----oo0oo---- ZOOM IMAGING SOLUTIONS, INC., No. 2:19-cv-01544 WBS KJN Plaintiff, v. ORDER RE: DEFENDANTS’ MOTION TO DISMISS EDWARD ROE; MAXWELL RAMSAY; JON CROSSEN; CORINNE FUEREST; ANDREW ALSWEET; KEVIN TOON; JASON PEEBLER; ABIGAIL NEAL; POWER BUSINESS TECHNOLOGY, LLC; BRYAN DAVIS; MAURA LOPEZ; JEFFREY ORLANDO; JESSICA HINTZ, and DOES 1 through 100, inclusive, Defendant.
----oo0oo---- In its Order of November 8, 2019, this court dismissed, and gave leave to amend, plaintiff’s claims for breach of contract, breach of implied covenant of good faith and fair dealing, misappropriation of trade secrets under state and federal law, intentional interference with contractual relations, violation of California’s Unfair Competition Law (“UCL”), and violation of the Computer Fraud and Abuse Act. (Docket No. 23 at 27-28.) Plaintiff subsequently filed a First Amended Complaint (“FAC”) containing the following eleven causes of action: (1) breach of contract against Roe pursuant to the 2017 Executive Agreement; (2) breach of contract against all defendants pursuant to the 2018 Employee Handbook; (3) breach of contract against Roe, Crossen, and Lopez pursuant to the 2013 Employee Handbook; (4) breach of the implied covenant of good faith and fair dealing; (5) violation of the California Uniform Trade Secrets Act (CUTSA), Cal. Civ. Code § 3426 et seq.; (6) violation of the Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836; (7) intentional interference with contractual relations; (8) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; (9) breach of fiduciary duty; (10) breach of the duty of loyalty; and (11) unfair business practices under California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. (Docket No. 61 (“FAC”).) Defendants now move to dismiss all claims of the FAC, except claims (8), (9), and (10).1 (Docket No. 68.)
1 In its previous order, the court found that plaintiff adequately pleaded causes of action for breach of fiduciary duty and breach of the duty of loyalty against Roe. (Docket No. 53 at 20, 22.) The court, however, dismissed plaintiff’s Computer Fraud and Abuse Act claim because plaintiff did not allege that defendants did not have authorized access to the information they allegedly misappropriated. (Docket No. 53 at 25-26.) In its FAC, plaintiff now alleges that defendants accessed the systems “without permission, in excess of their authorized scope.” (FAC ¶ 256.) The allegations suffice to remedy the deficiencies in the original complaint and defendants do not contest that they do. I. Breach of Contract (Counts One, Two, and Three) In the original complaint, plaintiff alleged one breach of contract claim, wherein plaintiff included violations of three distinct agreements by multiple defendants, none of whom were parties to all three agreements. The court dismissed plaintiff’s claim for failure to comply with Rule 10 of the Federal Rules of Civil Procedure and instructed plaintiff to allege a separate count for each breach of contract claim and to identify the defendants and the provisions each defendant violated. (Docket No. 53 at 5-7.) The FAC now alleges three separate breach of contract claims. The first claim alleges Roe’s violation of the non- compete and non-solicitation provisions of the 2017 Executive Agreement (Count One). (FAC ¶ 60.) The second claim alleges all defendants’ violations of the 2018 Employee Handbook’s “Confidentiality Obligation Policy” (Count Two). (FAC ¶ 74.) Finally, the third claim alleges Roe, Crossen, and Lopez’s breach of the 2013 Employee Handbook’s prohibitions on unauthorized disclosure, use, and removal from company premises of Zoom’s confidential information (Count Three). (FAC ¶ 159.) As instructed by the court, plaintiff has separated each breach of contract claim, and has identified the breaching defendants and the specific provisions breached. Plaintiff has thus remedied the defects in the original complaint. Accordingly, the court will not dismiss Counts One, Two, and Three of the FAC.
