1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 POWER INTEGRATIONS, INC., Case No. 20-cv-410-MMA (DEB)
12 Plaintiff, ORDER GRANTING IN PART AND 13 v. DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND 14 EDISON D. DE LARA, et al., AMENDED COMPLAINT 15 Defendants. [Doc. No. 79] 16 17 18 19 In its Second Amended Complaint (“SAC”), Power Integrations, Inc. (“Plaintiff”) 20 alleges four causes of action: (1) breach of contract; (2) trade secret misappropriation 21 under 18 U.S.C. § 1836; (3) interference with contractual relations; and (4) unfair 22 competition under the California Business and Professions Code. See Doc. No. 78 23 (“SAC”).1 Defendants Edison D. De Lara (“De Lara”), Charles Reyes Evangelista 24 (“Evangelista”), Ian B. Barrameda (“Barrameda”), and Alex F. Mariano II (“Mariano”) 25 (collectively, “Defendants”) move to dismiss Plaintiff’s four causes of action pursuant to 26 27 28 1 Federal Rule of Civil Procedure 12(b)(6). See Doc. No. 79. Plaintiff filed an opposition 2 to Defendants’ motion, and Defendants replied. See Doc. Nos. 81, 82. The Court found 3 the matter suitable for determination on the papers and without oral argument pursuant to 4 Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7.1.d.1. See Doc. No. 83. 5 For the reasons set forth below, the Court GRANTS in part and DENIES in part 6 Defendants’ motion to dismiss. 7 I. BACKGROUND2 8 Plaintiff’s allegations arise out of an employment dispute between Plaintiff, 9 Plaintiff’s previous employees, and one of Plaintiff’s competitors that allegedly targeted 10 Plaintiff’s employees. See SAC ¶¶ 11–27. 11 A. Plaintiff and General Background 12 Plaintiff, a company based in California, is “the leader in power conversion 13 technology,” and “a leading innovator in semiconductor technologies for high-voltage 14 power conversion and a leading supplier of cutting-edge power technologies including 15 high-performance [integrated circuits (‘ICs’)] used in high-voltage power-conversion 16 systems.” SAC ¶ 11. Plaintiff “is an intellectual property (‘IP’) focused power 17 technology company” and has invested heavily in developing intellectual property “for its 18 high-voltage power conversion products.” Id. ¶ 12. In 2015, Plaintiff began expanding 19 “its US-based Applications and Engineering Department (‘APPS US’) by establishing an 20 applications lab in Manila, Philippines (‘APPS Philippines’) and staffing it with local 21 engineering talent.” Id. ¶ 13. APPS Philippines initially employed 13 individuals, but 22 “grew to a size of nearly 30 engineers by early 2019.” Id. 23 Plaintiff’s applications engineers “design, build, and test power supplies using 24 [Plaintiff’s] ICs.” Id. ¶ 14. As part of these efforts, Plaintiff maintained and granted its 25 26 27 2 Because this matter is before the Court on a motion to dismiss, the Court must accept as true the allegations set forth in the complaint. See Hosp. Bldg. Co. v. Trs. Of Rex Hosp., 425 U.S. 738, 740 28 1 applications engineers access to a secured drive that contained various manuals, 2 specifications, and reports. See id. Plaintiff further required its applications engineers to 3 maintain personal folders on the secured drive, which Plaintiff retained ownership of, 4 where they were “asked to save all their weekly reports, technical reports, component 5 specifications, reference designs, and other status updates concerning their projects.” Id. 6 ¶ 15. Additionally, Plaintiff required its engineers to maintain confidentiality, and 7 included such requirements in their employment agreements. See id. ¶ 17. 8 Silanna Semiconductor North America, Inc. (“Silanna”) is a competitor of Plaintiff 9 and “is a newcomer in the industry and only recently entered the market for power 10 products including power converter ICs for AC-DC . . . power supplies.” Id. ¶¶ 2, 18. 11 Penbrothers International Inc. (“Penbrothers”) is “a Philippine-based staffing agency.” 12 Id. ¶ 2. Plaintiff alleges that “Silanna has secretly and systematically targeted and 13 recruited [Plaintiff’s] most experienced applications engineers and new product team 14 leaders” and “used a third party (Penbrothers) to conceal the hiring of the Defendants to 15 Silanna.” Id. ¶ 18. Silanna and Penbrothers were previously defendants in this action. 16 See generally Doc. No. 12. However, while this action was pending in the Northern 17 District, Plaintiff voluntarily dismissed Silanna on July 10, 2019. See Doc. No. 18. The 18 court dismissed Penbrothers based on lack of personal jurisdiction on November 18, 19 2019. See Doc. No. 49. 20 B. Defendant Mariano 21 Plaintiff alleges that it employed Mariano “from approximately October 1, 2008 22 through January 26, 2018.” SAC ¶ 28. Mariano signed an employment agreement, 23 which included an “Employee Agreement Regarding Confidentiality and Inventions” 24 (“EARCI”). Id. ¶ 29; see also Doc. No. 78-2 (containing Mariano’s employment 25 agreement and EARCI). Mariano was first employed as “a field applications engineer” in 26 Plaintiff’s “sales department based in the Philippines,” but later joined APPS Philippines 27 “and became the Team Leader for the LED Lighting Team.” SAC ¶ 28. Plaintiff alleges 28 that “Mariano participated in the design and planning of applications of [Plaintiff’s] new 1 and future high-voltage flyback controller ICs in power supplies” and “was exposed to 2 and acquired [Plaintiff’s] highly proprietary and sensitive information relating to the 3 designs, product plans, and applications of these new and future high-voltage ICs.” Id. 4 ¶ 31. Further, “Mariano was also intimately familiar with [Plaintiff’s] Philippine 5 operations.” Id. In accordance with Plaintiff’s policy, “Mariano maintained a personal 6 folder” on Plaintiff’s secured drive. See id. ¶ 34. However, Plaintiff alleges that 7 “Mariano’s folder surreptitiously disappeared from the APPS drive.” Id. Mariano 8 subsequently left Plaintiff’s employ and has since joined Silanna “as Principal Power 9 Applications Engineer.” Id. ¶ 36. Plaintiff alleges that Mariano was employed “as a 10 result of his intimate knowledge and possession of [Plaintiff’s] proprietary and 11 confidential information” and that he disclosed confidential information to Silanna. Id. 12 ¶ 36; see id. ¶ 39. 13 C. Defendant Barrameda 14 Plaintiff alleges that it employed Barrameda “from approximately April 7, 2015 to 15 March 2, 2019” and that he “was a founding member of APPS Philippines.” Id. ¶ 41. 16 Barrameda’s employment agreement with Plaintiff included an EARCI as well as a 17 conflict of interest provision that required him to disclose any potential conflicts of 18 interest to Plaintiff. See id. ¶¶ 42, 44; see also Doc. No. 78-3 (containing Barrameda’s 19 employment agreement and EARCI). Barrameda worked on both the “LED Lighting 20 Team” and the “Low-Power Team” where he became a Team Leader in April 2018. 21 SAC ¶ 41. Plaintiff alleges that Barrameda’s responsibilities included “participat[ion] in 22 the design and planning of applications of [Plaintiff’s] new and future high-voltage 23 flyback controller ICs in AC-DC power supplies” and gave him access to Plaintiff’s trade 24 secrets “and other proprietary and confidential information.” Id. ¶ 45. Plaintiff further 25 alleges, that unlike the other Defendants, Barrameda resigned from his position in 26 Plaintiff’s employ “purportedly to join Infineon Technologies.” Id. ¶ 48. However, 27 Plaintiff asserts that Barrameda “never accepted any offer from Infineon” and “used the 28 Infineon offer to lie about and conceal his employment with Silanna.” Id. ¶ 50. 