Elevation Point 2 Inc. v. Gukasyan

• Court: District Court, S.D. California
• Decided: February 3, 2022
• Docket: 3:21-cv-00281
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ELEVATION POINT 2 INC. dba Case No.: 21-cv-00281-WQH-AHG ELEVATION HEALTH PARTNERS, a 12 California corporation, ORDER 13 Plaintiff, 14 v. 15 STELLA GUKASYAN, an individual; 16 MARC NELLES, an individual, 17 Defendants. 18 HAYES, Judge: 19 The matter before the Court is the Motion to Dismiss the First Amended Complaint 20 (ECF No. 20) filed by Defendants Stella Gukasyan and Marc Nelles. 21 I. PROCEDURAL BACKGROUND 22 On February 16, 2021, Plaintiff Elevation Point 2 Inc. dba Elevation Health Partners 23 (“EHP”) filed a Complaint against Defendants Stella Gukasyan and Marc Nelles. (ECF 24 No. 1). The Complaint alleged that Defendants conspired to delete data and programs 25 owned by EHP and contained on a computer issued to Gukasyan after EHP notified 26 Gukasyan that her employment would be terminated. The Complaint brought a single 27 28 1 federal claim—violation of the Consumer Fraud and Abuse Act of 1986 (“CFAA”), 18 2 U.S.C. § 1030—as well as several claims under California state law. 3 On March 16, 2021, Defendants filed a Motion to Dismiss the Complaint for failure 4 to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 5). 5 On May 28, 2021, the Court issued an Order granting the Motion to Dismiss on the basis 6 that the Complaint failed to “identify any subsection of the CFAA allegedly violated by 7 Defendants” and that the exercise of supplemental jurisdiction over the remaining state law 8 claims was inappropriate. (ECF No. 9 at 5-6). 9 On July 8, 2021, EHP filed a Motion for Leave to File an Amended Complaint. 10 (ECF No. 13). On August 31, 2021, the Court issued an Order granting the motion. (ECF 11 No. 18). On September 3, 2021, EHP filed the First Amended Complaint (“FAC”). (ECF 12 No. 19). 13 On September 16, 2021, Defendants filed a Motion to Dismiss the FAC. (ECF No. 14 20). On October 8, 2021, EHP filed an Opposition in response to the Motion to Dismiss. 15 (ECF No. 21). On October 18, 2021, Defendants filed a Reply. (ECF No. 22). On October 16 22, 2021, EHP filed an Objection to Reply and Extrinsic Evidence. (ECF No. 23). 17 II. ALLEGATIONS IN THE FAC 18 Plaintiff EHP is a health care consulting company that “contract[s] with health care 19 providers and organizations to improve the quality of their services and standards of care . 20 . . .” (ECF No. 19 ¶ 10). Defendant Gukasyan was employed by EHP to conduct research, 21 consulting, and coaching. Gukasyan was “issued a laptop computer to assist her in 22 performing her job duties” that was utilized “to conduct interstate or foreign commerce via 23 connection to the internet.” (Id. ¶¶ 13-14). The computer’s hard drive contained 24 “numerous sensitive files and data belonging to [EHP],” including client lists and contact 25 information, research, scripts, exercises, trainings, and other work product. (Id. ¶ 14). 26 Gukasyan “expressly agreed in writing that all work performed, and work product created 27 as an employee of [EHP], belonged to the company.” (Id. ¶ 41). 28 1 “On or around September 18, 2019, [ ] Gukasyan was informed that she would be 2 terminated as of September 27, 2019.” (Id. ¶ 15). EHP notified Gukasyan that “she was 3 not authorized to copy, delete or otherwise tamper with electronic information belonging 4 to [EHP].” (Id.). “On or about September 23, 2019, [ ] Gukasyan informed [EHP] that she 5 was taking a permanent medical leave of absence, effective immediately.” (Id. ¶ 16). EHP 6 acknowledged receipt of Gukasyan’s medical leave notice, informed Gukasyan that her 7 access to company documents and files would be removed, turned off her access to 8 electronic data, and requested that Gukasyan make arrangements for returning her 9 computer. 