1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 MANPREET GILL, 10 Case No. 24-cv-02366-RS Plaintiff, 11 v. ORDER GRANTING IN PART AND 12 DENYING IN PART MOTION TO MARSH USA, INC., DISMISS AND GRANTING IN PART 13 AND DENYING IN PART MOTION TO Defendant. STRIKE 14
15 I. INTRODUCTION 16 Plaintiff Manpreet Gill (“Gill”) filed this action against his former employer, Defendant 17 Marsh USA, LLC (“Marsh”), averring that Marsh forced Gill to enter into illegal contracts while 18 employed at Marsh. Marsh, in turn, filed five counterclaims against Gill, which Gill now moves to 19 dismiss. Gill separately seeks to strike Marsh’s request for attorney’s fees and first affirmative 20 defense of unclean hands. For the reasons set forth herein, Gill’s motion to dismiss the 21 counterclaims is granted in part and denied in part, with leave to amend. Additionally, the motion 22 to strike is granted in part and denied in part, without leave to amend. 23 II. BACKGROUND 24 Marsh is an insurance and risk management services limited liability company (“LLC”) 25 incorporated in Delaware. Prior to his resignation in March of 2024, Gill worked at Marsh for 26 nearly 20 years. His last role at the company was Managing Director of the Communications, 27 Media, and Technology Practice Leader for the Western United States Region. Following his 1 resignation, Gill accepted a similar role at Lockton, a brokerage firm and Marsh’s competitor. 2 Trevor Smith, Gill’s colleague at Marsh, resigned on the same day and now similarly works at 3 Lockton. 4 Gill contends that, prior to his resignation, he informed Marsh’s clients about his 5 impending departure, providing them with his personal contact information should they have 6 lingering questions. In Marsh’s view, Gill’s conduct in the months leading up to his departure 7 amounted to impermissible solicitation of Marsh’s clients on Lockton’s behalf. As examples, 8 Marsh recounts that Gill emailed clients directly without copying his colleagues and shifted client 9 communications from emails to direct telephone calls; insisted that he be copied on client emails 10 regardless of context; joined client meetings he normally did not; took credit for his colleagues’ 11 work; and entertained clients excessively in the months leading up to his departure, all with the 12 purported intention of ingratiating himself with those clients. Marsh also bases its counterclaims 13 on Gill’s purported failure both to renew existing client renewal contracts by not responding to at 14 least one client’s request for proposals (“RFP”) and to seek new business or clients on Marsh’s 15 behalf, saving those business opportunities, instead, for Lockton. Gill’s pre-departure meetings 16 with clients are also characterized as efforts to inform them of his move to Lockton before 17 notifying Marsh, which Marsh maintains were efforts by Gill to solicit those clients for Lockton 18 while still employed at Marsh. This purportedly resulted in several of Marsh’s active and potential 19 accounts moving to Lockton following Gill’s resignation, as well as at least one employee. 20 III. LEGAL STANDARD 21 A. Motion to Dismiss 22 A complaint must be “a short and plain statement of the claim showing that the pleader is 23 entitled to relief.” Fed. R. Civ. P. 8(a)(2). While “detailed factual allegations” are not required, a 24 complaint must have sufficient factual allegations to state a claim that is “plausible on its face.” 25 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). A claim is facially plausible “when the plaintiff pleads factual content that allows the 26 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. 27 1 (citing Twombly, 550 U.S. at 556). This asks for “more than a sheer possibility that a defendant 2 has acted unlawfully.” Id. 3 A Rule 12(b)(6) motion to dismiss tests the sufficiency of the claims alleged in the 4 complaint. Dismissal under Rule 12(b)(6) may be based on either the “lack of a cognizable legal 5 theory” or on “the absence of sufficient facts alleged under a cognizable legal theory.” See 6 Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (internal quotation marks and 7 citation omitted). When evaluating such a motion, the court must accept all material allegations in 8 the complaint as true and construe them in the light most favorable to the non-moving party. In re 9 Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1140 (9th Cir. 2017). It must also “draw all 10 reasonable inferences in favor of the nonmoving party.” Usher v. City of Los Angeles, 828 F.2d 11 556, 561 (9th Cir. 1987). 