GENASYS INC., a Delaware corporation v. VECTOR ACOUSTICS, LLC, a Delaware limited liability company; HERNAN FREDERICK LOPEZ, an individual; MARCEL
Case No.: 22-CV-152 TWR (BLM)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
November 1, 2022
Honorable
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTIONS TO DISMISS
(ECF Nos. 10, 11)
Presently before the Court is Defendant Marcel Naujok‘s Motion to Dismiss (“Naujok MTD,” ECF No. 10) and Defendants Vector Acoustics, LLC and Hernan Frederick Lopez‘s Motion to Dismiss. (“Vector Lopez MTD,” ECF No. 11.) Plaintiff Genasys Inc. (“Genasys“) filed an Opposition to each Motion to Dismiss (ECF Nos. 14 (“Naujok Opp‘n,“), 15 (“Vector Lopez Opp‘n“)), and Defendants Naujok (“Naujok Reply,” ECF No. 17) and Vector Lopez (“Vector Lopez Reply,” ECF No. 16) filed Replies. In response to a Supplemental Request for Judicial Notice, (see ECF No. 16-1), Plaintiff filed a response. (“Response,” ECF No. 18.) The Court held a hearing on May 19, 2022. (See ECF No. 19.) Having carefully considered the parties’ arguments, the law, and the pleadings, the Court GRANTS IN PART AND DENIES IN PART both Naujok‘s and Vector Lopez‘s Motions to Dismiss.
BACKGROUND1
Genasys is a “leader in the Acoustic Hailing Device Industry” (the “AHD Industry“). (ECF No. 1 (“Compl.“) ¶ 9.) Plaintiff “develops and manufactures large-scale communication systems,” for example, “emergency warning systems and public safety mass notification systems that are used by various governmental and commercial organizations.” (Id.) Engineers and business development employees “regularly hold confidential product development meetings” to discuss design improvements to Genasys products. (Id. ¶ 13.)
Genasys “requires both its engineering employees and its business development employees to sign a Proprietary and Inventions Agreement and other employment agreements.” (Id. ¶ 14.) The employment agreements require employees to promptly disclose complete information concerning each and every invention (including a new contribution, concept, idea, development, formula, composition, technique, machine and improvement thereof, or know-how related thereto), discovery, improvement, device, design, apparatus, practice, process, method or product made, developed, perfected, devised, conceived or first reduced to practice by them, either solely or in collaboration with others, during the period of their employment by Genasys, and up to and including a period of one (1) year after termination of employment that relates to the business, produces, practice or techniques of Genasys, or to Genasys’ actual or demonstrably anticipated research or development, or resulting from any work performed by them for Genasys. (Id.) The employment agreements further require employees to agree that any and all Inventions made, developed, perfected, devised, conceived or reduced to practice by the employee during the period of employment and any other Inventions made, developed, perfected, devised, conceived or reduced to practice by them during the period of one (1) year after termination of their employment, relating directly or indirectly to the business, products, practices or techniques of Genasys or Genasys’ actual or demonstrably anticipated research or development, or resulting from any work performed by them for Genasys, are the sole property of Genasys, and they assigned any and all right title and interest in and to any and
In connection with the use of Genasys products, Genasys receives confidential information from clients, which provides a competitive edge in the industry. (Id. ¶¶ 18-19, 21.) Genasys limits access to the confidential information and, through the employment agreements, requires its employees to “hold ‘customer information’ and information relating to ‘the business, products, practices and techniques’ of its clients in the strictest confidence and not to use, publish, or disclose such information without Genasys’ Board of Directors written authorization.” (Id. ¶ 22.)
Genasys monitors the pricing of its products and does not publicize the information. (Id. ¶ 25.) Instead, Genasys “strategically and selectively discloses its prices” and requires, in the employment agreements, employees to maintain the confidence of its business and financial information. (Id. ¶ 27.)