10 Gukasyan returned the computer “on or about September 30, 2019.” (Id. ¶ 18). The 11 hard drive of the computer had been “completed deleted of all data,” including “factory 12 installed and after-market programs and files, including [EHP’s] data, files and 13 information.” (Id.). “The action and complex processes required to permanently delete 14 the laptop’s entire hard drive, required a knowing and intentional act” and was “undertaken 15 after [Gukasyan] went on Medical Leave, when she was no longer authorized to access or 16 utilize the computer, or the data contained on its hard drive.” (Id. ¶ 20). 17 Defendant Nelles “conspired with, aided, abetted and assisted [ ] Gukasyan in 18 deleting the data contained on the laptop, destroying software on the laptop and taking data 19 which belongs to [EHP].” (Id. ¶ 21). Nelles “is technically savvy, and based on comments 20 made previously by [ ] Gukasyan would have been the person to show how to and assist [ 21 ] Gukasyan in deleting the data on the laptop, including wiping the hard drive clean.” (Id.). 22 “At no time was [ ] Nelles authorized to access” the computer or its data. (Id.). 23 Defendants deleted the data “with the specific intent to destroy [EHP’s] data, insure 24 [sic] that it could not be recovered, prevent a smooth transition of project work, and thereby 25 cause [EHP] injury.” (Id. ¶ 22). Defendants also “obtained data from the laptop prior to 26 the deletion, by making copies of the data or otherwise storing such data in another 27 electronic medium.” (Id.). “By destroying the data belonging to [EHP], [ ] Gukasyan 28 breached her contract with [EHP].” (Id. ¶ 42). 1 The lost data includes client lists and leads, as well as two years of research work, 2 the recreation of which required “hundreds of hours” of work. (Id. ¶ 24). EHP “expended 3 significant time and resources in an effort to recover and/or investigate the deleted data.” 4 (Id. ¶ 25). EHP’s loss exceeded $5,000 within a one-year period. Gukasyan also failed to 5 return “various materials and physical supplies,” “whose replacement costs are estimated 6 to be in excess of $2,000.” (Id. ¶¶ 26-27). 7 EHP brings the following claims against Defendants: (1) violation of § 1030(a)(2) 8 of the CFAA against both Defendants; (2) violation of § 1030(a)(4) of the CFAA against 9 both Defendants; (3) violation of § 1030(a)(5)(A) of the CFAA against both Defendants; 10 (4) violation of § 1030(a)(5)(B) and (C) of the CFAA against both Defendants; (5) breach 11 of contract against Gukasyan; (6) conversion against both Defendants; (7) negligence 12 against both Defendants; (8) violation of subsections (c)(1), (c)(2), (c)(4), and (c)(7) of 13 California’s Comprehensive Computer Data Access and Fraud Act (“CCDAFA”), Cal. 14 Penal Code § 502, against both Defendants; and violation of California’s Unfair 15 Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, et seq., against both 16 Defendants. EHP seeks compensatory, statutory, and punitive damages, declaratory and 17 injunctive relief, restitution and disgorgement, and attorneys’ fees and costs.1 18 III. LEGAL STANDARD 19 Rule 12(b)(6) of the Federal Rules of Civil Procedure permits dismissal for “failure 20 to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In order to 21 22 23 1 Defendants request incorporation by reference of Exhibits A, B, and C to the Motion to Dismiss. “Generally, the scope of review on a motion to dismiss for failure to state a claim is limited to the contents 24 of the complaint.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). “A court may consider evidence 25 on which the complaint ‘necessarily relies’ if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 26 12(b)(6) motion.” Id. The FAC does not necessarily rely on or refer to any of the three documents. The Court denies Defendants’ request for incorporation by reference of the exhibits attached to the Motion to 27 Dismiss. Defendants also request incorporation by reference of Exhibits 1 and 2 to their Reply. The Court denies Defendants’ request for incorporation by reference of these exhibits because they were not