1 Plaintiff alleges, on information and belief, that “Barrameda gained employment 2 with Silanna as a result of his access to and intimate knowledge and possession of 3 [Plaintiff’s] proprietary and confidential information.” Id. ¶ 53. Plaintiff further claims 4 that Barrameda agreed to work for Silanna “months before he resigned from [Plaintiff].” 5 Id. ¶ 54. Finally, Plaintiff alleges, again on information and belief, that “Barrameda 6 disclosed confidential and trade secret information about [Plaintiff’s] products or 7 projects” through the submission of his resume, his conduct during job interviews, and 8 use of such information to assist Silanna in its product development while still employed 9 by Plaintiff. Id. ¶ 56. 10 D. Defendant De Lara 11 Plaintiff alleges that it employed De Lara “from approximately March 22, 2016 12 through May 11, 2019” first as “a senior engineer assigned to the LED Lighting Team” 13 and ultimately as “Team Leader” following Mariano’s departure. Id. ¶ 58. De Lara’s 14 employment agreement with Plaintiff included an EACRI. See id. ¶ 59; see also Doc. 15 No. 78-4 (containing De Lara’s employment agreement and EARCI). Like the other 16 Defendants, De Lara “participated in the design and planning of applications of 17 [Plaintiff’s] new and future high-voltage flyback controller ICs in AC-DC power 18 supplies.” SAC ¶ 61. De Lara had access to Plaintiff’s trade secrets “and other 19 proprietary and confidential information” and “was also intimately familiar with 20 [Plaintiff’s] Philippine operations.” Id. 21 Plaintiff asserts that De Lara left its employ “ostensibly as the result of accepting 22 employment with Penbrothers as a Staff Power Application Engineer” but “as De Lara 23 knew, under an agreement between Silanna and Penbrothers, De Lara was hired by 24 Penbrothers specifically for the purpose of being assigned to work for Silanna so that 25 Silanna could hide its raiding of [Plaintiff’s] top APPS Philippine engineers.” Id. ¶ 64. 26 To this effect, Plaintiff claims that De Lara was hired “as a result of his intimate 27 knowledge and possession of [Plaintiff’s] proprietary and confidential information.” Id. 28 ¶ 65. Finally, Plaintiff alleges that De Lara “provided Silanna with confidential business 1 and personnel information” and “also disclosed confidential and trade secret information 2 about [Plaintiff’s] products or projects” through his resume and during his interview. Id. 3 ¶¶ 68, 69. 4 E. Defendant Evangelista 5 Plaintiff alleges that it employed Evangelista “from approximately September 19, 6 2017 through May 16, 2019” in the capacity of “design engineer assigned to the Low- 7 Power Team.” Id. ¶ 70. Evangelista’s employment agreement with Plaintiff included an 8 EARCI. See id. ¶ 71; see also Doc. No. 78-5 (containing Evangelista’s employment 9 agreement and EARCI). Similar to the other Defendants, Evangelista “participated in the 10 design and planning of applications of [Plaintiff’s] new and future high-voltage flyback 11 controller ICs in AC-DC power supplies.” Id. ¶ 73. He also had access to Plaintiff’s 12 trade secrets “and other proprietary and confidential information” and “was also 13 intimately familiar with [Plaintiff’s] Philippine operations.” Id. Evangelista’s role 14 “included evaluations of new products at the applications/system level” and “he had 15 access to all confidential documents and information about [Plaintiff’s] products” that 16 were stored on the secure drive. Id. ¶ 74. Plaintiff alleges that Evangelista was obligated 17 to maintain a folder on the secured drive where he was to store “all his weekly reports, 18 technical reports, and other status updates concerning the projects he was working on.” 19 Id. ¶ 76. Plaintiff notes however, that the folder in question “is completely empty” and 20 alleges that “Evangelista either never saved any project-related reports and updates in his 21 personal folder . . . or deleted them or had them deleted.” Id. 22 Like De Lara, “Evangelista resigned from his employment with [Plaintiff] . . . 23 ostensibly as the result of accepting employment with Penbrothers as a Senior 24 Application Engineer.” Id. ¶ 77. However, Plaintiff alleges that Evangelista was hired as 25 part of a scheme between Silanna and Penbrothers through which Silanna attempted to 26 conceal the fact that it was hiring Plaintiff’s employees. See id. Plaintiff also claims, on 27 information and belief, that Evangelista “formally became an employee of Silanna after 28 the Penbrothers cover was blown.” Id. Similar to the previous allegations, Plaintiff 1 asserts that Evangelista was employed primarily because of his knowledge of Plaintiff’s 2 “proprietary and confidential information” and that he provided such information to 3 Silanna, including through the submission of his resume and during his job interview. Id. 4 ¶¶ 78, 81–82. 5 II. LEGAL STANDARD 6 A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro 7 v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A pleading must contain “a short and plain 8 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 9 8(a)(2). However, plaintiffs must also plead “enough facts to state a claim to relief that is 10 plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also 11 Fed. R. Civ. P. 12(b)(6). The plausibility standard demands more than a “formulaic 12 recitation of the elements of a cause of action,” or “‘naked assertions’ devoid of ‘further 13 factual enhancement.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 14 550 U.S. at 555, 557). Instead, the complaint “must contain sufficient allegations of 15 underlying facts to give fair notice and to enable the opposing party to defend itself 16 effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). 17 In reviewing a motion to dismiss under Rule 12(b)(6), courts must assume the truth 18 of all factual allegations and must construe them in the light most favorable to the 19 nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996) 20 (citing Nat’l Wildlife Fed’n v. Espy, 45 F.3d 1337, 1340 (9th Cir. 1995)). The court need 21 not take legal conclusions as true merely because they are cast in the form of factual 22 allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987) (quoting W. Min. 23 Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981)). Similarly, “conclusory allegations 24 of law and unwarranted inferences are not sufficient to defeat a motion to 25 dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). 26 In determining the propriety of a Rule 12(b)(6) dismissal, courts generally may not 27 look beyond the complaint for additional facts. See United States v. Ritchie, 342 F.3d 28 903, 907–08 (9th Cir. 2003). “A court may, however, consider certain materials— 1 documents attached to the complaint, documents incorporated by reference in the 2 complaint, or matters of judicial notice—without converting the motion to dismiss into a 3 motion for summary judgment.” Id.; see also Lee v. City of Los Angeles, 250 F.3d 668, 4 688 (9th Cir. 2001), overruled on other grounds by Galbraith v. County Of Santa Clara, 5 307 F.3d 1119, 1125–26 (9th Cir. 2002). “However, [courts] are not required to accept as 6 true conclusory allegations which are contradicted by documents referred to in the 7 complaint.” Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295–96 (9th Cir. 1998) 8 (citing In re Stac Electronics Securities Litigation, 89 F.3d 1399, 1403 (9th Cir. 1996)). 9 Where dismissal is appropriate, a court should grant leave to amend unless the 10 plaintiff could not possibly cure the defects in the pleading. Knappenberger v. City of 11 Phoenix, 566 F.3d 936, 942 (9th Cir. 2009) (quoting Lopez v. Smith, 203 F.3d 1122, 1127 12 (9th Cir. 2000)). 13 III. DISCUSSION 14 Plaintiff asserts four causes of action in its SAC: breach of contract, trade secret 15 misappropriation, interference with contractual relations, and unfair competition. See 16 SAC ¶¶ 99–150. The Court will consider each claim in turn. 17 A. Breach of Contract 18 Plaintiff’s first cause of action is breach of contract. SAC ¶¶ 99–111. Plaintiff sets 19 forth two alleged breaches: (1) that Defendants breached the confidentiality and company 20 materials clauses in their contracts and (2) that Defendant Barrameda breached the 21 conflict of interest clause in his contract. See id. ¶¶ 104–06, 108–10. 22 A breach of contract claim under California law requires “(1) the existence of a 23 contract[,] (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s 24 breach, and (4) resulting damage to plaintiff.” EPIS, Inc. v. Fidelity & Guaranty Life Ins. 25 Co., 156 F. Supp. 2d 1116, 1124 (N.D. Cal. 2001) (citing Reichert v. General Ins. Co., 26 442 P.2d 377, 381 (Cal. 1968)); see also CDF Firefighters v. Maldonado, 70 Cal. Rptr. 27 3d 667, 679 (Ct. App. 2008). 28 1 As a threshold matter, Plaintiff points out that Defendants only challenge the 2 breach element. See Doc. No. 81 at 10; see also Doc. No. 79-1 at 7–12 (failing to 3 challenge any of the other elements). The SAC alleges the existence of contracts 4 between Plaintiff and each Defendant, and that Plaintiff performed its obligations under 5 those contracts. See SAC ¶¶ 29–31, 42–44, 59–60, 71–72, 107. Therefore, the Court will 6 focus its analysis on the breach element and will consider each alleged breach in turn. 7 1. Breach of the Confidentiality and Company Materials Clauses 8 Plaintiff alleges that Defendants breached their confidentiality obligations. See 9 SAC ¶¶ 104–05, 108–09. Defendants argue that Plaintiff’s allegations regarding this 10 breach do not “identify what information was copied or disclosed, by whom, to whom, or 11 how that information fell under the contract definition of ‘Proprietary Information.’” 12 Doc. No. 79-1 at 8 (citing Doc. No. 78-2 at 4)); see also Doc. No. 82 at 4–8. Defendants 13 elaborate that “[n]othing in the SAC explains or describes in any way what information 14 was copied or deleted, how that information was confidential, proprietary, or how its 15 copying or deletion in any way constituted a breach of contract.” Doc. No. 79-1 at 9. 16 Thus, Defendants argue that the “claim fails as a ‘threadbare recital of the elements.’” Id. 17 at 8 (quoting Iqbal, 556 U.S. at 678). 18 Plaintiff responds that it has met its burden by alleging that Defendants 19 “disclos[ed] to Silanna [Plaintiff’s] confidential business and personnel information . . . 20 to help Silanna target, solicit, and recruit [Plaintiff’s] top engineering employees and 21 Team Leaders.” Id. at 12 (citing SAC ¶¶ 21, 39, 57, 68, 81, 85, 89). Plaintiff further 22 asserts that it has alleged that Defendants breached the confidentiality clause “by 23 disclosing to Silanna trade secret and other confidential information . . . at least in their 24 resumes submitted to and job interviews with Silanna.” Id. (citing SAC ¶¶ 24, 40, 56, 69, 25 82, 108). Finally, Plaintiff notes its contention that “Defendant Mariano made 26 unauthorized copies of highly sensitive documents about [Plaintiff’s] new and future 27 products” and that “Defendants then inexplicably deleted or caused the deletion of 28 Mariano’s employee folder on [Plaintiff’s] network.” Id. at 13 (citing SAC ¶¶ 22, 34, 1 35). Plaintiff argues that these allegations satisfy the pleading requirement for the breach 2 element. See id. at 10. 3 The employment agreement contains the following pertinent clauses: 4 5 VIII. Confidentiality
6 You acknowledge and recognize that the information, including, but 7 not limited to the Company’s trade secrets, technical data, marketing techniques, human resources, training materials, customer lists, location 8 selection, pricing, client contracts, methods of doing business, and the like, 9 and the similar information of its clients and its clients’ customers, including, without limitation, credit card, calling card, address, telephone 10 number or other personal information (“Confidential Information”) are 11 special, valuable and unique. As a material inducement to the Company to enter into this contract and in consideration of the compensation the 12 Company pays you under this contract, you agree: 13 a) That the Confidential Information is the sole and exclusive property 14 of the Company (or a third party providing the information to the 15 Company). The Company (or the third party, if applicable) owns all worldwide rights to the information under patent, copyright, trade 16 secret, confidential information or other property right. 17 b) That the Company’s disclosure of Confidential Information to you 18 does not confer upon you any license, interest or rights of any kind in 19 or to the Confidential Information. You may use the Confidential Information solely to benefit the Company and only during your 20 employment. 21 c) To safeguard the Confidential Information against disclosure to 22 others. 23 d) Not to directly or indirectly or in any manner, divulge, disclose or 24 communicate the Confidential Information to others, without the 25 express written permission of the Company, except that:
26 i) which you can demonstrate by written records was 27 previously known; 28 1 ii) which are now, or become in the future, public knowledge other than through your acts or omissions; 2 and 3 iii) which are lawfully obtained by you from sources independent of the Company. 4
5 e) Not to, directly or indirectly, in any form, by any means or for any purpose, reproduce, distribute, transmit, reverse engineer, de-compile, 6 disassemble or transfer, or use, the Confidential Information, or any 7 portion of either, to benefit yourself or any third party, or to cause any of the foregoing to happen. 8
9 f) Not to utilize schemes or formulas of the Company, or any variation or approximation thereof, for your own use or purposes, either by 10 itself or in concert with others; 11 g) That you will return the Confidential Information that is in your 12 possession or control to the Company, together with all copies, 13 documents, records, notebooks, programs and similar items, collections and materials (in writing, electronic or otherwise) that 14 relate to the Confidential Information, immediately (i) upon the 15 Company’s request, and/or (ii) upon the termination of your employment even without the Company’s request. 16
17 h) That the obligations contained herein will remain in effect during and after your employment with the Company. 18
19 [. . .]
20 XII. Termination of Employment 21 [. . .] 22
23 You agree that all Company records and properties in your custody or control shall be immediately surrendered to the Company, if requested 24 during your employment period, and at the termination thereof, whether or 25 not requested.
