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Sunpower Corporation, A Delaware Corporation v. Solarcity Corporation

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION


December 11, 2012

SUNPOWER CORPORATION, A DELAWARE CORPORATION, PLAINTIFF,
v.
SOLARCITY CORPORATION, A DELAWARE CORPORATION;
TOM LEYDEN, AN INDIVIDUAL;
MATT GIANNINI, AN INDIVIDUAL; DAN LEARY, AN INDIVIDUAL;
FELIX AGUAYO, AN 16 INDIVIDUAL;
ALICE CATHCART, AN INDIVIDUAL. DEFENDANTS.

The opinion of the court was delivered by: Lucy H. Koh United States District Judge

ORDER GRANTING DEFENDANTS' PARTIAL MOTION TO DISMISS

United States District Court For the Northern District of California

Before the Court is Defendants SolarCity Corporation, Tom Leyden, Matt Giannini, Dan Leary, Felix Aguayo, and Alice Catchart's ("Defendants") Partial Motion to Dismiss. See ECF No. 21 47 ("Motion"). Having considered the parties' submissions and the relevant case law, and the 22 parties' arguments at the hearing held on November 8, 2012, the Court GRANTS Defendants' 23 Motion. 24

I.FACTUAL BACKGROUND

SunPower is a leading manufacturer and distributor of high-efficiency solar panels and 26 other related equipment. Complaint, ECF No. 1 ("Compl.") ¶ 12. SolarCity is a distributor of solar 27 panels and other related equipment. Id. ¶ 13. Defendants Tom Leyden, Matt Giannini, Dan Leary, 28

Felix Aguayo, and Alice Cathcart (the "Individual Defendants") were employed by SunPower in sales positions before being recruited by SolarCity. Id. ¶¶ 14-19, 38-39. Each of the Individual 2

Defendants signed agreements at SunPower agreeing not to disclose "confidential or proprietary 3 information" to third parties and to return such information to SunPower upon ending their 4 employment. Id. ¶ 25. 5 6 company email account after he was terminated. Id. ¶ 32. SunPower also discovered that Aguayo 7 had forwarded several emails containing customer information, price lists, and market reports to 8 his personal email address on or about November 18, 2011. Id. Based on the emails Aguayo 9 accessed and the proximity in time to Leyden, Giannini, Leary, Aguayo, and Catchart's departures, 10 On or about December 9, 2011, SunPower discovered that Aguayo had accessed his SunPower initiated an investigation, including conducting a computer forensic analysis of the Id. ¶ 33.

SunPower's investigation revealed that, shortly before leaving SunPower, each of the Individual Defendants had used various means, including USB devices and portable hard drives, to 14 store SunPower files containing "confidential. and non-confidential proprietary information." Id. 15 ¶¶ 34-48. This information consisted of, inter alia, contact information, sales histories, potential 16 new sales, status, market and business analysis, quotes, forecast analysis, cash flow analysis, and 17 project economics. Id. SunPower is informed and believes that this information has been 18 delivered to Defendant SolarCity and that Defendants "continue to use. [the] data. for their own 19 benefit." Id. ¶¶ 49-55. 20

As a result of Defendants' actions, on February 13, 2012, SunPower filed the instant action.

In this action, SunPower alleges that Defendants misappropriated SunPower's trade secrets in 23 violation of the California Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq. ("Trade 24 Secrets Claim"). Id. ¶¶ 63-72. In addition to SunPower's Trade Secrets Claim, SunPower alleges 25 several causes of action based on Defendant's misappropriation of what SunPower terms "non-26 trade secret proprietary information." Id. ¶ 121. These causes of action include SunPower's: (1) 27 fourth cause of action for breach of confidence (see id. ¶¶ 118-124), (2) fifth cause of action for 28 conversion (see id. ¶¶ 125-130), (3) sixth cause of action for trespass to chattels (see id. ¶¶ 131-

computers used by the Individual Defendants. 12

II.PROCEDURAL BACKGROUND

137), (4) seventh cause of action for tortious interference with prospective economic advantage

(see id. ¶¶ 138-145); (5) eighth cause of action for common law unfair competition (see id. ¶¶ 146-3

Code section 17200 (id. ¶¶ 152-155) (collectively, "Non-Trade Secret Claims").*fn1 5

Trade Secrets Act supersedes SunPower's Non-Trade Secret Claims. Motion at 1. SunPower filed 8 its Opposition on October 11, 2012. ECF No. 51 ("Opposition"). Defendants filed their Reply on 9 151); and (6) ninth cause of action for unfair competition under California Business & Professions 4

