UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
September 26, 2011
AQUA CONNECT, INC., A NEVADA CORPORATION, PLAINTIFF,
CODE REBEL, LLC, A HAWAII LIMITED LIABILITY COMPANY; ARBEN KRYEZIU, AN INDIVIDUAL; VLADIMIR BICKOV, AN INDIVIDUAL; AND DOES 1 THROUGH 300, INCLUSIVE, DEFENDANTS.
The opinion of the court was delivered by: Honorable Ronald S.W. Lew Senior, U.S. District Court Judge
ORDER re: Defendants' Arben Kryeziu and Code Rebel, LLC's Motion to Dismiss Complaint for Lack of Personal Jurisdiction [FRCP 12(b)(2)], for Failure to State a Claim [FRCP 12(b)(6)], or in the alternative, for a More Definite Statement [FRCP 12(e)] 
On August 24, 2011, Defendants Arben Kryeziu ("Kryeziu") and Code Rebel, LLC's ("Code Rebel") Motion to Dismiss Complaint for Lack of Personal Jurisdiction [FRCP 12(b)(2)], for Failure to State a Claim [FRCP 12(b)(6)], or in the alternative, for a More Definite Statement [FRCP 12(e)]  came on for regular calendar before the Court.
The Court having reviewed all papers submitted pertaining to this Motion and having considered all arguments presented to the Court NOW FINDS AND RULES AS FOLLOWS:
The Court hereby DENIES IN PART AND GRANTS IN PART Defendants Kreyziu and Code Rebel's (hereinafter collectively referred to as "Movants") Motion.
Defendant Code Rebel is a Hawaii limited liability company maintained and located in the State of Hawaii. Defendant Code Rebel lists various customers on its website that have California businesses and headquarters. Defendant Kryeziu is a resident of Hawaii and a managing member of Defendant Code Rebel. Defendant Vladimir Bickov ("Bickov"), who is not a party to this Motion, is a resident of Australia and a Citizen of Ukraine. Defendant Bickov has not been served with a Complaint, but he consented to the removal of this present action to Federal court.
Plaintiff/Non-Movant Aqua Connect, Inc. ("Plaintiff") is a software company. Plaintiff sells and markets software known as Aqua Connect Terminal Server ("ACTS"). Plaintiff is a Nevada corporation with its principal place of business in Los Angeles County, California.
Plaintiff's claims arise out of the alleged reverse engineering of ACTS and the subsequent sale of infringing software by the three Defendants. On July 20, 2011, Movants, Defendants Code Rebel and Kryeziu, filed the present Motion .
II. Legal Standard
A. Motion to Dismiss for Lack of Personal Jurisdiction Pursuant to Federal Rule of Civil Procedure 12(b)(2)
Although the plaintiff has the burden of proving personal jurisdiction, to defeat a motion to dismiss, the plaintiff need only make a prima facie showing of jurisdictional facts. In re Pintlar Corp., 133 F.3d 1141, 1144 (9th Cir. 1998)(citing Farmers Ins. Exch. v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990)). The plaintiff need only allege facts which, if true, would support a finding of jurisdiction. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995)(citing Data Disc v. Sys. Tech. Assoc., 557 F.2d 1280, 1285 (9th Cir. 1977).
The exercise of personal jurisdiction over a nonresident defendant requires the presence of two factors. The forum state's laws must provide a basis for exercising personal jurisdiction, and the assertion of personal jurisdiction must comport with due process. Hirsch v. Blue Cross, Blue Shield, 800 F.2d 1474, 1477 (9th Cir. 1986). The California long-arm statute permits the exercise of jurisdiction "on any basis not inconsistent with the Constitution . . . of the United States." Cal. Civ. Proc. Code § 410.10. This statute renders the state and federal limits of jurisdiction coextensive. Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). Thus, only a due process analysis is required.
Due process requires that a defendant have "certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The defendant's contacts must be "such that the [defendant] should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Depending upon the nature and scope of the defendant's contacts with the forum, jurisdiction may be general or specific to the cause of action. Roth, 942 F.2d at 620 (citing Data Disc, 557 F.2d at 1287).
