Arthur J. Gallagher & Co. v. Petree

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 ARTHUR J. GALLAGHER & CO., No. 2:18-cv-03274-JAM-KJN 12 Plaintiff, 13 v. ORDER DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT 14 ROBERT PETREE, et al., 15 Defendants. 16 17 Insurance broker Arthur J. Gallagher & Co. (“AJG” or 18 “Plaintiff”) initiated the present action following the 19 resignation of its former employee, Robert Petree (“Petree”), who 20 took a job at AJG’s competitor, HUB International Insurance 21 Services Inc. (“HUB”). Compl., ECF No. 1. AJG brings the 22 following claims against Petree and HUB (collectively 23 “Defendants”): (1) mistaken receipt against Petree only; 24 (2) breach of implied-in-fact contract against Petree only; 25 (3) misappropriation of trade secrets in violation of the 26 California Uniform Trade Secrets Act (“CUTSA”); (4) violation of 27 the Defend Trade Secrets Act (“DTSA”); (5) breach of the purchase 28 agreement against Petree only; (6) breach of the employment 1 agreement against Petree only; and (7) breach of the employment 2 agreement (CA) against Petree only. First Amended Complaint 3 (“FAC”), ECF No. 17. 4 Defendants now move for summary judgment as to all claims. 5 See Defs.’ Mot. Summ. J. (“Mot.”), ECF No. 100. Plaintiff filed 6 an opposition, see Opp’n, ECF No. 104, to which Defendants 7 replied, see Reply, ECF No. 106. For the reasons set forth 8 below, the Court denies Defendants’ motion for summary judgment.1 9 10 I. BACKGROUND 11 This case involves three contracts. First, a Purchase 12 Agreement dated May 15, 2008 (the “2008 Purchase Agreement”) 13 under which AJG purchased the assets, property, goodwill, and 14 business of Petree’s insurance brokerage business, Robert Petree 15 Insurance Services (“RPIS”). Ex. A to Caldwell Decl., ECF No. 16 104-3. In consideration for the conveyance of RPIS, AJG agreed 17 to pay (1) a cash payment of $1,800,000 to Petree and RPIS; and 18 (2) three earnout installment payments to Petree based on a 19 formula set forth in the Purchase Agreement. See generally 2008 20 Purchase Agreement. Pursuant to this agreement, Petree received 21 a total of $100,323 in earnout payments (the “Earnout Payments”) 22 between June 2009 and June 2011. Mot. at 3; Opp’n at 2. Second, 23 an Employment Agreement dated May 15, 2008 (the “2008 Employment 24 Agreement”) under which AJG agreed to employ Petree in connection 25 with the acquisition of RPIS. Ex. B to Caldwell Decl. Third, an 26

27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for January 25, 2022. 1 Employment Agreement dated April 10, 2009 (the “2009 Employment 2 Agreement”) and signed by Petree on May 4, 2009, and by an AJG 3 representative on May 27, 2009. Ex. D. to Caldwell Decl. The 4 2009 Employment Agreement provides: “[t]his Agreement contains 5 the entire agreement of the parties with respect to the subject 6 matters covered hereby. The parties agree that all prior 7 negotiations or communications are of no force or effect.” 8 Section 11(D) of the 2009 Employment Agreement. It is undisputed 9 the 2009 Employment Agreement was given to Petree by mistake, 10 however, the parties dispute whether “the fact that Employment 11 Agreement 2 was given to Petree by mistake… render[s] it invalid 12 or unenforceable.” Opp’n at 14 (contending it is enforceable); 13 see also Mot. at 16 (contending it is void and unenforceable). 14 The 2008 Purchase Agreement and the 2008 Employment 15 Agreement include, inter alia, non-compete provisions (“the 2008 16 Noncompete Provisions”). See Section 7(f) of the 2008 Purchase 17 Agreement; Section 8 of the 2008 Employment Agreement. The 2009 18 Employment Agreement also contains covenants, albeit less 19 restrictive ones. See Section 8 of the 2009 Employment 20 Agreement. 21 22 II. OPINION 23 A. Evidentiary Objections 24 Defendants filed a Statement of Undisputed Facts, see 25 Defs.’ SUF, ECF No. 100-2, to which Plaintiff responded, see 26 Pl.’s Resp. to Defs.’ SUF., ECF No. 104-1. Plaintiff then filed 27 its own Separate Statement of Undisputed Facts, see Pl.’s SUF, 28 ECF No. 104-2, to which Defendants responded, see Defs.’ Resp. 1 to Pl.’s SUF., ECF No. 106-4. Further, Defendants raised 2 evidentiary objections to Plaintiff’s evidence. See Defs.’ 3 Objs., ECF No. 106-3. 4 The Court has reviewed these evidentiary objections but 5 declines to specifically rule on them as courts self-police 6 evidentiary issues on motions for summary judgment and a formal 7 ruling is unnecessary to the determination of these motions. 