attached 28 1 state a claim for relief, a pleading “must contain . . . a short and plain statement of the claim 2 showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Dismissal under 3 Rule 12(b)(6) “is proper only where there is no cognizable legal theory or an absence of 4 sufficient facts alleged to support a cognizable legal theory.” Shroyer v. New Cingular 5 Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (quoting Navarro v. Block, 250 6 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 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 10 “A claim has facial plausibility when the plaintiff pleads factual content that allows the 11 court to draw the reasonable inference that the defendant is liable for the misconduct 12 alleged.” Id. “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to 13 relief’ requires more than labels and conclusions, and a formulaic recitation of the elements 14 of a cause of action will not do.” Twombly, 550 U.S. at 555 (second alteration in original) 15 (quoting Fed. R. Civ. P. 8(a)). 16 IV. DISCUSSION 17 CFAA Claims 18 Plaintiff EHP brings four causes of action under the CFAA, which establishes civil 19 liability for conduct concerning computers that are “used in or affecting interstate or 20 foreign commerce or communication.” 18 U.S.C. § 1030(e)(2). EHP’s first claim is for 21 violation of subsection (a)(2), which establishes liability for any person that “intentionally 22 accesses a computer without authorization or exceeds authorized access, and thereby 23 obtains . . . information from any protected computer.” Id. § 1030(a)(2). The second claim 24 is for violation of subsection (a)(4), which establishes liability for any person that 25 “knowingly and with intent to defraud, accesses a protected computer without 26 authorization, or exceeds authorized access, and by means of such conduct furthers the 27 intended fraud and obtains anything of value, unless the object of the fraud and the thing 28 obtained consists only of the use of the computer and the value of such use is not more than 1 $5,000 in any 1-year period.” Id. § 1030(a)(4). The third claim is for violation of 2 subsection (a)(5)(A), which establishes liability for any person that “knowingly causes the 3 transmission of a program, information, code, or command, and as a result of such conduct, 4 intentionally causes damage without authorization, to a protected computer.” Id. § 5 1030(a)(5)(A). The fourth claim is for violation of subsections (a)(5)(B) and (C), which 6 establish liability for any person that “intentionally accesses a protected computer without 7 authorization, and as a result of such conduct, recklessly causes damage; or [ ] intentionally 8 accesses a protected computer without authorization, and as a result of such conduct, causes 9 damage and loss.” Id. § 1030(a)(5)(B) and (C). 10 Defendants contend that each of the causes of action contained in the FAC 11 impermissibly incorporate the FAC’s statement of facts common to all causes of action, 12 and that “Defendants should not be forced to guess what facts” support each claim. (ECF 13 No. 20 at 16). EHP contends that the use of incorporation by reference of common facts 14 in the FAC’s causes of action is permissible. 15 A complaint’s extensive use of incorporation by reference of a common set of facts 16 to several distinct claims may be impermissible if such use makes it difficult for a defendant 17 to identify the factual basis for each claim. The FAC in this case incorporates its statement 18 of facts common to all causes of action into each claim. The section of the FAC that states 19 the facts common to all causes of action is approximately five pages in length. Each claim 20 brought by EHP is related to the same underlying conduct—Defendant’s alleged deletion 21 of information contained on the computer issued to Gukasyan. The Court is unable to 22 conclude that it is difficult for Defendants to understand or respond to EHP’s allegations 23 such that dismissal is appropriate. See, e.g., TV Ears, Inc. v. Joyshiya Dev. Ltd., No. 20- 24 cv-1708-WGH-BGS, 2021 WL 5396111, at *13 (S.D. Cal, Nov. 18, 2021) (permitting 25 incorporation by reference where claims have a common factual basis). 