On August 2, 2012, Defendants filed the instant Motion seeking dismissal of SunPower's Non-Trade Secret Claims. Defendants' primary basis for relief is that the California Uniform 7 October 18, 2012. ECF No. 52 ("Reply"). 10

A motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th 13

III.LEGAL STANDARDS

United States District Court For the Northern District of California

Cir.2001). Dismissal under Rule 12(b)(6) may be based on either (1) the "lack of a cognizable 14 legal theory," or (2) "the absence of sufficient facts alleged under a cognizable legal theory." 15 Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988)*fn2 . While "'detailed factual 16 allegations'" are not required, a complaint must include sufficient facts to "'state a claim to relief 17 that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. 18 v. Twombly, 550 U.S. 544, 555, 570 (2007) ). "A claim has facial plausibility when the plaintiff 19 pleads factual content that allows the court to draw the reasonable inference that the defendant is 20 liable for the misconduct alleged." Id. 21

22 allegations of material fact as true and construes the pleadings in the light most favorable to

Accordingly, the Court does not address them.

For purposes of ruling on a Rule 12(b)(6) motion to dismiss, the Court accepts all Reed, No. CV 10--5783, 2012 WL 1460588, at *2 n. 2 (C.D. Cal. Mar. 16, 2012) (internal quotations omitted).

SunPower. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). 2

The Court need not, however, accept as true pleadings that are no more than legal conclusions or 3 the "formulaic recitation of the elements of a cause of action." Iqbal, 555 U.S. at 678 (quoting 4

Twombly, 550 U.S. at 555). Mere "conclusory allegations of law and unwarranted inferences are 5 insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 6 83 F.3d 1136, 1140 (9th Cir.1996); accord Iqbal,555 U.S. at 677-80. 7

In the instant Motion, Defendants move to dismiss the Non-Trade Secret Claims on the

9 grounds that: (1) California law has never recognized causes of action for conversion, trespass to 10 chattels, tortious interference with prospective economic advantage, common-law unfair competition, or statutory unfair competition based on the misappropriation of "non-trade secret proprietary information"; and (2) even if California law did previously allow such claims, such 13 claims are now superseded*fn3 by the California Uniform Trade Secrets Act ("CUTSA"). Motion at 14

2. Defendants also argue that SunPower's seventh cause of action for tortious interference with 15 prospective economic advantage should be dismissed because SunPower has failed to allege that 16

19. The Court addresses the supersession issue first and concludes that SunPower's Non-Trade 18

Secret Claims are superseded. 19

21 other injury caused by the misappropriation of trade secrets. Cal. Civ. Code § 3426.3. 22

Misappropriation means improper acquisition, or non-consensual disclosure or use of another's 23 trade secret. Id. § 3426.1(b). The statute defines a "trade secret" as information that derives 24 25

"[t]he [California] Supreme Court has criticized the use of 'preempt' to describe the supersession of one state law by another. The court therefore adopted the term 'displace.'" 184 Cal. App. 4th 27

210, 232 n. 14 (2010) (internal quotations and citations omitted), disapproved on other grounds by Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (2011). The Silvaco Court went on to state that 28

"[f]or present purposes we favor [the term] 'supersede[.]'" Id. The Court follows Silvaco and uses the term 'supersede' rather than 'preempt.'

Case No.: 12-CV-00694-LHK

ORDER GRANTING DEFENDANTS' PARTIAL MOTION TO DISMISS

IV.DISCUSSION

United States District Court For the Northern District of California

Defendants' conduct interfered with SunPower's relationship with a specific third party. Id. at 18-17

A.CUTSA Supersession

1.Background on CUTSA and CUTSA Supersession

California's Uniform Trade Secrets Act provides for the civil recovery of "actual loss" or

"independent economic value" from its confidentiality and "[i]s the subject of efforts that are 2 reasonable under the circumstances to maintain its secrecy." Id. § 3426.1(d). 3

4 same nucleus of facts as trade secret misappropriation." K.C. Multimedia, Inc. v. Bank of America 5

The savings clause does not affect "contractual remedies" and civil remedies "that are not based 7 upon misappropriation of a trade secret." Silvaco Data Systems v. Intel Corp., 184 Cal. App. 4th 8 (2011). "The preemption inquiry for those causes of action not specifically exempted by § 10

