3:18-cv-00527
D. Nev.Feb 24, 2022Background
- HP Tuners, LLC (HPT) was founded by Prociuk, Piastri, and Cannata; Operating Agreement (Nevada law) required members to assist in protecting HPT IP.
- Cannata helped acquire third‑party Chrysler/Jeep/Dodge code (2015) and later, while negotiating a buyout, transmitted HPT source code and a copy of HPT’s key generator to competitor Syked/Sykes‑Bonnett; Cannata signed an NDA with Syked.
- In October 2016 HPT bought out Cannata for $6.8M under a Purchase Agreement that included return/destruction of HPT confidential information, non‑disclosure, and non‑compete covenants.
- HPT learned of the disclosures in 2018 and sued asserting multiple claims: breach of fiduciary duty, fraud, CFAA, DTSA/NUTSA/ITSA, DMCA, breach of contract, conversion, unfair competition, and related claims.
- Parties filed cross motions for partial summary judgment and HPT moved to strike parts of Cannata’s factual statement; much sealed material was filed and parties submitted expert damages evidence (Bone) contested by Cannata.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Motion to strike portions of Cannata’s statement | Certain paragraphs are immaterial and argumentative; should be stricken | Paragraphs are material or match HPT’s facts; should remain | Granted in part: several paragraphs (20–22, 27–32, 39–42, 43–47 as argued) stricken; others denied |
| Breach of fiduciary duty (share/ disclosure of IP) | Cannata admitted sharing HPT confidential files and key generator; Operating Agreement imposed fiduciary duty to protect IP | No fiduciary duty or genuine factual disputes; alternatively shared material was derivative and not HPT IP | Reserved: Court found Operating Agreement creates fiduciary duty but reserved ruling on breach pending limited sur‑reply re: whether shared software was derivative of HPT IP |
| Fraudulent concealment (during buyout) | Cannata concealed material facts about sharing IP; had duty to disclose; HPT relied and was damaged | No deceptive intent; HPT could have discovered; subjective belief of permissibility | Denied (genuine issues of material fact on intent and reliance) |
| Trade‑secret misappropriation (DTSA, NUTSA, ITSA) | HPT identifies files and source code admitted transferred; seeks damages including saved development costs | HPT failed to identify secrets with sufficient particularity and show independent economic value; damages speculative | Denied (HPT failed to identify secrets with required particularity; damages/material issues remain) |
| Breach of Purchase Agreement (return/confidentiality clauses) | Cannata admitted retaining and disclosing confidential info, violating §§6.1, 6.3, 6.4 | HPT failed to substantially perform (payment/certificates) releasing Cannata | Liability granted for breach (admissions); damages denied (issues of amount/speculation) |
| Conversion | HPT: retention of property = conversion | Cannata: disputes facts/ legal basis | Denied (HPT offered no specific evidence on conversion at summary judgment) |
| CFAA (§1030) | HPT: Cannata exceeded authorized access and caused loss | Cannata: had authorization to access; no damage/loss as defined by statute | Granted for Cannata (Ninth Circuit Nosal narrow view; use restrictions ≠ access restrictions) |
| DMCA/ Copyright Act (17 U.S.C. §1201) | HPT asserts circumvention/distribution violations and damages | Cannata raises damages reliability and other defenses | Denied for defendant (Court declines summary judgment; damages remain fact issue) |
Key Cases Cited
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burdens)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (materiality and genuine issue standard)
- United States v. Nosal, 676 F.3d 854 (9th Cir. 2012) (CFAA: "exceeds authorized access" limited to access restrictions, not misuse)
- Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161 (9th Cir. 1998) (trade‑secret identification requirement)
- Bourns, Inc. v. Raychem Corp., 331 F.3d 704 (9th Cir. 2003) (trade‑secret damages may include saved development costs)
- Oracle Corp. v. SAP AG, 734 F. Supp. 2d 956 (N.D. Cal. 2010) (acknowledging recovery of saved development costs in trade‑secret context)
- Giles v. Gen. Motors Acceptance Corp., 494 F.3d 865 (9th Cir. 2007) (definition/ existence of fiduciary relationship)
- Klein v. Freedom Strategic Partners, LLC, 595 F. Supp. 2d 1152 (D. Nev. 2009) (elements of breach of fiduciary duty under Nevada)