26 Plaintiffs’ claims against Nelles are premised in part on the theory that he “conspired 27 with, aided, abetted and assisted [ ] Gukasyan in deleting the data on the laptop, destroying 28 software on the laptop and taking data which belongs to [EHP].” (ECF No. 19 ¶ 21). 1 Defendants contend that the allegations in the FAC against Nelles are conclusory and 2 speculative, and that Nelles’ liability as a co-conspirator is not pled with sufficient factual 3 particularity. EHP contends that the FAC adequately alleges direct and co-conspirator 4 liability for Nelles. 5 Numerous courts have held that specific allegations of an agreement and common 6 activities are required to plead a conspiracy under the CFAA. See, e.g., NetApp, Inc. v. 7 Nimble Storage, Inc., 41 F. Supp. 3d 816, 835 (N.D. Cal. 2014); Cool Runnings Int’l Inc. 8 v. Gonzalez, No. 21-cv-974-DAD-HBK, 2021 WL 5331453, at *13 (E.D. Cal. Nov. 16, 9 2021). The FAC’s only factual allegations specific to Nelles are: (1) that he “has facility 10 with and is knowledgeable regarding computers” (ECF No. 19 ¶ 12); (2) that he is 11 “technically savvy and [that] based on comments made previously by Defendant 12 Gukasyan, [Nelles] would have been the person to show how to and assist [ ] Gukasyan in 13 deleting the data on the laptop, including wiping the hard drive clean” (Id. ¶ 21); and (3) 14 that he was not authorized to access the computer or its data. The FAC provides 15 insufficient factual content beyond a “formulaic recitation of the elements of a cause of 16 action,” Twombly, 550 U.S. at 555, to plausibly support a conspiracy theory of liability 17 against Nelles. However, because the FAC also alleges that Nelles directly participated in 18 the deletion of EHP’s data, dismissal of the claims against Nelles based solely on EHP’s 19 failure to adequately plead the elements of a conspiracy is inappropriate. 20 Defendants contend that Gukasyan is not liable under the CFAA because she was 21 authorized to access the computer and the information contained within it until her 22 termination. Defendants contend that an employee’s use of a computer contrary to the 23 interests of their employer does not violate the CFAA. Defendants contend that the FAC’s 24 factual allegations are insufficient to support the CFAA claims brought under 18 U.S.C. § 25 1030(a)(5)(A)-(C) and that “pressing a ‘delete’ key” does not qualify as a transmission 26 under 18 U.S.C. § 1030(a)(5)(A). (ECF No. 22 at 6). 27 EHP contends that Gukasyan’s authorization to access the computer was rescinded 28 by its communication with her after Gukasyan informed EHP that she would be on 1 permanent medical leave. EHP contends that 18 U.S.C. § 1030(a)(5)(A) does not require 2 unauthorized access. EHP contends that it pled sufficient facts to support its CFAA causes 3 of action. 4 To bring an action under subsections (a)(2) or (a)(4) of the CFAA, the plaintiff must 5 show that the defendant accessed the computer without authorization or exceeding the 6 authorization that was granted. See 18 U.S.C. § 1030(a)(2) and (4); LVRC Holdings LLC 7 v. Brekka, 581 F.3d 1127, 1132 (9th Cir. 2009). Subsections (a)(5)(B) and (C) require 8 access without authorization. See 18 U.S.C. § 1030(a)(5)(B) and (C). Under the CFAA, 9 “an employer gives an employee ‘authorization’ to access a company computer when the 10 employer gives the employee permission to use it.” LVRC Holdings, 581 F.3d at 1133. 