CUTSA includes a savings clause (Section 3426.7) that "preempt[s] claims based on the Tech. & Operations, Inc., 171 Cal. App. 4th 939, 962 (2009); see also Cal. Civ. Code § 3426.7*fn4 . 6 210, 233 (2010), disapproved on other grounds by Kwikset Corp. v. Superior Court, 51 Cal.4th 310 9 3426.7(b) focuses on whether other claims are not more than a restatement of the same operative facts supporting trade secret misappropriation. . . If there is no material distinction between the wrongdoing alleged in a [C]UTSA claim and that alleged in a different claim, the [C]UTSA claim 13 preempts the other claim." Convolve, Inc. v. Compaq Comp. Corp., No. 00 CV 5141 (GBD), 2006 14 WL 839022, at *6 (S.D.N.Y. Mar. 31, 2006) (internal quotations omitted) (applying California 15 law). 16

Following the nucleus of facts test, a number of Courts, including this Court, have held that

CUTSA may supersede various claims including, inter alia, claims for conversion, common count, 18 quantum meruit, unjust enrichment, breach of confidence, unfair competition, and intentional and 19

negligent misrepresentation where the wrongdoing alleged in connection with such claims is the 2 misappropriation of trade secrets. See e.g. Louis v. Nailtiques Cosmetic Corp., 423 F. App'x 711, 3 California's Uniform Trade Secrets Act, Cal. Civ.Code § 3426.7." (citing K.C. Multimedia, Inc., 5 2010 WL 5069832 (N.D. Cal. Dec. 7, 2010) ("SOAProjects' attempt to use unjust enrichment to 7 recover for SCM's alleged misappropriation of SOAProjects' trade secrets likewise fails because it 8 is preempted by the California Uniform Trade Secret Act." (citing Silvaco,184 Cal. App. 4th 9

713 (9th Cir. 2011) ("Louis's common count and quantum meruit claims are preempted by 4

171 Cal. App. 4th at 954-55)); SOAProjects, Inc. v. SCM Microsystems, Inc., 10-CV-01773-LHK, 6

236)); Silvaco, 184 Cal. App. 4th at 236 (holding that claims for conversion, common count, 10 common law unfair business practices, intentional and negligent misrepresentation were 11 superseded by CUTSA); K.C. Multimedia, Inc., 171 Cal. App. 4th at 960 (concluding that

plaintiff's breach of confidence claim was superseded because "the conduct at the heart of" both 13 the breach of confidence claim and the UTSA claim was "the asserted disclosure of trade secrets by 14

Tam to respondents"); id. at 962(holding that statutory unfair competition claim was superseded 15 because it "rest[ed] squarely on its factual allegations of trade secret misappropriation"). 16

18 the extent such claims "are based on the same nucleus of facts as the misappropriation of trade 19 secrets claim for relief." Opposition at 3 (quoting K.C. Multimedia, Inc., 171 Cal. App. 4th at 958 20

(emphasis added)). Rather, SunPower argues that its Non-Trade Secret Claims are not based on 21 the same nucleus of fact as its Trade Secret Claim because the Non-Trade Secret Claims relate to 22 the misappropriation of SunPower's non-trade secret proprietary information, as opposed to the 23 misappropriation of SunPower's trade secrets. Id. at 5; see also id. (arguing that "[t]his non-trade 24 secret information is separate and apart from the trade secrets that form the basis of SunPower's 25

[UTSA] claim"). Thus, the Court must determine whether a claim based on the misappropriation 26 of non-trade secret proprietary information is superseded by CUTSA. 27 28

2.CUTSA Can Supersede Claims Based on the Misappropriation of Non-Trade Secret Information

In this case, SunPower does not dispute that the UTSA supersedes common-law claims to

Only one California Court has explicitly considered this issue, specifically the California

Court of Appeal in Silvaco. The Silvaco Court held that the UTSA superseded claims for 3 conversion, common count, common law unfair business practices, and intentional and negligent 4 misrepresentation because those claims were based on the misappropriation of trade secrets 5 plaintiff claimed were "contained" in computer software it had developed. See 184 Cal. App. at 6

236. In a footnote addressing the Eastern District of Pennsylvania's decision in Cenveo Corp. v. 7

We emphatically reject the Cenveo court's suggestion that the uniform act was not intended to preempt "common law conversion claims based on the taking of

information that, though not a trade secret, was nonetheless of value to the

claimant." (Cenveo, supra, 2007 WL 527720 a p.4) On the contrary, a prime purpose of the law was to sweep away the adopting states' bewildering web of rules

and rationales and replace it with a uniform set of principles for determining when one is-and is not-liable for acquiring, disclosing, or using "information ... of

value." (See § 3426.8.) Central to the effort was the act's definition of a trade secret. (See § 3426.1, subd. (d).) Information that does not fit this definition, and is not

otherwise made property by some provision of positive law, belongs to no one, and

cannot be converted or stolen. By permitting the conversion claim to proceed on a contrary rationale, the Cenveo court impliedly created a new category of intellectual

property far beyond the contemplation of the Act, subsuming its definition of "trade secret" and effectively obliterating the uniform system it seeks to generate.