Marcel Naujok worked for Genasys as Vice President of Business Development from June 2013 through October 2018. (Id. ¶¶ 41, 45.) He signed the employee agreements and thereafter “assumed the confidentiality commitments.” (Id. ¶ 42.) He attended many “Confidential Product Development Meetings”2 and was very familiar with the “Customer Network,”3 “Genasys’ Pricing Information,”4 and “Confidential Client Data.”5 (Id. ¶¶ 43-44.)
After his termination, “Naujok continued to provide various consulting services for Genasys from October 2018 until May 2021.” (Id. ¶ 46.) Throughout the consulting period, Naujok “continued to receive information regarding the Customer Network, Confidential Client Data, Proposed Product Modifications, and other proprietary information of Genasys.” (Id.)
Hernan Lopez worked for Genasys as Vice President of Product Development from 2003 through 2019. (Id. ¶¶ 28, 38.) He also signed the employee agreements and “assumed the confidentiality commitments,” (Id. ¶ 29), and he attended many Confidential Product Development meetings and was very familiar with the Customer Network, Genasys’ Pricing Information, and Confidential Client Data. (Id. ¶¶ 30-31.)
In May 2019, the United States Army made a presentation to Genasys regarding its use of Genasys products and provided a copy of some of the slides to Genasys. (Id. ¶¶ 32-33.) The Army emailed the presentation slides with the instruction: “This communication may contain information that is confidential in nature and unauthorized use or disclosure is strictly prohibited. If you are not the intended recipient, kindly reply or call at the number above to alert us. Afterward, please delete this communication in its entirety.” (Id. ¶ 35.) Lopez
In June 2019, Lopez terminated his employment with Genasys. (Id. ¶ 38.) Following his departure, Lopez retained the Army presentation slides as well as “information related to Genasys’ Pricing Information, Customer Network, Confidential Client Data, and other proprietary information of Genasys.” (Id. ¶ 39.)
In January 2020, Lopez founded Vector Acoustics (“Vector“). (Id. ¶ 47.) Naujok is “currently assisting Lopez with respect to” Vector‘s business.” (Id. ¶ 49.) Vector describes its business as “Design and Manufacturing of Loudspeakers and Audio Systems for Challenging Applications.” (Id. ¶ 48.) Vector‘s products appear to be a “mere reproduction of Legitimate Genasys Products with the addition of the Proposed Product Modifications and/or superficial alterations.” (Id. ¶ 50.)
Genasys believes that, in designing Vector‘s products, Lopez and Naujok “relied on Genasys’ Confidential Client Data, including, but not limited to, the Army Confidential Presentation Materials, and Proposed Product Modifications, as well as other proprietary information of Genasys.” (Id. ¶ 51.) For example, Lopez and Naujok utilized the Army‘s slides, which had been provided to Genasys, in a presentation with at least one of Genasys’ international customers. (Id. ¶ 54.) Further, Vector has been spreading misinformation about Genasys’ products to Genasys’ customers, including that Genasys’ patents on their products have expired. (Id. ¶ 55.)
Genasys asserts the following claims: (1) breach of contract against Lopez; (2) breach of contract against Naujok; (3) violation of California‘s Uniform Trade Secrets Act (“CUTSA“),
Defendant Naujok moves to dismiss all claims pursuant to
LEGAL STANDARDS
I. Federal Rule of Civil Procedure 12(b)(6)
“A motion to dismiss under
“Under
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.‘” Id. (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]‘—‘that the pleader is entitled to relief.‘” Id. at 679 (second alteration in original) (quoting
“If a complaint is dismissed for failure to state a claim, leave to amend should be granted ‘unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.‘” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). “A district court does not err in denying leave to amend where the amendment would be futile.” Id. (citing Reddy v. Litton Indus., 912 F.2d 291, 296 (9th Cir. 1990), cert. denied, 502 U.S. 921 (1991)).