11 “[W]hen an employer authorizes an employee to use a company computer subject to certain 12 limitations, the employee remains authorized to use the computer even if the employee 13 violates those limitations” or “resolves to use the computer contrary to the employer's 14 interest.” Id. “[A] person who ‘intentionally accesses a computer without authorization[]’ 15 accesses a computer without any permission at all, while a person who ‘exceeds authorized 16 access[]’ has permission to access the computer, but accesses information on the computer 17 that the person is not entitled to access.” Id. (quoting 18 U.S.C. § 1030(a)(2) and (4)) 18 (citations omitted). 19 The FAC alleges that Defendant Gukasyan was employed by EHP and was “issued 20 a laptop computer to assist her in performing her job duties.” (ECF No. 19 ¶ 13). The 21 FAC alleges that “[o]n or around September 18, 2019, [ ] Gukasyan was informed that she 22 would be terminated as of September 27, 2019” (Id. ¶ 15). The FAC alleges that EHP 23 notified Gukasyan that “she was not authorized to copy, delete or otherwise tamper with 24 electronic information belonging to [EHP].” (Id.). The FAC alleges that “[o]n or about 25 September 23, 2019, [ ] Gukasyan informed [EHP] that she was taking a permanent 26 medical leave of absence, effective immediately.” (Id. ¶ 16). The FAC alleges that EHP 27 acknowledged receipt of Gukasyan’s medical leave notice, informed Gukasyan that her 28 access to company documents and files would be removed, turned off her access to 1 electronic data, and requested that Gukasyan make arrangements for returning the 2 computer. The FAC alleges that “[a]t no time was [ ] Nelles authorized to access” the 3 computer or its data. (Id. ¶ 21). The FAC alleges that Defendants permanently deleted the 4 contents of the computer’s hard drive “after [Gukasyan] went on Medical Leave . . . .” (Id. 5 ¶ 20). 6 The FAC’s allegations support a “common sense” inference that EHP rescinded 7 permission for Gukasyan to access the computer prior to her termination when EHP 8 acknowledged receipt of Gukasyan’s notice, informed Gukasyan that her access to 9 company documents and files would be removed, turned off her access to electronic data, 10 and requested that Gukasyan make arrangements for returning the computer. United States 11 v. Nosal, 844 F.3d 1024, 1029 (9th Cir. 2016) (stating that authorization for an employee 12 was withdrawn when “the company revoked his computer access credentials, even though 13 he remained for a time as a contractor”); see Erhart v. BofI Holding, Inc., 387 F. Supp. 3d 14 1046, 1059 (S.D. Cal. 2019) (“Although Erhart may have initially had authorization to use 15 his company-issued laptop, BofI alleges it informed Erhart that it had not, and would not, 16 authorize him to keep physical possession of his BofI issued-laptop during his leave of 17 absence. The Bank also repeatedly requested the return of Erhart's BofI issued-laptop for 18 safekeeping while he was on a leave of absence. BofI therefore allegedly rescinded 19 permission to access the computer, making Erhart's future use unauthorized.” (quotations 20 and citations omitted)). The FAC alleges sufficient facts to support an inference that at the 21 time Defendants allegedly deleted the contents of the computer’s hard drive, neither 22 Defendant was authorized to access the computer. 23 Subsection (a)(5)(A) of the CFAA requires a knowing transmission “of a program, 24 information, code, or command” that intentionally causes damage without authorization. 25 18 U.S.C. § 1030(a)(5)(A). Unlike the other provisions of the CFAA at issue in this case, 26 there is no requirement that the defendant access the computer. The FAC alleges that 27 Defendants deleted the data on the computer “with the specific intent to destroy [EHP’s] 28 data, insure [sic] that it could not be recovered, prevent a smooth transition of project work, 1 and thereby cause [EHP] injury.” (ECF No. 19 ¶ 22). Deletion of data on a computer 2 involves the transmission of a program, information, code, or command to the computer. 3 The FAC adequately alleges facts to support an inference that Defendants acted knowingly 4 and intentionally, and transmitted a program, information, code, or command to the 5 computer. 