II. Breach of Covenant of Good Faith and Fair Dealing (Count Four) In its previous order, the court dismissed plaintiff’s breach of covenant of good faith and fair dealing for failure to identify the specific contractual provision that was frustrated by the defendants’ actions. (Docket No. 53 at 7-8.) Once again, the complaint does not identify the specific provisions frustrated by defendants’ actions. Plaintiff alleges that defendants failed “to make reasonable efforts to perform his obligations under . . . the agreements in Paragraphs 59-72, 73-80, and 158-164.” (FAC ¶ 197.) Those paragraph ranges do not refer to specific provisions. For example, from Paragraph 59 to Paragraph 72, only Paragraph 60 includes contractual provisions. Paragraph 60 itself then includes two provisions. Again, “[t]he court must dismiss plaintiff’s claim because it fails to identify the specific contractual provision frustrated by defendants’ conduct.” (Docket No. 53 at 7-8 (citing Ahmadi v. United Cont'l Holdings, Inc., No. 1:14-CV-00264-LJO, 2014 WL 2565924, at *6 (E.D. Cal. June 6, 2014); Plastino v. Wells Fargo Bank, 873 F. Supp. 2d 1179, 1191 (N.D. Cal.2012); Perez v. Wells Fargo Bank, N.A., No. C-11-02279 JCS, 2011 WL 3809808, at *18 (N.D. Cal. Aug. 29, 2011)).) Accordingly, the court will dismiss Count Four of the FAC. III. Misappropriation of Trade Secrets in Violation of CUTSA and DTSA (Counts Five and Six) In its previous order, the court dismissed plaintiff’s state and federal law claims for misappropriation of trade secrets because the complaint did not sufficiently identify the trade secrets at issue. (Docket No. 53 at 11-12.) The FAC now specifically alleges that defendants misappropriated “[1] Zoom’s customer list consisting of key customer contact information and the amounts and frequency of their purchases from Zoom’s business . . . ; [2] the underlying costs, profit margins, and pricing information, for equipment and services sold to Zoom’s customers by Zoom; [3] Zoom’s employee’s costs, including the rates and amounts of insurance premiums, salary history and information of Zoom’s employees . . . ; [4] the duration and expiration dates of service contracts sold and service by Zoom; and [5] the specific costs and prices of maintenance services within the financed loan amounts for Zoom equipment sold to customers.” (FAC ¶ 213.) These new allegations sufficiently allege the existence of trade secrets. Cf. Ikon Office Sols., Inc. v. Rezente, No. 2:10-1704 WBS KJM, 2010 WL 5129293, at *2 (E.D. Cal. Dec. 9, 2010) (finding allegations of misappropriated customer lists to suffice at the motion to dismiss stage). The allegations “describe the subject matter of the trade secret with sufficient particularity . . . and permit[] the defendant to ascertain at least the boundaries within which the secret lies.” Alta Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 3d 868, 881 (N.D. Cal. 2018); see also Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161, 1164 (9th Cir. 1998). Because plaintiff has thus remedied the defect in the original complaint, the court will not dismiss Counts Five and Six of the FAC.
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----oo0oo---- ZOOM IMAGING SOLUTIONS, INC., No. 2:19-cv-01544 WBS KJN Plaintiff, v. ORDER RE: DEFENDANTS’ MOTION TO DISMISS EDWARD ROE; MAXWELL RAMSAY; JON CROSSEN; CORINNE FUEREST; ANDREW ALSWEET; KEVIN TOON; JASON PEEBLER; ABIGAIL NEAL; POWER BUSINESS TECHNOLOGY, LLC; BRYAN DAVIS; MAURA LOPEZ; JEFFREY ORLANDO; JESSICA HINTZ, and DOES 1 through 100, inclusive, Defendant.
----oo0oo---- In its Order of November 8, 2019, this court dismissed, and gave leave to amend, plaintiff’s claims for breach of contract, breach of implied covenant of good faith and fair dealing, misappropriation of trade secrets under state and federal law, intentional interference with contractual relations, violation of California’s Unfair Competition Law (“UCL”), and violation of the Computer Fraud and Abuse Act. (Docket No. 23 at 27-28.) Plaintiff subsequently filed a First Amended Complaint (“FAC”) containing the following eleven causes of action: (1) breach of contract against Roe pursuant to the 2017 Executive Agreement; (2) breach of contract against all defendants pursuant to the 2018 Employee Handbook; (3) breach of contract against Roe, Crossen, and Lopez pursuant to the 2013 Employee Handbook; (4) breach of the implied covenant of good faith and fair dealing; (5) violation of the California Uniform Trade Secrets Act (CUTSA), Cal. Civ. Code § 3426 et seq.; (6) violation of the Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836; (7) intentional interference with contractual relations; (8) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; (9) breach of fiduciary duty; (10) breach of the duty of loyalty; and (11) unfair business practices under California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. (Docket No. 61 (“FAC”).) Defendants now move to dismiss all claims of the FAC, except claims (8), (9), and (10).1 (Docket No. 68.)