II. Federal Rule of Civil Procedure 12(e)
Under
ANALYSIS
I. Judicial Notice
Defendants all filed Requests for Judicial Notice (“Naujok RJN,” “Vector Lopez RJN,” ECF Nos. 10-3, 11-2 respectively.) “In ruling on a 12(b)(6) motion, a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice.” Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court may take judicial notice of an adjudicative fact that “is not subject to reasonable dispute” because it is “generally known within the trial court‘s territorial jurisdiction” or “can be accurately
Defendants are requesting that the Court accept as true information contained within the screenshots from the websites of Genasys and the General Services Administration (“GSA“), which is an independent government agency, (Naujok RJN at 2), as well as copies of Plaintiff‘s press releases and Form 10-K filings with the SEC. (Vector Lopez RJN 4-6.) Plaintiff opposes all requests. (Naujok Opp‘n at 6-9, Vector Lopez Opp‘n at 7-9.)
A. Genasys Website
“Private corporate websites, particularly when describing their own business,” are a source whose accuracy is reasonably questioned. See Spy Optic, Inc. v. Alibaba.Com, Inc., 163 F. Supp. 3d 755, 763 (C.D. Cal. 2015). Even if a court judicially notices a party‘s website, the court is simply taking “as true that the website exists and makes certain representations about the company to the public.” Woodside Invs., Inc. v. Complete Bus. Sols. Grp., Inc., No. 220CV00042JAMCKD, 2020 WL 869206, at *2 (E.D. Cal. Feb. 21, 2020). The court does not “assume the veracity of any of the representations the website contains.” Id. “Federal courts considering the issue have expressed skepticism as to whether it is appropriate to take judicial notice of information or documents appearing on websites that are created and maintained by a party to the litigation.” Gerritsen v. Warner Bros. Ent. Inc., 112 F. Supp. 3d 1011, 1030 (C.D. Cal. 2015).
The Court therefore DENIES all requests for judicial notice of Genasys website screenshots. First, even though Naujok appears to attach SEC filings and an investor presentation from the Genasys website, he provided only a link to the general website where he allegedly found the documents and thus there is no method of authentication for the Court to ensure the documents’ accuracy. See Hsieh v. FCA US LLC, 440 F. Supp. 3d 1157, 1161 (S.D. Cal. 2020) (“[N]umerous cases have denied judicial notice of a party‘s documents because they are not a source ‘whose accuracy cannot reasonably be questioned.‘“). Second, Vector Lopez attaches pages displaying customers of Genasys. (See Vector Lopez RJN at 2.) Plaintiff, however, admits that it has published at least some of the names of customers, (Vector Lopez Opp‘n at 8)—the names themselves, however, are irrelevant to the Court.
B. GSA Website
“Under
1. Naujok
None of the links provided by Naujok appear to lead to the intended webpage as they do not match the screenshots provided. The Court therefore DENIES Naujok‘s request for judicial notice of GSA links. They are irrelevant, not legible, and lack any clear link to assist the Court at the Motion to Dismiss stage. See Gerritsen, 112 F. Supp. 3d at 1030 (denying judicial notice of information in press releases and publicly available news articles because it was irrelevant for purposes of the motion to dismiss).
2. Vector Lopez
The link provided by Vector Lopez appears to lead to the intended webpage. Nonetheless, the information provided is not relevant. As already noted, although Plaintiff admits that it has published at least some of the names of customers, (Vector Lopez Opp‘n at 8), the names themselves are irrelevant. Thus, the Court DENIES Vector Lopez‘s request for judicial notice of GSA links.