Slater, CIV A 06-CV-2632, 2007 WL 527720 (E.D. Pa. Feb. 12, 2007), the Silvaco Court stated: 8

Silvaco,184 Cal. App. 4th at 239 n. 22. 17

Defendants contend that the Silvaco footnote stands for the proposition that, under

California law, SunPower's claims based on the misappropriation of non-trade secret proprietary 19 information are superseded. Motion at 11. The Court agrees that this footnote supports 20

Defendants' argument. However, the Court notes that an argument could be made that the footnote 21 is dicta as, unlike in the instant case, in Silvaco, there does not actually appear to have been any 22 allegation by plaintiff that the information plaintiff was seeking to protect was not a trade secret 23 and therefore not subject to trade secret law. See 184 Cal. App. 4th at 239 ("All of [plaintiff's] 24 claims, except its UCL claim. depend on [defendant's] supposed use, in [plaintiff's] words of 25

'software. which embodies and uses. [plaintiff's] Trade Secrets'"); Opposition at 7 (arguing 26 that "Silvaco address[ed] [a] complaint[] in which the additional common law causes of action 27 were explicitly based on the use of trade secrets). 28

Supreme Court "would decide [this issue] differently," this Court believes it prudent to follow 4

Silvaco. Cf Ryman v. Sears, Roebuck & Co., 505 F.3d 993, 995 (9th Cir. 2007) ("[W]here there is 5 no convincing evidence that the state supreme court would decide differently, a federal court is 6 obligated to follow the decisions of the state's intermediate appellate courts." (quoting Vestar Dev. 7

Nevertheless, even if the statement in Silvaco is technically dicta, given the Silvaco Court's

"emphatic[]" rejection of SunPower's position, absent "convincing evidence that" the California 3

II, LLC v. Gen. Dynamics Corp., 249 F.3d 958, 960 (9th Cir. 2001))). Here, SunPower has not 8 identified any decision that suggests the California Supreme Court would conclude that CUTSA 9 does not supersede claims based on the misappropriation of confidential or proprietary information 10 that nevertheless fails to qualify as a trade secret under CUTSA.

Moreover, the Court agrees with the rationale in Silvaco. In order for the taking of

information to constitute wrongdoing, the information must be property. Information is not 13 property unless some "positive law" makes it so. Silvaco,184 Cal. App. 4th at 239 n. 22. Thus, 14 the Court agrees with the Silvaco Court that, in order to state a claim based on the taking of 15 information, a plaintiff must show that he has some property right in such information (i.e. that the 16 information is proprietary). See id. If the basis of the alleged property right is in essence that the 17 information is that it is "not. generally known to the public," (Cal. Civ. Code § 3426.1(d)(1)) then 18 the claim is sufficiently close to a trade secret claim that it should be superseded notwithstanding 19 the fact that the information fails to meet the definition of a trade secret. To permit otherwise 20 would allow plaintiffs to avoid the preclusive effect of CUTSA (and thereby plead potentially more 21 favorable common-law claims) by simply failing to allege one of the elements necessary for 22 information to qualify as a trade secret. Cf Mattel, Inc. v. MGA Entm't, Inc., 782 F. Supp. 2d 911, 23

986 (C.D. Cal. 2011) ("Allowing civil plaintiffs to nevertheless proceed with such claims on the 24 basis of the theft of confidential information that doesn't meet the statutory definition of a trade 25 secret undermines the California Court of Appeal by 'alternatively plead[ing] claims with less 26 burdensome requirements of proof.'" (quoting Diamond Power Int'l v. Davidson, 540 F. Supp. 2d 27 1322, 1345 (N.D. Cal. 2007)). For example, a Plaintiff seeking to bring a non-CUTSA claim based 28 on the misappropriation of valuable information could avoid supersession under CUTSA by failing to allege that the information was "subject" to "reasonable" efforts "to maintain its secrecy." Cal. 2

Civi. Code § 3426.1(d)(1). Such a result would subvert CUTSA's purpose of providing a "uniform 3 set of principles for determining when one is-and is not-liable for acquiring, disclosing, or using 4

'information ... of value.'" Silvaco,184 Cal. App. 4th at 239 n. 22; see also BlueEarth Biofuels, 5