6 Defendants contend that the FAC fails to adequately allege a damage or loss and that 7 there was no damage or loss because data and work product was not stored on the 8 computer’s hard drive. EHP contends that it pled sufficient facts to support its allegations 9 of damage or loss. EHP contends that factual disputes are inappropriate for resolution on 10 a motion to dismiss. 11 The CFAA provides that “[a]ny person who suffers damage or loss by reason of a 12 violation of this section may maintain a civil action against the violator to obtain 13 compensatory damages and injunctive relief or other equitable relief.” 18 U.S.C. § 14 1030(g). Under the CFAA, damage is defined as “any impairment to the integrity or 15 availability of data, a program, a system, or information.” Id. § 1030(e)(8). Loss is defined 16 as “any reasonable cost to any victim, including the cost of responding to an offense, 17 conducting a damage assessment, and restoring the data, program, system, or information 18 to its condition prior to the offense, and any revenue lost, cost incurred, or other 19 consequential damages incurred because of interruption of service.” Id. § 1030(e)(11). 20 The conduct must involve “loss to 1 or more persons during any 1-year period . . . 21 aggregating at least $5,000 in value.”2 Id. § 1030(c)(4)(A)(i)(I). Damages are limited to 22 economic damages. See id. § 1030(g). 23 The FAC alleges that the hard drive of the computer had been “completed deleted 24 of all data,” including “factory installed and after-market programs and files, including 25 26 27 2 The CFAA provides that “[a] civil action for a violation of this section may be brought only if the conduct involves 1 of the factors set forth in subclauses (I), (II), (III), (IV), or (V) of subsection 28 1 [EHP’s] data, files and information.” (ECF No. 19 ¶ 18). The FAC alleges that the deleted 2 data included client lists and leads, as well as two years of research work, the recreation of 3 which required “hundreds of hours” of work. (Id. ¶ 24). The FAC alleges that EHP also 4 “expended significant time and resources in an effort to recover and/or investigate the 5 deleted data.” (Id. ¶ 25). The FAC alleges that EHP’s loss exceeded $5,000 within a one- 6 year period. These factual allegations are sufficient to support an inference that EHP’s 7 data and programs were impaired and that such impairment resulted in costs to EHP in 8 excess of $5,000. Defendants’ contention that the data was not destroyed because it was 9 not located on the computer’s hard drive raises a factual dispute not appropriate for 10 resolution on a motion to dismiss. The Motion to Dismiss as to EHP’s CFAA claims is 11 denied. 12 CCDAFA Claim 13 The FAC brings a claim for violation of four provisions of the CCDAFA. 14 Defendants contend that this claim should be dismissed “for the same reasons” as the 15 CFAA claims. (ECF No. 20 at 24). Defendants’ Motion to Dismiss the CCDAFA claim 16 is denied. 17 Breach of Written Contract 18 Under California law, “the elements of a cause of action for breach of contract are 19 (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, 20 (3) defendant's breach, and (4) the resulting damages to the plaintiff.” Oasis W. Realty, 21 LLC v. Goldman, 51 Cal. 4th 811, 821 (2011). Gukasyan contends that EHP fails to plead 22 that a contract existed or was breached because “[a] contract was not attached to the FAC, 23 nor did Plaintiff plead the material terms of the contract in the FAC, or the provision of the 24 contract [ ] Gukasyan allegedly breached.” (ECF No. 20 at 21). EHP contends that the 25 contract is the Employment Handbook that Gukasyan signed, and that the FAC alleges the 26 material portions of the handbook. EHP contends that its ownership of the data on the 27 computer is also required by statute, and that “[a] contract is not necessary to make this 28 so.” (ECF No. 21 at 19). Gukasyan responds that the handbook is not a contract. 