In the area of personal jurisdiction and the Internet, the Ninth Circuit has adopted the test set forth in Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997). See Gator.Com Corp. v. L.L. Bean, Inc., 341 F.3d 1072, 1079-80 (9th Cir. 2003)(citing the "sliding scale" test set forth in Zippo as a test "that both our own and other circuits have applied to Internet-based companies."). In Zippo, the court categorized Internet use and the exercise of personal jurisdiction along the following spectrum:
At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on an Internet [website] which is accessible to users in foreign jurisdictions. A passive [website] that does little more than make information available to those who are interested in it is not grounds for the exercise personal jurisdiction. The middle ground is occupied by interactive [website] where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the [website].
Zippo, 952 F. Supp. at 1124 (citations omitted).
B. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)
In a motion to dismiss brought under Federal Rule of Civil Procedure 12(b)(6), the Court must presume all non-conclusory, factual allegations of the complaint to be true and draw all reasonable inferences in favor of the non-moving party. Klarfeld v. United States, 944 F.2d 583, 585 (9th Cir. 1991). After accepting as true all non-conclusory statements and drawing all reasonable inferences in favor of the non-moving party, the Court must determine whether the complaint alleges a plausible claim for relief. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1940-41 (2009).
A dismissal can be based on the lack of cognizable legal theory or the lack of sufficient facts alleged under a cognizable legal theory. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). However, a party is not required to state the legal basis for his claim, only the facts underlying it. See McCalden v. Cal. Library Ass'n, 955 F.2d 1214, 1223 (9th Cir. 1990).
Additionally, claims of fraud must satisfy not only Rule 12(b)(6), but also the heightened pleading standard of Rule 9(b). In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Fed. R. Civ. P. 9(b).
The heightened pleading standard of Rule 9(b) is designed "to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong." Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir. 1993). In order to meet this standard, the plaintiff must allege the "who, what, where, when, and how" of the fraudulent conduct. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). The complaint must "state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation." Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004). "The plaintiff must set forth what is false or misleading about a statement, and why it is false." Vess, 317 F.3d at 1106 (quoting Decker v. Glenfed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994)).
However, "[m]alice, intent, knowledge and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b); Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973). Nevertheless, states of mind must still be alleged. Bender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir. 1984).
C. Motion for a More Definite Statement Pursuant to Federal Rule of Civil Procedure 12(e)
If a pleading to which a responsive pleading is permitted is so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading, the party may move for a more definite statement before interposing a responsive pleading. Fed. R. Civ. P. 12(e). A Rule 12(e) motion is proper only where the complaint is so indefinite that the defendant cannot ascertain the nature of the claim being asserted. See Famolare, Inc. v. Edison Bros. Stores, Inc., 525 F. Supp. 940, 949 (E.D. Cal. 1981).
Rule 12(e) motions are disfavored and rarely granted. Cellars v. Pac. Coast Packaging, Inc., 189 F.R.D. 575, 578 (N.D. Cal. 1998). A motion for a more definite statement fails where the complaint is specific enough to apprise the moving party of the substance of the claim being asserted. See Bureerong v. Uvawas, 922 F. Supp. 1450, 1461 (C.D. Cal. 1996).
A. Plaintiff's Request for Judicial Notice
As a preliminary matter, Plaintiff requests the Court take Judicial Notice that a "213" area code is a Los Angeles, California area code. This request, however, is DENIED AS MOOT because such information is not necessary to the Court's analysis.
B. Plaintiff's Motion to Dismiss Defendant Kryeziu for Lack of Personal Jurisdiction
The Court finds that Plaintiff has met its burden to defeat Movants' Motion to Dismiss by making out a prima facie showing of the Court's personal jurisdiction over Defendant Kryeziu. Plaintiff premises personal jurisdiction primarily on an allegation that Defendant Kryeziu sold infringing products to this state and participated in injuring Plaintiff, a California resident, by conspiring to reverse engineer Plaintiff's software. The Court finds that these contacts with California are sufficient for the Court to exert specific jurisdiction over Defendant Kryeziu.
Specific jurisdiction exists if the cause of action arises out of or is related to the defendant's forum activities. Hirsch v. Blue Cross, Blue Shield, 800 F.2d 1474, 1477 (9th Cir. 1986). The Ninth Circuit has formulated a three-prong test here in order to determine whether the exercise of specific jurisdiction comports with due process and therefore exists over the defendant: 1) the defendant must purposefully avail himself of the privilege of conducting activities in the forum by some affirmative act or conduct; 2) the plaintiff's claim must arise out of, or result from, the defendant's forum-related contacts; and 3) the extension of jurisdiction must be "reasonable." Roth, 942 F.2d at 620-21; see Haisten v. Grass Valley Med. Reimbursement Fund, 784 F.2d 1392, 1397 (9th Cir. 1986).