LLC v. Hawaiian Elec. Co., Inc., 123 Haw. 314, 327 (2010) ("A common law claim premised on 6 information that fails to qualify as a trade secret would seemingly undercut the statute's primary 7 goal of uniformity, potentially render parties liable for using information that is not secret when the 8

Pooley, Trade Secrets, § 2.03[6])). 10

UTSA would not impose liability, and potentially pose Supremacy Clause problems." (quoting 9

The Court also notes that the holding in Silvaco is consistent with the position taken by a

number of state Supreme Courts that have held that claims based on the misappropriation of information may be superseded notwithstanding the fact that the information ultimately fails to 13 qualify as a trade secret. See HDNet v. N. Am. Boxing Council, 972 N.E.2d 920, 922-926 (Idaho 14

2012) (following "majority" view in concluding that UTSA preempts claims based on the 15 misappropriation of confidential, proprietary, or otherwise secret information regardless of whether 16 the information ultimately qualifies as a trade secret); Robbins v. Supermarket Equip. Sales, LLC, 17

290 Ga. 462, 465 (2012) ("For the GTSA to maintain its exclusiveness, a plaintiff cannot be 18 allowed to plead a lesser and alternate theory of restitution simply because the information does not 19 qualify as a trade secret under the act."); BlueEarth, 123 Haw. at 327 (holding "that the HUTSA 20 preempts non-contract, civil claims based on the improper acquisition, disclosure or use of 21 confidential and/or commercially valuable information that does not rise to the level of a 22 statutorily-defined trade secret"); Mortgage Specialists, Inc. v. Davey, 153 N.H. 764, 776 (2006) 23

(rejecting plaintiff's argument and declining "to adopt the position of a minority of courts that have 24 held that common law and statutory claims are not preempted by the UTSA if they involve 25 information that does not meet the statutory definition of a trade secret"); Dicks v. Jensen, 172 Vt. 26

43, 51 (2001) ("Finally, plaintiff argues that even if his customer list does not meet the statutory 27 definition of a trade secret, defendants were under a common law duty not to solicit the Lodge's 28 customers. This argument fails because it is explicitly contravened by the Trade Secrets Act.

Section 4607 states 'this chapter displaces conflicting tort, restitutionary, and any other law of this 2 state providing civil remedies for misappropriation of a trade secret.' 9 V.S.A. § 4607. Thus, the 3 statute plainly bars a common law remedy on this theory").*fn5 The Court considers these cases 4 persuasive. 5

Furthermore, the majority of district courts that have considered Silvaco have held that

CUTSA supersedes claims based on the misappropriation of information that does not satisfy the 7 definition of trade secret under CUTSA. See e.g. FormFactor, Inc. v. Micro-Probe, Inc., C 10-8

3095 PJH, 2012 WL 2061520, at *15 (N.D. Cal. June 7, 2012) ("With regard to the breach of 9 confidence claim, CUTSA preempts other claims based on misappropriation of confidential 10 information, regardless of whether the information ultimately meets the statutory definition of a

trade secret." (citing Silvaco,184 Cal. App. 4th at 236-40)); Heller v. Cepia, L.L.C., C 11-01146

JSW, 2012 WL 13572, at *7 (N.D. Cal. Jan. 4, 2012) ("Therefore, Heller's common law claims 13 against Cepia premised on the wrongful taking and use of confidential business and proprietary 14 information, regardless of whether such information constitutes trade secrets, are superseded by the 15

IEG WVG, 2011 WL 1375311 (S.D. Cal. Apr. 12, 2011) ("CUTSA preempts all claims based upon 17 the misappropriation of ... confidential information, whether or not that information rises to the 18 level of a trade secret." (internal quotations omitted)); Mattel, Inc., 782 F. Supp. 2d at 987 ("In an 19 effort to align with the California courts that have addressed this issue, the Court concludes that 20

UTSA supersedes claims based on the misappropriation of confidential information, whether or not 21 that information meets the statutory definition of a trade secret." (citing Silvaco,184 Cal. App. 4th

WL 2803947, at *6 n. 5 (S.D. Cal. July 15, 2010) (holding that a "careful reading of the Silvaco 24 decision reveals that it does not undermine the conclusion that the UTSA only preempts additional 25

WUTSA does not preempt claims that "do not depend on information that meets the statutory 27 definition of a 'trade secret'"); but cf Frantz v. Johnson, 116 Nev. 455, 465 (2000) (noting that "[t]here may be future instances where a plaintiff will be able to assert tort claims. that do not 28 depend on the information at issue being deemed a trade secret, and thus are not precluded by the UTSA")