12 B. Motion to Strike 13 A court “may strike from a pleading an insufficient defense or any redundant, immaterial, 14 impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “[T]he function of a 12(f) motion to 15 strike is to avoid the expenditure of time and money that must arise from litigating spurious issues 16 by dispensing with those issues prior to trial.” SidneyVinstein v. A.H. Robins Co., 697 F.2d 880, 17 885 (9th Cir.1983). 12(f) motions are “generally regarded with disfavor because of the limited 18 importance of pleading in federal practice, and because they are often used as a delaying tactic.” 19 Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1152 (C.D. Cal. 2003). However, an 20 affirmative defense may be stricken as insufficient if it does not give the opponent “fair notice” of 21 the defense or if it is immaterial, i.e., has “no possible bearing on the subject of the litigation.” 22 Wyshak v. City Nat'l Bank, 607 F.2d 824, 827 (9th Cir. 1979; Platte Anchor Bolt, Inc. v. IHI, Inc., 23 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004) (citations omitted). Unless it would prejudice the 24 opposing party, courts freely grant leave to amend stricken pleadings. Wyshak, 607 F.2d at 826; 25 see also Fed. R. Civ. P. 15(a)(2). 26 27 1 IV. DISCUSSION 2 A. Motion to Dismiss 3 1. Breach of Fiduciary Duty 4 Marsh first avers that Gill breached his fiduciary duties by ingratiating himself with 5 Marsh’s clients in the hopes of gaining their business for Lockton while still employed at Marsh. 6 The viability of this counterclaim first turns on the choice of law under which the claim arises, and 7 the parties dispute whether Delaware or California law is applicable. Marsh contends that California law governs this claim because it does not arise out of a failure or breach related to the 8 actual governance of the company. Gill, by contrast, argues that California’s “internal affairs 9 doctrine” dictates that a breach of fiduciary duty claim such as this one is “subject to the laws of 10 the state of incorporation.” Davis & Cox v. Summa Corp., 751 F.2d 1507, 1527 (9th Cir. 1985), 11 overruled on other grounds by Mattel, Inc. v. MGA Ent., Inc., 705 F.3d 1108, 1110 (9th Cir. 12 2013).
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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 MANPREET GILL, 10 Case No. 24-cv-02366-RS Plaintiff, 11 v. ORDER GRANTING IN PART AND 12 DENYING IN PART MOTION TO MARSH USA, INC., DISMISS AND GRANTING IN PART 13 AND DENYING IN PART MOTION TO Defendant. STRIKE 14
15 I. INTRODUCTION 16 Plaintiff Manpreet Gill (“Gill”) filed this action against his former employer, Defendant 17 Marsh USA, LLC (“Marsh”), averring that Marsh forced Gill to enter into illegal contracts while 18 employed at Marsh. Marsh, in turn, filed five counterclaims against Gill, which Gill now moves to 19 dismiss. Gill separately seeks to strike Marsh’s request for attorney’s fees and first affirmative 20 defense of unclean hands. For the reasons set forth herein, Gill’s motion to dismiss the 21 counterclaims is granted in part and denied in part, with leave to amend. Additionally, the motion 22 to strike is granted in part and denied in part, without leave to amend. 23 II. BACKGROUND 24 Marsh is an insurance and risk management services limited liability company (“LLC”) 25 incorporated in Delaware. Prior to his resignation in March of 2024, Gill worked at Marsh for 26 nearly 20 years. His last role at the company was Managing Director of the Communications, 27 Media, and Technology Practice Leader for the Western United States Region. Following his 1 resignation, Gill accepted a similar role at Lockton, a brokerage firm and Marsh’s competitor. 2 Trevor Smith, Gill’s colleague at Marsh, resigned on the same day and now similarly works at 3 Lockton. 