The plaintiff bears the burden of satisfying the first two prongs of this specific jurisdiction test. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). If the plaintiff fails to satisfy either of these prongs, then personal jurisdiction is not established in the forum state. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). "If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the defendant to 'present a compelling case' that the exercise of jurisdiction would not be reasonable." Id.
Here, the Court finds that Plaintiff has satisfied all three prongs, and therefore the Court has specific jurisdiction over Defendant Kryeziu.
1. Purposeful Availment
The Court finds that Defendant Kryeziu has purposefully availed himself of the privilege of conducting activities in California.
Purposeful availment "examines whether the defendant's contact with the forum are attributable to his own actions or are solely the actions of the plaintiff." Sinatra v. National Enquirer, 854 F.2d 1191, 1195 (9th Cir. 1998). To show purposeful availment, a plaintiff must show that the defendant "engage[d] in some form of affirmative conduct allowing or promoting the transaction of business within the forum state." Gray & Co. v. Firstenberg Machinery Co., 915 v. F.2d 758, 760 (9th Cir. 1990).
Here, the Complaint alleges that Defendant Kryeziu personally participated in and encouraged both the alleged reverse engineering and infringing sales on which Plaintiff relies to establish personal jurisdiction. Compl. ¶¶ 7, 9, 11. Furthermore, Defendant Kryeziu states in his declaration that he is "the Managing Member" of Defendant Code Rebel. Declaration of Arben Kreyziu ("Kreyeziu Decl."), ¶2. Moreover, Movants do not offer any evidence rebutting Plaintiff's allegations that Defendant Kryeziu participated in and encouraged the reverse engineering and the infringing sales. As such, the Court accepts Plaintiff's allegations as true for the purposes of this motion. See Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001) ("Where not directly controverted, plaintiff's version of the facts is taken as true for the purposes of a 12(b)(2) motion to dismiss").
a. The Fiduciary Shield Doctrine
Movants do argue, however, that Defendant Kryeziu's activities on behalf of Defendant Code Rebel should not be considered Defendant Kryeziu's own personal contacts with California. Although Movants do not use the term, they appear to rely of the fiduciary shield doctrine. Colt Studio, Inc. v. Badpuppy Enter., 75 F. Supp. 2d 1104, 1111 (C.D. Cal. 1999). Under the fiduciary shield doctrine, "officers, directors, agents and employees" of a corporation are not necessarily subject to a given jurisdiction based on the corporation's contacts with that jurisdiction. Id.
The Court finds that the fiduciary shield doctrine does not apply to Defendant Kryeziu given that a corporate officer's contacts on behalf of a corporation are sufficient to subject the officer to personal jurisdiction where the officer is a "primary participant in the alleged wrongdoing or had control of, and direct participation in the alleged activities." All-star Marketing Group, LLC v. Your Store Online, LLC, 666 F. Supp. 2d 1109, 1120 (C.D. Cal. 2009).
As noted, the Court accepts, for the purposes of analyzing jurisdiction, the uncontroverted allegation that Defendant Kryeziu personally participated and encouraged the reverse engineering and the sale of infringing products to California. This is "sufficient to establish that [he was] the moving force behind the infringing activity." Id. (holding that a corporate officer was the moving force behind an infringing activity when the officer personally participated and encouraged the sale of infringing products to the forum state). Accordingly, the Court consider the reverse engineering and the infringing sales for the purposes of analyzing Defendant Kryeziu's contacts with the fourm. Because these activities occurred via Defendant Code Rebel's website, the Court examines them in the context of law governing personal jurisdiction based on Internet activity.
b. Defendant Kryeziu's Activities via Defendant Code Rebel's Website
In the Internet context, "the Ninth Circuit utilizes a sliding scale analysis under which 'passive' websites do not create sufficient contacts to establish purposeful availment, whereas interactive websites may create sufficient contacts, depending on how interactive the website is. See Gator.Com Corp. v. L.L. Bean, Inc., 341 F.3d 1072, 1079-80 (9th Cir. 2003) (citing the "sliding scale" test as a test "that both our own and other circuits have applied to Internet-based companies."). Here, Plaintiff alleges that, through their website, Movants solicited business from California customers and regularly sold infringing products to California in the State. Declaration of Michael K. Hagemann ("Hagemann Decl."), ¶¶2-10.