26 27 E.g., Doc. No. 78-3 at 5–6, 8 (Barrameda). Mariano’s employment agreement differs 28 from the other Defendants’ contracts; his does not contain the clauses reproduced above. 1 See Doc. No. 78-2. However, all four Defendants signed the EARCI, which contains the 2 following relevant clauses: 3 4 2. Confidentiality I will maintain in confidence and will not disclose or use, either during or 5 after the term of my employment without the prior express written consent 6 of the Company, any proprietary or confidential information or know-how belonging to the Company (“Proprietary Information”), whether or not it is 7 in written or permanent form, except to the extent required to perform duties 8 on behalf of the Company in my capacity as an employee. Proprietary information refers to any information, not generally known in the relevant 9 trade or industry, which was obtain from the Company, or which was 10 learned, discovered, developed, conceived, originated or prepared by me in the scope of my employment. Such Proprietary Information includes, but is 11 not limited to, software, technical and business information relating to the 12 Company’s inventions or products, research and development, production processes, manufacturing and engineering processes, machines and 13 equipment, finances, customers, marketing and production and future 14 business plans and any other information which is identified as confidential by the Company. Upon termination of my employment or at the request of 15 my supervisor before termination, I will deliver to the Company all written 16 and tangible material in my possession incorporating the Proprietary Information or otherwise relating to the Company’s business. These 17 obligations with respect to Proprietary Information extend to information 18 belonging to customers and suppliers of the Company who may have disclosed such information to me as the result of my status as employee of 19 the Company. 20 [. . .] 21
22 4. Company Materials Upon termination of my employment with the Company or at any other time 23 upon the Company’s request, I will promptly deliver to the Company, 24 without retaining any copies, all documents and other materials furnished to me by the Company or prepared by me for the Company. 25
26 27 E.g., Doc. No. 78-3 at 16, 18 (Barrameda). Nonetheless, Plaintiff asserts breach of 28 confidentiality against all four Defendants in terms of the employment agreement. See 1 SAC ¶¶ 104–05, 108–09. Plaintiff does however tie its allegations regarding Mariano to 2 the text of the EARCI. See id. ¶ 30. 3 Plaintiff alleges that Defendants “disclosed to Silanna [Plaintiff’s] confidential 4 business and personnel information, including the performance and/or compensation 5 structures of one or more [of] [Plaintiff’s] applications engineers, to help Silanna target 6 [Plaintiff’s] top engineering employees and Team Leaders for solicitation and 7 recruitment.” Id. ¶ 21; see also id. ¶ 108 (alleging that Defendants breached their 8 employment agreements by making copies of or disclosing without permission Plaintiff’s 9 “proprietary and confidential information,” such as business operation and product 10 information). Additionally, Plaintiff specifically claims that Defendants “disclosed trade 11 secret information about [Plaintiff’s] new and future high-voltage power conversion 12 products in their resumes submitted to Silanna and/or during their job interviews with 13 Silanna.” See, e.g., id. ¶ 24. 14 Defendants challenge this allegation in their reply and suggest that “[h]aving 15 overemphasized the importance of the ‘missing’ resumes, Plaintiff fell on its sword once 16 those resumes became court exhibits. The ‘smoking gun’ evidence that Plaintiff 17 promised would demonstrate a breach is simply not there, which forced Plaintiff to resort 18 to a thin procedural argument.” Doc. No. 82 at 6. Defendants have attached the resumes 19 in question to their motion. See Doc. Nos. 79-2, 79-3, 79-4, 79-5. Regardless of what 20 information may or may not be present in Defendants’ resumes, the fact remains that 21 Plaintiff has plausibly alleged that the disclosure occurred either in Defendants’ resumes 22 or during the course of their interviews with Silanna. See SAC ¶ 24. Because Plaintiff’s 23 allegation of disclosure during the interviews is sufficient, the Court finds that Plaintiff 24 plausibly alleges breach of the confidentiality clause. 25 As to the alleged breach of the termination and company materials clauses, 26 Plaintiff claims the following: “Defendant Mariano also made unauthorized copies of 27 highly sensitive documents about [Plaintiff’s] new and future products, including 28 Operational Technical Specifications.” SAC ¶ 22. Plaintiff elaborates that: 1 2 34. While at Power Integrations, Mariano maintained a personal folder on the APPS drive as did all Power Integrations engineers. These folders 3 contained information about Power Integration products, and what the 4 engineer was working on, and were the property of Power Integrations. These folders were not to be taken or deleted upon termination. In early 5 2019, Power Integrations discovered that Mariano’s folder surreptitiously 6 disappeared from the APPS drive. On information and belief, Mariano and/or one or more other Defendants deleted or caused the deletion of 7 Mariano’s personal folder from the APPS drive around the time of or after 8 Mariano’s departure from Power Integrations.
9 10 Id. ¶ 34; see also ¶ 109. The employment agreement and EARCI demonstrate that all 11 four Defendants were bound to return any records or other company owned materials at 12 the end of their employment with Plaintiff. E.g., Doc. No. 78-3 at 5–6, 8, 18 13 (Barrameda). Plaintiff adequately alleges that one or more Defendants breached their 14 obligation by deleting Mariano’s personal information, which plausibly suggests a failure 15 to deliver Plaintiff-related materials to Plaintiff at the end of employment. Thus, the 16 Court finds that Plaintiff plausibly alleges breach of the termination and company 17 materials clauses to survive a motion to dismiss. 18 2. Breach of the Conflict of Interest Clause 19 Plaintiff also alleges that Defendant Barrameda breached his conflict of interest 20 obligation. See SAC ¶¶ 44, 51, 54, 110. Defendants attack this assertion describing it as 21 “an odd attempt to somehow save the obviously deficient claim for breach of contract” 22 and as “yet another transparent attempt to find a roundabout way to enforce the non- 23 compete provisions this Court has already ruled are invalid, unlawful, and 24 unenforceable.” Doc. No. 79-1 at 11 (emphasis omitted). Defendants argue that “[t]here 25 is no fact in the SAC that supports the notion that Defendant Barrameda was performing 26 work for Silanna during his employment with [Plaintiff]” and that “the only allegation of 27 ‘early’ work for Silanna is an alleged conference Barrameda attended two weeks after he 28 left [Plaintiff].” Id. at 11–12 (citing SAC ¶ 24) (emphasis omitted); see also Doc. No. 82 1 at 7. Plaintiff responds that “Barrameda’s breach went even further” than the other 2 Defendants because “after being secretly hired by Silanna and while still employed at 3 [Plaintiff], Barrameda continued for months to assist Silanna with its AC-DC power 4 conversion products using [Plaintiff’s] confidential and trade secret information.” Doc. 5 No. 81 at 13; see id. at 17. Plaintiff claims this enabled Barrameda “to then promote and 6 sell Silanna’s very first flyback controller IC in the United States just two weeks after his 7 official departure from [Plaintiff].” Id. (citing SAC ¶¶ 23, 51, 56). 8 Barrameda’s employment agreement contains the following relevant provision: 9 10 X. Prohibition on Conflict of Interest
11 You warrant that to the best of your knowledge no conflict of interest 12 exists or is likely to arise in the performance of your obligations under this Agreement. In the course of this Agreement, you shall not render work or 13 services for another employer, directly or indirectly, part-time or full-time 14 while still employed by the Company. Neither shall you engage in any activity likely to compromise your ability to perform your obligations under 15 this Agreement fairly and independently. In this regard, you shall 16 immediately disclose to the Company any activity which constitutes or may constitute a conflict of interest. 17