8 See Sandoval v. Cty. Of San Diego, 985 F.3d 657, 665 (9th Cir. 9 2021)(citing to Burch v. Regents of the Univ. of Cal., 433 10 F.Supp.2d 1110, 1119 (E.D. Cal. 2006)). 11 B. Legal Standard 12 Courts must grant a party’s motion for summary judgment “if 13 the movant shows that there is no genuine dispute as to any 14 material fact and the movant is entitled to a judgment as a 15 matter of law.” Fed. R. Civ. P. 56(a). The movant bears the 16 initial burden of “informing the district court of the basis for 17 its motion, and identifying [the documents] which it believes 18 demonstrate the absence of a genuine issue of a material fact.” 19 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A fact is 20 material if it “might affect the outcome of the suit under the 21 governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 22 248 (1986). Once the movant makes this initial showing, the 23 burden rests upon the nonmoving party to “set forth specific 24 facts showing that there is a genuine issue for trial.” Id. An 25 issue of fact is genuine if “the evidence is such that a 26 reasonable jury could return a verdict for the nonmoving party.” 27 Id. 28 /// 1 C. Analysis 2 1. Cal. Bus. & Prof. Code Sections 16600 and 16601 3 Defendants’ leading argument for summary judgment on the 4 second, fifth, sixth, and seventh causes of actions is that the 5 2008 Noncompete Provisions are void and unenforceable under 6 California Business and Professions Code Section 16600. Mot. at 7 9-13. That Section provides: “Except as provided in this 8 chapter, every contract by which anyone is restrained from 9 engaging in a lawful profession, trade, or business of any kind 10 is to that extent void.” Cal. Bus. & Prof. Code § 16600. The 11 2008 Noncompete Provisions, according to Defendants, are 12 precisely such unlawful restraints. Mot. at 11. AJG responds 13 that these provisions are enforceable because they were entered 14 into in connection with the sale of Petree’s ownership interest 15 in RPIS to AJG and, therefore, fall within a statutory exception 16 to Section 16600’s prohibition of restrictive covenants: Section 17 16601. Opp’n at 5. The Section 16601 exception covers 18 restrictive covenants entered into in connection with the sale of 19 a business entity or the goodwill of a business and specifically 20 provides: “Any person who sells the goodwill of a business… may 21 agree with the buyer to refrain from carrying on a similar 22 business within a specified geographic area in which the business 23 so sold… has been carried on, so long as the buyer… carries on a 24 like business therein.” Cal. Bus. & Prof. Code § 16601. 25 Defendants argue the Section 16601 exception does not apply 26 for two reasons. Mot. at 11-13. First, the 2008 Noncompete 27 Provisions are tied to Petree’s employment, not to the sale of 28 RPIS. Id. at 12-13. To support this contention, Defendants rely 1 on Fillpoint, LLC v. Maas, 208 Cal.App.4th 1170 (2012). Id. 2 That case also involved two agreements - a stock purchase 3 agreement and an employment agreement - with noncompete 4 provisions which the plaintiff-business sought to enforce against 5 defendant-former-employee. Fillpoint, 208 Cal.App.4th at 1173. 6 The court upheld the noncompete covenant in the purchase 7 agreement because “the purchase agreement’s covenant was focused 8 on protecting the acquired goodwill for a limited period of 9 time.” Id. at 1180. But the court struck down the noncompete in 10 the employment agreement, finding it did not fit 11 within the 16601 exception and instead “targeted an 12 employee’s fundamental right to pursue his or her profession.” 13 Id. at 1183. So too here argue Defendants. Mot. at 12-13. 14 Because the restrictive covenants are tied to Petree’s 15 employment, and not to the sale of RPIS, they target Petree’s 16 fundamental right to pursue his profession, thereby violate 17 Section 16600, and do not fall under the Section 16601 exception. 18 Id. 19 AJG counters the 2008 Noncompete Provisions protect the 20 goodwill acquired by AJG when it bought RPIS by prohibiting 21 Petree from soliciting RPIS customers for two years after his AJG 22 employment. Opp’n at 5-6. AJG points out the parties 23 specifically agreed the express purpose of those restrictive 24 covenants was to “protect the Personal Goodwill Assets, business 25 and other Property” that AJG was purchasing from Petree, and that 26 they were “reasonably necessary and tailored to protect 27 [Gallagher’s] legitimate business interests.” Id. (citing to 28 Section 7(f) of the 2008 Purchase Agreement and Section 8 of the 1 2008 Employment Agreement). The 2008 Agreements were also 2 entered into contemporaneously and in connection with the sale of 3 the RPIS’s assets to AJG. Id. at 7. Petree signed both after 4 reviewing with counsel. Id. at 6. 