1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CANTER STRATEGIC WEALTH Case No.: 24-cv-2439-BJC-JLB 12 MANAGEMENT, LLC,
13 Plaintiff, ORDER GRANTING IN PART AND 14 DENYING IN PART DEFENDANTS’ v. MOTIONS TO DISMISS [ECF NOS. 15 17, 18] MICHAEL BERNIER; LPL FINANCIAL, LLC; and DOES 1 to 10, 16 inclusive, 17 Defendants. 18
19 On December 23, 2024, Plaintiff Canter Strategic Wealth Management, LLC 20 (“Canter”) filed this action alleging misappropriation of trade secrets, breach of contract, 21 and state law claims arising from an employment agreement. ECF No. 1. Pending before 22 the Court are Motions to Dismiss the First Amended Complaint filed by Defendants’ 23 Michael Bernier (“Bernier”) and LPL Financial, LLC (“LPL”). ECF Nos. 17, 18. Plaintiff 24 opposed [ECF Nos. 23, 24], and Defendants filed Replies. ECF Nos. 25, 26. For the 25 reasons below, the Defendants’ Motions to Dismiss are GRANTED in part and DENIED 26 in part. 27
28 1 I. Background 2 Plaintiff employed Defendant Bernier as a Senior Wealth Advisor from January 3, 3 2019, until October 23, 2024. ECF No. 15 ¶ 26. When his employment began, Bernier 4 and Plaintiff entered into an Employment Agreement that specified all of his current clients 5 would be transferred to Canter, where Bernier would continue to provide services to them. 6 Id. ¶ 29. In order to do his work, Bernier regularly accessed various kinds of sensitive 7 information pertaining to both his clients and Plaintiff’s general business. Id. ¶ 26-27. 8 Seeking to protect information it considered sensitive, Plaintiff had Bernier sign a 9 “Confidentiality, Non-Solicitation & Non-Disparagement Agreement” (the 10 “Confidentiality Agreement”) that was included in the Employment Agreement. Id. ¶ 37. 11 This agreement required Bernier 12 (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate or make available 13 Confidential Information, or allow it to be disclosed, published, 14 communicated or made available, in whole or part, to any entity or person whatsoever . . . ; and (iii) not to access or use any Confidential Information, 15 and not to copy any documents, records, files, media or other resources 16 containing any Confidential Information, or remove such documents, records, files, media or other resources from the premises or control of Canter, except 17 as required in the performance of [Bernier’s] authorized duties to Canter or 18 with the prior consent of an authorized officer acting on behalf of Canter. 19 Id. ¶ 43(emphasis added). Bernier further “agree[d] and covenant[ed], during one year, to 20 run consecutively, starting on the date of terminating, that [he] w[ould] not use any of 21 Canter’s trade secrets and/or confidential or proprietary information to directly or indirectly 22 solicit the Clients of Canter, or to interrupt, disturb, or interfere with the relationships of 23 Canter with its Clients.” Bernier also agreed to a buyout provision under which Plaintiff 24 would have the right of first refusal to purchase Bernier’s client relationships to retain them 25 as Plaintiff’s clients when Bernier left the company. Id. ¶ 31. 26 On October 23, 2024, Defendant Bernier resigned from his position at Canter and 27 began employment with Defendant LPL. Id. ¶ 54-55. Following Bernier’s departure, 28 Plaintiff began an investigation into Bernier’s activity logs within Plaintiff’s computer 1 systems. Plaintiff alleges it discovered that Bernier improperly accessed and copied 2 Confidential and Proprietary Information (“CP Information”) and Trade Secrets in 3 violation of the Confidentiality Agreement. Id. ¶ 63-64. Plaintiff also alleges that Bernier 4 deleted files containing CP Information and Trade Secrets, and Plaintiff has been unable 5 to recover some of this information. Id. ¶¶ 75, 229. Plaintiff alleges that Bernier used this 6 information to solicit clients, and he harmed its reputation by intentionally manipulating 7 client reports before he left. Id. ¶ 95-99. 8 On December 23, 2024, Plaintiff filed its original Complaint with this Court. ECF 9 No. 1. On February 7, 2025, both Defendants Bernier and LPL filed Motions to Dismiss. 10 ECF Nos. 11, 12. On February 28, 2025, Plaintiff filed a First Amended Complaint 11 (“FAC”), alleging the following claims based on the unauthorized access, copy, and use of 12 its Trade Secrets and CP Information: Claim 1- misappropriation of trade secrets under the 13 Defend Trade Secrets Act, 18 U.S.C. § 1836 (“DTSA”); Claim 2- misappropriation of trade 14 secrets under California’s Uniform Trade Secrets Act, California Civil Code § 3426 15 (“CUTSA”); Claim 3- breach of contract; Claim 4 - engagement in unlawful, unfair, and 16 fraudulent business acts in violation of California Business and Professions Code § 17200 17 (“Section 17200”); Claim 5- intentional interference with prospective economic 18 advantage; Claim 6 - tortious interference with contractual relations; Claim 7- breach of 19 fiduciary duty; Claim 8- breach of the duty of loyalty; Claim 9- refusal to return stolen 20 property in violation of California Penal Code § 496; Claim 10- unauthorized access to 21 Defendant’s digital data in violation of California Penal Code § 502; and Claim 11- 22 conversion. ECF No. 15. 