18 19 Doc. No. 78-3 at 6 (Barrameda). Further the EARCI contains the following relevant 20 passage: 21 8. No Conflicting Obligations 22 My performance of this Agreement and as an employee of the Company 23 does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me prior to my 24 employment with the Company. I will not disclose to the company, or 25 induce the Company to use, any confidential or proprietary information or material belonging to any previous employer or other person or entity. I am 26 not a party to any other agreement which will interfere with my full 27 compliance with this Agreement. I will not enter into any agreement, whether written or oral, in conflict with the provisions of this Agreement. 28 1 2 Id. at 18–19. Plaintiff alleges that “Barrameda accepted an employment offer from 3 Silanna and secretly started working for Silanna months before he resigned from 4 [Plaintiff].” SAC ¶ 23. Plaintiff elaborates that “Barrameda was targeted, solicited, and 5 recruited for Silanna . . . as early as October 2018 while Barrameda was still employed by 6 [Plaintiff]” and that when Barrameda gave Plaintiff notice of his intention to work 7 elsewhere, he “used Infineon as a decoy, lied about his intended employment with 8 Infineon and hid his employment with Silanna while he was still employed by 9 [Plaintiff].” Id. ¶¶ 51, 54; see id. ¶¶ 23, 48. Thus, Plaintiff claims that “Defendant 10 Barrameda breached the conflict-of-interest provisions of the Barrameda employment 11 agreement by failing to disclose to [Plaintiff] the actual conflict of interest after he 12 accepted an employment offer from Silanna months before his resignation from 13 [Plaintiff].” Id. ¶ 110. These allegations provide factual support for Plaintiff’s conflict of 14 interest breach claim. 15 The Court finds Defendants’ argument that this claim is “an attempt to create a 16 post-employment restraint on trade” unpersuasive. See Doc. No. 79-1 at 12 (emphasis 17 omitted). Regardless of whether Barrameda’s alleged attendance at a conference on 18 behalf of Silanna shortly after his departure from Plaintiff’s employ is persuasive, the fact 19 remains that Plaintiff has alleged that Barrameda accepted an offer from Silanna during 20 his tenure with Plaintiff without informing it, that this occurred “as early as October 21 2018,” and that he misled Plaintiff as to where he would be working. SAC ¶ 54; see id. 22 ¶¶ 23, 48, 51, 110. Thus, the Court finds that Plaintiff plausibly alleges breach of the 23 conflict-of-interest clauses to survive a motion to dismiss. 24 3. Conclusion 25 Accordingly, the Court DENIES Defendants’ motion to dismiss Plaintiff’s breach 26 of contract claim. 27 B. Trade Secret Misappropriation 28 1 Plaintiff’s second cause of action is trade secret misappropriation under 18 U.S.C. 2 § 1836. See SAC ¶¶ 112–137. Defendants argue that this claim should be dismissed 3 because Plaintiff “has not identified its trade secrets with any particularity, let alone 4 sufficient particularity” and “has failed to establish how the technical aspects of its broad 5 categories of alleged trade secret and confidential information are separate and distinct 6 from information it openly provides to the general public.”3 Doc. No. 79-1 at 13; see 7 also Doc. No. 82 at 8–12. In response, Plaintiff asserts that it “has met the Rule 8 8 pleading standard and put Defendants on ample notice of the trade secrets involved.” 9 Doc. No. 81 at 20. Plaintiff also rejects Defendants’ second argument and challenges the 10 manner in which Defendants raised the issue. See id. at 23. 11 As a threshold matter, there remains some confusion between the parties as to what 12 pleading standard applies to this case. Defendants remain convinced that Plaintiff must 13 plead this claim with particularity. See Doc. No. 79-1 at 13–15. However, as Plaintiff 14 correctly notes, this Court has already found that the “general pleading standards under 15 Rule 8, which require plausibility as opposed to particularity,” apply to this claim. See 16 Doc. No. 69 at 33; Doc. No. 81 at 20–21. The Court’s view of this issue has not changed, 17 and as such, it will apply the plausibility standard set forth in Federal Rule of Civil 18 Procedure 8 to this claim, rather than the particularity standard articulated in Federal Rule 19 of Civil Procedure 9. See Doc. No. 69 at 33 (“In applying the Rule 12(b)(6) standard to 20 DTSA allegations, the Court applies general pleading standards under Rule 8, which 21 require plausibility as opposed to particularity . . . .”); see also Power Integrations, Inc. v. 22 De Lara, No. 20-cv-410-MMA (MSB), 2020 WL 1467406, at *17 (S.D. Cal. Mar. 26, 23 2020) (same). 24 25 3 Defendants assert that Plaintiff has not demonstrated that the alleged trade secret is “separate and 26 distinct from information it openly provides to the general public.” Doc. No. 79-1 at 13. To support this argument, Defendants have attached extrinsic materials to their motion. See id. at 16; Doc. No. 79-6. 27 Even if the Court considered these materials, the Court finds Plaintiff’s allegations sufficient to survive the instant motion to dismiss and that Defendants’ argument and materials are better suited for a motion 28 1 To plead a trade secret misappropriation cause of action under the Defend Trade 2 Secrets Act (“DTSA”), a plaintiff must allege the following: “(1) the plaintiff owned a 3 trade secret; (2) the defendant misappropriated the trade secret; and (3) the defendant’s 4 actions damaged the plaintiff.” AlterG, Inc. v. Boost Treadmills LLC, 388 F. Supp. 3d 5 1133, 1144 (N.D. Cal. 2019) (quoting Alta Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 6 3d 868, 877 (N.D. Cal. 2018)). The DTSA creates a civil cause of action for owners of 7 trade secrets that are misappropriated “if the trade secret is related to a product or service 8 used in, or intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1). 9 The DTSA defines “trade secret” as “all forms and types of financial, business, scientific, 10 technical, economic, or engineering information, including patterns, plans, compilations, 11 program devices, formulas, designs, prototypes, methods, techniques, processes, 12 procedures, programs, or codes, whether tangible or intangible, and whether or how 13 stored, compiled, or memorialized physically, electronically, graphically, 14 photographically, or in writing” so long as the owner (a) “has taken reasonable measures 15 to keep such information secret” and (b) “derives independent economic value” from 16 being secret. 18 U.S.C. § 1839(3). The DTSA defines “misappropriation” as “(a) 17 ‘acquisition of a trade secret’ by a person who knows or should know the secret was 18 improperly acquired or (b) ‘disclosure or use of a trade secret of another without express 19 or implied consent.’” Cave Consulting Grp., Inc. v. Truven Health Analytics Inc., No. 20 15-CV-02177-SI, 2017 WL 1436044, at *3 (N.D. Cal. Apr. 24, 2017) (quoting 18 U.S.C. 21 § 1839(5)). In sum, the DTSA “contemplates three theories of liability: (1) acquisition, 22 (2) disclosure, or (3) use.” Id. at *4 (citing 18 U.S.C. § 1839(5)). 23 1. Ownership of Trade Secret 24 Defendants argue that “the SAC is remarkably devoid of facts alleging a specific 25 trade secret” and merely “contains a laundry list of items that fail to meaningfully define 26 the trade secrets allegedly at issue.” Doc. 79-1 at 13; see also Doc. No. 82 at 8–10. 27 Specifically, Defendants take issue with Plaintiff’s use of the phrase “including but not 28 limited to” in one of the complaint’s paragraphs pertaining to the trade secret claim. Doc. 1 79-1 at 14 (emphasis omitted) (citing SAC ¶ 31). Defendants argue that this language 2 “shroud[s] the entire foundation of the SAC in a nebulous cloud of unidentified data, 3 information or documents” and that “Defendants cannot defend themselves against open- 4 ended, incomplete, unintelligible, and obscure definitions.” Id. Plaintiff responds by 5 distinguishing the SAC from the authority cited by Defendants in their motion and argues 6 “the trade secrets identified in the SAC are tethered to a specific technology (i.e. new and 7 future high-voltage flyback controller ICs) and to specific aspects of the technology (i.e. 8 their designs, product plans, and applications).” Doc. No. 81 at 21–22 (citing SAC ¶¶ 31, 9 113). Further, Plaintiff argues that the “use of phrases such as ‘including but not limited 10 to’ to give examples of the types of trade secrets at issue does not automatically render a 11 trade secret claim impermissibly broad or vague.” Id. at 22. 12 Given that the Court has established that Federal Rule of Civil Procedure 8 applies 13 to this claim, see Doc. No. 69 at 33, the Court must determine whether Plaintiff’s 14 pleading of the DTSA claim plausibly expresses “a short and plain statement of the 15 claim.” Fed. R. Civ. P. 8(a)(2); see also Twombly, 550 U.S. at 570 (“[W]e do not require 16 heightened fact pleading of specifics, but only enough facts to state a claim to relief that 17 is plausible on its face.”). The Court finds that Plaintiff has met this requirement. The 18 SAC includes the following relevant paragraph pertaining to trade secrets: 19 20 113. [Plaintiff] is a leading innovator in semiconductor technologies for high-voltage power conversion. As a leading innovator, [Plaintiff] owns 21 special, valuable and unique trade secrets relating to the designs, product 22 plans, and applications of its new and future high-voltage flyback controller ICs, including but not limited to Operational Technical Specifications 23 (‘OTS’), product designs, definitions, specifications, schedules and 24 forecasts, new technologies (such as PowiGaNTM, [Plaintiff’s] gallium nitride technology, and active clamp technology used in these products), 25 product meeting minutes, BOMs, business plans, business opportunities and 26 strategies, marketing and sales projections, customer acquisition, customer requirements, preferences and feedback, and design challenges and solutions 27 and negative know-how at the applications/system level. 28 1 SAC ¶ 113. Further, the Complaint also states: 2 3 12. Unlike many of its competitors, [Plaintiff] is an intellectual property (“IP”) focused power technology company, having devoted a substantial 4 amount of resources into developing the IP, including patents and trade 5 secrets, for its high voltage power conversion products. [Plaintiff’s] technologies and IP are valuable information often sought after by its 6 competitors. 7 [. . .] 8
9 114. New and future products are the crown jewels of any high-tech company and are the lifeblood of [Plaintiff]. [Plaintiff] has expended 10 considerable amount of time, effort, and expense in developing and 11 maintaining Power Integrations Future High-Voltage Power Product Trade Secrets, which are not known to the public and are not readily ascertainable 12 by proper means to persons who could derive value from their disclosure or 13 use, including [Plaintiff’s] competitors.