5 Further, AJG distinguishes Fillpoint as follows: whereas 6 here the noncompete provisions in the 2008 Purchase Agreement and 7 the 2008 Employment Agreement are identical, the noncompete 8 provisions in the stock purchase agreement and employment 9 agreement in Fillpoint were distinct. Opp’n at 8-9. 10 Specifically, the stock purchase agreement contained a three-year 11 noncompete whereas the employment agreement contained a broad 12 one-year noncompetition agreement that became effective upon the 13 termination of the defendant’s employment. Fillpoint, 208 14 Cal.App.4th at 1174. The distinction mattered because the latter 15 targeted the defendant’s right to pursue his profession, whereas 16 the purchase agreement was focused on the acquired goodwill. Id. 17 at 1182-1183. Additionally, AJG points out the noncompete in the 18 employment agreement struck down in Fillpoint was significantly 19 broader than here. Opp’n at 9. 20 In their reply, Defendants contend Plaintiff’s attempt to 21 distinguish Fillpoint fails. Reply at 4-5. However, it is 22 Defendants’ attempt to explain away the distinctions AJG 23 identified that falls short. Defendants do not establish 24 Fillpoint is so factually similar that the Court should find it 25 controls here and warrants the grant of summary judgment. 26 For these reasons, Defendants’ first argument as to why the 27 Section 16601 exception does not apply fails. Their second 28 argument is the restricted activities in the 2008 Noncompete 1 Provisions are too broad to fall within Section 16601. Mot. at 2 13. To support their argument, Defendants cite to Strategix, 3 Ltd. v. Infocrossing West, Inc., 142 Cal.App.4th 1068 (2006). 4 Id. In that case, the court explained Section 16601 “limits the 5 geographic scope of a noncompetition covenant to the area where 6 the sold company carried on business” and “by extension… courts 7 may enforce nonsolicitation covenants barring the seller from 8 soliciting the sold business’s employees and customers.” 9 Strategix, 142 Cal.App.4th at 1073 (emphasis in original). This 10 rule from Strategix, AJG counters, supports enforcement of the 11 2008 Noncompete Provisions. Opp’n at 6-7. Defendants had the 12 opportunity in their reply brief to address Defendants’ Strategix 13 arguments yet failed to do so. See Reply. As such, Defendants 14 have not shown they are entitled to summary judgment under 15 Strategix due to the broadness of the 2008 Noncompete Provisions. 16 In sum, Defendants fail to demonstrate that as a matter of 17 law the Section 16601 exception does not apply to the 2008 18 Noncompete Provisions. 19 2. Severability 20 Defendants further argue that if the Court finds the 2008 21 Noncompete Provisions to be unenforceable, the Court cannot sever 22 these provisions. Mot. at 15. However, as explained in the 23 previous section, Defendants did not establish these provisions 24 are unenforceable as a matter of law. Thus, the Court does not 25 reach the parties’ severability arguments. See Mot. at 15; Opp’n 26 at 11-12. 27 3. Issue Preclusion 28 Defendants next contend the 2008 Noncompete Provisions are 1 unenforceable under the doctrine of issue preclusion. Mot. at 2 13-15. Issue preclusion “bars ‘successive litigation of an issue 3 of fact or law actually litigated and resolved in a valid court 4 determination essential to the prior judgment,’ even if the issue 5 recurs in the context of a different claim.’” Taylor v. 6 Sturgell, 553 U.S. 880, 892 (2008). 7 Here, Defendants argue the Northern District of California’s 8 decision in Arthur J. Gallagher & Co. v. Tarantino, et al., 498 9 F.Supp.3d 1155(N.D. Cal. Nov. 2, 2020), bars AJG from enforcing 10 the 2008 restrictive covenants because there AJG’s claims against 11 a different former employee based on “practically word-for-word 12 identical” non-compete provisions were dismissed. Mot. at 14. 13 But a close reading of Tarantino indicates issue preclusion does 14 not apply here because the issues were not identical nor actually 15 litigated. See Opp’n at 9-11, 13. For instance, the Tarantino 16 court did not determine any issues involving restrictive 17 covenants found in a purchase agreement because there was no 18 purchase agreement at issue in that case. See 498 F.Supp.3d 19 1155. Because multiple issues present in this case were not 20 actually litigated in Tarantino, issue preclusion does not apply. 