23 On March 14, 2025, Defendants Bernier and LPL filed the present Motions to 24 Dismiss the FAC pursuant to Federal Rule of Civil Procedure 12(b)(6), alleging that the 25 FAC fails to state a claim upon which relief can be granted. ECF No. 17, 18. On April 18, 26 2025, Plaintiff filed Oppositions. ECF Nos. 23, 24. On April 25, 2025, Defendants filed 27 Replies. ECF Nos. 25, 26. 28 // 1 II. Legal Standard 2 A. Federal Rule of Civil Procedure 12(b)(6) 3 Under Federal Rule of Civil Procedure 12(b)(6), a party may file a motion to dismiss 4 on the grounds that a complaint “fail[s] to state a claim upon which relief can be granted.” 5 Fed. R. Civ. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) “tests the legal 6 sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 7 To survive a motion to dismiss, “a complaint must contain sufficient factual matter, 8 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 9 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 10 (2007)); Fed. R. Civ. P. 8(a)(2). “A claim has facial plausibility when the plaintiff pleads 11 factual content that allows the court to draw the reasonable inference that the defendant is 12 liable for the misconduct alleged.” Id. “[D]etermining whether a complaint states a 13 plausible claim is context specific, requiring the reviewing court to draw on its experience 14 and common sense.” Id. at 663-64. “Factual allegations must be enough to raise a right to 15 relief above the speculative level.” Twombly, 550 U.S. at 555. If Plaintiff “ha[s] not 16 nudged [his] claims across the line from conceivable to plausible,” the complaint “must be 17 dismissed.” Id. at 570. The complaint “must contain allegations of underlying facts 18 sufficient to give fair notice and to enable the opposing party to defend itself effectively.” 19 Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). 20 In reviewing the plausibility of a complaint on a motion to dismiss, a court must 21 “accept factual allegations in the complaint as true and construe the pleadings in the light 22 most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 23 519 F.3d 1025, 1031 (9th Cir. 2008). But courts are not “required to accept as true 24 allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable 25 inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (quoting 26 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001)). 27 III. Analysis 28 Defendants contend the FAC must be dismissed for the following reasons: (1) 1 Plaintiff has not alleged a trade secret with sufficient particularity to support a claim under 2 either DTSA or CUTSA; (2) the contract underlying the breach of contract claim is void 3 under California Business and Professions Code § 16600 (“Section 16600”) as an 4 impermissible restraint on trade; (3) Plaintiff’s non-trade secrets causes of action are 5 preempted by CUTSA; (4) Plaintiff fails to plead causation for its non-trade secrets causes 6 of action; (5) Plaintiff fails to allege intentional misconduct for its claims of tortious 7 interference with contractual relations and intentional interference with prospective 8 economic advantage; (6) Plaintiff’s breach of loyalty claim arises out of Defendant’s 9 exercise of his right to secure alternative employment; and (7) Plaintiff fails to allege any 10 wrongdoing against LPL. ECF Nos. 17-1, 18-1. Each argument is addressed in turn below. 11 A. Misappropriation of Trade Secrets 12 Under either DTSA or CUTSA, a claim for trade secret misappropriation must 13 allege: “(1) that the plaintiff possessed a trade secret, (2) that the defendant misappropriated 14 the trade secret; and (3) that the misappropriation caused or threatened damage to the 15 plaintiff.” InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 657-58 (9th Cir. 16 2020); see also CleanFish, LLC v. Sims, 2020 WL 1274991, at *8 (N.D. Cal. Mar. 17, 17 2020) (“The elements of trade secret misappropriation under DTSA and CUTSA are 18 essentially the same”). “[T]he definition of trade secret consists of three elements: (1) 19 information, (2) that is valuable because it is unknown to others, and (3) that the owner has 20 attempted to keep secret.” InteliClear, LLC, 978 F.3d at 657; 18 U.S.C. § 1839(3)(5); see 21 also Cal. Civ. Code § 3426.1(d). In the complaint, a plaintiff must allege a trade secret 22 with “sufficient particularity to separate it from matters of general knowledge in the trade 23 or of special persons who are skilled in the trade, and to permit the defendant to ascertain 24 at least the boundaries within which the secret lies.” Pellerin v. Honeywell Int’l, Inc., 877 25 F. Supp. 2d 983, 988 (S.D. Cal. 2012) (quoting Diodes, Inc. v. Franzen, 260 Cal. App. 2d 26 244, 253 (1968)). 