C. Plaintiff‘s Press Releases
“Courts may take judicial notice of publications introduced to ‘indicate what was in the public realm at the time, not whether the contents of those articles were in fact true.‘” Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 960 (9th Cir. 2010) (quoting Premier Growth Fund v. Alliance Capital Mgmt., 435 F.3d 396, 401 n.15 (3d Cir. 2006)) (citing In re Google Assistant Priv. Litig., 546 F. Supp. 3d 945, 956 (N.D. Cal. 2021)). Nonetheless, the Court DENIES Vector and Lopez‘s request for judicial notice of Plaintiff‘s press releases because they are irrelevant to the instant Motion to Dismiss. See Gerritsen, 112 F. Supp. 3d at 1030 (denying judicial notice of information in press
D. Form 10-Ks
“Courts can consider securities offerings and corporate disclosure documents that are publicly available.” Gerritsen, 112 F. Supp. 3d at 1031; see also Wynn v. Chanos, 75 F. Supp. 3d 1228, 1235 (N.D. Cal. 2014) (“SEC forms such as a Form 8-K or Form 10-K are matters of public record and may be subject to judicial notice.“). A court, however, only takes judicial notice of the “content of the SEC Forms [] and the fact that they were filed with the agency. The truth of the content, and the inferences properly drawn from them, however, is not a proper subject of judicial notice under
E. Supplemental Request for Judicial Notice
As a part of their Reply, Vector Lopez included a Supplemental Request for Judicial Notice, (“RJN 2,” ECF No. 16-1), in which Defendants request the Court judicially notice a press release and Plaintiff‘s price list from Sourcewell‘s website.6 (Id. at 2.) For the foregoing reasons, see supra Sections I.B.2 and I.C, the Court DENIES Vector Lopez‘s supplemental request. Accordingly, the Court need not address Plaintiff‘s Response.
II. Breach of Contract
To have a viable breach of contract claim, there must be (1) a contract, (2) plaintiff‘s performance or excuse for nonperformance, (3) defendant‘s breach, and (4) damages to plaintiff. Coles v. Glaser, 2 Cal. App. 5th 384, 391 (2016). It is “absolutely essential to plead the terms of the contract either in haec verba or according to
California
Defendants Vector Acoustics and Lopez move to dismiss Plaintiff‘s breach of contract cause of action on the grounds that it is void under Section 16600 or, in the alternative, preempted by CUTSA, see infra Section VI.A, or impermissibly vague. (Vector Lopez MTD at 8, 12 n.2).
Defendant Naujok, on the other hand, moves to dismiss Plaintiff‘s breach of contract claim because (1) “Plaintiff fails to specify the actual ‘Agreements’ Naujok purportedly breached;” (2) Naujok‘s employment was terminated in October 2018, and thus any agreements concerning his consulting work would “not fall within Plaintiff‘s definition of ‘Agreements‘” under the operative Complaint; (3) the Complaint “generically describes the ‘Agreements’ to include a set of undefined agreements without titles;” (4) Plaintiff failed to attach copies of the “Agreements” or “to allege their terms in sufficient detail;” and (5) Plaintiff fails to allege “facts to support its allegation that it has performed its end of the bargain.” (Naujok MTD 1 at 13-14.) Plaintiff counters that it does in fact identify the “specific contractual commitments that are at issue” and outlines the specific obligations that Naujok breached. (Naujok Opp‘n at 9-10.)7 Additionally, given that Genasys provided Naujok with employment, it contends that it performed its end of the bargain. (Id. at 11.)