1 In its previous order, the court found that plaintiff adequately pleaded causes of action for breach of fiduciary duty and breach of the duty of loyalty against Roe. (Docket No. 53 at 20, 22.) The court, however, dismissed plaintiff’s Computer Fraud and Abuse Act claim because plaintiff did not allege that defendants did not have authorized access to the information they allegedly misappropriated. (Docket No. 53 at 25-26.) In its FAC, plaintiff now alleges that defendants accessed the systems “without permission, in excess of their authorized scope.” (FAC ¶ 256.) The allegations suffice to remedy the deficiencies in the original complaint and defendants do not contest that they do. I. Breach of Contract (Counts One, Two, and Three) In the original complaint, plaintiff alleged one breach of contract claim, wherein plaintiff included violations of three distinct agreements by multiple defendants, none of whom were parties to all three agreements. The court dismissed plaintiff’s claim for failure to comply with Rule 10 of the Federal Rules of Civil Procedure and instructed plaintiff to allege a separate count for each breach of contract claim and to identify the defendants and the provisions each defendant violated. (Docket No. 53 at 5-7.) The FAC now alleges three separate breach of contract claims. The first claim alleges Roe’s violation of the non- compete and non-solicitation provisions of the 2017 Executive Agreement (Count One). (FAC ¶ 60.) The second claim alleges all defendants’ violations of the 2018 Employee Handbook’s “Confidentiality Obligation Policy” (Count Two). (FAC ¶ 74.) Finally, the third claim alleges Roe, Crossen, and Lopez’s breach of the 2013 Employee Handbook’s prohibitions on unauthorized disclosure, use, and removal from company premises of Zoom’s confidential information (Count Three). (FAC ¶ 159.) As instructed by the court, plaintiff has separated each breach of contract claim, and has identified the breaching defendants and the specific provisions breached. Plaintiff has thus remedied the defects in the original complaint. Accordingly, the court will not dismiss Counts One, Two, and Three of the FAC.
II. Breach of Covenant of Good Faith and Fair Dealing (Count Four) In its previous order, the court dismissed plaintiff’s breach of covenant of good faith and fair dealing for failure to identify the specific contractual provision that was frustrated by the defendants’ actions. (Docket No. 53 at 7-8.) Once again, the complaint does not identify the specific provisions frustrated by defendants’ actions. Plaintiff alleges that defendants failed “to make reasonable efforts to perform his obligations under . . . the agreements in Paragraphs 59-72, 73-80, and 158-164.” (FAC ¶ 197.) Those paragraph ranges do not refer to specific provisions. For example, from Paragraph 59 to Paragraph 72, only Paragraph 60 includes contractual provisions. Paragraph 60 itself then includes two provisions. Again, “[t]he court must dismiss plaintiff’s claim because it fails to identify the specific contractual provision frustrated by defendants’ conduct.” (Docket No. 53 at 7-8 (citing Ahmadi v. United Cont'l Holdings, Inc., No. 1:14-CV-00264-LJO, 2014 WL 2565924, at *6 (E.D. Cal. June 6, 2014); Plastino v. Wells Fargo Bank, 873 F. Supp. 2d 1179, 1191 (N.D. Cal.2012); Perez v. Wells Fargo Bank, N.A., No. C-11-02279 JCS, 2011 WL 3809808, at *18 (N.D. Cal. Aug. 29, 2011)).) Accordingly, the court will dismiss Count Four of the FAC. III. Misappropriation of Trade Secrets in Violation of CUTSA and DTSA (Counts Five and Six) In its previous order, the court dismissed plaintiff’s state and federal law claims for misappropriation of trade secrets because the complaint did not sufficiently identify the trade secrets at issue. (Docket No. 53 at 11-12.) The FAC now specifically alleges that defendants misappropriated “[1] Zoom’s customer list consisting of key customer contact information and the amounts and frequency of their purchases from Zoom’s business . . . ; [2] the underlying costs, profit margins, and pricing information, for equipment and services sold to Zoom’s customers by Zoom; [3] Zoom’s employee’s costs, including the rates and amounts of insurance premiums, salary history and information of Zoom’s employees . . . ; [4] the duration and expiration dates of service contracts sold and service by Zoom; and [5] the specific costs and prices of maintenance services within the financed loan amounts for Zoom equipment sold to customers.” (FAC ¶ 213.) These new allegations sufficiently allege the existence of trade secrets. Cf. Ikon Office Sols., Inc. v. Rezente, No. 2:10-1704 WBS KJM, 2010 WL 5129293, at *2 (E.D. Cal. Dec. 9, 2010) (finding allegations of misappropriated customer lists to suffice at the motion to dismiss stage). The allegations “describe the subject matter of the trade secret with sufficient particularity . . . and permit[] the defendant to ascertain at least the boundaries within which the secret lies.” Alta Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 3d 868, 881 (N.D. Cal. 2018); see also Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161, 1164 (9th Cir. 1998). Because plaintiff has thus remedied the defect in the original complaint, the court will not dismiss Counts Five and Six of the FAC.