27 Here, Plaintiff asserts that Bernier misappropriated Trade Secrets and CP 28 Information in violation of DTSA and CUTSA. To determine whether Plaintiff has 1 satisfied the first element of the claim, the Court looks to the terms as defined by Plaintiff 2 in the FAC. Trade Secrets are defined as: 3 e customer [sic] profiles, client financial positions and planning strategies, portfolio models and formulations, client lists and corresponding contact 4 information, investment profiles, tax planning analyses, client pricing and 5 related data, and Canter’s marketing, advertising and lead-generations strategies, each of which is sensitive and strategically valuable information 6 that Canter goes to great lengths to protect and which, if disclosed to third 7 parties (or a competitor like LPL), would cause substantial and irreparable harm to Canter. 8 9 FAC ECF No. 15 ¶ 5. CP Information “includes, but is not limited to investment policy 10 statements, external client strategy analyses, external client investment strategies and 11 forecasts, client account statements, personal email correspondences, client documents 12 received, client notes, retirement suitability forms, retirement checklists, and client tax 13 documents.” ECF No. 15 ¶ 4. According to Plaintiff, “Canter maintains its CP Information 14 and Trade Secrets in secure data repositories that are access-restricted, password-protected, 15 and consistently monitored for improper intrusions or access.” Id. ¶ 19. 16 The CP and Trade Secret definitions include several items alleged with sufficient 17 particularity to allow Defendants to “ascertain at least the boundaries within which the 18 secret lies.” Alta Devices, Inc. v. LG Electronics, Inc., 343 F.Supp. 3d 868, 881 (N.D.Cal. 19 Oct. 17, 2018). For instance, included in the definition of Trade Secrets are “client financial 20 positions and planning strategies, portfolio models and formulations” “investment profiles, 21 tax planning analyses, client pricing and related data,” which describe information specific 22 to individual clients that would not be information generally known in the trade or by 23 persons who are skilled in the trade. In addition, the Trade Secret definition includes “client 24 lists and corresponding contact information,” which at this stage in the pleadings is 25 sufficient to state a protected category of information. See Albert’s Organics, Inc. v. 26 Holzman, 445 F.Supp. 3d 463 (N.D.Cal. Mar. 23, 2020)(“Courts have frequently held that 27 customer-related information qualifies as a trade secret, especially if a plaintiff has spent 28 ‘considerable time, effort, and resources,’ in developing some of that information”); see 1 also H.Q. Milton, Inc. v. Webster, 2017 WL 5625929, at *3 (N.D. Cal. Nov. 22, 2017) 2 (finding “customer list and contact information, sales leads, customer interests, and 3 [plaintiff's] proprietary pricing” constituted trade secrets). 4 Similarly, the CP Information definition includes “client account statements, 5 personal email correspondences [sic], client documents received, client notes, retirement 6 suitability forms, retirement checklists, and client tax documents,” all of which are defined 7 with sufficient particularity to put Defendant on notice of what is included. See, e.g., 8 Nextdoor.Com v. Abhyanker, 2013 WL 3802526, at *5-6 (N.D. Cal. July 19, 2013) (finding 9 that even though some items were general, “the list as a whole provided sufficient 10 specificity to give Defendants notice of [Plaintiff]’s allegations, at least at the pleading 11 stage”). The FAC provides additional notice to Defendants regarding the scope of the 12 claims by attaching specific dates for some of the acts of misappropriation, including that 13 “client tax analyses” were stolen on October 11, 22, and 24, 2024. ECF No. 15 ¶ 66, 75. 14 Defendant contends that Plaintiff’s list fails to provide reasonable notice as to the 15 boundaries of Plaintiff’s claim, citing Masimo Corp. v. Apple, 2020 WL 4037213 (C.D. 16 Cal. June 25, 2020), Emazing Lights LLC v. De Oca, 2016 WL 3658945, at *2 (C.D. Cal. 17 Jan. 7, 2016), and Acrisure v. Socal Comm. Ins. Services, 2019 WL 4137618 (C.D. Cal. 18 Mar. 27, 2019) in support. As a primary matter, the cases cited by Defendant are not 19 binding on this Court and are distinguishable. In Emazing Lights, the plaintiff’s trade secret 20 definition in the complaint included highly specific language, such as source code and 21 firmware for named products. Emazing Lights LLC v. De Oca, 2016 WL 3658945, at *2 22 (C.D. Cal. Jan. 7, 2016). However, the definition began with the phrase “include, but are 23 not limited to,” and closed with the phrase “and any other information not publically [sic] 24 and widely known . . . .” Id. The court found that this phrasing created “unlimited reach” 25 not present in any other accepted trade secret definitions. Id. Here, Plaintiff’s Trade Secret 26 definition does not contain this unlimited language. Therefore, Emazing Lights is not 27 instructive. 28 Acrisure is distinguishable because the definition of trade secrets there included 1 broad references to categories of information that did not give an indication of “what 2 specific programs, projects, or contracts are at issue.” 