14 115. Each of Power Integrations Future High-Voltage Power Product Trade 15 Secrets alleged herein derives independent economic value from not being generally known to, and not being readily ascertainable through proper 16 means by [Plaintiff’s] competitors and any other persons who can obtain 17 economic value from the disclosure or use of the information.
18 19 Id. ¶¶ 112, 114–15 (citation omitted). Finally, Plaintiff details the steps it has taken to 20 ensure that its trade secrets remain confidential: 21 22 including (1) keeping the trade secret information in [Plaintiff’s] locked facilities and/or in secure and restricted-access computer network systems; 23 (2) requiring non-disclosure agreements from employees and non-employees 24 exposed to the trade secret information; (3) ensuring limited access to trade secret information; and (4) implementing additional procedures to require 25 and remind employees to maintain the confidentiality of all such 26 information.
27 28 1 Id. ¶ 116. Plaintiff sufficiently alleges the requirements of a trade secret as defined by the 2 DTSA, alleging that Plaintiff “has taken reasonable measures to keep such information 3 secret” and that it “derives independent economic value” keeping its trade secrets 4 confidential. 18 U.S.C. § 1839(3); see SAC ¶ 113, 112, 114–16. Plaintiff’s description 5 of the trade secrets identifies the technologies at issue: “high-voltage flyback controller 6 ICs” and “PowiGaNTM, [Plaintiff’s] gallium nitride technology, and active clamp 7 technology used in these products.” SAC ¶ 113. Further, Plaintiff has plausibly pleaded 8 that it “derives independent economic value” from these trade secrets. See § 1839(3); 9 SAC ¶¶ 114–15. Plaintiff further bolsters this claim of economic value by alleging that 10 Silanna used Plaintiff’s secret information to develop competing products in a relatively 11 short period of time. See, e.g., SAC ¶¶ 20, 27, 130. Collectively, these allegations 12 plausibly support the “independent economic value” requirement of Section 1839(3). 13 Therefore, the Court finds that Plaintiff plausibly alleges the trade secret element of its 14 DTSA claim under Rule 8 to survive a motion to dismiss. 15 2. Misappropriation of Trade Secret 16 Defendants also challenge Plaintiff’s pleading of misappropriation and argue that 17 “it has alleged no facts sufficient to establish misappropriation.” Doc. No. 79-1 at 17; see 18 also Doc. No. 82 at 10–12. Defendants elaborate that “[n]owhere does the SAC plainly 19 state how it is that the Defendants misappropriated [Plaintiff’s] alleged ‘trade secrets’” 20 and that “the entirety of [Plaintiff’s] allegations of misappropriation is its own 21 unsupported belief that the Individual Defendants were ‘exposed to’ Power Integrations 22 Future Product Trade Secrets and that this ‘exposure’ must have been the reason they 23 were able to gain subsequent employment.” Doc. No. 79-1 at 17 (emphasis omitted). 24 Plaintiff responds that “[it] need not prove or ‘establish misappropriation’ at this 25 juncture and has alleged more than sufficient facts to establish plausibility.” Doc. No. 81 26 at 24–25 (emphasis omitted). Further, Plaintiff argues that its “claim does not rest on a 27 ‘mere possession’ or ‘inevitable disclosure’ theory” and that it “has alleged 28 circumstances that indicate both actual and threatened misappropriation of the trade 1 secrets by Defendants.” Id. at 25. In so doing, Plaintiff relies on language from this 2 Court’s previous Order: “[a]s the Court already found, Defendant Barrameda’s ‘alleged 3 conduct of lying about his employment with Infineon Technologies constitutes 4 circumstantial evidence that he is in possession of Plaintiff’s sensitive information and a 5 likeliness that he intends to use or disclose that information.’” Id. (quoting Doc. No. 69 6 at 37).4 7 The DTSA permits a court to enjoin “any actual or threatened misappropriation.” 8 18 U.S.C. § 1836(b)(3)(A)(i). Both state and federal courts in California have held that a 9 plaintiff must prove more than a defendant’s mere possession of trade secrets. E.g., 10 Pellerin v. Honeywell Int’l, Inc., 877 F. Supp. 2d 983, 989 (S.D. Cal. 2012); Cent. Valley 11 Gen. Hosp. v. Smith, 75 Cal. Rptr. 3d 771, 792 (Ct. App. 2008). Threatened 12 misappropriation may occur under several variations: (1) a defendant possesses trade 13 secrets and “actually has misused or disclosed some of those trade secrets in the past”; (2) 14 a defendant possesses trade secrets and “intends to improperly use or disclose some of 15 those trade secrets”; and (3) a defendant possesses trade secrets and “wrongly refuses to 16 return the trade secrets after a demand for their return has been made.” Cent. Valley Gen. 17 Hosp., 75 Cal. Rptr. 3d at 791–92. However, “the issuance of an injunction based on a 18 claim of threatened misappropriation requires a greater showing than mere possession by 19 a defendant of trade secrets where the defendant acquired the trade secret by proper 20 means.” Id. at 792 (emphasis added). 21 The SAC includes several allegations that constitute circumstantial evidence that 22 Defendants both possessed sensitive information belonging to Plaintiff and a likeliness 23 that they intended to use or disclose that information. See Doc. No. 69 at 37 (citing 24
25 26 4 In their Reply brief, Defendants take issue with the Court’s finding that Barrameda’s alleged lying “constitutes circumstantial evidence that he is in possession of Plaintiff’s sensitive information and a 27 likeliness that he intends to use or disclose that information.” See Doc. No. 82 at 11–12; Doc. No. 69 at 37. Specifically, “Defendants ask the Court to reconsider this ruling.” Doc. No. 82 at 11. The Court 28 1 Shippers, a Div. of Illinois Tool Works, Inc. v. Fontenot, No. 13CV1349 JLS (MDD), 2 2013 WL 1209056, at *4 (S.D. Cal. Sept. 23, 2013)). In addition to the allegations of 3 Barrameda’s duplicity with respect to his relationship with Infineon Technologies and 4 Silanna, which the Court addressed in its previous order and have been reproduced in the 5 SAC, see id.; see e.g., SAC ¶¶ 48–49, 51–52, 124, Plaintiff has set forth allegations that 6 are relevant to the issue of misappropriation. For example, Plaintiff has elaborated on its 7 allegations that Barrameda lied about his future employment with Infineon Technologies 8 to include all Defendants: 9 10 128. When [Plaintiff] demanded compliance with the Power Integrations Employment Agreements, counsel for Silanna and Defendants represented 11 that [Plaintiff’s] former employees, including Defendants, would be 12 “assigned to [Silanna]’s ‘DC-DC’ power conversion business” which allegedly “is organized entirely separately from the Company’s ‘AC-DC’ 13 power products” that compete[] with [Plaintiff’s] products.[] As discovery 14 in this case has shown, however, none of the Defendants were assigned to Silanna’s DC-DC power conversion business; all Defendants work on 15 Silanna’s AC-DC power products either exclusively or primarily, and were 16 doing so and/or assigned or expected to do so before their counsel’s false representation to the court on May 17, 2019. In fact, Defendants have been 17 assigned to, and have worked on, the very flyback controller ICs with which 18 Silanna competes with [Plaintiff].
