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Ikon Office Solutions, Inc v. Michael Rezente and Christy Friend

December 8, 2010

IKON OFFICE SOLUTIONS, INC., PLAINTIFF,
v.
MICHAEL REZENTE AND CHRISTY FRIEND, DEFENDANTS.



MEMORANDUM AND ORDER RE:MOTION TO DISMISS

Plaintiff Ikon Office Solutions, Inc. ("Ikon") brought this action against defendants Michael Rezente and Christy Friend arising out of defendants' former employment with plaintiff. The First Amended Complaint ("FAC") alleges misappropriation of trade secrets under the California Uniform Trade Secrets Act ("CUTSA"), Cal. Civ. Code §§ 3426-3426.11, interference with prospective economic relations, breach of duty of loyalty and fiduciary duty, and unfair competition under California's Unfair Competition Law ("UCL") and false advertising laws, Cal. Bus. & Prof. Code 17200-17210, 17500, and 17508. Presently before the court is defendants' motion to dismiss the FAC for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

I. Factual and Procedural Background Ikon sells, leases, and services office equipment and systems including copiers and printers, and provides services including technical support, document outsourcing, equipment maintenance, and network facilities management. (FAC ¶ 2.) Both defendants are former employees of Ikon who worked in its Sacramento, California, "Marketplace." (Id. ¶¶ 3, 7.) Rezente was an Area Sales Manager who resigned on July 31, 2009, and Friend was an Account Executive who resigned on July 13, 2009. (Id.) Plaintiff alleges that defendants now both work for Delta CopySystems, Inc. ("DCSI"), a direct competitor of plaintiff, and that defendants have violated their post-employment obligations to it by soliciting Ikon customers and employees and misappropriating Ikon trade secrets and confidential information. (Id. ¶¶ 5-6, 9-10.)

In its FAC, plaintiff brings claims for misappropriation of trade secrets under CUTSA, interference with prospective economic relations, breach of duty of loyalty and fiduciary duty, and unfair competition under the UCL. Presently before the court is defendants' motion to dismiss the FAC pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

II. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). "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.'" Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 556-57).

A. CUTSA Misappropriation of Trade Secrets Claim To state a claim for misappropriation of trade secrets under CUTSA, a plaintiff must allege (1) the existence of a trade secret and (2) misappropriation of the trade secret. Gabriel Tech. Corp. v. Qualcomm Inc., No. 08 CV 1992, 2010 WL 3718848, at *8 (S.D. Cal. Sept. 20, 2010). A trade secret is: information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) Derives 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) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Cal. Civ. Code § 3426.1(d). A plaintiff is required to "describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons . . . skilled in the trade." Imax Corp. v. Cinema Tech., Inc., 152 F.3d 1161, 1164-65 (9th Cir. 1998) (internal quotation mark omitted).

Plaintiff alleges that the trade secrets misappropriated by defendants included: the books and records of Ikon, the confidential customer list and account information contained therein, including the identity of Ikon customers, their names and addresses, agents and account managers, business and financial dealings, the transactions in their Ikon accounts, purchase requirements, purchasing history and patterns, servicing terms and conditions, lease agreement lengths, expirations, and terms, equipment configurations, customer plans, preferences, and communicated needs, interconnectivity opportunities, profitability considerations, Ikon's strengths and weaknesses with its customers, and other business and financial information concerning Ikon products, prices, pricing schedules, profitability considerations, marketing strategies, leasing terms, vendors, costs, training techniques, distribution and delivery systems, and/or other market considerations . . . . (FAC ¶ 71.) While some of this information may fall into the category of general knowledge in the trade or special knowledge of persons skilled in the trade, plaintiff has sufficiently alleged the existence of trade secrets. Specifically, a customer list that an employer has expended time and effort to build is protected as a trade secret. See, e.g., MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 520-21 (9th Cir. 1993); Hollingsworth Solderless Terminal Co. v. Turley, 622 F.2d 1324, 1333 (9th Cir. 1980); Reeves v. Hanlon, 33 Cal. 4th 1140, 1155-56 (2004); Morlife, Inc. v. Perry, 56 Cal. App. 4th 1514, 1520-23 (1st Dist. 1997); Courtesy Temp. Serv., Inc. v. Camacho, 222 Cal. App. 3d 1278, 1287-88 (2d Dist. 1990); Am. Credit Indem. Co. v. Sacks, 213 Cal. App. 3d 622, 630-32 (2d Dist. 1989).

Taking the description of the information as true, plaintiff must have expended considerable time and effort to acquire it. The amount of information itself is alleged to be considerable, as Rezente was responsible for overseeing services for "1,400-2,500 copiers" and "several hundred" customers, and Friend was responsible for "275 Ikon customers." (FAC ¶¶ 18, 25.) Plaintiff has alleged that its customer information provided plaintiff "with a significant advantage or 'head start' over its competitors who do not have and could not readily, if ever, obtain that amount or amalgam of information." (Id. ¶ 34.) Plaintiff has also alleged that the customer information was not generally known to the public and that plaintiff took appropriate measures to protect the information. (See id. ¶¶ 37-40, 73-74.) Thus, plaintiff has sufficiently alleged the existence of trade secrets.*fn1

As to the second prong, plaintiff has alleged that defendants misappropriated the alleged trade secrets. "Misappropriation" means:

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


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