Plaintiff does not adequately state a claim for breach of contract. Plaintiff alleges the existence of contracts in the
Even if the employment agreements as alleged could be found to constitute a “contract” for purposes of Plaintiff‘s claims, they would not be valid under Section 16600. Defendant Naujok contends that the “Alleged Agreements” contain “impermissible and unlawful[ly] overbroad intellectual property assignment[]” provisions and thus, even if properly pled, are void and unenforceable. (Naujok MTD at 15-16.) Defendants Vector and Lopez echo this contention. (Vector Lopez MTD at 10.) Pursuant to Section 16600, Defendants are correct. Plaintiff seeks to clarify that it is “not alleg[ing] the Agreements were violated simply because Naujok is competing with Genasys, but, instead, alleg[ing] Naujok breached the Agreements by using Genasys’ confidential, trade secret information in violation of the Agreements.” (Naujok Opp‘n at 12) (emphasis in original). Plaintiff‘s clarification highlights both a deficiency in its Complaint and a conflation of a tortious wrong with a breach of contract. The way in which the employment agreements were allegedly breached is not relevant if the contract itself is void.8
The Court finds the employment agreements are unnecessarily broad and thus violate Section 16600 and are not enforceable. See Armorlite Lens Co. v. Campbell, 340 F. Supp. 273, 275 (S.D. Cal. 1972) (“An Agreement, such as the one involved in the instant case, which requires a former employee to turn over to his former employer all new ideas and concepts concerning the field of work or the products of the employer which occur to him within one year after the termination of his employment, is unnecessarily broad.” (emphasis in original)). Plaintiff‘s employee agreements are similarly broad to those the court encountered in Armorlite, including a continuing obligation for one-year post-employment that encompasses all new ideas and concepts relating to the employee‘s work at Genasys. As in Armorlite, broad employment agreements, such as the ones at issue here, “encompass[] not only the dishonest employee with whom plaintiff is concerned, but also the honest employee who legitimately
Courts disagree about whether a “trade secret exception” exists under Section 16600. Arthur J. Gallagher & Co. v. Tarantino, 498 F. Supp. 3d 1155, 1169 (N.D. Cal. 2020) (“[T]here is not a clear consensus as to whether there is such an exception to
Because Plaintiff‘s employee agreements fail under Section 16600 and do not qualify for any exception, the Court GRANTS Defendants’ Motions to Dismiss the breach of contract claims and DISMISSES those claims against all Defendants.
III. California‘s Uniform Trade Secrets Act (“CUTSA“) and the Defend Trade Secrets Act (“DTSA“)
“Courts have held that the DTSA and the CUTSA share the same pleading requirements for the identification of trade secrets.” Alta Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 3d 868, 880-81 (N.D. Cal. 2018); see also InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 657 (9th Cir. 2020) (“Courts have analyzed these claims together because the elements are substantially similar.“). “To state a claim for trade secret misappropriation under the DTSA and the CUTSA, a plaintiff must allege that: ‘(1) the plaintiff owned a trade secret; (2) the defendant misappropriated the trade secret; and (3) the defendant‘s actions damaged the plaintiff.‘” Id. at 877 (quoting Space Data Corp. v. X, No. 16-cv-03260-BLF, 2017 WL 5013363, at *2 (N.D. Cal. Feb. 16, 2017)).
The definition of a “trade secret” is extremely similar under the DTSA and CUTSA. See Workplace Techs. Rsch., Inc. v. Project Mgmt. Inst., Inc., No. 18CV1927 JM (MSB), 2021 WL 4895977, at *20 (S.D. Cal. Oct. 20, 2021). Under the DTSA, a “trade secret” is:
financial, business, scientific, technical, economic, or engineering information . . . if—(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
information, including a formula, pattern, compilation, program, device, method, technique, or process that: (1) [d]erives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) [i]s
the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
“Under both the DTSA and the CUTSA, ‘misappropriation’ means either (1) the [a]cquisition of a trade secret by another person who knows or has reason to know that the trade secret was acquired by improper means; or (2) the [d]isclosure or use of a trade secret of another without express or implied consent.” Alta Devices, Inc. 343 F. Supp. 3d at 877 (citing
“To have independent economic value, a trade secret must be ‘sufficiently valuable and secret to afford an actual or potential economic advantage over others.‘” Calendar Rsch., 2017 WL 10378336, at *3 (quoting Yield Dynamics, Inc. v. TEA Sys. Corp., 154 Cal. App. 4th 547, 564 (2007)). “[C]ircumstantial evidence of the resources invested in producing the information, the precautions taken to protect its secrecy, and the willingness of others to pay for its access” all can sufficiently meet the low standard to show trade secrets derive economic value. Id. at *3-4.
