Averon Alleges Harms From AT&T ‘Beyond Mere Economic Damages’

The U.S. District Court for Delaware should deny AT&T’s motion to dismiss Averon’s first amended complaint because Averon “pled facts that adequately support each of its causes of action,” said Averon’s redacted answer Monday (docket 1:22-cv-01341).

AT&T is alleged to have courted Averon as a business partner for its passwordless authentication technology, only for AT&T to use that technology to form the ZenKey joint venture with T-Mobile and Verizon that foreclosed Averon as a direct market competitor (see 2301100002). Averon asserts various claims against AT&T, including for trade secret misappropriation under the federal Defend Trade Secrets Act and California Uniform Trade Secrets Act (CUTSA).

AT&T “tries to downplay the significance” of its relationship with Averon as merely being that of a customer and a service provider, said Averon’s answer. But the facts pled “demonstrate a complex, multi-year collaboration” in which Averon trusted AT&T with its most sensitive confidential information and trade secrets, “pursuant to the creation of a business relationship far beyond that of mere customer and provider,” it said. “AT&T repeatedly ignores specific facts supporting Averon's claims and pled by Averon that, at the pleading stage, must be accepted as true.”

The CUTSA doesn’t preempt any of Averon's claims for fraud, unfair competition or intentional interference with prospective economic relations, said Averon’s answer. Those claims aren’t based on the same "nucleus” of facts as Averon's CUTSA misappropriation claim, it said. Averon's fraud claim involves AT&T's false and misleading statements about “its termination of signaling services to Averon,” it said.

Averon's unfair and unlawful business practices claims “involve AT&T's entire scope of conduct in forming ZenKey as a joint venture with the other major telecom providers while locking Averon out of the market,” said Averon’s answer. Its intentional interference with potential customers claim “involves facts related to AT&T's contact with Averon's potential customers or joint venturers,” it said.

The economic loss doctrine doesn’t bar Averon's claims for fraud and misrepresentation and intentional interference with prospective economic relations, said Averon’s answer. “Averon alleges harms that go beyond mere economic damages,” it said. AT&T's formation of ZenKey as a joint venture with Verizon and T-Mobile “preempted Averon from developing a business around its technology,” it said.

ZenKey also “poached and interfered with” Averon's relationships with its potential customers, said Averon’s answer. “These harms are beyond the scope of economic damages that may be recovered solely from Averon's breach of contract actions,” it said. “While some overlap is inevitable, simply having some overlap does not render all of these harms as purely economic damages. These harms are more than the result of a loss of access to AT&T's signaling services.”

If the court finds Averon's pleadings “deficient” under the Federal Rules of Civil Procedure, Averon asks that the court grant leave for Averon to file a second amended complaint “to address any such deficiencies,” said the company.