2019 WL 4137618 *3 (emphasis in 3 original). Although the definition of trade secrets in Acrisure contained some of the same 4 categories of information as contained in Plaintiff’s definition of trade secrets, such as 5 customer contact lists, the remainder of the categories of information were broader than 6 the definition here. Therefore, Defendant’s reliance on Acrisure misses the mark. 7 The Trade Secrets and CP Information definitions contain some items that are not 8 specific enough to constitute trade secrets for purposes of the present motion. Included in 9 these categories are: “marketing, advertising and lead-generations strategies,” which do not 10 aid Defendants in distinguishing these items from “matters of general knowledge within 11 the parties’ industry . . . .” See CleanFish, 2020 WL 1274991, at *9. These are “broad 12 categories that would be applicable to any business.” Id. While not required to spell out 13 the details of its marketing and advertising strategies, the FAC does not allege a trade secret 14 in these categories because it does not specify anything about the strategies it claims were 15 stolen. See Mattel, 782 F. Supp. 2d at 967 (“the concept of projecting sales through market 16 research and communication within the company is general, intuitive, and without dispute 17 derives no independent economic value from its secrecy”); Masimo Corp. v. Apple Inc., 18 2020 WL 4037213, at *5 (C.D. Cal. June 25, 2020) (holding that a plaintiff failed to plead 19 a trade secret when it employed broad references to product plans, briefs and technical 20 drawings, “without reference to specific plans, briefs, or drawings”). 21 However, the insufficiency of these categories does not invalidate the finding that 22 Plaintiff has sufficiently asserted protectable trade secrets and the definition is sufficient to 23 survive the notice pleading standard. See Nextdoor.Com, 2013 WL 3802526, at *5-6. 24 Accordingly, Plaintiff has satisfied the first element of a misappropriation of trade secrets 25 claim, i.e. that Plaintiff possessed a trade secret. InteliClear, LLC, 978 F.3d at 657. 26 Plaintiff has also sufficiently alleged the second element of a trade secret 27 misappropriation claim by asserting that Bernier accessed, copied, and deleted Canter’s CP 28 Information and Trade Secrets. ECF No. 15 at ¶ 64. For instance, Plaintiff asserts that 1 “[o]n October 14 and 22, 2024, Bernier “accessed CP Information and Trade secrets 2 concerning certain client tax analyses and printed them out — Canter’s forensic 3 investigation has confirmed that Bernier has retained and continues to use them.” Id. ¶75. 4 The third element is satisfied because Plaintiff asserts that it suffered damage due to 5 Bernier’s use of the misappropriated “CP Information and Trade Secrets he took from 6 Canter to acquire Canter’s clients and unfairly compete with Canter.” Id. ¶ 83. Plaintiff 7 further alleges that Bernier harmed Plaintiff’s reputation in the industry and goodwill 8 among clients and prospective clients “[b]y not sending clients [] complete reports and 9 resigning from Canter,” creating “the impression for such clients that Canter was not a 10 worthy investment adviser.” Id. ¶ 99. 11 Plaintiff has thus advanced a sufficiently pled trade secret misappropriation claim at 12 this stage in the pleadings. Accordingly, Defendants’ motions to dismiss as to this claim 13 are DENIED. 14 B. Breach of Contract 15 A claim for breach of contract requires a plaintiff to allege the following: “(1) the 16 [legally enforceable] contract, (2) plaintiff’s performance or excuse for nonperformance, 17 (3) defendant’s breach, and (4) the resulting damages to plaintiff.” Careau & Co. v. Sec. 18 Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1388 (1990). 19 Under California law, “every contract by which anyone is restrained from engaging 20 in a lawful profession, trade, or business of any kind is to that extent void.” Cal. Bus. & 21 Prof. Code § 16600. However, “a former employee may be barred from soliciting existing 22 customers to redirect their business away from the former employer and to the employee’s 23 new business if the employee is utilizing trade secret information to solicit those 24 customers.” Retirement Grp. v. Galante, 176 Cal. App. 4th 1226, 1237 (2009) (emphasis 25 in original). Thus, a non-solicitation agreement that covers both trade secret and non-trade 26 secret information is enforceable if it prevents an employee from using trade secret 27 information to solicit existing customers. See VibrantCare Rehab., Inc. v. Deol, 2021 WL 28 1614692, at *5 (E.D. Cal. Apr. 26, 2021) (“§ 16600’s ‘to that extent void’ language 1 evidences the legislature[’]s intent to sever invalid portions of contracts.” (emphasis in 2 original)); Hiossen, Inc. v. Kim, 2016 WL 10987365, at *12 (C.D. Cal. Aug. 17, 2016) 3 (invalidating some provisions of a confidentiality agreement that did not rely on trade 4 secrets while enforcing those that did). 