A. Naujok
Naujok moves to dismiss Plaintiff‘s claims for violation of CUTSA and DTSA because (1) “Plaintiff fails to allege ownership of any trade secret with sufficient particularity;” (2) “Plaintiff‘s protected information does not constitute trade secrets as they have been published, are well known[,] and [are] not secret;” and (3) “Plaintiff fails to allege Naujok misappropriated Plaintiff‘s trade secrets through acquisition or use.” (Naujok MTD at 16, 20.)
The Court AGREES that Plaintiff fails to plead with particularity its trade secret claims as they are “impermissibly conclusory.” See Synopsys, Inc. v. ATopTech, Inc., No. C 13-CV-02965 SC, 2013 WL 5770542, at *6 (N.D. Cal. Oct. 24, 2013) (“Materials are not trade secrets just because Plaintiff says they are: there must be some minimally plausible factual explanation for why trade secret protection applies.“). Plaintiff alleges that “[t]he Protected Information, including, but not limited to, the Army Confidential Presentation Materials and additional Confidential Client Data, the Proposed Product Modifications, the Customer Network, and the Pricing Information each constitute trade secrets.” (Compl. ¶¶ 72, 82.) Instead of detailing how and why “this array of potential sources” are protected trade secrets, however, Plaintiff relies on conclusory buzzwords pulled from CUTSA
In Synopsys, the court found that “vague references to an enormous array of potential sources do not suffice to survive” a motion to dismiss when the court cannot “determine where trade secret protection begins and ends as to any of this material.” 2013 WL 5770542, at *6. Similarly, in Vendavo, the court found the “conclusory and generalized allegations” to be insufficient when described “in broad, categorical terms, more descriptive of the types of information that generally may qualify as protectable trade secrets than as any kind of listing of particular trade secrets.” See 2018 WL 1456697, at *4 (emphasis in original); cf. Navigation Holdings, 445 F. Supp. 3d at 77 (finding the plaintiffs’ description of their client information sufficient when they thoroughly detailed who their clientele included, what information they maintain about their clientele, and the work put into assembling the clientele database).
Here, the Court confronts the same issue. As in Synopsys and Vendavo, Plaintiff fails to plead facts supporting its conclusory allegations that the identified sources of information constitute trade secrets. Further, some of the information within the categories listed is publicly available, as Plaintiff itself acknowledges, (see Naujok Opp‘n at 16; see also Compl. ¶ 27), which, without more, fails to provide the Court with a roadmap to distill what information may be a trade secret and what may not. Thus, the Court GRANTS Naujok‘s Motion to Dismiss the CUTSA and DTSA claims.9
B. Vector Acoustics and Hernan Lopez
First, Defendants contend that “[b]ecause the [Army] presentation and the presentation materials were created by the Army, under well-established copyright law, the Army, and not Plaintiff, is the owner of said presentation and materials.” (Vector Lopez MTD at 13.) Second, Defendants believe the pleading is so “spartan” that it is not clear what constitutes the “confidential client data“—i.e., the substance of the alleged trade secret information, the customers involved, any steps Plaintiff took to keep the information secret, and various other details necessary for Defendants to understand the allegations. (Id. at 14.) Third, Defendants contest the allegation that “the idea of adding Bluetooth capability to a product” or “the idea to make speakers more powerful” belong to Plaintiff because they are “ideas generally known in society” and the “speaker trade.” (Id. at 15.) Fourth, Defendants contend that Plaintiff did not list anything other than customer name and contact information in the Complaint as part of the “customer network” and that this allegation, without more, does not qualify as a trade secret. (Id. at 16.) Finally, Defendants state that “Plaintiff does not allege why its pricing is protectable and why it gives it a competitive advantage” and that Plaintiff “publishes its pricing on the GSA‘s website” and thus the information does not constitute trade secrets. (Id. at 17); see also supra note 4.