19 20 SAC ¶ 128. Further, expanding on the theory of circumstantial evidence, Plaintiff claims 21 that “Defendants conspired with and knowingly allowed Silanna to use and exploit . . . 22 their knowledge and possession of [Plaintiff’s] proprietary and confidential information, 23 including and especially Power Integrations Future High-Voltage Power Product Trade 24 Secrets . . . to unfairly compete with [Plaintiff].” Id. ¶ 122. Plaintiff adds other 25 allegations, including that “Mariano made unauthorized copies of highly sensitive 26 documents about [Plaintiff’s] new and future products, including OTS” and that 27 “Defendants also disclosed trade secret information about [Plaintiff’s] new and future 28 high-voltage power conversion products in their resumes submitted to Silanna and/or 1 during their job interviews with Silanna.” Id. ¶¶ 123, 126. Finally, Plaintiff alleges that 2 Silanna has exploited its trade secrets “to introduce its first two high-voltage flyback 3 controller ICs for AC-DC power supplies . . . just five to six months after hiring 4 Defendant Mariano, and announce the full release of these products less than a year after 5 hiring . . . Defendants Barrameda, Evangelista and De Lara.” Id. ¶ 130. 6 The Court finds that Plaintiff’s allegations, when considered together and in the 7 light most favorable to Plaintiff, represent “enough facts to state a claim to relief that is 8 plausible on its face.” Twombly, 550 U.S. at 570; see Cahill, 80 F.3d at 337–38 (citing 9 Nat’l Wildlife Fed’n, 45 F.3d at 1340); Doc. No. 69 at 37 (citation omitted). Further, 10 Plaintiff plausibly alleges the first two prongs described in Central Valley General 11 Hospital. See 75 Cal. Rptr. 3d at 791–92. Therefore, the Court finds that Plaintiff has 12 sufficiently pleaded the misappropriation element of its DTSA claim to survive a motion 13 to dismiss. 14 3. Damages 15 Defendants do not appear to address the damages element of the DTSA claim. 16 Plaintiff does not provide argument on this element either, though it notes that 17 “Defendants do not dispute the sufficiency of pleading as to the damages element.” Doc. 18 No. 81 at 19. Plaintiff’s complaint includes the following relevant passages: 19 20 131. On information and belief, Defendants have used [Plaintiff’s] trade secrets of substantial and economic value for their own personal gain, 21 allowing Silanna to unfairly compete with [Plaintiff] in the market for high- 22 voltage flyback controller ICs for AC-DC power supplies.
23 132. Defendants’ current and continued misappropriation of [Plaintiff’s] 24 trade secrets is reckless and malicious. Defendants knew of and agreed to abide by the confidentiality obligations and restrictions on the use and 25 disclosure of [Plaintiff’s] trade secrets. 26 133. As a direct and proximate result of Defendants’ current and continued 27 misappropriation of [Plaintiff’s] trade secrets, [Plaintiff] will suffer 28 imminent and irreparable harm. 1 134. Unless enjoined by this Court, Defendants’ acts of misappropriation 2 will continue, and [Plaintiff] will continue to suffer irreparable harm. 3 135. [Plaintiff] has no adequate remedy at law and is entitled to an 4 injunction under 18 U.S.C. § 1836(b)(3)(A). 5 136. On information and belief, Defendants’ continued use of these trade 6 secrets is willful and malicious, and [Plaintiff] is entitled to recover 7 enhanced damages and its reasonable attorneys’ fees under 18 U.S.C. §§ 1836(b)(3). 8
9 Doc No. 78 ¶¶ 131–36. Therefore, the Court finds that Plaintiff has sufficiently pleaded 10 the damages element of its DTSA claim. 11 4. Conclusion 12 The Court finds that Plaintiff has alleged sufficient facts to plead its DTSA 13 claim. Accordingly, the Court DENIES Defendants’ motion to dismiss Plaintiff’s 14 DTSA claim. 15 C. Interference with Contractual Relations 16 Plaintiff’s third cause of action is interference with contractual relations. See SAC 17 ¶¶ 138–44. Defendants challenge this claim on two grounds. See Doc. No. 79-1 at 19– 18 20. First, Defendants argue that Plaintiff has failed to allege breach of contract and that 19 “[b]ecause . . . the breach of contract claims lack facts alleging an actual breach, the 20 claim for interference likewise falls.” Id. at 20. Second, Defendants argue that “[t]he 21 claim further fails under 12(b)(6) for lack of specificity.” Id. Defendants elaborate that 22 “[i]nsofar as the claim is based solely on alleged interference with the Defendants’ 23 contracts, it is 1) simply another attempt to restate the already-dismissed claim for 24 violation of non-solicitation covenants, and 2) lacking any factual specifics with respect 25 to who induced what breach of what contract or covenant.” Id.; see also Doc. No. 82 at 26 12–13. Plaintiff responds that it “has sufficiently pled each element” of the claim. See 27 Doc. No. 81 at 29. Specifically, Plaintiff argues that it “alleges that each Defendant 28 knowingly interfered with [Plaintiff’s] contractual relations with at least other Defendants 1 by conspiring with Silanna and each []other” and by “using [Plaintiff’s] confidential 2 personnel information, to secretly target and entice [Plaintiff’s] top-performing 3 applications engineers to improperly use and disclose [Plaintiff’s] confidential and trade 4 secret information in breach of their employment agreements, causing harm to 5 [Plaintiff].” Id. (citing SAC ¶¶ 39, 54, 57, 66, 68, 79, 81, 89, 138–43). 6 7 The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract 8 between plaintiff and a third party; (2) defendant’s knowledge of this 9 contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of 10 the contractual relationship; and (5) resulting damage. 11 12 AlterG, Inc., 388 F. Supp. 3d at 1149 (quoting Pac. Gas & Elec. Co. v. Bear Stearns & 13 Co., 791 P.2d 587, 589–90 (Cal. 1990)). “Unlike the related tort of intentional 14 interference with prospective economic advantage . . . intentional interference with 15 contractual relations does not require that a defendant’s conduct be independently 16 wrongful.” Blizzard Entm’t Inc. v. Ceiling Fan Software LLC, 28 F. Supp. 3d 1006, 1015 17 (C.D. Cal. 2013) (citing Quelimane Co. v. Stewart Title Guar. Co., 960 P.2d 513, 530 18 (1998)). 19 The Court has already found that Plaintiff has adequately pleaded its claims for 20 breach of contract. See supra Section III.A. Thus, Plaintiff has alleged the first and 21 fourth elements of its interference claim. 22 The Court finds Plaintiff sufficiently pleads second element—defendants’ 23 knowledge of the contract—because Plaintiff alleges that such knowledge existed “at 24 least because they each executed their respective employment agreements with 25 [Plaintiff].” See id.; SAC ¶ 140. The combination of this allegation with the specific 26 allegations that each Defendant signed substantially similar employment contracts with 27 Plaintiff and the fact that these agreements are attached to the Complaint as exhibits 28 1 satisfies this element. See, e.g., SAC ¶¶ 29–31, 42–44, 59–60, 71–72; Doc. No. 78-3 2 (Barrameda). 