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Science of Skincare, LLC v. Phytoceuticals

July 8, 2009

SCIENCE OF SKINCARE, LLC D/B/A INNOVATIVE SKIN CARE, A CALIFORNIA LIMITED LIABILITY COMPANY PLAINTIFF,
v.
PHYTOCEUTICALS, INC., A NEW JERSEY CORPORATION, MOSTAFA M. OMAR, PH.D., AN INDIVIDUAL, DELTA OVERTON, AN INDIVIDUAL, PHYTO-C SKIN CARE, LLC, A NORTH CAROLINA LIMITED LIABILITY COMPANY, MOLLY PAGET, AN INDIVIDUAL, LAURA TERINO, AN INDIVIDUAL, AND AND DOES 1 THROUGH 10, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Hon. Otis D. Wright II United States District Judge

ORDER GRANTING DEFENDANT DELTA OVERTON'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT OVERTON'S MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

This action stems from the classic tale of employees from Company A who conspire to resign from their posts to join a competitor company, Company B. Company A in this case is Science of Skincare d/b/a Innovative Skin Care ("Innovative"). Innovative sells clinical skincare products under a series of specialized brands to certain exclusive and narrow retail customers. It is alleged that the individual defendants named in this action conspired to go to work for Phytoceuticals, Inc. and also to create Phyto-C Skin Care, LLC.

After a number of employees left Innovative in May 2008, Plaintiff filed a complaint in Los Angeles Superior Court in June 2008. The action was removed to this Court in July 2008. Plaintiff's First Amended Complaint ("FAC"), filed March 27, 2009, asserts the following seven claims for relief: (1) Breach of Fiduciary Duty; (2) Breach of Non-Disclosure Agreement; (3) Intentional Interference with Prospective Economic Advantage; (4) Misappropriation of Trade Secrets; (5) Trade Libel; (6) Defamation; and (7) Violations of California Business and Professions Code § 17200.

Pending before the Court is Defendant Delta Overton's Motion for Summary Judgment or, in the alternative, Partial Summary Judgment, filed April 2, 2009. On May 22, 2009, Plaintiff filed an Opposition, to which Defendant Overton timely filed a Reply Brief. The gist of Defendant Overton's Motion is that, while she admits she left Innovative intending to form another company, her business venture was never realized. Accordingly, Defendant Overton argues that Plaintiff has suffered no cognizable damages by her resigning from Innovative. Plaintiff, on the other hand, argues it did suffer damages as a result of Overton's unfair methods in inducing twelve sales representatives to resign. After reviewing the parties' submissions and the case file, as well as the arguments advanced by counsel at the hearing, the Court hereby GRANTS Defendant Overton's Motion for Partial Summary Judgment and DENIES her Motion for Summary Judgment.

II. FACTUAL BACKGROUND

Except where otherwise indicated, the following facts are undisputed.

Further, as a preliminary matter, the Court OVERRULES Defendant's Objections to Plaintiff's Declarations. (Docket # 73.)

Delta Overton was a National Sales Director for Innovative from January 2006 until she resigned in May 2008. (UF,*fn1 1.) Phytoceuticals, Inc., a company operated by Mostofa M. Omar, Ph.D ("Dr. Omar"), was one of Innovative's primary suppliers of skin care products. (Pl.'s Opp. at 5.) Starting in 2007, Innovative began to experience problems with Phytoceuticals, Inc. and Dr. Omar after Innovative learned that Phytoceuticals, Inc. was selling certain products under a different name over the Internet. (Id.) In 2008, while Innovative prepared to release a new line of products, it also decided to phase out its business dealings with Phytoceuticals, Inc. and Dr. Omar. (Id.) According to Plaintiff, Innovative's plans concerning the release of its new line and the information regarding the problems with Phytoceuticals and Dr. Omar were kept strictly confidential within Innovative's upper management, which included Delta Overton. (Id.)

After Innovative ceased doing business with Phytoceuticals and Dr. Omar, Overton resigned from Innovative and initially planned to go into business with Dr. Omar. (UF, 8.) As Overton planned her resignation from Innovative, she also allegedly induced twelve of Plaintiff's account executives to also submit their resignations. (FAC ¶ 19.) Plaintiff argues that the loss of a large percentage of its sales force resulted in a substantial injury. (FAC ¶ 19.)

Although Overton and the twelve account executives initially planned to go into business with Dr. Omar, Overton allegedly never completed the formation of the company.*fn2 (UF, 8.) The evidence presented shows that Overton worked with Dr. Omar initially in the start-up phase of their new venture. This start-up phase consisted of emails sent between Dr. Omar and Overton planning to have a "sales force" for their new company in place by July 2008. Dr. Omar and Overton's plans never materialized.

By way of declaration, Plaintiff alleges that the twelve account executives were induced to resign from Plaintiff's company based on false statements and/or revelation of confidential information made by Defendant Overton. Further, Plaintiff's president and chief executive officer declares that Plaintiff was forced to incur expenses in excess of $125,000 to replace the departing sales staff.

III. DISCUSSION

A. Legal Standard: Summary ...


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