information was developed through due diligence, shared only with senior employees, and protected by NDAs.

Aiding and Abetting Breach of Fiduciary Duty: Minnesota law requires showing a third party breached a fiduciary duty, the defendant knew of that breach, and the defendant substantially assisted it. The court denied the motion as to Vigilant North allegedly aiding Huls's breach. As to claims that Huls and Vigilant North aided Murray's breach, the court also denied the motion but noted that whether Murray breached his own fiduciary duty must be determined in a separate proceeding, since Murray is not a party to this case.

Tortious Interference with Contract: Surefox alleged Huls interfered with Murray's contracts. Because Murray is not a party to this case and another court must first determine whether Murray breached his contract, the court denied this motion without prejudice (meaning Surefox may refile or pursue this theory as appropriate).

Huls's Counterclaims — Motion to Dismiss Denied

California Constructive Discharge / Whistleblower Claim (Cal. Lab. Code § 1102.5): This law prohibits retaliation against employees who refuse to participate in activity that would violate law. Surefox argued the California law could not apply because Huls moved to Minnesota in 2022. The court found sufficient California connections: Surefox NA is a California company headquartered there, Google is a California company, and Huls performed work in California. Surefox also argued Huls did not identify a specific violated law, but the court found that fraud — which Huls alleged Szott committed — violates California Civil Code §§ 1709 and 1710. The motion was denied.

Minnesota Whistleblower Act (Minn. Stat. § 181.932): This law prohibits retaliation against employees who in good faith report violations of law or refuse to follow orders to violate the law. Surefox argued Huls's job duties included reporting billing irregularities, so his conduct was not protected whistleblowing. The court disagreed, finding Huls alleged he was reporting what he believed was fraud by the co-founder — not a mere internal policy dispute. Motion denied.

California Unfair Competition Law (Cal. Bus. & Prof. Code § 17200): Huls argued the confidentiality clauses in his agreements were de facto non-compete covenants, void under California Business and Professions Code § 16600.1, and that Surefox violated the UCL by including them. Surefox raised extraterritoriality, litigation privilege, and standing arguments. The court found the alleged misconduct — drafting overbroad confidentiality agreements — occurred in California, rejected the litigation privilege argument because the claim is not based on Surefox's enforcement conduct, and found that attorney's fees can plausibly establish economic injury at the pleading stage under some California court decisions. Motion denied.

The court also denied Defendants' alternative motion for a more definite statement under Federal Rule of Civil Procedure 12(e), implicitly by denying the overall motion.

The case will proceed on all claims.