5 Here, Defendant Bernier contends that the breach of contract claim is insufficient 6 for two reasons: (1) the Non-Solicitation Agreement is void under California Business & 7 Professions Code section 16600 because it goes beyond the allowable “bounds of 8 protecting Plaintiff’s trade secrets[;]” and (2) the Employment Agreement is void because 9 it includes the Non-Solicitation Agreement and a Buyout clause, which are impermissible 10 restraints on trade. ECF No. 17-1 at 9. 11 1. Legally Enforceable Contract 12 To satisfy the first prong, Plaintiff must sufficiently plead the existence of an 13 enforceable contract. 14 The Court looks to the language of the Agreement to determine its enforceability.1 15 The Confidentiality Agreement clearly states that employees “will not use any of Canter's 16 trade secrets and/or confidential or proprietary information to directly or indirectly solicit 17 the Clients of Canter, or to interrupt, disturb, or interfere with the relationships of Canter 18 with its Clients.” ECF No. 15-2 at 1(emphasis added). Employees are prohibited for one 19 year following termination from using “trade secret information and/or confidential or 20 proprietary information” to recruit other Canter employees. Id. (emphasis added). 21 Here, the agreement is enforceable insofar as it prohibits employees from using 22 trade-secret information to solicit clients from Canter. Defendant Bernier acknowledges 23 that “a restriction as to trade secrets is appropriate” but argues that Plaintiff lists trade 24
25 1 Because the Complaint incorporates by reference the Confidentiality Agreement, the 26 Court may properly consider it in this Rule 12(b)(6) challenge “without converting the 27 motion to dismiss into a motion for summary judgment.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 28 1 secrets as an alternative to confidential information, thereby rendering the provisions—and 2 possibly the entire contract—unenforceable due to its overbreadth. ECF No. 17-1 at 10- 3 11. However, these provisions are enforceable where they are limited to protecting trade 4 secrets. See VibrantCare, 2021 WL 1614692, at *5; Cal. Bus. & Prof. Code § 16600. 5 Conversely, the Agreement is not enforceable regarding the use, disclosure, copying, 6 or removal of non-trade secret information for the solicitation of Plaintiff’s clients or 7 employees. Accordingly, Plaintiff has satisfied the first element of a breach of contract 8 claim: a valid contract.2 9 2. Performance and Breach 10 Plaintiff has satisfied the second element because he claims, and Bernier does not 11 dispute, that Plaintiff has performed, or substantially performed, all of its obligations under 12 the contract. ECF No. 15 ¶ 169. Additionally, Plaintiff satisfied the third element because 13 he sufficiently alleges Defendant breached the Confidentiality Agreement in the following 14 ways: (1) disclosing trade secrets to LPL and other third parties, Id. ¶ 163; (2) copying, 15 retaining, and removing trade secrets, Id.; (3) using trade secrets to solicit clients, Id. ¶ 165; 16 (4) using trade secrets to solicit employees from Plaintiff, Id. ¶ 167. 17 3. Damages 18 As to the fourth element, Plaintiff claims to have suffered damages directly due to 19 Defendants’ conduct, including “the loss of certain confidential information and trade 20 secrets deleted by Bernier, loss of client relationships and revenue, loss of goodwill, loss 21 of reputation, as well as damages sustained in connection with identifying, investigating, 22 [and] attempting to remedy the harm inflicted by Bernier.” Id. ¶ 171. These allegations 23 satisfy the fourth element of a breach of contract claim because they arise from the use or 24 25
26 27 2 Further, Plaintiff may continue to assert a claim that Defendant Bernier deleted files in violation of the Employment Agreement because that allegation is unrelated to restraining 28 1 removal of Plaintiff’s trade secrets or from the solicitation of clients or employees using 2 trade secrets which are enforceable portions of the agreement.3 3 As set forth above, Defendants’ motions to dismiss Plaintiff’s breach of contract claim 4 are GRANTED in part and DENIED in part. 5 C. Preemption 6 Common law claims such as misappropriation, conversion, and unjust enrichment 7 can be preempted by CUTSA if the claims are based upon the same facts underlying claims 8 for misappropriation of a trade secret. Silvaco Data Sys. v. Intel Corp., 184 Cal. App. 4th 9 210, 236 (2010) (quoting Cal. Civ.Code § 3426.7). The underlying aim of CUTSA is “to 10 make uniform the law with respect to the subject of [trade secrets] among states enacting 11 it.” Id. “CUTSA includes a preemption provision that displaces common law and statutory 12 theories of recovery to the extent that they are predicated on the same facts upon which 13 one could assert a claim for misappropriation of trade secrets.” Spring Design, Inc., v. 14 Barnesandnoble.com, LLC, 2010 WL 11607095, *2 (N.D. Cal. April 8, 2010); Gabriel 15 Techs. Corp. v. Qualcomm Inc., 2009 WL 3326631, at *11 (S.D. Cal. Sept. 3, 16 2009)(“Courts have held that where a claim is based on the ‘identical nucleus’ of facts as 17 a trade secrets misappropriation claim, it is preempted by CUTSA”); Cal. Civ. Code § 18 3426.7. Common law claims that arise from “a wrongful taking of information that does 19 not qualify as a trade secret” can also be superseded if the plaintiff does not identify a law 20 protecting the rights.” Heller v. Cepia, LLC, 2012 WL 13572, *7 (N.D. Cal. Jan. 4, 2012). 