21 4. 2009 Employment Agreement 22 Defendants present two additional arguments as to the second 23 and seventh causes of action. Mot. at 15, 16. Beginning with 24 the second cause of action for breach of the implied-in-fact 25 contract, Defendants argue: “By AJG’s own allegations, its second 26 cause of action for breach of implied-in-fact contract is an 27 attempt to subject Petree to the 2008 restrictive covenants, if 28 the 2008 agreement was superseded by the 2009 Employment 1 Agreement. However, because the 2008 restrictive covenants are 2 not enforceable… Plaintiff’s second cause of action must fail.” 3 Mot. at 15. But for the reasons explained above, Defendants have 4 not established the 2008 provisions are unenforceable as a matter 5 of law. Therefore, this argument as to the second cause of 6 action necessarily fails. 7 As to the seventh cause of action, Defendants contend that 8 because AJG never intended to enter into the 2009 Employment 9 Agreement, that Agreement is void and unenforceable. Mot. at 16. 10 Specifically, Defendants argue for rescission of the 2009 11 Employment Agreement based on unilateral mistake. Id. 12 A party may rescind a contract if “consent of the party 13 rescinding… was given by mistake.” Cal. Civ. Code § 1689(b)(1). 14 California Civil Code Section 1577 defines mistake of fact as “a 15 mistake, not caused by the neglect of a legal duty on the part of 16 the person making the mistake, and consisting in: (1) An 17 unconscious ignorance or forgetfulness of a fact past or present, 18 material to the contract; or (2) Belief in the present existence 19 of a thing material to the contract, which does not exist, or in 20 the past existence of such a thing, which has not existed.” Cal. 21 Civ. Code § 1577. Here, it was AJG which made a mistake giving 22 Petree the 2009 Employment Agreement, as AJG’s person most 23 qualified (“PMK”) witness, Bruce Caldwell, testified in his 24 deposition.2 Mot. at 16 (citing to Caldwell Depo., Ex. A. to

25 2 The Court briefly acknowledges AJG’s objection to Defendants’ use of its PMK’s deposition testimony on the grounds “Defendants’ 26 questioning was improper because it called for a lay witness to 27 provide a legal conclusion.” Opp’n at 17. However, the Court reiterates that it self-polices evidentiary issues on motions for 28 summary judgment and specifically ruling on evidentiary 1 O’Brien Decl., ECF No. 100-3). Due to this mistake of fact, 2 Defendants contend the 2009 Employment Agreement should be 3 rescinded, and the seventh cause of action based upon that 4 Agreement fails. Id. 5 AJG insists, however, the 2009 Employment Agreement is 6 enforceable. Opp’n at 14-18. As an initial matter, AJG concedes 7 Petree was given this agreement by mistake because it “was 8 intended to be given to producers and account executives who were 9 not merger partners.” Id. at 14. Petree, as a merger partner 10 whose business had been acquired by AJG, should have an 11 employment agreement tied to the purchase agreement. Id. 12 Nevertheless, AJG contends this mistake does not render the 2009 13 Employment Agreement invalid or unenforceable because (1) the 14 evidence establishes the mutual assent of the parties, (2) Petree 15 did not plead mistake of fact as an affirmative defense, and (3) 16 even if Petree had pled this defense, he cannot establish any of 17 the elements. Id. 18 As to mutual assent, AJG argues “ordinarily, one who accepts 19 or signs an instrument, which on its face is a contract, is 20 deemed to assent to all its terms." Opp’n at 14 (quoting Meyer 21 v. Benko, 55 Cal.App.3d 937, 943 (1976)). Indeed, “the general 22 rule is that when a person with the capacity of reading and 23 understanding an instrument signs it, he is, in the absence of 24 fraud and imposition, bound by its contents, and is estopped from 25 saying that its explicit provisions are contrary to his 26 intentions or understanding.” Meyer, 55 Cal.App.3d at 943. 27

