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Amron International Diving Supply, Inc., A California Corporation v. Hydrolinx Diving Remainder of Communication

October 21, 2011

AMRON INTERNATIONAL DIVING SUPPLY, INC., A CALIFORNIA CORPORATION,
PLAINTIFF,
v.
HYDROLINX DIVING REMAINDER OF COMMUNICATION, INC., A CALIFORNIA CORPORATION; SAAD SADIK, A.K.A. TODD SADIK, A.K.A. JOHN SADIK, A.K.A. DALEA ESTEPHAN, A.K.A. STEVEN MORALES, A.K.A. STEPHAN MORALES, A.K.A. FRANK JASHUA, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court

ORDER

(1) GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S CONSPIRACY CAUSE OF ACTION AGAINST DEFENDANT HYDROLINX; AND (2) DENYING THE DEFENDANTS' MOTION TO DISMISS

Amron filed this action against Defendants on August 22, 2011. (Doc. No. 1, "Complaint.") On September 13, 2011, Defendants Hydrolinx Diving Communication, Inc. ("Hydrolinx") and Saad Sadik ("Sadik") (collectively "Defendants") filed a motion to dismiss Plaintiff Amron International Diving Supply, Inc. ("Amron")'s complaint. (Doc. No. 15.) On October 17, 2011, Amron filed a response in opposition. (Doc. No. 18.) The Court submitted the matter on October 17, 2011. (Doc. No. 19.)

Background

Amron is a leading manufacturer and supplier of diving, tactical, hyperbaric, and outdoor equipment for over 33 years. (Complaint at ¶ 7.) Amron produces commercial diving equipment, including radios and unscramblers that allow divers and surface personnel to communicate with one another. (Id. at ¶ 8.) Sadik was employed at Amron as an electrical engineer from October 2000 to April 23, 2010. (Id. at ¶ 9.) On October 18, 2000, Sadik signed an Agreement for Nondisclosure of Trade Secrets. (Id. at ¶ 10.) Among the terms of the Agreement for Nondisclosure of Trade Secrets are:

(a) I have this date entered into discussions and negotiations with [Amron]. As a direct result of said discussions and negotiations, certain technical information has been disclosed to me. I understand and agree that this information is of a confidential nature and that disclosure to unauthorized persons would constitute calculable loss to [Amron]. I will regard and preserve as confidential all information pertaining to [Amron] obtained to me from discussions, drawings, blueprints, manufacturing processes, and other sources of any kind as a result of these discussions and negotiations.

(b) I will not without written authorization from [Amron] disclose to others or attempt to cause manufacture of products, techniques, or client contracts related to these discussions and negotiations. (Id. at ¶ 10(a) & (b).) As part of these agreements, Sadik assigned his interest in all ideas and inventions, whether patentable or not, made or conceived by him, solely or jointly with others, during the term of my employment and agreed not to disclose to others, or take or use for his own purposes or purposes of others, during or after his employment, any trade secrets, confidential information, knowledge, data or know-how in Amron's possession, whether or not by work product. (Id. at ¶ 11.) Plaintiff's complaint also alleges that Sadik agreed to return all things belonging to Amron and all copies of documents containing Amron's trade secrets, confidential information, knowledge, data or know-how in his possession or control after his employment ended. (Id. at ¶ 11.) On March 29, 2002, Sadik re-signed other versions of the Agreement for Nondisclosure of Trade Secrets and Employee Invention and Secrecy Agreement. (Id. at ¶ 12.) Sadik also signed a Proprietary Information Agreement on March 29, 2002. (Id. at ¶ 13.) This agreement stated that Sadik would not: divulge, communicate or use to the detriment of Amron International, or to the benefit of any other person, or persons, or misuse in any other way, any confidential information or trade secrets of the Company, including, but not limited to know how, customer lists, distributor and/or sales representative lists, information pertaining to suppliers or manufacturers utilized by the Company, information relating to distribution methods, accounts, technical data in which the Company has a proprietary interest, or any other information not generally available to the general public relating to the Company's business affairs or activities. (Id. at ¶ 13.) The agreement also stated that Sadik agreed not to "call on, solicit or take away or attempt to call on, solicit or take away any of the clients, distributors, customers, suppliers, or manufacturers who do business with the Company, either for himself/herself or for any other business entity." (Id.)

On March 29, 2002, Sadik also signed an acknowledgment that he received a copy of the Amron Employee Handbook and that he had read it in its entirety. (Id. at ¶ 14.) The Amron Employee Handbook contains a section entitled "Office Equipment & IT Policies." This policy states:

All electronic files; records, and communication, software, databases, hardware, electronic storage media, digital files and telephone equipment remain the sole property of the Company and are to be used only for Company business purposes. Employees who use these systems for inappropriate purposes or who otherwise violate this policy will be subject to discipline, up to and including termination of employment. (Id. at ¶ 14.)