21 To survive preemption, Plaintiff’s claims must “allege wrongdoing that is materially 22 23 24 3 Defendant Bernier argues in the alternative that the buyout provision of his employment 25 agreement is a de facto restraint on trade that renders the entire contract unenforceable under § 16600. ECF No. 17-1 at 13. However, the buyout provision itself is not the basis 26 of Plaintiff’s breach of contract claim. Moreover, if the buyout provision is unenforceable 27 or illegal under § 16600, it could be severed with no effect on the provisions of the contract in dispute. See VibrantCare, 2021 WL 1614692, at *12. 28 1 distinct from the wrongdoing alleged in a CUTSA claim.” SunPower Corp. v. SolarCity 2 Corp., No. 12-CV-00694-LHK, 2012 WL 6160472, at *9 (N.D. Cal. Dec. 11, 2012). “If 3 the plaintiff identifies no property right outside of trade secrets law, then he has no remedy 4 outside that law, and there is nothing unsound or unjust about holding other theories 5 superseded.” Silvaco, 184 Cal. App. 4th at 239. 6 Defendants contend that CUTSA preempts causes of action 4-11 of the FAC, which 7 cover all non-misappropriation claims except for breach of contract.4 Plaintiff responds 8 that (1) each of the non-trade secret claims is based on independently actionable conduct, 9 such as the misappropriation of confidential information, and (2) preemption should not be 10 decided on a motion to dismiss because it is a fact based inquiry, citing Genasys Inc. v. 11 Vector Acoustics, LLC, 638 F. Supp. 3d 1135, 1155 (S.D. Cal. 2022), Amron Int’l Diving 12 Supply, Inc. v. Hydrolinx Diving Commc’n, Inc., 2011 WL 5025178, at *10 (S.D. Cal. Oct. 13 21, 2011), DJO Global Inc. v. Glader, 2016 WL 11622009, *6 (S.D. Cal. Dec. 22, 2016), 14 and Bryant v. Mattel, Inc., 2010 WL 3705668, at *22 (C.D. Cal. Aug. 2, 2010). ECF No. 15 23 at 27-31. 16 As a primary matter, the preemption issue may be decided on a motion to dismiss. 17 The cases cited by Plaintiff to the contrary are not binding and do not support Plaintiff’s 18 position. For instance, in Genasys Inc., the plaintiff failed to plead a trade secret, so the 19 question of preemption was deferred until one was pled. 638 F. Supp. 3d at 1155. 20 Therefore, this Court follows many other courts that have determined questions of 21 preemption on a motion to dismiss. See MedImpact, 2020 WL 5064253, *16. Accordingly, 22 the Court considers whether causes of action 4-11 rest on factual allegations that are the 23 24 25
26 27 4 The breach of contract claim is not preempted because CUTSA states that contractual remedies are not affected. Cal. Civ. Code § 3426.7(b)(1); Farmers Ins. Exch., 2013 WL 28 1 same as those underlying the misappropriation of trade secrets claims and are preempted 2 by CUTSA.5 3 Here, Claims 4 and 5 are preempted to the extent they are based on the use of trade 4 secrets and confidential information to solicit clients, but they are not preempted regarding 5 allegations that Bernier deleted confidential information, intentionally interfered with 6 contracts and prospective economic advantages, sabotaged client accounts, and solicited 7 clients because the facts underlying these assertions are materially different from the 8 misappropriation of trade secrets. 9 Claim 6 for tortious interference with contractual relations is preempted in its 10 entirety because Plaintiff simply alleges that Bernier “[used] Canter’s CP Information to 11 induce clients to leave Canter and follow Bernier to LPL,” which is “no more than a 12 restatement of the same operative facts” of the trade secrets claim. See Gabriel Techs., 13 2009 WL 3326631, at *11. 14 Claim 7 for breach of fiduciary duty and Claim 8 for breach of the duty of loyalty 15 are not preempted to the extent they allege Bernier “prepar[ed] improper or misleading 16 investment reports to send to Canter’s clients[,]” and “[deleted] Canter’s files from its 17 internal file and data systems . . . .” ECF No. 15 ¶ 201, 203, 208. But they are preempted 18 where they rely on factual allegations that are the same as those supporting the 19 misappropriation claims. See SunPower, 2012 WL 6160472, *6-7. 20 Claim 9, asserting violations of California Penal Code § 496, is preempted because 21 it is based on the same common factual nucleus as the CUTSA claim. See ATS Prods., Inc. 22 23 5 As noted above, claim 4 alleges engagement in unlawful, unfair, and fraudulent business 24 acts in violation of California Business and Professions Code § 17200 (“Section 17200”); 25 Claim 5 alleges intentional interference with prospective economic advantage; Claim 6 alleges tortious interference with contractual relations; Claim 7 alleges breach of fiduciary 26 duty; Claim 8 alleges breach of the duty of loyalty; Claim 9 alleges refusal to return stolen 27 property in violation of California Penal Code § 496; Claim 10 alleges unauthorized access to Defendant’s digital data in violation of California Penal Code § 502; and Claim 11 28 1 v. Champion Fiberglass, Inc., 2015 WL 224815, at *2 (N.D. Cal. Jan. 15, 2015) (discussing 2 preemption of claims under Section 496) 3 Plaintiff alleges that Defendant Bernier “misappropriated Canter’s CP Information 4 by deleting it, downloading, copying, and removing it from Canter’s premises and internal 5 systems[,]” and further has “refused or failed to return Canter’s property . . . .” ECF No. 6 15 ¶¶ 214. 