28 objections is unnecessary. See Sandoval, 985 F.3d at 665. 1 Here, Petree accepted and signed the 2009 Employment Agreement. 2 See 2009 Employment Agreement at 18. He does not contend 3 otherwise in his reply. See Reply. Nor does Petree respond to 4 AJG’s second argument that Defendants failed to plead the 5 affirmative defense of mistake of fact and thereby waived this 6 defense, see Opp’n at 14-15; nor to AJG’s final argument that the 7 unilateral mistake of fact defense is generally raised by the 8 mistaken party against whom contract enforcement is being sought 9 and here the mistaken party was AJG not Petree, see id. at 15. 10 Failure to oppose these arguments constitutes waiver and does not 11 demonstrate an entitlement to summary judgment. Richardson-Bass 12 v. State Center Cmty. College District, Case No. 1-19-cv-01566- 13 AWI-SAB, 2020 WL 5658225, at *15 (E.D. Cal. Sept. 23, 2020). 14 Defendants instead pivot in their reply brief and argue that 15 if the Court finds the 2009 Employment Agreement is valid, then 16 the Court should find its restrictive covenants supersede those 17 in both 2008 Agreements. Reply at 8-9.3 AJG contends the 18 opposite. See Opp’n at 17-18. Specifically, AJG emphasizes that 19 when Petree sold his business to AJG and agreed to the applicable 20 restrictive covenants, he agreed that if the 2008 Employment 21 Agreement were to be modified in the future, any such 22 modification would need to be in a writing that specifically 23 referred to that Agreement. Id. at 18. Section 11(D) of the 24 3 Defendants also raise a new argument that AJG cannot show 25 Petree violated the 2009 restrictive covenants. Reply at 9-10. However, it is improper for Defendants to raise new issues in 26 reply. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 27 912, 919 (9th Cir. 2001)(“[I]ssues which are not specifically and distinctly argued and raised in a party’s opening brief are 28 waived.”) Thus, the Court did not consider this argument. 1 2008 Employment Agreement provides: “this Agreement may not be 2 amended, altered or modified without the prior written consent of 3 both parties, and such instrument shall acknowledge that it is an 4 amendment or modification of this Agreement.” The parties 5 dispute whether the 2009 Employment Agreement so acknowledged. 6 AJG contends that although the 2009 Employment Agreement provided 7 generally that it was intended to be an amendment to any existing 8 employment agreement, it did not specifically acknowledge that it 9 was an amendment or modification to the 2008 Employment 10 Agreement. Opp’n at 18. Accordingly, it did not supersede the 11 2008 Employment Agreement and the restrictive covenants therein. 12 Id. Nor did the 2009 Employment Agreement supersede the 2008 13 Purchase Agreement because the subject matters of the two 14 Agreements were distinct. Id. 15 Defendants counter that the 2009 Employment Agreement did 16 not need to specifically name the 2008 Employment Agreement in 17 order for the 2009 restrictive covenants to supersede the 2008 18 restrictive covenants. Reply at 8-9. According to Defendants, 19 it suffices that the 2009 Employment Agreement states: “This 20 Agreement contains the entire agreement of the parties with 21 respect to the subject matters covered hereby. The parties agree 22 that all prior negotiations are of no force or effect. Further, 23 the parties agree that there are no oral agreements, 24 understandings, undertakings or promises of the parties relating 25 to the subject matters covered by this Agreement.” Section 11(D) 26 of the 2009 Employment Agreement. 27 The Court does not agree that this is consistent with the 28 plain language of the 2008 Employment Agreement, which requires 1 any modification to “acknowledge” that it is “an amendment or 2 modification of this Agreement.” Section 11(D) of the 2008 3 Employment Agreement (emphasis added). The key phrase is “this 4 Agreement.” While Section 11(D) of the 2009 Employment Agreement 5 generally acknowledges “all prior negotiations,” it does not 6 specifically acknowledge the 2008 Employment Agreement as the 7 plain language of Section 11(D) of the 2008 Employment Agreement 8 requires. Accordingly, Defendants fail to establish the 2009 9 restrictive covenants supersede the 2008 covenants as a matter of 10 law, and thus are not entitled to summary judgment on the seventh 11 cause of action. 12 5. Trade Secret Misappropriation Claims 13 Defendants argue that even if the Court finds the 14 restrictive covenants are enforceable, they are still entitled to 15 summary judgment on the second, third, fourth, fifth, sixth, and 16 seventh causes of action because AJG cannot show (1) Petree 17 breached the agreements by soliciting AJG clients and employees 18 or (2) that Defendants misappropriated trade secrets or 19 confidential information. Mot. at 16-24. AJG counters that 20 genuine issues of material fact exist as to these trade secret 21 misappropriation claims and thereby preclude summary judgment. 