As the Court finds that Movants once again offer no conflicting evidence, the Court accepts this allegation as true for the purposes of analyzing personal jurisdiction on a Motion to Dismiss. Based on the allegation, the Court finds that by operating a highly commercial website through which regular sales of allegedly infringing software are made to customers in this state, Defendant Kryeziu, through Defendant Code Rebel, purposefully availed himself of the benefits of doing business in California, such that he should reasonably anticipate being haled into court here. Stomp, Inc. v. NeatO, LLC, 61 F. Supp. 2d 1074, 1978 (finding purposeful availment where NeatO's website allowed California consumers to purchase NeatO's products over the Internet).
2. Whether Plaintiff's Claims Arise Out of Defendant Kryeziu's Contacts
The Court finds that Plaintiff's claims arise out of Defendant Kreyziu's forum related activities.
A lawsuit arises out of a defendant's contacts with a forum state if there is a direct nexus between the cause of action being asserted and the defendant's activities in the forum. See Shute v. Carnival Cruise Lines, 897 F.2d 377, 385 (9th Cir. 1990), rev'd on other grounds, 499 U.S. 585 (1991). The Ninth Circuit follows a "but for test" in determining whether an action arises out of the defendant's contacts with the forum state. Ballard v. Savage, 65 F.3d 1495, 1500 (9th Cir. 1995).
Here, Defendant Kryeziu's contacts with the forum are (1) the sale of allegedly infringing products to customers in this state and (2) conspiracy to fraudulently induce Plaintiff, a California citizen, into granting Defendant Kryeziu access to Plaintiff's software for reverse engineering. These contacts are sufficient to satisfy the arising out of requirement given that "but for" the sale of products to California citizens and reverse engineering of Plaintiff's software, Plaintiff would not have been allegedly injured. All-star, 666 F. Supp. 2d at 1123 (finding that lawsuit would not have occurred "but for" defendant's interactive website and direct sales to California customers).
3. Exercising Jurisdiction over Defendant Kryeziu is Reasonable
The Court finds that the final prong of the Ninth Circuit three-part test for specific jurisdiction is satisfied as exercising jurisdiction over Defendant Kryeziu is reasonable.
Reasonableness is assessed by the following factors: (1) the extent of the defendants' purposeful interjection into the forum; (2) the burden on the defendant in litigating in the forum; (3) the extent of conflict with the sovereignty of the defendant's state;
(4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum. Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1487-88 (9th Cir. 1993). The burden to establish unreasonableness, however, once the other prongs of the personal jurisdiction test are established, is on the defendant. Id. at 1487.
Addressing the first factor, the Ninth Circuit has held that this factor "parallels the question of minimum contacts" in determining the reasonableness of exercising specific jurisdiction. Amoco Egypt Oil Co. v. Leonis Nav. Co., Inc., 1 F.3d 848, 852 (9th Cir. 1993); Roth v. Garcia Marquez, 942 F.2d 617, 623 (9th Cir. 1991) ("In light of the first prong of purposeful availment, analysis of this first factor in the third prong would be redundant"). As such, because Defendant Kryeziu purposefully availed himself on California by serving as the driving force behind the activities of Defendant Code Rebel in California, the Court finds that Defendant Kryeziu purposefully interjected himself on California, supporting a finding of reasonableness.
The second factor, the burden on a defendant in litigating in the forum, must be examined in light of the corresponding burden on a plaintiff. Sinatra v. National Enquirer, Inc., 854 F.2d 1191, 1199 (9th Cir. 1988). The Court finds that there is little burden on Defendant Kryeziu to defend the action in this forum. As the alleged sole manager and member of Defendant Code Rebel, whose jurisdiction has not been challenged by Movants, Defendant Kryeziu will be litigating in California regardless of the Court's jurisdiction on him.
The third factor involves evaluating the extent of any conflict with the sovereignty of Defendant Kryeziu's home state. Here, Defendant Kryeziu is a citizen of Hawaii rather than a foreign nation. As such, "[a]ny conflicting sovereignty interests [can be] accommodated through choice-of-law rules." Nissan Motor Co. Ltd. v. Nissan Computer Corp., 89 F. Supp. 2d 1154, 1161 (C.D. Cal. 2000) (citing Gray & Co. v. Firstenberg Machinery Co., 913 F.2d 758, 761 (9th Cir. 1990)). As a consequence, the Court finds this factor of little importance in its determination of reasonableness.