1 In an action for breach of a written contract, the plaintiff must allege the provision 2 of the contract which supports their claim. See Miron v. Herbalife Int’l, Inc., 11 Fed. Appx. 3 927, 929 (9th Cir. 2001). This does not require that the plaintiff attach the contract to the 4 complaint or recite the contract’s terms verbatim. See Misha Consulting Grp., Inc. v. Core 5 Educ. and Consulting Sols., Inc., No. C-13-4262-RMW, 2013 WL 6073362, at *1 (N.D. 6 Cal. Nov. 15, 2013) (stating that most district courts have come to the same conclusion). 7 The FAC alleges that “Gukasyan expressly agreed in writing that all work performed, and 8 work product created as an employee of Elevation Health Partners, belonged to the 9 company” and that “by destroying the data belonging to [EHP], [ ] Gukasyan breached her 10 contract with [EHP].” (ECF No. 19 ¶¶ 41-42). The FAC alleges facts to support the 11 existence of a contract. 12 The sole contractual term described in the FAC establishes EHP’s ownership of the 13 computer’s data. However, it does not impose an obligation on Gukasyan to refrain from 14 deleting EHP’s data. As a result, the FAC’s factual allegations do not support an inference 15 that the alleged contract was breached. The Motion to Dismiss as to EHP’s claim for 16 breach of written contract is granted. 17 Conversion 18 The elements of conversion are (1) a plaintiff’s ownership or right to possession of 19 personal property; (2) a defendant’s disposition of property in a manner inconsistent with 20 the plaintiff’s rights, and (3) damages. See Voris v. Lampert, 7 Cal. 5th 1141, 1150 (2019). 21 Defendants contends that the FAC does not differentiate between tangible and intangible 22 property and fails to allege any identifiable personal property to which EHP has a right of 23 ownership. EHP contends that California law provides that EHP owns the data on the 24 computer and that a plaintiff “need not separate out personal property, as conversion in fact 25 applies to both intangible and tangible property.” (ECF No. 21 at 20). 26 The FAC alleges that the computer’s hard drive contained “numerous sensitive files 27 and data belonging to [EHP],” including client lists and contact information, research, 28 scripts, exercises, trainings, and other work product. (ECF No. 19 ¶ 14). The FAC alleges 1 that Defendants injured EHP by intentionally deleting data contained on the computer’s 2 hard drive. The FAC alleges that EHP’s loss exceeded $5,000 within a one-year period 3 and that Gukasyan also failed to return “various materials and physical supplies,” “whose 4 replacement costs are estimated to be in excess of $2,000.” (Id. ¶¶ 26-27). 5 Under California law, “[e]verything which an employee acquires by virtue of his 6 employment, except the compensation which is due to him from his employer, belongs to 7 the employer, whether acquired lawfully or unlawfully, or during or after the expiration of 8 the term of his employment.” Cal. Lab. Code § 2860. Conversion can encompass claims 9 regarding intangible interests. See Welco Elecs., Inc. v. Mora, 223 Cal. App. 4th 202, 213 10 (2014); Erhart, 387 F. Supp. 3d at 1060. The factual allegations support an inference that 11 EHP owned the physical materials and supplies, as well as the data contained on the 12 computer’s hard drive, and that Defendants’ destruction and withholding of EHP’s 13 property injured EHP. The Motion to Dismiss as to EHP’s claim for conversion is denied. 14 Negligence 15 “An action in negligence requires a showing that the defendant owed the plaintiff a 16 legal duty, that the defendant breached the duty, and that the breach was a proximate or 17 legal cause of injuries suffered by the plaintiff.” Ann M. v. Pac. Plaza Shopping Ctr., 6 18 Cal. 4th 666, 673 (1993). Defendants contend that the FAC fails to allege facts that 19 establish the elements of a negligence claim, including the existence of a duty. EHP 20 contends that the FAC states a claim for negligence and that its negligence claim is 21 supported by California Labor Code Section 2865. Defendants respond that the Labor 22 Code section cited by EHP provides an employer with a right to indemnity, and is not 23 applicable to this case. 24 “Every person is bound, without contract, to abstain from injuring the person or 25 property of another, or infringing upon any of his or her rights.” Cal. Civ. Code § 1708. 