4 Gill contends that, prior to his resignation, he informed Marsh’s clients about his 5 impending departure, providing them with his personal contact information should they have 6 lingering questions. In Marsh’s view, Gill’s conduct in the months leading up to his departure 7 amounted to impermissible solicitation of Marsh’s clients on Lockton’s behalf. As examples, 8 Marsh recounts that Gill emailed clients directly without copying his colleagues and shifted client 9 communications from emails to direct telephone calls; insisted that he be copied on client emails 10 regardless of context; joined client meetings he normally did not; took credit for his colleagues’ 11 work; and entertained clients excessively in the months leading up to his departure, all with the 12 purported intention of ingratiating himself with those clients. Marsh also bases its counterclaims 13 on Gill’s purported failure both to renew existing client renewal contracts by not responding to at 14 least one client’s request for proposals (“RFP”) and to seek new business or clients on Marsh’s 15 behalf, saving those business opportunities, instead, for Lockton. Gill’s pre-departure meetings 16 with clients are also characterized as efforts to inform them of his move to Lockton before 17 notifying Marsh, which Marsh maintains were efforts by Gill to solicit those clients for Lockton 18 while still employed at Marsh. This purportedly resulted in several of Marsh’s active and potential 19 accounts moving to Lockton following Gill’s resignation, as well as at least one employee. 20 III. LEGAL STANDARD 21 A. Motion to Dismiss 22 A complaint must be “a short and plain statement of the claim showing that the pleader is 23 entitled to relief.” Fed. R. Civ. P. 8(a)(2). While “detailed factual allegations” are not required, a 24 complaint must have sufficient factual allegations to state a claim that is “plausible on its face.” 25 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). A claim is facially plausible “when the plaintiff pleads factual content that allows the 26 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. 27 1 (citing Twombly, 550 U.S. at 556). This asks for “more than a sheer possibility that a defendant 2 has acted unlawfully.” Id. 3 A Rule 12(b)(6) motion to dismiss tests the sufficiency of the claims alleged in the 4 complaint. Dismissal under Rule 12(b)(6) may be based on either the “lack of a cognizable legal 5 theory” or on “the absence of sufficient facts alleged under a cognizable legal theory.” See 6 Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (internal quotation marks and 7 citation omitted). When evaluating such a motion, the court must accept all material allegations in 8 the complaint as true and construe them in the light most favorable to the non-moving party. In re 9 Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1140 (9th Cir. 2017). It must also “draw all 10 reasonable inferences in favor of the nonmoving party.” Usher v. City of Los Angeles, 828 F.2d 11 556, 561 (9th Cir. 1987). 12 B. Motion to Strike 13 A court “may strike from a pleading an insufficient defense or any redundant, immaterial, 14 impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “[T]he function of a 12(f) motion to 15 strike is to avoid the expenditure of time and money that must arise from litigating spurious issues 16 by dispensing with those issues prior to trial.” SidneyVinstein v. A.H. Robins Co., 697 F.2d 880, 17 885 (9th Cir.1983). 12(f) motions are “generally regarded with disfavor because of the limited 18 importance of pleading in federal practice, and because they are often used as a delaying tactic.” 19 Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1152 (C.D. Cal. 2003). However, an 20 affirmative defense may be stricken as insufficient if it does not give the opponent “fair notice” of 21 the defense or if it is immaterial, i.e., has “no possible bearing on the subject of the litigation.” 22 Wyshak v. City Nat'l Bank, 607 F.2d 824, 827 (9th Cir. 1979; Platte Anchor Bolt, Inc. v. IHI, Inc., 23 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004) (citations omitted). Unless it would prejudice the 24 opposing party, courts freely grant leave to amend stricken pleadings. Wyshak, 607 F.2d at 826; 25 see also Fed. R. Civ. P. 15(a)(2). 