7 Claim 10, asserting violations of California Penal Code § 502, is preempted in part 8 because it is based on allegations that Bernier “knowingly, and without permission, 9 access[ed] Canter’s data, software, computer and/or computer systems. Id. at ¶ 220. As 10 with common law claims, Section 502 claims can be preempted if they are based on the 11 “same common factual nucleus” as a misappropriation claim. Movement Mortg., LLC v. 12 Scrima, 2024 WL 3011202, at *5 (E.D. Cal. June 11, 2024) (discussing preemption of 13 claims under Section 502); Cal. Civ. Code § 3426.7(b) (“This title does not affect . . . 14 criminal remedies, whether or not based upon misappropriation of a trade secret.”). The 15 portion of Claim 10 related to the deletion of files is not preempted because it is more than 16 a mere recitation of the facts of the CUTSA claim. Specifically, Plaintiff alleges a violation 17 of Section 502(c)(5), which addresses the denial of access to an authorized user. Plaintiff 18 appears to be alleging that, due to the deletion of its files, authorized users were unable to 19 access information to which they had a right of access. However, the portion of the Section 20 502 claim that is predicated on the copying of data, as opposed to its deletion, is preempted 21 by CUTSA for the same reasons as the Section 496 claim is preempted. 22 Claim 11 for conversion is not preempted because Plaintiff alleges that Defendants 23 “substantially interfered with Canter’s property, including its CP Information, by 24 intentionally and knowingly deleting CP Information.” Here, Plaintiff does not appear to 25 rely on the misappropriation of the trade secrets information in alleging conversion. 26 Therefore, this claim is not preempted. 27 In summary, the Court finds that Claim 6 for tortious interference with contractual 28 relations and Claim 9 for violation of Cal. Pen. Code § 496 are preempted in their entirety. 1 Further, the following claims are preempted in part, insofar as they rely on the same factual 2 underpinnings of the misappropriation claims: Claim 4 for violation of Cal. Bus. & Prof. 3 Code § 17200; Claim 5 for intentional interference with prospective economic advantage; 4 Claim 7 for breach of fiduciary duty; Claim 8 for breach of the duty of loyalty; and Claim 5 10 for violation of Cal. Pen. Code § 502. Claim 11 for conversion is not preempted. 6 Therefore, the Court GRANTS IN PART AND DENIES IN PART Defendants’ Motions 7 to Dismiss for preemption. 8 D. Defendant Bernier’s Other Arguments for Dismissal 9 Bernier’s final three arguments for dismissal are as follows: (1) Plaintiff fails to 10 plead causation for Claims 4, 5, 7, and 8; (2) Plaintiff fails to allege intentional misconduct 11 necessary for Claim 5; and (3) Claim 8 fails as a matter of law because it relates to Bernier’s 12 right to secure alternative employment. The Court considers the portions of each claim that 13 have not been preempted by CUTSA. 14 First, Defendant Bernier asserts that the claims for unfair business practices, 15 intentional interference with prospective economic advantage, and breach of fiduciary duty 16 or the duty of loyalty each require that the alleged misconduct be the cause of a disruption 17 in a client relationship. ECF No. 17-1 at 20. Bernier argues that, after omitting the conduct 18 involving misappropriation, the only remaining allegations are the ones regarding sabotage 19 using inaccurate reports. Id. at 21. Bernier implies that this allegation is not reasonable 20 enough to meet the pleading standards of Twombly and Iqbal. However, as pled in the 21 FAC, Claims 4, 5, 7, and 8 are not merely based on the sabotage allegations, but also on 22 the allegations regarding the deletion of files. Accepting these allegations as true for 23 purposes of the present motion, the Court finds that Plaintiff has sufficiently pled causation 24 for the damages individually alleged under each claim. ECF No. 15 ¶¶ 179, 189, 204, 209. 25 On a motion to dismiss, Plaintiff needs only plead “factual content that allows the court to 26 draw the reasonable inference that the defendant is liable for the misconduct alleged.” 27 Iqbal, 556 U.S. at 678. Here, the Court finds the facts sufficient for such inference. 