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Medimpact Healthcare Systems v. SXC Health Solutions

September 3, 2008

MEDIMPACT HEALTHCARE SYSTEMS, INC., PLAINTIFF,
v.
SXC HEALTH SOLUTIONS, INC., ET. AL., DEFENDANT.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

Plaintiff Medimpact Healthcare Systems ("Plaintiff" or "Medimpact") has brought suit against Defendants SXC Health Solutions("SXC"), Richard Scot Giambruno ("Giambruno"), Thomas N. Tabback ("Tabback"), and Independence Health Strategies ("Independence") alleging the following causes of action: (1) misappropriation of trade secrets; (2) intentional interference with prospective economic advantage; (3) negligent interference with prospective economic advantage; (4) unfair competition; and (5) injunctive relief. Defendants Giambruno, Tabback and Independence have filed the instant motion to dismiss requesting that the Court dismiss Plaintiff's second through fifth causes of action as preempted by the California Uniform Trade Secrets Act. For the reasons set forth below, this motion is granted in part and denied in part.

BACKGROUND

The following facts are taken from Plaintiff's complaint. Medimpact is a San Diego based company in the business of providing Pharmacy Benefits Management services to various customers. (Complaint ¶ 1) Giambruno and Tabback were employees of Medimpact until December 2007. (¶ 2) Prior to their departure, Giambruno and Tabback worked together to form a competing business which was named Independence Health Strategies. (¶¶ 17-19, 22) During this time, they also developed a relationship with SXC, Medimpact's direct competitor in the Pharmacy Benefits Management services industry. (¶¶ 14,16, 20) Giambruno and Tabback also allegedly diverted a large potential client Ceres Strategies from Medimpact to either SXC or their own venture, Independence Health. (¶¶ 15-16) While still working for Medimpact, Giambruno and Tabback registered their new venture, Independence Health as a limited liability company in Florida. (¶ 19)

Plaintiff alleges that Giambruno and Tabback (1) used Medimpact's confidential and proprietary information to develop their business venture; (2) used Medimpact's confidential and proprietary information to solicit Medimpact's clients for their new venture; (3) used Medimpact's financial resources to develop business relations with future clients for Independence Health; and (4) spent company time developing a relationship with SXC, Medimpact's direct competitor.

DISCUSSION

A motion to dismiss for failure to state a claim will be denied unless it appears that "no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Fidelity Financial Corp. v. Federal Home Loan Bank of San Francisco, 792 F.2d 1432, 1435 (9th Cir. 1986).

Defendants argue that Plaintiff's second, third, fourth and fifth causes of action should be dismissed because they are preempted by the California Uniform Trade Secrets Act ("CUTSA"). California Civil Code Section 3426.7 states that the provisions of the CUTSA do "not affect (1) contractual remedies, whether or not based upon misappropriation of a trade secret, (2) other civil remedies that are not based upon misappropriation of a trade secret, or (3) criminal remedies, whether or not based upon misappropriation of a trade secret." Courts have interpreted this provision to mean that claims that are "based on the same nucleus of facts as the misappropriation of trade secrets claims" are preempted. Digital Envoy, Inc. v. Google Inc., 370 F. Supp. 2d 1025, 1035 (N.D. Cal. 2005).

A cause of action for misappropriation of trade secrets under the California Uniform Trade Secrets Act , California Civil Code § 3426.1(b) includes the following elements:

(1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(2) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(A) Used improper means to acquire knowledge of the trade secret; or

(B) At the time of disclosure or use, knew or had reason to know that his or her knowledge ...


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