22 Opp’n at 18-24. 23 The CUTSA defines a “trade secret” as “information, 24 including a… compilation… that (1) Derives independent economic 25 value, actual or potential, from not being generally known to the 26 public or to other persons who can obtain economic value from its 27 disclosure or use; and (2) is the subject of efforts that are 28 reasonable under the circumstances to maintain its secrecy.” 1 Cal. Civ. Code § 3426.1(d). Similarly, the DTSA defines a “trade 2 secret” as “all forms and types of financial, business, 3 scientific, technical, economic, or engineering information, 4 including patterns, plans, compilations, program devices, 5 formulas, designs, prototypes, methods, techniques, processes, 6 procedures, programs, or codes, whether tangible or intangible, 7 and whether or how stored, compiled, or memorialized physically, 8 electronically… or in writing if, (A) the owner thereof has taken 9 reasonable measures to keep such information secret, and (B) the 10 information derives independent economic value, actual or 11 potential, from not being generally known to, and not being 12 readily ascertainable through proper means by, another person who 13 can obtain economic value from the disclosure or use of the 14 information.” 18 U.S.C. § 1839(3). 15 Beginning with the list of client e-mail addresses Petree 16 provided to HUB, Defendants contend this list does not constitute 17 a trade secret. Mot. at 16. Specifically, Defendants argue a 18 list of clients and their contact information, without more, is 19 not a trade secret because it is generally and publicly available 20 information and thus is not confidential. Id. at 18 (citing to 21 Morlife, Inc. v. Perry, 56 Cal.App.4th 1514 (1997)). In Morlife, 22 Inc., the court of appeals affirmed the trial court’s finding 23 that “a compilation, developed over a period of years, of names, 24 addresses, and contact persons, containing pricing information 25 and knowledge about particular roofs and roofing needs of 26 customers using its services” constituted a trade secret. 56 27 Cal.App.4th at 1521. The court reasoned the client list “had 28 independent economic value” as “the identity of those particular 1 commercial buildings using such services is not generally known.” 2 Id.; see also American Credit Indemnity, Co. v. Sacks, 213 3 Cal.App.3d 622, 631 (1989). By contrast, client lists are not 4 protected trade secrets where “the names and addresses of 5 persons, firms and corporations using the type of products sold 6 by plaintiff are commonly known to the trade.” Sacks, 213 7 Cal.App.3d at 633-634; see also Morlife, 56 Cal.App.4th at 1521- 8 1522 (“With respect to the general availability of customer 9 information, courts are reluctant to protect customer lists to 10 the extent they embody information which is ‘readily 11 ascertainable’ through public sources, such as business 12 directories… the more difficult information is to obtain, and the 13 more time and resources expended by an employer in gathering it, 14 the more likely a court will find such information constitutes a 15 trade secret.”). Defendants contend the client e-mail list here 16 falls into the latter category as “what Petree shared was not 17 anything private which derived economic value.” Mot. at 20. All 18 of the client names and e-mail addresses, Defendants point out, 19 are publicly available, for example on clients’ websites or their 20 LinkedIn profiles. Id. AJG did not spend significant time or 21 resources to compile the list. Id. It is “simply a list of 22 email addresses, akin to information in a public phone book.” 23 Id. 24 In opposition, AJG responds first by pointing out it is 25 undisputed that (1) Petree provided HUB with a list of clients, 26 the representatives of those clients with whom he dealt, and 27 their contact information; and (2) HUB used this information to 28 send a targeted communication to those clients. Opp’n at 18. 1 According to AJG, this alone creates a triable issue of fact on 2 the trade secret misappropriation claim. Id. Other triable 3 issues of fact include: whether AJG’s IT employee in fact 4 uploaded the client information to Petree’s personal Gmail 5 account, whether Petree waited for clients to contact him or 6 whether he initiated that contact, and whether Petree shared 7 trade secret information with HUB before he resigned from AJG. 8 Id. at 19. As to the client e-mail list, AJG emphasizes that 9 “[w]hether information is a trade secret is ordinarily a question 10 of fact.” Id. (citing to San Jose Construction, Inc. v. 11 S.B.C.C., Inc., 155 Cal.App.4th 1528, 1537 (2007)). Here, AJG 12 has brought forward enough evidence to create a triable issue as 13 to whether the client information Petree shared is more than just 14 publicly available names and e-mails and instead shared the type 15 of insurance products the clients needed, which is not publicly 16 available, and may constitute a legally protectable trade secret. 