26 27 1 IV. DISCUSSION 2 A. Motion to Dismiss 3 1. Breach of Fiduciary Duty 4 Marsh first avers that Gill breached his fiduciary duties by ingratiating himself with 5 Marsh’s clients in the hopes of gaining their business for Lockton while still employed at Marsh. 6 The viability of this counterclaim first turns on the choice of law under which the claim arises, and 7 the parties dispute whether Delaware or California law is applicable. Marsh contends that California law governs this claim because it does not arise out of a failure or breach related to the 8 actual governance of the company. Gill, by contrast, argues that California’s “internal affairs 9 doctrine” dictates that a breach of fiduciary duty claim such as this one is “subject to the laws of 10 the state of incorporation.” Davis & Cox v. Summa Corp., 751 F.2d 1507, 1527 (9th Cir. 1985), 11 overruled on other grounds by Mattel, Inc. v. MGA Ent., Inc., 705 F.3d 1108, 1110 (9th Cir. 12 2013). 13 “In a diversity case, federal courts apply the substantive law of the forum in which the 14 court is located, including the forum’s choice of law rules.” Downing v. Abercrombie & Fitch, 265 15 F.3d 994, 1005 (9th Cir. 2001) (internal quotations omitted). California has adopted the internal 16 affairs doctrine, a choice of law principle that requires the laws of a business entity’s state of 17 incorporation to govern matters concerning its internal affairs, i.e., those “matters peculiar to the 18 relationships among or between the corporation and its current officers, directors, and 19 shareholders.” Edgar v. MITE Corp., 457 U.S. 624, 645 (1982); State Farm Mut. Auto. Ins. Co. v. 20 Superior Ct., 114 Cal. App. 4th 434, 442 (2003); Cal. Corp. Code § 17708.01(a)(1) (“The law of 21 the state . . . under which a foreign limited liability company is formed governs all of the 22 following: The organization of the limited liability company, its internal affairs, and the authority 23 of its members and managers.”). 24 In Davis & Cox, the Ninth Circuit held that “claims involving ‘internal affairs’ of 25 corporations, such as the breach of fiduciary duties, are subject to the laws of the state of 26 incorporation.” 751 F.2d at 1527. An exception to the internal affairs doctrine applies “where, with 27 1 respect to the particular issue, some other state has a more significant relationship to the parties 2 and the transaction…there is no reason why corporate acts involving the making of contracts, the 3 commission of torts and the transfer of property should not be governed by the local law of 4 different states.” Lidow v. Superior Ct., 206 Cal. App. 4th 351, 360 (2012). The applicability of 5 the exception turns on whether the claim implicates some “vital statewide interests.” Id. at 362. 6 Marsh argues that the internal affairs doctrine is inapplicable because the particular breach 7 it avers is unrelated to a matter of “actual governance” of the company, and instead concerns 8 Gill’s purported diversion of corporate opportunities. See Medimpact Healthcare Sys., Inc. v. 9 IQVIA, 646 F. Supp. 3d 1266, 1278-79 (S.D. Cal. 2022). In Medimpact, the court held that the 10 breach of fiduciary duty claim, which concerned the misappropriation of trade secrets, fell outside 11 of the internal affairs of the company because the averments underlying the claim in that case did 12 not implicate corporate governance, “such as the election/appointment of directors or officers, 13 issues related to by-laws, issuance of corporate shares, holding of meetings, voting, right to 14 examine records, or reclassification of shares.” Id. at 1278. 