26 Defendants had a duty to not delete EHP’s data. The FAC alleges that Defendants injured 27 EHP by intentionally deleting EHP’s data. This factual allegation supports an inference 28 1 that Defendants breached their duty, causing injury to EHP. The Motion to Dismiss as to 2 EHP’s negligence claim is denied. 3 UCL Claim 4 California’s Unfair Competition Law prohibits “any unlawful, unfair or fraudulent 5 business act or practice.” Cal. Bus. & Prof. Code § 17200. “The UCL's purpose is to 6 protect both consumers and competitors by promoting fair competition in commercial 7 markets for goods and services.” Kasky v. Nike, Inc., 27 Cal. 4th 939, 949 (2002). 8 “Because Business & Professions Code § 17200 is written in the disjunctive, it establishes 9 three varieties of unfair competition—acts or practices which are unlawful, or unfair, or 10 fraudulent.” Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 11 (1999). A practice is “unlawful” if it violates other laws. Kasky, 27 Cal. 4th at 949 (2002). 12 A practice is “fraudulent” if “members of the public are likely to be deceived.” Davis v. 13 HSBC Bank Nev., N.A., 691 F.3d 1152, 1169 (9th Cir. 2012). The “unfair” prong of the 14 UCL prohibits “practice[s] [that] may be deemed unfair even if not specifically proscribed 15 by some other law.” Cel-Tech Commc’ns, 20 Cal. 4th at 180. 16 Defendants contend that the UCL claim should be dismissed for a lack of factual 17 basis and because it is predicated on other improperly pled claims. Defendants contend 18 that the UCL is not applicable because the parties are not business competitors. EHP 19 contends that Defendants’ actions were unfair and that the FAC alleges numerous illegal 20 or unfair business practices that can serve as predicates for an unlawful-prong UCL claim. 21 The Court has determined that the FAC states claims for multiple violations of 22 federal and California state law that may serve as predicates for an unlawful-prong UCL 23 claim. The dispute in this case is related to the commercial activities of EHP that Gukasyan 24 was employed to perform and that were allegedly impaired by Defendants’ conduct. See 25 Erhart, 387 F. Supp. 3d 1059-60 (describing how a similar CFAA claim could serve as a 26 predicate for a UCL violation); cf. That v. Alders Maint. Assn., 206 Cal. App. 4th 1419, 27 1427 (“A[] [homeowners] association does not participate as a business in the commercial 28 market, much less compete in it. The dispute here is not related to any activity that might 1 deemed in the least bit commercial. Indeed, it is solely related to the conduct of 2 || association elections .... We do not foreclose entirely the notion that the UCL could apply 3 ||to an association. If, for example, an association decided to sell products or services . . ., 4 might be liable for such acts under the UCL.”). Defendants’ alleged conduct is plausibly 5 actionable under the unlawful prong of the UCL.* The Motion to Dismiss as to EHP’s 6 claim is denied. 7 || V. CONCLUSION 8 IT IS HEREBY ORDERED that the Motion to Dismiss the FAC (ECF No. 20) filed 9 || by Defendants Stella Gukasyan and Marc Nelles is granted in part and denied in part. The 10 || motion is granted as to the breach of contract claim against Defendant Stella Gukasyan and 11 otherwise denied. No later than thirty (30) days from the date of this Order, Plaintiff 12 Elevation Point 2 Inc. dba Elevation Health Partners may file any motion for leave to 13 |}amend. 14 || Dated: February 3, 2022 BE: eg Ze. A a 15 Hon, William Q. Hayes 16 United States District Court 17 18 19 20 21 22 23 24 25 26 27 || ———___—_—_—- 28 || The Court does not reach the UCL’s unfair or fraudulent prongs.