17 See Opp’n at 20-21. 18 Next, Defendants contend that even if the client e-mail list 19 Petree shared with HUB did constitute a trade secret, AJG is not 20 entitled to trade secret protection because it did not take 21 reasonable steps to maintain the secrecy of the list. Mot. at 22 20-21 (citing to Morlife, 56 Cal.App.4th at 1521-1523). Under 23 both the CUTSA and DTSA, for information to qualify as a trade 24 secret, reasonable steps must be taken to protect the secrecy of 25 the information. See Cal. Civ. Code § 3426.1(d)(2); 18 U.S.C. § 26 1839(3)(A). Here once again, AJG has brought forward enough 27 evidence to create a triable issue as to whether it took 28 reasonable steps to maintain the secrecy of the client list. See 1 Opp’n at 21-22. Defendants stress that an AJG IT employee worked 2 with Petree to upload his client contacts to a private e-mail 3 account used for Petree’s side business, a wine group called 4 Petree Cellars, which was accessible by third parties, including 5 Petree’s wife. Mot. at 21. This, according to Defendants, 6 reflects AJG’s failure to take reasonable efforts to maintain the 7 secrecy of the information. Id. AJG, however, counters with 8 evidence that: Petree entered into multiple agreements to protect 9 AJG’s confidential information and trade secrets; he completed 10 training on AJG’s corporate confidentiality and data use 11 policies, and he signed AJG’s Mobile Device Policy governing his 12 use of personal devices to connect with AJG’s email and other 13 information. Opp’n at 22. Additionally, AJG points out it uses 14 password protected computer systems, and software to secure and 15 manage its applications and information on its employees’ mobile 16 devices. Id. This is sufficient to create a triable issue as to 17 whether AJG took reasonable steps to maintain the secrecy of its 18 client list. 19 Third, Defendants contend that even if the client e-mail 20 list did constitute a trade secret and even if AJG took 21 reasonable steps to protect that list, there was no 22 misappropriation because the use of a client list for an 23 announcement of a change of employment is permitted. Mot. at 22- 24 23. To support this argument, Defendants cite to the Sacks 25 court’s holding that: “the right to announce a new affiliation, 26 even to trade secret clients of a former employer, is basic to an 27 individual's right to engage in fair competition.” 213 28 Cal.App.3d at 636. In Sacks, the defendant-former employee sent 1 a letter to clients of her former employer that went beyond 2 merely announcing a change of employment instead amounting to a 3 solicitation. Id. The letter informed customers of “interesting 4 competitive alternatives” at the new company, inviting them to 5 inquire about the new company’s policy, and indicating she would 6 happy to “discuss it in detail when they are ready to renew.” 7 Id. The court found this announcement did more than simply 8 announce a “new affiliation,” but rather solicited clients to 9 move to their business. Id. at 636-637. By contrast here, 10 Defendants contend HUB’s e-mail announcing it had hired Petree 11 did not go beyond a mere announcement and thus was permitted 12 under Sacks. Mot. at 22. Defendants add that AJG has no 13 evidence Petree solicited clients; rather, he “simply waited for 14 his former clients to contact him” following HUB’s announcement 15 and his update to his LinkedIn profile. Id. at 23. Likewise, 16 Defendants contend Petree did not solicit AJG employees. Id. at 17 24. In opposition, AJG contends there is sufficient evidence to 18 create a triable issue as to misappropriation. Opp’n at 22-24. 19 The Court agrees. 