E.D.C. Technologies, Inc. v. Seidel

225 F. Supp. 3d 1058, 2016 WL 7102731, 2016 U.S. Dist. LEXIS 169330
District Court, N.D. California·Decided December 6, 2016·No. Case No. 16-cv-03316-SI·Published·Cited by 2 cases

Opinion

ORDER ON PLAINTIFF’S SPECIAL MOTION TO STRIKE AND MOTION TO DISMISS

Re: Dkt. No. 55

SUSAN ILLSTON, United States District Judge

Now before the Court is plaintiff E.D.C. Technologies, Inc.’s special motion to strike and dismiss defendant Jim Sei-del’s fourth and fifth counterclaims and defendant Seidel Associates LLC d/b/a GreenBox Energy’s first through third counterclaims. Dkt. No. 55. This motion is scheduled to be heard on December 9, 2016. Pursuant to Civil Local Rule 7—1(b), the Court determines that this matter is appropriate for resolution without oral argument and VACATES the hearing. For the reasons set forth below, the Court will DENY plaintiffs motion to strike and DENY plaintiffs motion to dismiss.

BACKGROUND

Plaintiff E.D.C. Technologies, Inc. (“EDC”) is the creator of an internet-based hot water management system that allows customers to remotely monitor, configure, and actively manage their hot water systems. See First Amend. Compl. (“FAC”) (Dkt. No. 33) ¶¶ 16,18. Defendant Jim Seidel is EDC’s former Vice President of Sales and Marketing. Id. ¶¶ 1, 5. Defendant Seidel Associates, LLC d/b/a Green-Box Energy (“GreenBox”) is a competing business Seidel allegedly created while employed by EDC. Id. ¶¶ 8-9, 79. Defendant Jason Pavlos is EDC’s former lead operations technician. Id. ¶¶ 6, 58.

EDC alleges that, while still employed with the company, Seidel and Pavlos developed GreenBox using EDC’s technology and resources. Id. ¶ 85. EDC alleges that Seidel and Pavlos met with EDC customers and used EDC products to demonstrate service features the two were developing in competition with EDC. Id. EDC alleges that it fired both Seidel and Pavlos when the company learned of these, and other, actions. Id. ¶¶ 82, 86.

In this lawsuit, EDC sues Seidel, Seidel Associates, GreenBox, and Pavlos, alleging [1062] federal question jurisdiction pursuant to the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and the Stored Communications Act, 18 U.S.C. §§ 2701, 2707 (Counts 1-2). EDC also brings various California state law causes of action (Counts 3-10), including claims for intentional interference with contractual relations and intentional interference with prospective economic advantage.

Seidel and GreenBox each assert counterclaims against EDC. See Dkt. Nos. 39, 40. According to Seidel and GreenBox, Sei-del voluntarily resigned from EDC and sought to “develop a revolutionary new product[,] .... a completely different control and monitoring system from EDC’s .,.GreenBox Countercl. (Dkt. No. 39) ¶ 7. Seidel maintains that he did not steal or use any of EDC’s proprietary information and that GreenBox developed its unique product in collaboration with a third-party. Id. ¶¶,8-10. Seidel and Green-Box claim that they never contacted or pursued EDC customers; they allegedly only work with two former EDC customers, and only because these customers contacted Seidel directly when EDC was unable to meet their product requests.' Id. ¶¶ 13-14.

In July 2016, EDC management sent various emails to current and prospective EDC customers, contractors, and developers, describing certain factual allegations in this lawsuit in an apparent effort to prevent losing business. See id. ¶ 17; Decl. Wathen (Dkt. No. 55-1), Exs. A-D. Seidel and GreenBox allege that EDC knowingly included false information in these emails—such as the fact that Seidel was terminated (he claims to have resigned), that Seidel was an EDC shareholder (he claims that he was not), and that Seidel stole EDC trade secrets and customers (he claims that he did not); and they bring causes of action arising from the false communications. GreenBox Countercl. ¶¶ 17-43; Seidel Countercl. ¶¶ 64-79. EDC makes the instant motion to strike and dismiss the Seidel and GreenBox counterclaims that arise from the customer emails: (1) Seidel’s fourth counterclaim for defamation; (2) Seidel’s fifth counterclaim for intentional interference with prospective economic advantage; (3) GreenBox’s first counterclaim for intentional interference with contractual relations; (4) Green-Box’s second counterclaim for intentional interference with prospective economic advantage; and (5) GreenBox’s third counterclaim for trade libel. See Mot. (Dkt. No. 55).

LEGAL STANDARD

I. Anti-SLAPP (Cal. Civ. Proc. Code § 425.16)

The California Legislature passed California Civil Procedure Code section 425.16 to address “a disturbing increase” in Strategic Lawsuits Against Public Participation (“SLAPPs”), or suits brought “primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances.” Cal. Civ. Proc. Code § 425.16(a). Section 425.16 permits defendants (or counterclaim defendants) to bring a “special motion to strike” if a cause of action against them arises “from any act ... in furtherance of the person’s right of petition or free speech' ... in connection with a public issue[.]” Id. § 425.16(b)(1), (h). A special motion to strike under section 425,16 is commonly referred to as an anti-SLAPP motion.

In order, to prevail on an anti-SLAPP motion, the movant must first make a prima facie showing, through the pleadings themselves and supporting affidavits, that the statement or conduct underlying the legal claims against it quali-[1063] fíes for protection under the anti-SLAPP statute. Id. § 425.16(b); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1110 (9th Cir. 2003). The burden then shifts to the non-moving party to demonstrate a probability of prevailing on the challenged claims. Cal. Civ. Proc. Code § 425.16(b)(1); Vess, 317 F.3d at 1110.

The California Legislature expressly intended that section 425.16 ‘Tie construed broadly” in protection of the public interest. Cal. Civ. Proc. Code § 425.16(a). Although it is a state statute, a party may bring an anti-SLAPP motion to strike state-law claims in federal court. Vess, 317 F.3d at 1109 (citing United States ex. rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 970-73 (9th Cir. 1999) (holding that there is no direct conflict between the Federal Rules and §§ 425.16(b) and (c), and that adopting California procedural rules serves the purposes of the Erie doctrine)).

II. Motion to Dismiss (Fed. R. Civ. P. 12(b)(6))

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E.D.C. Technologies, Inc. v. Seidel, 225 F. Supp. 3d 1058, 2016 WL 7102731, 2016 U.S. Dist. LEXIS 169330 (N.D. Cal. 2016).

225 F. Supp. 3d 1058 (E.D.C. Technologies, Inc. v. Seidel) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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