The fourth factor considers California's interest in adjudicating the controversy. Here, when the alleged false promise/fraud and reverse engineering occurred and when the lawsuit was brought, Plaintiff had its principal place of business in California and was a citizen of California. 28 U.S.C. § 1332(c)(1) (deeming a corporation to be a citizen where it has its principal place of business). As such, because California maintains a strong interest in redressing the injury of its resident/citizen, the Court finds this factor weighs in favor of Plaintiff. See Panavision Intern., L.P. v. Toeppen, 141 F.3d 1316, 1323 (9th Cir. 1998).
The fifth factor - the most efficient judicial resolution of the controversy - primarily focuses on the location of the evidence and the witnesses. Core-Vent Corp., 11 F.3d at 1489. Here, while Movants contend that their documents and evidence are located in Hawaii, Plaintiff contends that its documents and evidence are located primarily in California. Consequently, in terms of the evidence and witnesses, this factor is neutral in assessing the reasonableness. However, as stated above, the personal jurisdiction of Defendant Code Rebel has not been challenged in this case. As such, litigation will proceed against Defendant Code Rebel in California regardless of the outcome of this Motion. It would be contrary to principals of judicial economy to have a separate proceeding in Defendant Kryeziu's home state of Hawaii. Accordingly, the Court finds this factor weighs in favor of Plaintiff.
The sixth factor is the importance of the forum to a plaintiff's interest in convenient and effective relief. Nothing in the papers establishes that effective relief it not available to Plaintiff in Hawaii, Defendant Kryeziu's preferred choice of forum. While litigating in Hawaii would no doubt inconvenience Plaintiff, "neither the Supreme Court nor [the Ninth Circuit] has given much weight to inconvenience to the Plaintiff." Ziegler v. Indian River County, 64 F.3d 470, 476 (9th Cir. 1995). The Court finds this factor therefore tips only slightly in favor of Plaintiff.
The final factor - the availability of an alternative forum - is the only factor that tips toward Movants. Plaintiff "must carry the burden of proving the unavailability of an alternative forum." Pacific Alt. Trading Co. v. M/V Main Exp., 758 F.2d 1325, 1331 (9th Cir. 1985). Here, the Court finds that this factor favors Movants as Plaintiff has not demonstrated or even argued that Hawaii is not a viable and available venue for litigating this suit.
As such, five out of the seven factors favor Plaintiff, one is neutral, and only one favors Movants. Although Movants argue that litigating in California will inconvenience Defendant Kryeziu, the Court finds that this is not sufficient, given the balance of the remaining factors to establish that exercising personal jurisdiction over Defendant Kryeziu would be reasonable.
In sum, because all three requirements - purposeful availment, arising out of, and reasonableness - weigh in favor of a finding of specific jurisdiction, the Court finds that it is appropriate to exercise personal jurisdiction over Defendant Kryeziu. As such, the Court DENIES Movants' Motion to Dismiss Defendant Kryeziu for Lack of Personal Jurisdiction.
C. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)
1. Plaintiff's Second Cause of Action - False Promise
The Court DENIES Movants' Motion to Dismiss Plaintiff's Second Cause of Action for False Promise.
Movants argue that Plaintiff's Second Cause of Action for False Promise, which is a type of fraud, should be dismissed because the claim fails to satisfy the heightened pleading requirements for fraud pursuant to Federal Rule of Civil Procedure 9(b).
Under California law, "[t]he elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." Lazar v. Super. Ct., 12 Cal. 4th 631, 638 (1996). According to rule 9(b), the allegations of false promise must be accompanied by the who, what, where, when, and how of the fraud charged. See Vess, 317 F.3d at 1106.
The Court finds that Plaintiff has sufficiently pled with particularity the elements of fraud under California law. Plaintiff's Complaint pleads with particularity facts indicating Movants made material misrepresentations as to its intent to contract with Plaintiff, and that Plaintiff reasonably relied on the misrepresentations to its detriment.
The Court finds that Plaintiff has also sufficiently pled the scienter requirement of fraud by averring generally facts which indicate Movants knew their misrepresentations were false at the time of contracting*fn1 . See Locke v. Warner Bros., Inc., 57 Cal. App. 4th 354, 368 (Ct. App. 1997)(holding "[f]raudulent intent must often be established by circumstantial evidence, and may be inferred from such circumstances as defendant's . . . failure even to attempt performance . . .").
Therefore, the Court finds Plaintiff has pled with particularity the elements of a fraud claim under Rule 9(b), and Movants' Motion to Dismiss for failure to state a claim for fraud is hereby DENIED.