ORDER GRANTING DEFENDANTS' PARTIAL MOTION TO DISMISS

CUTSA." (citing Silvaco,184 Cal. App. 4th at 236-240)); Jardin v. Datallegro, Inc., 10-CV-2552-16 at 239 n.22)); but see Leatt Corp. v. Innovative Safety Tech., LLC, 09-CV-1301-IEG (POR), 2010 23

claims that depend on the misappropriation of a trade secret" and declining to dismiss plaintiff's 2 claims based on "the misappropriation of otherwise confidential or proprietary, but not trade secret, 3 information"). 4

5 at 4 (citing PQ Labs, Inc. v. Yang Qi, C 12-0450 CW, 2012 WL 2061527, at *5 (N.D. Cal. June 7, 6

2012) ("If a claim is based on confidential information other than a trade secret, as that term is 7 defined in CUTSA, it is not preempted." (quoting First Advantage Background Services Corp. v. 8

Private Eyes, Inc. ("First Advantage"), 569 F. Supp. 2d 929, 942 (N.D. Cal. 2008))); TMX 9

June 17, 2010) (holding that plaintiff could "continue to pursue [his] [tort claims] so long as the

confidential information at the foundation of the claim is not a trade secret, as that term is defined

in [the UTSA]." (quoting First Advantage, 569 F. Supp. 2d at 942)); Ali v. Fasteners for Retail, 13

Inc., 544 F. Supp. 2d 1064, 1072 (E.D. Cal. 2008) ("[I]t is still unclear how much of the allegedly 14 misappropriated information was a trade secret. Therefore, it would be premature to hold that 15

CUTSA preempts Plaintiff's conversion claim."); First Advantage, 569 F. Supp. 2d at 942 (holding 16 that plaintiff could "continue to pursue the claim for false promise, so long as the confidential 17 information at the foundation of the claim is not a trade secret, as that term is defined in 18

July 6, 2006) (holding that conversion claim based on misappropriation of proprietary materials 20 was not superseded because plaintiff "did not incorporate by reference its allegation that its 21 proprietary materials are trade secrets in its proposed claim for conversion"; thus plaintiff's 22 conversion claim was "an alternative theory, which [plaintiff] [was] allowed to plead")); 23

WL 170180, at *1 (E.D. Cal. Jan. 19, 2012) (holding that defendants failed to show that "CUTSA 25 preempts common law misappropriation claims and unfair competition claims that pertain to 26 intellectual property other than trade secrets"). The Court is not persuaded by these cases. 27

SunPower cites several district court cases reaching a contrary conclusion. See Opposition

Funding, Inc. v. Impero Technologies, Inc., C 10-00202 JF (PVT), 2010 WL 2509979 (N.D. Cal. 10

CUTSA."); Terarecon, Inc. v. Fovia, Inc., C 05-4407 CW, 2006 WL 1867734, at *10 (N.D. Cal. 19

Opposition at 10 (citing Strayfield Ltd. v. RF Biocidics, Inc. No. CIV. S-11-2631 LKK/GGH, 2012 24

As an initial matter, three of the six cases SunPower cites were decided before Silvaco. See

Ali, 544 F. Supp. 2d at 1072 (decided in 2008); First Advantage, 569 F. Supp. 2d at 942 (decided in

2008); Terarecon, Inc., 2006 WL 1867734 (decided in 2006). Furthermore, the three cases cited 2 by SunPower that post-date Silvaco (PQ Labs, Inc., Strayfield, and TMX Funding, Inc.) failed to 3 consider Silvaco. Moreover, two relied on the Northern District of California's decision First 4

Advantage, which pre-dates Silvaco. See PQ Labs, Inc., 2012 WL 2061527 at *5 (quoting First 5

Advantage, 569 F. Supp. 2d at 942); TMX Funding, Inc., 2010 WL 2509979 at *10 (citing First 6

Instead, the Court follows Silvaco, FormFactor, Heller, and Mattel in holding that CUTSA 8 supersedes claims based on the misappropriation of information, regardless of whether such 9 information ultimately satisfies the definition of trade secret. 10

Advantage, 569 F. Supp. 2d at 942). Accordingly, the Court declines to follow these decisions. 7 In reaching this conclusion, the Court observes that, while not explicitly addressing the issue of supersession, at least two Ninth Circuit cases have suggested that a plaintiff who fails to show that information constitutes a legally protectable trade secret, may nevertheless prevail on 13 non-trade secret claims based on the misappropriation of the same information. 14