15 California Corporations Code § 17708.01(a) does not limit the internal affairs of a 16 company to matters related to its actual governance. Medimpact, too, should not be read to limit 17 the internal affairs doctrine simply to such matters. Rather, the weight of authority counsels that 18 breach of fiduciary duty claims are typically considered within the ambit of a company’s internal 19 affairs. See, e.g., In re Verisign, Inc., Derivative Litig., 531 F. Supp. 2d 1173, 1214-15 (N.D. Cal. 20 2007). As articulated in Lidow, the exception to the internal affairs doctrine applies when the party 21 advancing the claim implicates a broader state interest or external affairs such as tort or contract 22 disputes. In Medimpact, the vital state interest tied to the breach of fiduciary duty claim was the 23 misappropriation of trade secrets, circumstances absent here. Marsh has not plead how the 24 averments attached to this counterclaim, including Gill’s client communications and his general 25 practices vis-à-vis his colleagues, implicate any vital California interest such that the exception to 26 the internal affairs doctrine is applicable. Nor has Marsh explained why California has a more 27 significant relationship to the parties than Delaware, other than that Gill’s alleged misconduct 1 occurred in California. The site of the alleged misconduct cannot alone form the basis for deciding 2 which state’s law applies – following that logic would collapse the internal affairs doctrine 3 entirely. 4 Applying Delaware law to this claim, the question then arises whether Gill owed Marsh 5 any fiduciary obligations. LLCs are “creatures of contract” in that they may modify, expand, or 6 otherwise alter the default fiduciary duties owed by the company or its members. See In re Atlas 7 Energy Res., LLC, No. CIV.A. 4589-VCN, 2010 WL 4273122, at *6 (Del. Ch. Oct. 28, 2010). 8 Absent a contractual provision making such an alteration, an LLC’s managers and controlling 9 members in a manager-managed LLC owe the “traditional fiduciary duties that directors and 10 controlling shareholders in a corporation would.” Kelly v. Blum, 2010 WL 629850 (Del. Ch. Feb. 11 24, 2010). Delaware courts have typically imposed “no fiduciary duties on non-managing, non- 12 controlling members of [LLCs].” While Marsh avers that Gill “participated in the management 13 functions of Marsh and exercised discretionary authority,” Countercl. ¶ 73, Marsh has failed to 14 aver whether Gill was a manager or controlling member at Marsh or if a contractual provision 15 imposing fiduciary duties on Gill exists. Absent specific averments resolving these questions, 16 Marsh’s breach of fiduciary duty claim fails under Delaware law. 17 2. Breach of Duty of Loyalty 18 A breach of duty of loyalty claim requires “(1) the existence of a relationship giving rise to 19 a duty of loyalty; (2) one or more breaches of that duty; and (3) damage proximately caused by 20 that breach.” Huong Que, Inc. v Luu, 150 Cal. App. 4th 400, 410 (2007). Under California law, 21 “an employee, while employed, owes undivided loyalty to his employer.” Id. at 414. Gill does not 22 propose that he owed no duty of loyalty to Marsh, but instead seeks to dismiss this claim on the 23 basis that his former employer pleads neither any breaches of that duty nor that its harm was 24 proximately caused by Gill’s purported breach. 25 “While California law does permit an employee to seek other employment and even to 26 make some ‘preparations to compete’ before resigning, California law does not authorize an 27 employee to transfer his loyalty to a competitor. During the term of employment, an employer is 1 entitled to its employees’ undivided loyalty.” Fowler v. Varian Associates, Inc., 196 Cal. App. 3d 2 34, 41 (1987). Gill contends that his communications with clients prior to his departure were 3 intended merely to notify them of his change in employment, rather than to solicit their business 4 for Lockton, and were therefore lawful. The clients repeatedly confirmed that Gill met with them 5 to inform them of his impending move. Gill also challenges Marsh’s allegations that he reached 6 out increasingly to clients to schedule communications and meetings prior to leaving. Gill is 7 correct that these averments alone do not establish that he was attempting to solicit those clients 8 improperly. However, Gill wrongly isolates those averments. 