28 1 Second, Bernier asserts that Plaintiff provides insufficient facts for the Court to infer 2 an intentional act for the tort of intentional interference with prospective economic 3 advantage. ECF No. 17-1 at 22. On the contrary, Plaintiff alleges that Bernier: (1) “on 4 multiple occasions, excluded the probability of success page from reports for clients whose 5 projected returns indicated a lack of profitability;” (2) “sent reports to clients that had 6 incorrect or missing data;” (3) “failed to send any report to many other clients who should 7 have received them;” (4) “destroyed some of [Canter’s CP] information as Canter has not 8 been able to recover at least some of the files.” ECF No. 15 ¶¶ 96-98, 229. The Court 9 finds that both the claims asserting that Bernier undermined Plaintiff’s reputation and the 10 deletion allegations in the FAC are sufficient to infer an intentional act. Reeves v. Hanlon, 11 33 Cal. 4th 1140, 1152 n.6 (2004) (“[A] plaintiff must plead and prove . . . the defendant’s 12 intentional acts designed to disrupt the relationship . . . .”) Similarly, Plaintiff’s claims that 13 Bernier provided incomplete reports to clients are pled with sufficient particularity to state 14 a plausible claim that this was done with the purpose of harming Canter’s reputation. See 15 Iqbal, 556 U.S. at 678. 16 Third, Bernier asserts that Plaintiff’s breach of loyalty claim fails as a matter of law 17 because its allegations go no further than making preparations for new employment. ECF 18 No. 17-1 at 23. A breach of the duty of loyalty requires action going beyond “seeking other 19 employment or making preparations to create a competitive corporation to compete with 20 his or her employer.” Youngevity Int’l v. Smith, 2018 WL 4691272, * (S.D. Cal. Sept. 28, 21 2018). Here, however, the claims asserting “sabotage” and deletion of data go far beyond 22 mere preparation and are “inimical to the best interests of the employer.” See Stokes v. 23 Dole Nut Co., 41 Cal. App. 4th 285, 295 (1995). Therefore, Plaintiff’s breach of loyalty 24 claim is sufficient to state a claim that is plausible on its face. For the foregoing reasons, 25 the Court DENIES Defendants’ motions to dismiss any claims due to issues of causation, 26 inference of an intentional act, or failure as a matter of law. 27 // 28 // 1 E. Failure to Allege Wrongdoing by Defendant LPL 2 Defendant LPL additionally argues that Plaintiff has failed to allege any wrongdoing 3 against it. ECF No. 18-1 at 3-6. Plaintiff responds that the allegations are sufficient to 4 meet the notice pleading standard because a basis for its allegations is inferable through 5 circumstantial evidence. ECF No. 24 at 10. The Court agrees with Plaintiff that the 6 allegations are sufficient to survive a motion to dismiss. In attempting to meet the Iqbal 7 pleading standard, a plaintiff is permitted to make allegations upon information and belief 8 “where the facts are peculiarly within the possession and control of the defendant or where 9 the belief is based on factual information that makes the inference of culpability plausible.” 10 Soo Park v. Thompson, 851 F. 3d 910, 928 (9th Cir. 2017) (quoting Arista Records, LLC 11 v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010)). However, “mere conclusory statements[] do 12 not suffice” to support a claim. Iqbal, 556 U.S. at 678. 13 Plaintiff alleges that LPL knowingly participated in Bernier’s use of trade secrets to 14 steal Canter’s clients and that LPL used trade secrets to recruit two employees of Canter. 15 ECF No. 15 ¶¶ 83, 124. In support, Plaintiff asserts that Bernier’s investment advisor 16 registration was transferred to LPL the same day he resigned from Canter, which “could 17 not have been accomplished without malice aforethought and knowing coordination.” Id. 18 ¶¶ 2, 57. He further claims that the speed with which Bernier’s clients were transferred to 19 LPL was much faster than the industry standard. Id. ¶ 59. Finally, Plaintiff states that LPL 20 publicly announced its intent to take Bernier’s clients from Canter. Id. ¶ 87. 21 Accepting these allegations as true and construing them in the light most favorable 22 to Plaintiff, each of the allegations state a claim for relief that is plausible because of the 23 circumstantial evidence alleged, thus putting Defendant LPL on notice of the claims against 24 it. See Starr, 652 F.3d at 1216. Because further facts demonstrating LPL’s potential 25 involvement with Bernier’s alleged misappropriation are “peculiarly within the possession 26 and control of the defendant,” Plaintiff’s otherwise conclusory allegations are sufficiently 27 supported by circumstantial evidence to allow the claims to proceed, despite Defendant 28 LPL’s argument to the contrary. See Soo Park, 851 F. 3d at 928. l IV. Conclusion and Order 2 For the foregoing reasons, the Court GRANTS Defendants’ motions to dismiss 3 ||Claims 6 and 9; GRANTS IN PART AND DENIES IN PART Defendants’ motions to 4 || dismiss Claims 3, 4, 5, 7, 8, and 10; and DENIES Defendants’ motion to dismiss Claims 5 |} 1, 2, and 11. Plaintiff is GRANTED leave to amend its Complaint. Plaintiff may file a 6 || Second Amended Complaint no later than June 30, 2026. 7 IT IS SO ORDERED 8 Dated: May 28, 2026 9 10 oq Gar Cb A fu 11 12 Honorable Benjamin J. Cheeks United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28