15 the district court properly dismissed plaintiff's UTSA claim because SunPower failed to identify its 16 purported trade secrets, the "dimension[s] and tolerance[s]" of various components of its projector 17 system, with sufficient particularity. Imax, 152 F.3d 1161, 1167 (9th Cir. 1998). The Court 18 nevertheless held that, notwithstanding plaintiff's "failure to establish a legally protectable trade 19 secret," the district court should not have dismissed plaintiff's common law unfair competition 20 claim. Id. at 1169. In reaching this conclusion, the Court reasoned that "[u]nder California law a 21 plaintiff can maintain a common law unfair competition claim regardless of whether it 22 demonstrates a legally protectable trade secret." Id. 23

Similarly, in City Solutions, Inc. v. Clear Channel Communications, the Court upheld a jury

24 verdict finding in plaintiff's favor on a common-law unfair competition claim based on defendant's 25 misappropriation of plaintiff's "confidential and proprietary business strategy" concerning a 26 citywide news rack project. City Solutions, 365 F.3d 835, 842 (9th Cir. 2004). In upholding the 27 jury's verdict, the City Solutions Court held that "common law misappropriation is one of a number 28

Specifically, in Imax Corp. v. Cinema Technologies, Inc., the Ninth Circuit concluded that

of doctrines subsumed under the umbrella of unfair competition" that may be "invoked. to protect 2 something of value not otherwise covered by patent or copyright law, [or] trade secret law.." Id. 3

4 concludes that they should not be followed. As an initial matter, both Imax and City Solutions 5 predate Silvaco. See Silvaco, 184 Cal. App. 4th 210 (2010); City Solutions, 365 F.3d 835 (2004); 6

Imax, 152 F.3d 1161 (1998). While, the Ninth Circuit's decisions on questions of state law are 7 ordinarily binding on this court, where, as here, there has been "subsequent indication from the 8

California Courts. Silicon Image, Inc. v. Analogix Semiconductor, 642 F. Supp. 2d 957, 969 (N.D. 10

To the extent Imax and City Solutions are in conflict with the holding in Silvaco, the Court California courts that [the Ninth Circuit's] interpretation was incorrect," the Court may follow the 9

Cal. 2008) (quoting Owen By & Through Owen v. United States, 713 F.2d 1461, 1464 (9th Cir. 1983)). Here, since Imax and City Solutions were decided, the California Court of Appeal has

"emphatically reject[ed]" the proposition that the UTSA "was not intended to preempt common 13 law conversion claims based on the taking of information that, though not a trade secret, was 14 nonetheless of value to the claimant." Silvaco, 184 Cal. App. 4th at 239 n. 22. Thus, the Court 15 concludes that City Solutions and Imax should not be followed to the extent they suggest that 16

SunPower may bring a claim based on confidential or proprietary information that does not satisfy 17 the definition of trade secret. See Silicon Image, Inc., 642 F. Supp. 2d at 969 (holding that because 18

"several California appellate courts have rejected the Ninth Circuit's interpretation of California 19 law and the Court finds no California case in which the federal courts' interpretation of California 20 law has been approved, the Court. must follow the more recent California cases on the question 21 of extrinsic evidence"); Neilson v. Union Bank of California, N.A., 290 F. Supp. 2d 1101, 1136 n. 22

93 (C.D. Cal. 2003) ("[E]ven if the court were to read Grosvenor as broadly as Leider contends, 23

Grosvenor was decided in 1990. This was long before the California Courts of Appeal decided 24

Fiol and Saunders. To the extent Grosvenor is inconsistent with these courts' interpretation of state 25 law, the court concludes that it must follow the decisions of the California courts." (citing Pershing 26

Moreover, neither Imax nor City Solutions even explicitly considered the question of

28 supersession. Accordingly, the Court concludes that they should not be applied in the supersession

Park Villas Homeowners Ass'n. v. United Pacific Ins. Co., 219 F.3d 895, 903 (9th Cir.2000))).

context. See Digital Envoy, Inc. v. Google Inc.,370 F. Supp. 2d 1025, 1035 (N.D. Cal. 2005)2

("Moreover, as acknowledged in the Postx decision, the Ninth Circuit did not address the 3 preemption issue in City Solutions.. As a result, the Court finds that California's statute, as 4 persuasively interpreted in Callaway, preempts Digital's claims for unfair competition and unjust 5 enrichment." (internal citations omitted)).*fn6 7 secret proprietary information are superseded unless one of the following conditions is met: (1) 8

'made property by some provision of positive law,'. on grounds that are qualitatively different 10 from the grounds upon which trade secrets are considered property" (Bryant v. Mattel, Inc., CV 04-

