The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge
ORDER (1) GRANTING IN PART AND DENYING IN PART ENEA'S MOTION FOR SUMMARY JUDGMENT (2) GRANTING IN PART AND DENYING IN PART COUNTERDEFENDANTS' FIRST MOTION FOR PARTIAL SUMMARY JUDGMENT; (3) DENYING COUNTERDEFENDANTS' SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT; AND (4) GRANTING ENEA'S MOTION FOR SUMMARY THIRD CLAIMS OF BAGHAI'S COUNTERCLAIM JUDGMENT ON THE SECOND AND AND RELATED COUNTERCLAIMS
Defendant Enea TekSci, Inc. ("Enea") has filed a motion for summary judgment on the Complaint filed by Vance Hilderman ("Hilderman") and Highrely, Inc. ("Highrely") (collectively "Plaintiffs"). Hilderman, Highrely, and Tony Baghai ("Baghai") (collectively "Counterdefendants") have filed two motions for partial summary judgment on Enea's counterclaims. Enea has also filed a motion for summary judgment as to the Second and Third Claims of Baghai's Counterclaim against Enea. For the reasons discussed below, Enea's motion for summary judgment as to Plaintiffs' claims is GRANTED IN PART and DENIED IN PART, Counterdefendants' first motion for partial summary judgment is GRANTED IN PART and DENIED IN PART, Counterdefendants' second motion for partial summary judgment is DENIED, and Enea's motion for summary judgment on the Second and Third Claims of Baghai's Counterclaim is GRANTED.
This case arises out of a dispute between Enea and two of its former employees, Hilderman and Baghai.
Hilderman was the founder of TekSci, Inc., which was sold to Enea AB in 2000. The company became known as "Enea-TekSci" or Enea. Enea is a software consulting company that provides, among other things, software, systems development, consulting and training, and software certification for critical and real-time systems such as those systems found in the avionics industry, the telecommunications industry, and the medical industry.
Hilderman continued as an employee of Enea until he left the company in February 2004. In February 2004, Hilderman and Enea entered into a Severance Agreement. (Pls.' Ex. A.) The Severance Agreement provided, among other things:
17. Confidentiality. Employee agrees to keep confidential all trade secrets, confidential, and proprietary information of Enea obtained by Employee during the course of his employment with Enea, including, but not limited to, information pertaining to product offerings, pricing and marketing structures and strategies, software programs existing or under development, and the identities of current and prospective customers, to the extent such information is not generally available to the public.
18. Anti-Piracy and Non-competition. Employee shall not, for a period of six (6) months after the Resignation date, either on his own account or in conjunction with any other person, firm, or company;
(a) Solicit or entice away, or attempt to solicit or entice away, from Enea or from its parent or any affiliated or subsidiary corporation, any person employed by Enea on the Resignation Date;
(b) Solicit or attempt to solicit the business of any person, firm or company who has at any time within one year prior to the Resignation Date been a customer or client of Enea or its parent or any affiliated or subsidiary corporation.
The Severance Agreement provides that it shall be construed and interpreted according to the laws of the State of California. (Pls.' Ex. A at ¶ 12.)
In February 2005, Hilderman formed HighRely. HighRely, like Enea, is engaged in the business of providing engineering support and development to clients in need of embedded high-reliability software services.
HighRely employed Ray Madjidi ("Madjidi"), a former project manager for Enea, and Baghai, also a former employee of Enea. Baghai and Madjidi ceased employment at Enea in March 2005. There is a dispute as to when Baghai and Madjidi began working for HighRely. Hilderman is a shareholder of HighRely, but is not an employee.
In late March, 2005, Boeing contacted Baghai regarding work on C-17 document verification. Baghai claims that he had been fired before being contacted by Boeing. Enea disputes Baghai's claim that he had been terminated. In April, 2005 HighRely obtained a contract with Boeing.
HighRely provided services on Boeing's C-130 program throughout 2005 and part of 2006. Boeing ultimately terminated HighRely's contract, claiming that funding had ceased for the C-130 program. In March of 2005, Hilderman contacted Hospira, a medical device company, to obtain a contract for HighRely. No contract resulted from these discussions.
Hospira and Boeing were major customers of Enea during 2004 and 2005. Hilderman was involved in obtaining Hospira and Boeing as customers for Enea while he was employed at Enea. Baghai was involved in Boeing projects while he was employed at Enea.