20 Misappropriation of trade secrets can be established by 21 circumstantial evidence. UniRAM Tech., Inc. v. Taiwan 22 Semiconductor Mfg. Co., 617 F.Supp.2d 938, 944 (N.D. Cal. 2007) 23 (“Circumstantial evidence is particularly appropriate in trade 24 secret cases.”). Here there is enough circumstantial evidence 25 from which a reasonable jury could conclude that Defendants 26 misappropriated Plaintiff’s trade secrets. See Opp’n at 23-24 27 (summarizing evidence of misappropriation). For instance, AJG 28 brought forward evidence that “HUB wanted Petree to bring 1 Gallagher’s clients to HUB, that HUB knew of the restrictive 2 covenants, that Petree lacks credibility regarding his claim that 3 he waited until after he left Gallagher to provide Gallagher’s 4 clients’ contact information to HUB, and that he just sat back 5 and waited for the phone to ring without doing anything to 6 proactively solicit Gallagher’s clients using Gallagher’s trade 7 secret information.” Opp’n at 24. Given these disputes of 8 material fact, summary judgment on the issue of misappropriation 9 is unwarranted. 10 Defendants’ arguments in reply do not alter this analysis. 11 Reply at 1-4. Specifically, Defendants contend that AJG’s 12 submission of five e-mails and two meeting invitations from 13 Petree to six clients out of the nearly two dozen clients that 14 AJG alleges Defendant illegally contacted is insufficient to 15 raise a triable issue of fact. Id. at 1. First, Defendants 16 argue this evidence is inadmissible for failure to identify it in 17 discovery. Id. at 1-2. Second, they argue the substance of the 18 e-mails and the meeting invitations do not create a triable issue 19 because none indicate Petree did not wait for his former clients 20 to contact him after he joined HUB. Id. at 2-3. Rather these 21 communications “imply some previous conversation.” Id. at 3. 22 Defendants also highlight AJG’s failure to submit any 23 declarations from any client stating Petree contacted them first. 24 Id. From Petree’s declaration and the declarations of nine 25 former AJG client’s corroborating Petree’s declaration, 26 Defendants argue the Court should conclude there is no triable 27 issue. Id. 28 The Court does not so conclude. AJG’s evidence in 1 opposition, see Opp’n at 23-24, is sufficient to create a triable 2 issue as to misappropriation. 3 Lastly, Defendants add that there is no evidence they 4 acquired the client e-mail list by improper means. Mot. at 23- 5 24. Both DTSA and CUTSA require the acquisition of trade secret 6 information to be through “improper means” in order to be 7 actionable; and both define “improper means” as “theft, bribery, 8 misrepresentation, breach or inducement of a breach of a duty to 9 maintain secrecy, or espionage through electronic or other 10 means.” 18 U.S.C. § 1839(6)(A); Cal. Civ. Code. § 3426.1(a). 11 Defendants state Petree acquired the client e-mail list in the 12 course of his employment, and HUB acquired it from Petree in 13 order to send an employment announcement, and contend neither 14 constitute improper means. Mot. at 23-24. To support their 15 position, they cite to two non-binding, out-of-circuit decisions: 16 Packaging Corp. of America, Inc. v. Croner, 419 F.Supp.3d 1059 17 (N.D. Ill. 2020) and Prominence Advisors, Inc. v. Dalton, No. 17 18 C 4369, 2017 WL 6988661 (N.D. Ill. Dec. 18, 2017). These 19 decisions do not persuade the Court summary judgment is 20 warranted, particularly in light of the evidence of improper 21 means AJG brought forward in opposition. See Opp’n at 23-24 22 (summarizing evidence). 23 6. Earnout Payments 24 In three short paragraphs tacked on to the end of their 25 motion and one short paragraph at the end of their reply, 26 Defendants argue they are entitled to summary judgment on the 27 first cause of action pertaining to the Earnout Payments. Mot. 28 at 24-25; Reply at 10. Specifically, Defendants insist the ee ene ene EO OO OO IID

1 EFarnout Payments were a negotiated term of the 2008 Purchase 2 Agreement and were related to Petree’s ability to generate 3 revenue in the first three years of his employment, not to the 4 restrictive covenants. Id. at 25. In other words, the 5 | enforceability of the restrictive covenants has no bearing on the 6 | Earnout Payments. Id. 7 AJG responds to Defendants’ arguments regarding the Earnout 8 Payments in an equally cursory manner. Opp’n at 24-25. Because 9 | the parties have not done this issue “justice by making what is 10 effectively a passing reference to it in their briefs... the Court 11 declines to take it up in that underdeveloped form.” Shen v. 12 Albany Unified Sch. Dist., 3:17-cv-02478-JD, 2018 WL 4053482, at 13 *4 (N.D. Cal. Aug. 24, 2018). Therefore, the Court also denies 14 Defendants’ motion as to the first cause of action. 15 16 Til. ORDER 17 For the reasons set forth above, Defendants’ Motion for 18 Summary Judgment is DENIED. 19 IT IS SO ORDERED. 20 Dated: April 26, 2022 21 kA 22 teiren staves odermacr 7008 23 24 25 26 27 28 22