2. Plaintiff's Third Cause of Action -Inducing Breach of Contract
The Court GRANTS Movants' Motion to Dismiss Plaintiff's Third Cause of Action for Inducing Breach of Contract (also known as interfering with the performance of a contract).
Only a "stranger to a contract may be liable in tort for intentionally interfering with the performance of the contract." Pacific Gas & Electric Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1296 (1990); Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 514 (1994) (holding that "interference with a contract does not lie against a party to the contract" and that liability "falls only on strangers-interlopers who have no legitimate interest in the scope of course of the contract's performance."). Here, the Complaint specifically alleges that Movants were interested parties to an End User License Agreement contract*fn2 . As such, the Court finds that the Complaint fails to set forth facts averring that Movants were strangers to the contract.
Accordingly, the Court GRANTS Movants' Motion to Dismiss Plaintiff's Third Cause of Action of Inducing Breach of Contract. However, because the Plaintiff may be able to allege additional facts to support this Claim, the Court DISMISSES with 20 days leave to amend Plaintiff's Third Cause of Action of Inducing Breach of Contract.
3. Plaintiff's Fourth Cause of Action -Misappropriation of Trade Secrets
The Court GRANTS Movants' Motion to Dismiss Plaintiff's Fourth Cause of Action for Misappropriation of Trade Secrets.
To prove an action for misappropriation of trade secrets, "a plaintiff must establish (among other things) that the defendant improperly 'used' the plaintiff's trade secret." Sargent Fletcher, Inc. v.Able Corp., 110 Cal. App. 4th 1658, 1668.
The Court finds that the Complaint fails to set forth sufficient facts to establish that Movants "improperly used" Plaintiff's trade secret. The only allegation that Plaintiff asserts in its Complaint the alleged improper use is "acquir[ing] the secret by reverse engineering." Compl. ¶43. Under the California Civil Code, however, reverse engineering cannot be the only allegation of "improper" use in an action for misappropriation of trade secrets. Cal. Civ. Code §3246.1(a) ("Reverse engineering . . . alone shall not be considered improper means"); see also ABBA Rubber Co. v. Seaquist, 235 Cal. App. 3d 1, 21-22, fn. 9 (Ct. App. 1991).
Accordingly, the Court GRANTS Movants' Motion to Dismiss Plaintiff's Fourth Cause of Action for Misappropriation of Trade Secrets. However, because the Plaintiff may be able to allege additional facts to support this Claim, the Court DISMISSES with 20 days leave to amend Plaintiff's Fourth Cause of Action for Misappropriation of Trade Secrets.
4. Plaintiff's Seventh Cause of Action -Fraudulent Transfer
The Court GRANTS Movants' Motion to Dismiss Plaintiff's Seventh Cause of Action for Fraudulent Transfer.
To support a cognizable fraudulent transfer claim, California Civil Code §3439.04 provides that a plaintiff must allege that it has a "claim" against a defendant. A "claim" is defined as a "right to payment." Cal. Civ. Code §3439.01(b). Plaintiff, however, only asserts that it "has a right to payment" from the Movants. The Court finds that this is just a "formulaic recitation of the elements" of the cause of action for fraudulent transfer. See Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007). The Court finds that Plaintiff's Complaint is deficient because it does not provide any additional facts for how Plaintiff currently has a right to payment from Movants.
Accordingly, the Court GRANTS Movants' Motion to Dismiss Plaintiff's Seventh Cause of Action for Fraudulent Transfer. However, because Plaintiff may be able to allege additional facts to support this Claim, the Court DISMISSES with 20 days leave to amend Plaintiff's Seventh Cause of Action for Fraudulent Transfer.
D. Movants' Motion For A More Definite Statement
Finally, the Court DENIES Movants' Motion for a More Definite Statement Pursuant to Federal Rule of Civil Procedure 12(e). As noted above, Plaintiff has set forth sufficient facts with regard to its Second Cause of Action for False Promise. The Motion for a More Definite Statement is moot as to Plaintiff's Third, Fourth, and Seventh Causes of Action as the Court GRANTS Movants' Motion to Dismiss for those claims.
For the reasons stated above, the Court DENIES IN PART AND GRANTS IN PART Movants' Motion to Dismiss Complaint for Lack of Personal Jurisdiction [FRCP 12(b)(2)], for Failure to State a Claim [FRCP 12(b)(6)], or in the alternative, for a More Definite Statement [FRCP 12(e)].
IT IS SO ORDERED.