Plaintiff's complaint alleges that Sadik was terminated on April 22, 2010 after an outburst in which Sadik smashed computer equipment and stormed out of the building. (Id. ¶ 16.) During his employment at Amron, Sadik had access to his assigned computer workstation and two additional lab computers, "Test Bench 1" and "Test Bench 3." (Id. at ¶ 17.) Sadik had protected the two computers with passwords. (Id. at ¶ 17.) After terminating Sadik, Amron asked Sadik for the passwords. (Id. at ¶ 18.) Sadik responded that he did not know them. (Id.) Sadik told Amron that a "[l]ong time ago, I was setting the Bios Hard Drive configuration and accidentally saved a password. I do not know it and never used the computer since then." (Id.) Sadik also told Amron that Test Bench 3 was "worthless," and that he had not used it for three years. (Id.) Sadik told Amron to dispose of the computers. (Id. at ¶ 19.) Sadik even offered to help, telling Amron that "it takes 10 minutes to destroy HD." (Id. at ¶ 18.)

Suspecting that Sadik may have lied about the passwords, Amron contacted an IT consultant, Jose Guzman. (Id. at ¶ 19.) Guzman cleared the BIOS and Windows passwords for several drives on for Test Bench 3 and Test Bench 1 and discovered that files had been created, modified, and deleted on Test Bench 3 through April 21, 2010. (Id.) Contrary to Sadik's representations, Test Bench 3 was operational and in use by Sadik as recently as the day before his last day at Amron. (Id.)

On or about June 10, 2010, Amron's newly hired Senior Electrical Engineer discovered programs named "BOMB" on both Test Bench 1 and Test Bench 3. (Id. at ¶ 20.) Amron claims that the "BOMB" programs facilitated the ability to delete directories, including subdirectories, with traces of copying activity, in "quiet mode," without asking a user for permission or displaying any message on the screen. (Id.)

On or about February 22, 2011, Amron discovered that Sadik, under the alias "Todd Sadik," started his own diving communication company, named Hydrolinx Diving Communication, Inc.-Defendant Hydrolinx-and had an exhibit booth at the Underwater Intervention show. (Id. at 21.) The exhibit booth contained brochures for radios and unscramblers. (Id.) On March 22, 2011, Amron received an e-mail from a customer asking for a quotation on an alternative to a radio produced by Hydrolinx. (Id.)

Based on this information, Amron began reviewing hard drives from Test Bench 1 and Test Bench 3 on March 25, 2011. (Id. at ¶ 22.) On or about May 9, 2011, Amron retained a computer forensic analyst, Sergio Kopelev, to conduct a computer forensic analysis of the three computers used by Sadik at Amron. (Id. at ¶ 23.)

From this forensic investigation, Amron discovered that Sadik had copied more than a hundred thousand files from Amron's computer systems and purged thousands of engineering documents from Amron's computer systems. (Id. at ¶ 24.) At the time of the investigation, Test Bench 3 was discovered to contain 3 separate hard drives. (Id. at ¶ 25.) One of the hard drives was Sadik's personal hard drive, hand-labeled "Saad Home." (Id.) Kopelev determined that the "Saad Home" drive had previously been connected to Test Bench 3 and Sadik copied and deleted large amounts of data from Amron via the hard drives of Test Bench 3 and Test Bench 1. Additionally, at least 10 external USB devices, including external hard drives and USB Flash Drives, had been plugged in to Test Bench 3, with evidence, indicating that Sadik had copied files to these external devices. (Id. at ¶¶ 25-26.)

The hard drive labeled "Saad Home," contained approximately 115,000 live or deleted files in computer folders labeled "Amron Work," "Confidential Work," and "Confidential Work Dengerus." (Id. at ¶ 27.) Amron's complaint alleges that Sadik often hid these folders beneath several layers of "temp" folders containing "BOMB" programs located in the directories for quick deletion. (Id.) The hard drive contained over 700 AutoCad "DWG" files relating to Amron's projects. (Id.)

Additionally, the "Saad Home" hard drive Sadik copied contained Amron drawings and drawings belonging to Amron's customers. (Id.) In addition, Sadik copied more than 250 Bill of Materials files, including details of the components for all of Amron's products, including vendor part numbers and quantities. (Id. at ¶ 28.)

Sadik copied almost 2,000 files related to Amron's internal test procedures, test results and vendor and customer quote information. (Id.) He copied over 15,000 editable Word product manual files and technical documents. (Id.) At least 200 of these product manuals and technical documents were confidential. (Id.) Sadik also copied more than 1,500 images containing the word "Amron" in the file or path name. (Id.) Many of these images were confidential photographs of Amron's products being tested, including photographs of the inside, top, back, and sides of Amron's products that are not available to the public. (Id.)

Sadik also copied information concerning Amron's vendors and customers. (Id. at ¶ 29.) Amron found email files on Sadik's computer containing information regarding Amron's customers and vendors. (Id.) Sadik also sent several emails to one of his personal email accounts. (Id.) These emails contained source code and algorithms belonging to Amron. (Id.) Plaintiff alleges that from 2007 to 2010, Sadik saved emails addressed to the "Manufacturing Group" to a special folder. (Id. at ¶ 30.) These emails contained the full information of the returns of all of Amron's manufactured products, including product information, customer names, contact information, shipping addresses, phone numbers, and fax numbers. (Id.) Finally, Sadik accessed and copied ...


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