IV. Intentional Interference with Contractual Relations (Count 7) In evaluating plaintiff’s claim for intentional interference with contractual relations, the court found that “[p]laintiff’s allegations sufficiently plead wrongful conduct distinct from the alleged misappropriation of trade secrets.” (Docket No. 53 at 16.) The court thus concluded that plaintiff’s claim was not preempted by the CUTSA. (Id.; see also Ikon, 2010 WL 5129293, at *4 (“Because this allegation arises from facts different from the claim of misappropriation of trade secrets, the claim is not preempted by CUTSA.”).) The court nonetheless dismissed plaintiff’s claim because the complaint did not allege actual breach or disruption of the contractual relationships at issue. (Docket No. 53 at 17 (citing Walters v. Fid. Mortg. of Cal., 730 F. Supp. 2d 1185, 1210 (E.D. Cal. 2010).) The FAC now alleges that “at least 74 Zoom customers have cancelled their agreements with Zoom.” (FAC ¶ 249.) The FAC therefore now sufficiently pleads a claim for intentional interference with contractual relations. (See Docket No. 53 at 16-17 (finding that the complaint satisfies all other elements of the cause of action).) Accordingly, the court will not dismiss Count 7 of the FAC. V. Unfair Business Practices (Count 11) This court previously dismissed plaintiff’s original claim under the unlawful prong of the UCL because it explicitly relied on defendant’s misappropriation of trade secrets and was therefore preempted by the CUTSA. (Docket No. 53 at 23.) Just as in the original complaint, plaintiff’s claim in the FAC that defendants acted unlawfully is explicitly based on the same nucleus of facts as trade secret misappropriation. (FAC ¶ 281 (Defendants “have violated the UCL’s prohibition against engaging in any unlawful act . . . as a result of their violations of [CUTSA].”).) This claim is therefore identical to the misappropriation claim and “there is no material distinction between the wrongdoing underlying” the two claims. See Ikon, 2010 WL 5129293, at *3. The CUTSA thus preempts plaintiff’s claim for a violation of the unlawful prong of the UCL. The court also dismissed plaintiff’s original claim under the unfair prong of the UCL for the same reasons. In the original complaint, plaintiff alleged that defendants acted unfairly because plaintiff “use[d] Zoom’s confidential and proprietary business information” to solicit employees and customers. (Docket No. 53 at 23 (citing Complaint ¶ 149).) Plaintiff has now amended its allegations to allege that defendants “publicize[d] false business information about Zoom to its customers . . . and . . . solicit[ed] Zoom’s salespersons and technicians based on false information.” (FAC ¶ 282.) Specifically, plaintiff alleges that defendants Alsweet and Roe made such allegedly false representations. (FAC ¶¶ 49(c)-(d); Ex. D.) To make false representations, Alsweet “use[d] Zoom’s confidential information.” (FAC ¶ 49(d).) Similarly, to reach out to Zoom’s customers and communicate Zoom’s alleged closing, “Roe us[ed] Zoom’s confidential information directly and indirectly” (FAC ¶ 65), including Zoom’s customer lists (FAC ¶ 167). Just as in the original complaint, the alleged unfair conduct in the FAC relies on the misappropriation allegations, so the CUTSA preempts this claim. Accordingly, the court will dismiss Count 11 of the First Amended Complaint. VI. Further Amendment In its Order of November 8, 2019, the court made it clear what plaintiff needed to do in order to cure the defects in its complaint with respect to the dismissed claims. In the Second Amended Complaint, plaintiff has cured the defects with respect to the breach of contract, trade secrets, and interference with contractual relations claims. However, plaintiff has failed to cure the defects with respect to its breach of implied covenant or UCL unfair conduct claims. Since plaintiff has been given a full and fair opportunity to do so, the court must infer that plaintiff is unable in good faith to allege facts sufficient to state either of those claims. Under these circumstances, to give plaintiff yet another opportunity to amend its complaint would serve only to prolong this litigation, enhance the costs of the opposing party, and unnecessarily consume additional judicial time and resources. IT IS THEREFORE ORDERED that defendant’s Motion to Dismiss (Docket No. 68) be, and the same hereby is, GRANTED IN PART without leave to amend as to the following claims: (1) breach of implied covenant of good faith (Count Four); and (2) violation of the UCL for unlawful and unfair conduct (Count 11). IT IS FURTHER ORDERED that defendant’s Motion to Dismiss be, and the same hereby is, DENIED IN PART as to the following claims: (1) breach of the 2017 Executive Agreement by Roe (Count 1); (2) breach of 2018 Employee Handbook by all defendants (Count 2); (3) breach of 2013 Employee Handbook by Roe, Cross, and Lopez (Count 3); (4) violation of the CUTSA (Count 5); (5) violation of the DTSA (Count 6); and (6) intentional interference with contractual relations (Count 7). Dated: January 29, 2020 he ble 7H. De, bE UNITED STATES DISTRICT JUDGE