Plaintiffs Hilderman and HighRely claim that Enea interfered with their contract with Boeing and their prospective contract with Hospira by telling Boeing and Hospira that Hilderman was violating the terms of the Severance Agreement and was subject to a non-compete agreement. Plaintiffs assert the following causes of action: (1) declaratory relief; (2) breach of contract; (3) interference with contractual relations and prospective economic advantage; and (4) violation of California Business & Professions Code § 17200.
In its Amended Counterclaim and Third-Party Complaint, Enea claims that Baghai, while still employed by Enea, forwarded Enea's customer leads, proprietary trade secrets, employee leads, Enea employee email addresses, and other confidential information to Hilderman for the benefit of HighRely. Enea asserts causes of action for (1) breach of the duty of loyalty by Baghai; (2) misappropriation of trade secrets by Baghai, Hilderman, and HighRely, (3) aiding and abetting by Hilderman; (4) breach of contract by Hilderman and Baghai; (5) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, by Hilderman, Baghai, and HighRely; (6) conspiracy to intentionally interfere with contract against Hilderman, Baghai, and HighRely; (7) conspiracy to intentionally interfere with prospective economic advantage against Hilderman, Baghai, and Highrely, and (8) unfair business practices, Cal. Bus. & Prof. Code § 17200, against Hilderman, Baghai, and HighRely.
In his Counterclaim, Baghai alleges that he was wrongfully terminated in breach of his employment agreement. Baghai further alleges that company policy provided that he would have the right to purchase his laptop computer upon termination, but that Enea refused to allow him to do so. According to Baghai, Enea accessed his private e-mail accounts and other information on the computer in violation of company policy. The Counterclaim asserts causes of action for (1) breach of contract; (2) intrusion into private affairs; (3) violation of the Electronic Communications Privacy Act ("ECPA") (18 U.S.C. §§ 2510-2522, 18 U.S.C. §§ 2701-2711); and (4) intentional infliction of emotional distress ("IIED'). In an order filed on June 13, 2006, the Court dismissed Baghai's claim under Title II of the ECPA (Baghai's claim under Title I survived) and IIED claim.
Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure if the moving party demonstrates the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997). A dispute is genuine if a reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 248.
A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to establish an essential element of the nonmoving party's case on which the nonmoving party bears the burden of proving at trial. Id. at 322-23. "Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).
Once the moving party establishes the absence of genuine issues of material fact, the burden shifts to the nonmoving party to set forth facts showing that a genuine issue of disputed fact remains. Celotex, 477 U.S. at 314. The nonmoving party cannot oppose a properly supported summary judgment motion by "rest[ing] on mere allegations or denials of his pleadings." Anderson, 477 U.S. at 256. When ruling on a summary judgment motion, the court must view all inferences drawn from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
A. Enea's Motion For Summary Judgment
Enea moves for summary judgment on all of the claims asserted by Hilderman and HighRely. The Court will address each of the claims in turn.
Plaintiffs seek a declaration that pursuant to the Severance Agreement, Hilderman is entitled to solicit business, customers and employees of Enea after August 13, 2004.
The "actual controversy" requirement of the Declaratory Judgment Act is the same as the "case or controversy" requirement of Article III of the United States Constitution. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40 (1937). Article III requires that there be a "substantial controversy . . . of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 272 (1941). "[A]n actual controversy must be extant at all stages of review, not merely at the time the complaint is filed." Arizonans for Official English v. Arizona, 520 U.S. 43, 67 (1997) (internal quotation marks and citations omitted).
Enea does not dispute that under the terms of the Severance Agreement, Hilderman is permitted to solicit employees and customers of Enea after August 13, 2004, provided that Hilderman complies with the confidentiality provision of the Severance Agreement and does not use confidential, proprietary or trade secret information of Enea. The controversy surrounds what constitutes confidential, proprietary or trade secret information that Hilderman is prohibited from using and whether Hilderman/HighRely used any such information in the pursuit of hiring employees or obtaining new business.
Plaintiffs' declaratory relief claim misframes the issue. There is no dispute that Hilderman can solicit employees and customers of Enea after the initial six-month period as long as no confidential, proprietary or trade secret information is used in the process. Because there is no actual dispute within the claim for declaratory relief, the Court grants summary judgment in favor of Enea, dismissing the claim without prejudice.
Plaintiffs allege that Enea breached the terms and provisions of the Severance Agreement by falsely telling third parties that Hilderman had agreed to a non-compete clause and was breaching that agreement ...