3 The third element—defendants’ intentional acts designed to induce a breach or 4 disruption of the contractual relationship—is more problematic. In the section of the 5 SAC that covers this cause of action, Plaintiff asserts that “Defendants have interfered 6 with and continue to interfere with [Plaintiff’s] contracts to put [Plaintiff] in a 7 competitive disadvantage and prevent performance of those contracts and/or to cause the 8 termination and/or breach of these contracts.” SAC ¶ 142. By itself this “threadbare 9 recital[] of the elements” is insufficient. Iqbal, 556 U.S. at 678. The SAC does not 10 specify how each Defendant intentionally interfered with the contractual relations 11 between Plaintiff and other Defendants or employees. For example, Plaintiff highlights 12 several paragraphs alleging that Defendants “provided Silanna with confidential business 13 and personnel information . . . to target [Plaintiff’s] top engineering employees . . . for 14 solicitation and recruitment.” SAC ¶ 39; see also SAC ¶¶ 57, 68, 81. Plaintiff also 15 alleges that “conspiring with Silanna and each other, Defendants also used [Plaintiff’s] 16 confidential business operations and personnel information to help Silanna target, solicit, 17 and recruit [Plaintiff’s] engineers . . . causing a group of Philippine-based top engineers 18 to resign from [Plaintiff] and join Silanna.” Id. ¶ 89. 19 While these allegations support the claim that Defendants breached their contracts 20 with Plaintiff, they do not allege that Defendants intentionally interfered with the 21 contracts of other employees. First, as currently pleaded, these allegations imply that it 22 was Silanna, rather than Defendants, that was using the information allegedly provided 23 by Defendants to “target” Plaintiff’s employees. See id. However, Silanna is not a party 24 to this action. See Doc. No. 18. Second, allegations that some of Plaintiff’s other 25 employees were “targeted” by Silanna, and subsequently left Plaintiff’s employ do not 26 expressly indicate that these employees breached their contracts. See SAC ¶¶ 39, 57, 68, 27 81, 89. Thus, these allegations are insufficient to establish that Defendants intentionally 28 interfered with contractual relations between Plaintiff and its other employees. 1 However, Plaintiff sets forth additional allegations with respect to Defendant 2 Mariano. See id. ¶¶ 54, 66, 79. For example, Plaintiff alleges that “[o]n information and 3 belief, Barrameda was targeted, solicited, and recruited for Silanna by Mariano, as early 4 as October 2018 while Barrameda was still employed by [Plaintiff].” Id. ¶ 54; see also 5 id. ¶¶ 66, 79. As previously noted by the Court, Plaintiff alleges that Barrameda 6 breached his conflict of interest clause by working for both Plaintiff and Silanna at the 7 same time. See, e.g., id. ¶ 54. While this sufficiently alleges that Barrameda breached 8 his contract, the language describing Mariano’s actions only mentions that he “targeted, 9 solicited, and recruited [Barrameda] for Silanna.” See id. Plaintiff does not allege that 10 Mariano solicited or recruited Barrameda to work for Silanna and Plaintiff 11 simultaneously or otherwise induce Barrameda to breach his contract. 12 Plaintiff also alleges that De Lara and Evangelista were also “targeted, solicited, 13 and recruited for Silanna by Mariano and Hodge.” See id. ¶¶ 66, 79. Like Silanna, 14 Hodge has also been voluntarily dismissed from this suit by Plaintiff. See Doc. No. 32. 15 Further, as noted above, these allegations do not allege that Mariano intentionally tried to 16 induce De Lara and Evangelista to breach their contracts by allegedly soliciting or 17 recruiting them to change employers. See SAC ¶¶ 66, 79. 18 Thus, the Court finds that Plaintiff has not sufficiently pleaded its interference with 19 contractual relations claim. Accordingly, the Court GRANTS Defendants’ motion and 20 DISMISSES Plaintiff’s interference with contractual relations claim with leave to 21 amend. 22 D. Unfair Competition 23 Plaintiff’s fourth cause of action is unfair competition under the California 24 Business and Professions Code. See SAC ¶¶ 145–50. Defendants argue that “[b]ecause 25 the SAC still alleges no facts sufficient to establish any wrongful, unlawful, or fraudulent 26 activity, there is no factual predicate for a claim under section 17200.” Doc. No. 79-1 at 27 20–21 (citation omitted); see also Doc. No. 82 at 13. Plaintiff responds that “[b]ecause 28 1 [Plaintiff] has adequately alleged at least Defendants’ violation of the DTSA, 2 Defendants’ motion to dismiss the UCL claim must be denied.” Doc. No. 81 at 29. 3 California Business & Professions Code § 17200 “establishes three varieties of 4 unfair competition—acts or practices which are unlawful, or unfair, or fraudulent.” Cel- 5 Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 540 (1999) (citations 6 omitted). “Because the statute is written in the disjunctive, it is violated where a 7 defendant’s act or practice violates any of the foregoing prongs.” Davis v. HSBC Bank 8 Nevada, N.A., 691 F.3d 1152, 1168 (9th Cir. 2012). 9 The unlawful prong “is essentially an incorporation-by-reference provision.” 10 Obesity Research Inst., LLC v. Fiber Research Int’l, LLC, 165 F. Supp. 3d 937, 952 11 (S.D. Cal. 2016); see also Cel-Tech Commc’ns, Inc., 973 P.2d at 539–49 (“By 12 proscribing ‘any unlawful’ business practice, ‘section 17200 “borrows” violations of 13 other laws and treats them as unlawful practices’ that the unfair competition law makes 14 independently actionable.”). Accordingly, “[w]hen a statutory claim fails, a derivative 15 UCL claim also fails.” Obesity Research Inst., LLC, 165 F. Supp. 3d at 953 (quoting 16 Aleksick v. 7–Eleven, Inc., 140 Cal. Rptr. 3d 796, 801 (Ct. App. 2012)). Here, Plaintiff 17 can succeed on this prong only if it pleads sufficient facts to support another cause of 18 action. See Aleksick, 140 Cal. Rptr. 3d at 801. Because Plaintiff sufficiently pleads its 19 DTSA claim, see supra Section III.B, the Court finds that Plaintiff sufficiently pleads its 20 unlawful prong UCL claim. 21 Accordingly, the Court DENIES Defendants’ motion to dismiss Plaintiff’s unfair 22 competition claim. 23 IV. CONCLUSION 24 For the foregoing reasons, the Court GRANTS in part and DENIES in part 25 Defendants’ motion to dismiss. Although Plaintiff has failed to adequately plead it claim 26 for interference with contractual relations, it is not clear that it would be unable to do so if 27 given leave to amend. Accordingly, that claim is dismissed without prejudice and with 28 1 ||leave to amend. See Knappenberger, 566 F.3d at 942. Plaintiff may file an amended 2 ||complaint curing the deficiencies noted herein on or before August 24, 2020. 3 IT IS SO ORDERED. 4 5 ||Dated: August 10, 2020 6
8 United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28