# When the Trade-Secret Statute Swallows the Tort: BlueEarth Biofuels v. Hawaiian Electric and UTSA Preemption

> Hawaii's Supreme Court adopted the majority view that the Uniform Trade Secrets Act displaces tort claims built on misused confidential information, even when that information is not a statutory trade secret.

Topic: Trade Secrets  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/blueearth-biofuels-v-hawaiian-electric-utsa-preemption/


What happens to a plaintiff's tort claims when the misconduct is, at bottom, the misuse of secret information—but the information may not qualify as a "trade secret"? That question divides courts across the country, and in *BlueEarth Biofuels, LLC v. Hawaiian Electric Co.*, 235 P.3d 310, 123 Haw. 314 (2010), the Supreme Court of Hawaii gave its answer. Responding to certified questions from a federal court, the court held that Hawaii's Uniform Trade Secrets Act displaces tort and restitution claims premised on the improper acquisition, disclosure, or use of confidential information—even when that information does not meet the statutory definition of a trade secret. The decision aligned Hawaii with the "majority approach" to UTSA preemption and remains a leading authority on how far a uniform trade-secret statute reaches.

## At a glance

- **Case:** *BlueEarth Biofuels, LLC v. Hawaiian Electric Co.*, No. SCCQ-30144, 235 P.3d 310, 123 Haw. 314 (Haw. July 20, 2010).
- **Court:** Supreme Court of Hawaii (Moon, C.J., Nakayama, Acoba, Duffy, and Recktenwald, JJ.), answering certified questions from the U.S. District Court for the District of Hawaii.
- **Posture:** Certified questions of state law regarding the scope of preemption (displacement) under the Hawaii Uniform Trade Secrets Act, Haw. Rev. Stat. ch. 482B.
- **Holding:** HUTSA displaces non-contract civil claims based on the alleged acquisition, disclosure, or use of confidential or commercially valuable information, whether or not that information rises to the level of a statutorily defined trade secret.
- **Significance:** Adopts the majority view of UTSA preemption, broadly displacing parallel tort theories and channeling such disputes into the trade-secret statute (and contract).

## The facts: a biodiesel deal that collapsed

BlueEarth Biofuels specialized in developing biodiesel production facilities. It set out to build a biodiesel plant on Maui in cooperation with Hawaiian Electric Company and its subsidiary Maui Electric Company, exchanging sensitive business information under confidentiality agreements as the parties explored the venture. According to BlueEarth, the relationship soured when the Hawaiian Electric defendants—along with an HECO executive, Karl Stahlkopf, and a fuel supplier, Aloha Petroleum—allegedly negotiated behind its back to cut BlueEarth out of the project it had originated.

BlueEarth sued in federal court, pleading a mix of claims: breach of contract, tortious interference, unfair competition, and trade-secret misappropriation. The defendants argued that the trade-secret statute swallowed the tort theories. Because the answer turned on unsettled Hawaii law, the federal district court certified questions to the Hawaii Supreme Court, asking it to define the boundaries of HUTSA's displacement provision.

## The framework: when do claims "conflict" with HUTSA?

The certified questions asked the court to map the relationship between HUTSA and Hawaii's common-law tort and restitution claims. Like most uniform-act states, Hawaii's statute contains a displacement clause providing that the Act supplants conflicting civil remedies for the misappropriation of a trade secret while leaving contractual remedies and claims not based on misappropriation untouched. The interpretive battleground is the meaning of "conflict."

The court adopted a functional, "same proof" approach. A tort or restitution claim conflicts with HUTSA—and is therefore displaced—when it is based upon the misappropriation of information, such that proving the non-statutory claim would also establish trade-secret misappropriation. Where a claim rests instead on wrongful conduct *independent* of the misappropriation, it survives. This test looks to the factual nucleus of the claim rather than the label the plaintiff attaches to it, preventing artful pleading from evading the statute's exclusivity.

## The key holding: preemption reaches non-trade-secret information

The most consequential ruling addressed the hardest question: does HUTSA displace claims premised on the misuse of confidential information that does *not* qualify as a trade secret? Courts nationwide split on this. Under the "minority" view, a plaintiff whose information falls short of trade-secret status may still pursue common-law tort theories, because the statute by its terms governs only "trade secrets." Under the "majority" view, the statute occupies the broader field of confidential business information, so a plaintiff cannot resurrect a displaced theory simply by conceding the information was not quite a trade secret.

The Hawaii Supreme Court chose the majority approach. It held that HUTSA "displaces non-contract civil claims based upon the alleged acquisition, disclosure, or use of confidential information that does not rise to the level of a statutorily-defined trade secret." The court reasoned that allowing common-law claims to survive whenever information falls just short of the statutory definition would undermine the uniform act's goal of providing a single, predictable framework, and would let plaintiffs achieve through tort law what the legislature channeled into the statute. The practical effect is sweeping: in Hawaii, a would-be plaintiff cannot fall back on tort theories to protect confidential information that fails the trade-secret test, and is left to the statute itself and to contract.

## Open questions

- **What counts as "independent" wrongdoing?** The court preserved claims based on conduct independent of misappropriation, but drawing that line in practice—where the same facts support multiple theories—remains contested.
- **How does the rule treat restitution and unjust enrichment?** The displacement analysis covers non-contract civil claims, yet the precise treatment of equitable theories on varied facts is left to future application.
- **Where exactly is the contract carve-out's edge?** Contract claims survive, but disputes that blend confidentiality agreements with tort allegations test how cleanly the statute separates the two.

## Implications

- **Plead contract, not just tort.** In majority-approach states like Hawaii, a confidentiality agreement may be the only reliable vehicle to protect information that does not qualify as a trade secret.
- **Tort fallbacks are unreliable.** Plaintiffs cannot count on common-law misappropriation, unfair competition, or interference theories to survive once HUTSA applies.
- **Identify independent wrongs early.** Claims that rest on conduct genuinely separate from the misuse of information stand the best chance of surviving displacement.
- **Know your jurisdiction's approach.** Because states split on UTSA preemption, the same complaint can survive in a minority-view state and be gutted in a majority-view one.
- **Watch the certified-question device.** Federal courts will send unsettled state trade-secret questions to state supreme courts, so the governing rule may be set by a state-law ruling mid-litigation.

## Frequently asked questions

**What did BlueEarth Biofuels v. Hawaiian Electric decide about UTSA preemption?**
The Hawaii Supreme Court, answering certified questions, held that the Hawaii Uniform Trade Secrets Act displaces non-contract civil claims based on the misuse of confidential or commercially valuable information, whether or not that information rises to the level of a statutorily defined trade secret. This is the "majority approach" to UTSA preemption.

**Does HUTSA preempt every claim related to confidential information?**
No. The court held that HUTSA displaces conflicting tort and restitution claims that are based on misappropriation, but claims survive to the extent they rest on wrongful conduct independent of the misappropriation, and contract claims are not displaced.

**How did this case reach the Hawaii Supreme Court?**
The U.S. District Court for the District of Hawaii certified questions of state law to the Hawaii Supreme Court because the scope of HUTSA preemption was unsettled and would control the federal litigation between BlueEarth and the Hawaiian Electric defendants.

## Authorities and sources

- Hawaii Supreme Court opinion (Hawaii State Judiciary, PDF): https://www.courts.state.hi.us/docs/opin_ord/sct/2010/jul/30144ada.pdf
- CourtListener opinion, 235 P.3d 310: https://www.courtlistener.com/opinion/870659/blueearth-biofuels-llc-v-hawaiian-electric-co/
- FindLaw case page: https://caselaw.findlaw.com/court/hi-supreme-court/1532107.html