9 In fact, Marsh pleads sufficient circumstantial evidence, which, viewed in totality, leads to 10 the plausible inference that Gill sought to solicit wrongfully those clients for Lockton. Marsh 11 largely contends that, in addition to his communications with clients, Gill began taking steps to 12 ingratiate himself with Marsh’s clients near the end of his employment – steps he had not taken in 13 the past, including joining client meetings he typically would not, taking credit for his colleagues’ 14 work, and wining and dining clients increasingly. He also moved client communications from 15 email or test messages to calls he conducted independently.1 All this Gill did while purportedly 16 failing to renew existing client contracts, with the alleged intention that clients would leave Marsh 17 and join Gill at Lockton – conduct that plausibly constitutes a transfer of loyalty to Lockton prior 18 to his departure. Gill’s improper narrowing of Marsh’s averments as simply complaining of Gill’s 19 work quality fails to persuade. 20 Marsh has also adequately plead that its injury was proximately caused by Gill’s actions. 21 Specifically, Marsh averred that Gill atypically slowed the client renewal process down so that 22
23 1 Gill contends that Marsh is in possession of his work phone so should be able to determine 24 whether his communications with clients entail more than mere notifications of his impending departure. Gill’s work phone was returned to the company upon Gill’s departure. However, Gill 25 claimed to forget the password after he resigned, so Marsh is unable to retrieve his communications with clients. While Gill’s inability to recall the passcode occurred purportedly 26 after he had already departed Marsh, so cannot serve as a basis to show he breached his duty of loyalty, Marsh similarly cannot be faulted for failing to investigate Gill’s phone when its contents 27 are inaccessible. 1 clients would not be under contract with Marsh when he moved to Lockton. After Gill left Marsh, 2 those clients moved to Lockton as well. While Gill may argue that those clients’ departure was 3 caused not by any breach on Gill’s part but simply their desire to continue working with an 4 individual they valued (or, rather, their independent desire to engage with Lockton), at this 5 juncture, that need not be accepted as true. Accordingly, Marsh’s breach of duty of loyalty 6 counterclaim has been plausibly plead. 7 3. Tortious Interference with Active and Prospective Business Relations 8 The third counterclaim advanced by Marsh suggests that Gill tortiously interfered with its 9 active business relations, providing the examples of three of Marsh’s clients, Client A, Client J, 10 and Client I, all of whom had existing business relationships with Marsh before switching to 11 Lockton. Similarly, the fourth counterclaim pleads tortious interference with Marsh’s prospective business client, focusing only on Gill’s purported failure to pursue the RFP with Client A. 12 Under California law, to state a claim for either tortious interference with business 13 relations or for prospective business advantage, a party must show: 14 15 (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; 16 (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) 17 actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. 18 TransWorld Airlines, Inc. v. Am. Coupon Exch., Inc., 913 F.2d 676, 689 (9th Cir. 1990); see also 19 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1153 (2003). In addition, a party 20 advancing tortious interference with a prospective economic advantage must also plead that the 21 interference was “wrongful by some measure beyond the fact of the interference itself.” CRST Van 22 Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099, 1108 (9th Cir. 2007) (citing to Della 23 Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 392-93 (1995)). Gill does not address 24 all factors but contends that Marsh’s tortious interference claims fail because it has failed to plead 25 plausibly that he intentionally interfered with Marsh’s business relations, and because Gill’s 26 conduct, to the extent it was wrongful, was not independent of the interference. 