70 F. Supp. 3d 951
N.D. Cal.2014Background
- AngioScore (plaintiff) makes the AngioSculpt angioplasty balloon; defendants are Dr. Eitan Konstantino and entities TriReme, Quattro, and QT, which sell a competing device called Chocolate.
- Konstantino founded AngioScore, later founded TriReme/Quattro/QT while serving on AngioScore’s board; AngioScore alleges he secretly developed Chocolate in breach of fiduciary duty and concealed it.
- AngioScore sued (patent infringement initially) and later added state-law claims: breach of fiduciary duty (against Konstantino), aiding and abetting that breach (against TriReme/Quattro/QT), and a UCL claim (against all defendants).
- Defendants moved to dismiss aiding-and-abetting and UCL claims under Rule 12(b)(6); the court decided on the Fourth Amended Complaint (4AC).
- Court found the 4AC adequately pleaded: (a) knowledge and substantial participation by TriReme and Quattro in Konstantino’s alleged breach, (b) plausible successor liability for QT; thus aiding-and-abetting claim survives.
- Court held UCL claim sufficiently pleads standing and unlawfulness (borrowing the aiding-and-abetting violation) but dismissed with prejudice requests for nonrestitutionary disgorgement and monetary damages; injunctive relief under UCL remains available.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether aiding-and-abetting breach of fiduciary duty is pleaded (knowledge) | 4AC pleads Konstantino’s roles and concealment; corporations knew or should have known; QT is successor | Defendants: plaintiff pleads alter-ego so cannot plead aiding-and-abetting; QT didn’t exist then; no specific successor pleading | Knowledge adequately pleaded for TriReme/Quattro via imputed knowledge; QT plausibly liable under successor-liability theory; claim survives |
| Whether aiding-and-abetting pleaded (substantial participation) | Alleged acts (design, testing, financing, prototypes, analyses) show substantial assistance to breach | Defendants: actions are routine business acts, not done to further a fiduciary breach | Alleged operational acts can be substantial participation if done with knowledge to further the breach; claim survives |
| UCL standing (lost business / market share) | Loss of market share and denied business opportunity is cognizable UCL injury | Defendants: allegation is only "lost business," insufficient for standing | Standing satisfied; lost business/market-share is a cognizable UCL injury |
| UCL remedies available | Seeks injunction, disgorgement of IPO proceeds, and monetary damages | Defendants: nonrestitutionary disgorgement and damages are not recoverable under UCL; insufficient basis for injunctive relief | Injunctive relief may proceed; nonrestitutionary disgorgement and monetary damages are dismissed with prejudice; injunctive relief remains available |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard: plausibility requirement)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must state a plausible claim)
- Ileto v. Glock, Inc., 349 F.3d 1191 (9th Cir. 2003) (Rule 12(b)(6) tests legal sufficiency)
- Balistreri v. Pacifica Police Dep’t, 901 F.2d 696 (9th Cir. 1990) (dismissal for lack of cognizable legal theory or facts)
- Starr v. Baca, 652 F.3d 1202 (9th Cir. 2011) (alternative explanations must be "so convincing" to render claim implausible)
- In re First Alliance Mortg. Co., 471 F.3d 977 (9th Cir. 2006) (knowledge element requires actual knowledge of the specific primary wrong)
- Casey v. U.S. Bank Nat’l Ass’n, 127 Cal.App.4th 1138 (Cal. Ct. App. 2005) (elements of aiding-and-abetting fiduciary breach under California law)
- Malpiede v. Townson, 780 A.2d 1075 (Del. 2001) (Delaware standard for knowing participation in fiduciary breach)
- Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc., 159 F.3d 358 (9th Cir. 1998) (successor liability circumstances)
- Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163 (Cal. 1999) (UCL competitor-context unfairness test)
- Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (Cal. 2003) (nonrestitutionary disgorgement and damages not available in individual UCL actions)
- Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (Cal. 2011) (UCL standing requires injury in fact and loss of money or property)