Veronica Foods Company v. Kurt Ecklin
3:16-cv-07223
| N.D. Cal. | Jun 29, 2017Background
- Veronica Foods, a longtime bulk importer/supplier of extra virgin olive oil and related specialty products, alleges it developed trade secrets: a Customer List, Confidential Business Information (ordering histories, contacts, pricing, preferences, billing), and a Supplier List.
- Former employee Kurt Ecklin signed a confidentiality agreement, worked for Veronica from 2004–2015, and then joined competitor MillPress in 2016; Veronica alleges Ecklin and MillPress solicited Veronica customers and suppliers using those trade secrets.
- Veronica sued under the Defend Trade Secrets Act (DTSA) and California Uniform Trade Secrets Act (CUTSA), seeking damages and injunctive relief; defendants moved to dismiss the first amended complaint.
- Defendants contended Veronica publicly disclosed much of the allegedly secret information (website, social media, third‑party lists), failed to plead misuse after the DTSA effective date (May 11, 2016), and did not plausibly allege improper acquisition, use, or reasonable secrecy measures.
- The court took judicial notice of Veronica Foods’ own website and social media posts and an unsigned form confidentiality agreement (for pleading purposes), but declined to judicially notice certain third‑party media reports.
- The court granted defendants’ motion, dismissing the FAC with leave to amend because Veronica failed to plausibly allege misappropriation (insufficient particularity tying alleged secrets to specific post‑DTSA acts or specific seized suppliers/customers).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Veronica adequately pleaded existence of trade secrets (customer, supplier, business info) | Veronica: Lists and compiled information (contact persons, ordering histories, pricing, preferences, supplier identities) are trade secrets protected by CUTSA/DTSA; it took reasonable measures (passwords, NDAs). | Defs: Veronica publicly disclosed many customers/suppliers via website/social media; public disclosures and lack of stronger secrecy measures defeat trade secret status. | Court: Allegations were conclusory; public disclosures shown by judicial notice undermined secrecy for material portions; plaintiff failed to plausibly allege the particularity required. |
| Whether misappropriation was plausibly alleged (acquisition/use/disclosure) | Veronica: Ecklin had access and used knowledge to solicit customers and suppliers for MillPress, causing loss of accounts. | Defs: No specific factual allegations of improper acquisition or use; conduct can be explained as lawful market entry; no breach alleged. | Court: Plaintiff failed to allege specific facts tying defendants’ solicitations to use of particular trade secrets; naked assertions insufficient. |
| Whether DTSA claim covers alleged conduct (timing) | Veronica: Alleged continuing use of secrets including specific months after DTSA effective date suffices at pleading stage. | Defs: Most acquisition/use occurred before DTSA (pre‑May 11, 2016); plaintiff alleges only continuing use without discrete post‑enactment acts. | Court: DTSA requires some act on/after May 11, 2016; FAC’s boilerplate assertions of post‑DTSA use were legal conclusions without factual connection—insufficient. |
| Whether public policy/monopoly concerns bar trade secret relief (CUTSA balancing) | Veronica: Diodes pre‑UTSA common‑law balancing is inapplicable; CUTSA statutory framework controls; protection is warranted. | Defs: Protecting Veronica’s monopoly power should not outweigh Ecklin’s right to new employment; plaintiff seeks to stifle competition. | Court: Did not decide the balancing question because plaintiff failed on misappropriation pleading; declined to reach public‑policy argument. |
Key Cases Cited
- MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993) (misappropriation occurs where customer database information is used to solicit customers)
- Morlife, Inc. v. Perry, 56 Cal. App. 4th 1514 (1997) (customer lists reflecting customers with particular needs can be trade secrets)
- Ultimax Cement Mfg. Corp. v. CTS Cement Mfg. Corp., 587 F.3d 1339 (Fed. Cir. 2009) (public disclosure extinguishes trade secret protection)
- Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244 (1968) (common‑law balancing of employer monopoly interest and employee mobility in trade secret context)
- In re Providian Credit Card Cases, 96 Cal. App. 4th 292 (2002) (public disclosure can be fatal to trade secret status)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not entitled to presumption of truth on a motion to dismiss)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead plausible entitlement to relief)