27 Gill first attacks three “buckets” of acts raised in Marsh’s counterclaims that the latter 1 contends evince tortious interference. The first relates to Gill’s purported practice of “siloing 2 communication to himself, involving himself in accounts he previously had not, taking credit for 3 colleagues’ work, and delaying client renewal meetings.” Countercl. ¶ 94. Gill argues that this 4 does not resemble conduct intended to disrupt Marsh’s business relationships and that these 5 actions cannot be said to have caused Client A, J, and I’s departures from Marsh. Second, Gill 6 challenges Marsh’s claim that Gill acted wrongfully by failing to finalize a client services 7 agreement (“CSA”) with Client A in a timely manner before departure, arguing that Gill’s 8 purported inaction to deliver a message to a client cannot constitute tortious interference. Finally, 9 Gill maintains that Marsh has not averred plausibly that Gill solicited Marsh’s clients on 10 Lockton’s behalf. As such, Gill argues, Marsh has not plead any independent acts of interference. 11 Gill’s attempt to characterize his affirmative actions and omissions as mere inaction fails to 12 persuade. As explained above, Marsh has plead at least plausibly that Gill’s actions, in totality 13 may constitute solicitation of Marsh’s clients for Lockton in breach of Gill’s duty of loyalty to 14 Marsh. Similarly, here, the wrongful conduct may constitute tortious interference with Marsh’s 15 business relations with A, J, and I, who all eventually transferred their business to Lockton. 16 Further, while Gill’s failure to pursue Client A’s RFP in a timely fashion could be construed as 17 mere inaction that does not rise to the level of tortious interference, Marsh has sufficiently plead 18 otherwise at this juncture. Indeed, Marsh contends that Gill interfered tortiously with its 19 prospective business relations with Client A by the independent act of delaying its response to 20 Client A’s RFP, causing Marsh considerable loss. Accordingly, these claims survive Gill’s 21 motion. 22 4. UCL 23 “California’s UCL prohibits unfair competition by means of any unlawful, unfair or 24 fraudulent business practice. Each prong of the UCL is a separate and distinct theory of liability.” 25 Birdsong v. Apple, Inc., 590 F.3d 955, 959 (9th Cir. 2009) (quoting Cal. Bus. & Prof. Code § 26 17200). Marsh avers that Gill’s conduct, as plead in averments attendant to its foregoing counterclaims, was unlawful or unfair in violation of the UCL. 27 1 Gill challenges Marsh’s UCL claim on the basis that it has failed to aver any unlawful or 2 unfair behavior in violation of the UCL. The Ninth Circuit has explained that in order for a party 3 to plead a violation of California’s UCL under its “unlawful” prong, “a common law violation 4 such as breach of contract is insufficient.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1044 (9th Cir. 2010). Instead, a business practice “forbidden by law, be it civil or criminal, 5 federal, state, or municipal, statutory, regulatory, or court-made” must be the predicate for a UCL 6 claim brought under the unlawful prong. Id. (quoting Saunders v. Superior Ct., 27 Cal. App. 4th 7 832, 838–39 (1994)). A common law violation may be a basis for a UCL claim if the alleged 8 conduct is also unlawful, unfair, or fraudulent. Id. (internal citation omitted). Marsh does not 9 dispute that its counterclaims concern common law violations only but argues nonetheless that its 10 breach of duties of loyalty and tortious interference claims still constitute UCL violations.2 11 While Marsh has provided no authority to support the notion that a breach of duty of 12 loyalty claim may be based upon a UCL violation under the unlawful prong, the opposite is true 13 for its tortious interference claims. In CRST Van Expedited, Inc., the Ninth Circuit held that a 14 tortious interference with contractual relations claim may be actionable under the UCL. See 479 15 F.3d at 1107. However, that case pre-dated Shroyer, and the weight of authority since suggests 16 that a UCL violation brought under the “unlawful” prong may not be predicated on common law 17 violations alone. See Foundry IV Inc. v. Hard Carry Gaming Inc., No. CV 23-2690-KK-MARx, 18 2024 WL 211010 at *6-7 (C. D. Cal. Jan. 3, 2024) (collecting cases). Marsh’s attempt to cabin 19 Shroyer to only some common law violations (without even specifying which) fails to persuade. 20 Marsh’s UCL claim fails for the independent reason that it has failed to plead the 21 appropriate remedy. “Injunctive relief and restitution are the only remedies available under the 22 UCL.” Esparza v. Safeway, Inc., 36 Cal. App. 5th 42, 53 (2019) (citation omitted). Marsh seeks 23 neither remedy in its Counterclaims but construes its requests for damages as “restitution of the 24 monies it had a vested interest in” and “injunctive relief requiring Gill to unlock his Marsh 25
