Swipe & Bite, Inc. v. Chow
147 F. Supp. 3d 924
N.D. Cal.2015Background
- Swipe & Bite, a California startup, alleges that defendants William Chow and Christopher Trinh (among others) removed source code and cut off access to company servers in June 2015, causing lost contracts and business harm.
- Developers (Chow and Trinh) purportedly worked for equity (Chow up to 25%; Trinh up to 1%) under partially oral/partially written arrangements; Swipe & Bite disclaims a work-for-hire copyright theory and instead alleges ownership under California law (partnership/promoter/fiduciary theories).
- Swipe & Bite filed suit in Santa Clara Superior Court and obtained a TRO against Trinh; the case was removed to federal court by defendants asserting federal-question jurisdiction under the Copyright Act.
- The FAC asserts nine state-law causes of action (breach of fiduciary duty, aiding & abetting, intentional/tortious interference with contract and prospective advantage, conspiracy, violation of court order, declaratory relief) and expressly disclaims copyright infringement.
- The court addressed (1) whether federal subject-matter jurisdiction exists because resolution of ownership would require applying the Copyright Act (work-for-hire); and (2) Trinh’s Rule 12(b)(6) motion to dismiss several claims against him.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction: Does resolution require federal copyright law (work-for-hire) so removal is proper? | Swipe & Bite: claims are state-law only; ownership need not invoke Copyright Act because ownership arises under CA law (partnership/promoter/fiduciary), and work-for-hire would be a defendant-only defense. | Defendants: ownership of the code is disputed and can only be resolved by applying the Copyright Act work-for-hire doctrine, creating a federal question. | Court: Denied remand — federal jurisdiction exists because ownership of the code is central and resolution requires applying the work-for-hire doctrine (T.B. Harms/JustMed line). |
| Contract formation/enforceability (Trinh): Is there a valid contract (equity for coding work) or is it barred by Statute of Frauds/illusory consideration? | Swipe & Bite: agreement was partially written/memoized by emails; alleges mutual obligations and vesting over time. | Trinh: agreement is subject to Statute of Frauds (multi-year), lacks sufficient writing and mutuality/consideration. | Court: Complaint alleges enough (partially written memorandum/email) to survive pleading stage; defenses may be raised later. |
| Aiding & abetting breach of fiduciary duty (against Trinh): Has Swipe & Bite pleaded that Trinh knowingly and substantially assisted Chow’s breach? | Swipe & Bite: Trinh materially assisted Chow, removed code, and refused restoration, aiding Chow’s breach. | Trinh: contends he had no fiduciary duty and is owner of his code. | Court: Denied dismissal as to aiding & abetting — allegations sufficiently plead Trinh’s knowing assistance to Chow’s breach. |
| Intentional/tortious interference (contract and prospective economic advantage) (against Trinh): Has Swipe & Bite pleaded knowledge of specific contracts/relationships and intentional acts to disrupt them? | Swipe & Bite: alleges disruption of contracts and prospects caused by defendants’ conduct; asserts defendants knew of company customers and prospects. | Trinh: lacks specific knowledge of the particular contracts/prospects and insufficient factual allegations. | Court: Dismissed claims (intentional interference with contract; interference with prospective advantage) against Trinh with leave to amend for failure to allege requisite knowledge and facts. |
| Conspiracy (against Trinh and others): Has plaintiff pleaded an actionable conspiracy with predicate torts identified? | Swipe & Bite: alleges a conspiracy among defendants to commit wrongful acts (lists specific alleged acts). | Defendants: challenge sufficiency; conspiracy requires identification of predicate torts and plausible agreement. | Court: Dismissed conspiracy claim with leave to amend — insufficiently identifies which predicate torts support the conspiracy. |
| Violation of court order (sanctions / contempt) (against Trinh): Can plaintiff maintain a separate cause of action to enforce/demand sanctions for violating the TRO from the voluntarily dismissed state action? | Swipe & Bite: alleges Trinh violated the July 10 TRO by wiping/destroying ESI and seeks sanctions/remedies. | Trinh: underlying state action was voluntarily dismissed, so federal court lacks basis to enforce or vindicate that state TRO in this claim. | Court: Dismissed without leave to amend — claim fails as pleaded and cannot be maintained here. |
Key Cases Cited
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (federal courts are courts of limited jurisdiction)
- Caterpillar, Inc. v. Williams, 482 U.S. 386 (federal defense cannot create federal question jurisdiction)
- JustMed Inc. v. Byce, 600 F.3d 1118 (9th Cir.) (ownership dispute over source code required applying work-for-hire — federal jurisdiction)
- Scholastic Entm’t, Inc. v. Fox Entm’t Grp., 336 F.3d 982 (9th Cir.) (use of T.B. Harms test for Copyright Act jurisdiction)
- T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir.) (test for when cases arise under the Copyright Act)
- Topolos v. Caldewey, 698 F.2d 991 (9th Cir.) (copyright ownership alone does not always create federal jurisdiction)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard: plausible claim required)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard and rejection of conclusory allegations)
- Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal.3d 1118 (elements for intentional interference with contractual relations)
- Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (interference with prospective economic advantage requires an independently wrongful act)