Plaintiff opposes, relying on
Plaintiff‘s statements of the law are all correct; however, Plaintiff is missing the essential first element—that Plaintiff in fact owns a trade secret. Plaintiff‘s allegations “simply recite the statutory definition of a trade secret.” See Pellerin v. Honeywell Int‘l, Inc., 877 F. Supp. 2d 983, 988 (S.D. Cal. 2012) (finding the defendant‘s trade secret counterclaim failed because, while it “identified the end product,” it did not “describe the manufacturing process with sufficient particularity to put [the p]laintiffs on notice” of the actual trade secret“). As described above, see supra Section III.A, the trade secret claims are “impermissibly vague,” and thus the Court GRANTS Vector Acoustics and Hernan Lopez‘s Motion to Dismiss the CUTSA and DTSA claims.
VI. Unjust Enrichment
There is disagreement among California courts as to whether a standalone cause of action exists for unjust enrichment. See Snopes Media Grp., Inc. v. Mikkelson, No. 21-CV-1730-BAS-DEB, 2022 WL 1343106, at *5 (S.D. Cal. May 3, 2022); see also Doe v. Roblox Corp., No. 3:21-CV-03943-WHO, 2022 WL 1459568, at *12 (N.D. Cal. May 9, 2022) (“California case law appears unsettled on the availability of [unjust enrichment as] a cause of action.” (quoting ESG Cap. Partners, LP v. Stratos, 828 F.3d 1023, 1038 (9th Cir. 2016))). The Ninth Circuit, however, “has construed the common law to allow an unjust enrichment cause of action through quasi-contract.” ESG Cap. Partners, 828 F.3d at 1038 (citing Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 762 (9th Cir. 2015)). Further, in ESG Capital Partners, the Ninth Circuit allowed a cause of action of unjust enrichment to go forward because it “state[d] a claim for relief as an independent cause of action or as a quasi-contract claim for restitution.” 828 F.3d at 1038.10 Since the Ninth Circuit‘s decision in 2016, many courts in this Circuit have followed suit, allowing unjust enrichment claims to proceed outside of quasi-contract.11 See Snopes Media Grp., 2022 WL 1343106, at *5; see also Giannetta v. Marmel, No. 5:20-CV-01410-RGK-KK, 2021 WL 2954083, at *3 (C.D. Cal. Mar. 19, 2021) (“[I]n the Ninth Circuit, courts consider claims for unjust enrichment.“).12 “To
Naujok moves to dismiss Plaintiff‘s unjust enrichment claim as it is a remedy rather than a cause of action, or alternatively, is preempted by CUTSA. (Naujok MTD at 22.) Vector and Lopez likewise move to dismiss the claim for unjust enrichment as there is “no separate cause of action.” (Vector Lopez MTD at 17.) Plaintiff responds that it is permitted to file an unjust enrichment claim as an alternative form of relief and that it is premature for the Court to consider whether the unjust enrichment claim is preempted by CUTSA. (Naujok Opp‘n at 18.13)
Plaintiff cites to In re Sony Gaming Networks and Customer Data Security Breach Litigation, 996 F. Supp. 2d 942, 985 n.37 (S.D. Cal. 2014), in support of its proposition that unjust enrichment may be filed as an alternative form of relief. (Naujok Opp‘n at 18.) Plaintiff‘s reliance, however, is misplaced. Despite being a Southern District of California case, the footnote to which Plaintiff cited relies on the state laws of Florida, Michigan, New York, and Ohio. See In re Sony, 996 F. Supp. 2d at 985 n.37. In contrast, California law appears to disagree and permit CUTSA to preempt common law tort claims when they “do not genuinely allege ‘alternative legal theories’ but are a transparent attempt to evade the strictures of CUTSA by restating a trade secrets claim as something else.” Loop AI Labs Inc. v. Gatti, No. 15-CV-00798-HSG, 2015 WL 5158461, at *2 (N.D. Cal. Sept. 2, 2015) (citing Silvaco Data Sys. v. Intel Corp., 184 Cal. App. 4th 210, 240 (2010), disapproved on other grounds by Kwikset Corp. v. Super. Ct., 51 Cal. 4th 310 (2011)).14 Plaintiff seems to acknowledge that it is seeking to evade the preemption of CUTSA by admitting to pleading unjust enrichment as an alternative form of relief despite the fact that it was pled with the same nucleus of facts. (See Naujok Opp‘n at 18.) Thus, the Court DISMISSES the unjust enrichment claim against all Defendants.