26 2 Marsh does not argue in its opposition to Gill’s motion that it avers a UCL violation derived from these claims under the “unfair” prong. In focusing its opposition on caselaw relevant to the 27 “unlawful” prong only, it abandons the “unfair” prong of its UCL claim. 1 iPhone.” Opp. at 15. In fact, Marsh plead with specificity only that it is entitled to lost profits it 2 expected to earn from Clients A, J, and I, and makes no mention of the purported injunctive relief 3 (i.e., enjoining Gill to provide the password to his Marsh iPhone) it now asserts. Profits Marsh 4 expected to earn from business relations cannot constitute restitution because Marsh has no “ownership interest in it and thus there is nothing to restore.” Lee v. Luxottica Retail N. Am., Inc., 5 65 Cal. App. 5th 793, 807 (2021) (internal quotes omitted). Marsh’s claim that it properly plead 6 remedies available under the UCL is unconvincing. 7 B. Motion to Strike 8 Gill separately moves to strike (1) Marsh’s request for attorneys’ fees under the UCL; and 9 (2) Marsh’s affirmative defense of unclean hands. Gill admits that his own complaint seeks 10 attorneys’ fees under the UCL, however he plans to amend his complaint to correct this error. 11 Indeed, “attorney fees and damages, including punitive damages, are not available under the 12 UCL.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1148 (2003). Marsh 13 contends that it will withdraw its request for attorneys’ fees if Gill does the same. The parties are 14 welcome to stipulate to do so if they so desire, but what is relevant here is whether Marsh is 15 entitled to attorneys’ fees under the UCL. As it is not, Marsh’s request for attorneys’ fees under 16 the UCL is stricken. 17 Gill additionally moves to strike Marsh’s affirmative defense of unclean hands. In 18 California, “[t]he misconduct that brings the clean hands doctrine into play must relate directly to 19 the cause at issue. Past improper conduct or prior misconduct that only indirectly affects the 20 problem before the court does not suffice.” Kendall-Jackson Winery, Ltd. V. Superior Ct., 76 Cal. 21 App. 4th 970, 979 (1999). Gill argues that his claims concern his post-employment restraints on 22 trade, whereas Marsh’s allegations pertain only to his conduct while employed at Marsh, so the 23 defense must be struck as improperly unsuited to Gill’s claims. Marsh does not directly challenge 24 Gill’s motion, arguing instead that it is premature to determine whether the defense is applicable 25 or not. While it is unclear how Marsh’s defense relates squarely with Gill’s claims, which are 26 largely predicated on Marsh’s anticompetitive conduct following Gill’s departure, construing 27 Gill’s motion in the light most favorable to Marsh as is required, it is possible that Marsh’s 1 unclean hands defense may relate to Gill’s averments. As such, the motion to strike this defense is 2 denied. 3 V. CONCLUSION 4 For the reasons explained herein, the motion to dismiss is granted as to the breach of 5 fiduciary duty and UCL counterclaims with leave to amend within 30 days of the date of this 6 order. The motion to dismiss is denied as to the remaining counterclaims. Gill’s motion to strike is 7 also granted in part and denied in part. Because amendment of Marsh’s request for attorneys’ fees 8 under the UCL would be futile, the request is stricken without leave to amend. 9 10 IT IS SO ORDERED. 11 3 12 Dated: July 18, 2024 .
RICHARD SEEBORG 14 Chief United States District Judge
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Z 18 19 20 21 22 23 24 25 26 27 98 ORDER ON MOTION TO DISMISS COUNTERCLAIMS CASE No. 24-cv-02366-RS