V. Unfair Competition Under California Business and Professions Code Section 17200
“[U]nfair competition shall mean and include any unlawful, unfair[,] or fraudulent business act or practice and unfair, deceptive, untrue[,] or misleading advertising and any act prohibited by Chapter 1.”
There is disagreement among Ninth Circuit district courts as to whether CUTSA supersedes
Because Plaintiff has failed sufficiently to plead any specific trade secret, see supra Section III, the Court agrees with Plaintiff, (see Vector Lopez Opp‘n at 22), that “[d]efendants’ motion to dismiss based on preemption cannot be addressed until it is determined whether the allegedly misappropriated information constitutes a trade secret.” Amron Int‘l Diving Supply, Inc. v. Hydrolinx Diving Commc‘n, Inc., No. 11-CV-1890-H JMA, 2011 WL 5025178, at *10 (S.D. Cal. Oct. 21, 2011) (“[U]ntil the distinction is made between [the plaintiff]‘s allegedly misappropriated trade secret information and its confidential or non-confidential proprietary non-trade secret information, the question of preemption should not be addressed.“). Without knowing which allegations—if any—contain valid trade secrets, the Court is not able to determine whether those claims are preempted by CUTSA. Accordingly, the Court DENIES Defendants’ Motions to Dismiss Plaintiff‘s claim under
VI. Attorneys’ Fees and Costs
Naujok states, pursuant to California
VII. Motion for a More Definite Statement
Naujok requests that if the Court does not dismiss the Complaint pursuant to
CONCLUSION
In light of the foregoing, the Court GRANTS IN PART AND DENIES IN PART Defendants’ Motions to Dismiss. Specifically, the Court:
- GRANTS Naujok‘s Motion to Dismiss the Breach of Contract Claim,
- GRANTS Vector Acoustic and Hernan Lopez‘s Motion to Dismiss Breach of Contract Claim,
- GRANTS Naujok‘s Motion to Dismiss the CUTSA Claim,
- GRANTS Vector Acoustic‘s Motion to Dismiss the CUTSA Claim,
- GRANTS Naujok‘s Motion to Dismiss the DTSA Claim,
- GRANTS Vector Acoustic‘s Motion to Dismiss the DTSA Claim,
- GRANTS Naujok‘s Motion to Dismiss the Unjust Enrichment Claim,
- GRANTS Vector Acoustic‘s Motion to Dismiss the Unjust Enrichment Claim,
- DENIES Naujok‘s Motion to Dismiss the Section 17200 Claim,
- DENIES Vector Acoustic‘s Motion to Dismiss the Section 17200 Claim,
- DENIES Naujok‘s Request for Attorneys’ Fees, and
- DENIES Naujok‘s Request for a More Definite Statement.
The Court DISMISSES all claims specified above WITHOUT PREJUDICE and GRANTS Plaintiff leave to amend its Complaint. Plaintiff MAY FILE an amended complaint curing the deficiencies outlined in this Order within fourteen (14) days of the electronic docketing of this Order. Should Plaintiff elect not to file a timely amended complaint, this action will proceed as to Plaintiff‘s surviving causes of action.
IT IS SO ORDERED.
Dated: November 1, 2022
Honorable Todd W. Robinson
United States District Judge