Claims allege "wrongdoing" that is "material[ly] distinct[] [from] the wrongdoing alleged in a 14

(applying the nucleus of facts test). The Court addresses each of these issues in turn. 16

19 labeling of its non-trade secret information as "proprietary" (see e.g. Compl. ¶ 120), SunPower has 20 failed to allege facts sufficient to show that SunPower has property rights in its non-trade secret 21 information. 22

23 information." Id. ¶¶ 120, 121, 122, 123, 126, 132, 134, 142, 149, 154. Indeed, the term does not 24 appear anywhere in the section of SunPower's Complaint setting forth SunPower's factual 25 allegations regarding Defendants' alleged misconduct. See id. ¶¶ 12-55. The term does not make 26

(N.D. Cal. Nov. 20, 2004) (noting that "the preemption question. was not before the" Court in City Solutions, but nevertheless concluding that "City Solutions strongly suggests that a plaintiff 28 may still allege trade secrets misappropriation and unfair competition as alternative theories of liability")

Case No.: 12-CV-00694-LHK

ORDER GRANTING DEFENDANTS' PARTIAL MOTION TO DISMISS

In light of Silvaco, the Court concludes that SunPower's claims based on its non-trade

SunPower can allege facts that show that "the [non-trade secret proprietary] information. was 9 9049 DOC RNBX, 2010 WL 3705668, at *22 (C.D. Cal. Aug. 2, 2010) (quoting Silvaco, 184

Cal.App.4th at 239 n. 22)), or (2) it can otherwise be concluded that SunPower's Non-Trade Secret 13

[C]UTSA claim...." (Convolve, Inc., 2006 WL 839022 at *6) (internal quotations omitted) 15

3.SunPower Has Not Alleged Facts Sufficient to Show That SunPower Has a Property Interest in its Non-Trade Secret Proprietary

Information

Having reviewed the Complaint, the Court concludes that, notwithstanding SunPower's

As an initial matter, SunPower never actually defines the term "non-trade secret proprietary

its first appearance until the portions of SunPower's Complaint setting forth its specific causes of 2 action. See id. ¶¶ 120, 121, 122, 123, 126, 132, 134, 142, 149, 154. No information is provided in 3 these sections regarding what information SunPower contends constitutes non-trade secret 4 proprietary information. Given the dearth of information concerning the nature of SunPower's 5 non-trade secret proprietary information, the Court cannot conclude that this information is made 6 property by virtue of some law other than CUTSA. 7

The Court also notes that, in the section of SunPower's Complaint setting forth its factual

8 allegations regarding Defendants' alleged misconduct, SunPower uses the terms "confidential 9 information" and "non-confidential proprietary information." Id. ¶¶ 34, 36, 41, 43, 45, 48, 49, 50, 10

51. While SunPower makes a facial distinction between these two categories, SunPower uses both terms to refer to the same computer files. See e.g. ¶ 34 (alleging that Defendants stole "tens-of- thousands of computer files containing [SunPower] confidential information and non-confidential 13 proprietary information. [and that these] files included. quotes, deals, proposals, contracts, and 14 files containing forecast analysis, market analysis, business analysis and information downloaded" 15 from SunPower's sales website); id. ¶ 36 (alleging that Leyden "copied at least thousands of files 16 containing [SunPower] confidential information and non-confidential proprietary information. 17 include[ing] hundreds of quotes, proposals, and contracts, as well as files containing market 18 analysis, forecast analysis, and business analysis"); id. ¶ 41 (alleging that Leary "copied at least 19 tens-of-thousands of files containing [SunPower] confidential information and non-confidential 20 proprietary information. [including] over 40,000 quotes, contracts, proposals and deals." etc.). 21

22 information" to refer to the same data without making any effort to assign particular data to 23 particular categories suggests that the distinction SunPower is drawing is superficial. To the extent 24

SunPower uses the terms "confidential information" and "non-confidential proprietary 25 information" as proxies for the terms "trade secret information" and "non-trade secret proprietary 26 information," the Court concludes that the distinction SunPower draws between the latter two 27 categories of information is likely superficial as well. Thus, the Complaint supports the conclusion 28 that any property interest SunPower may have in its non-trade secret proprietary information is

SunPower's use of the terms "confidential information" and "non-confidential proprietary qualitatively no different from the grounds upon which its trade secrets are considered property. 2

Accordingly, the Court cannot conclude from these facts that SunPower has a property interest in 3 the non-trade secret proprietary information or that this property interest is sufficiently distinct 4 from its interest in its trade secrets such that its Non-Trade Secret Claims are not superseded. 5

6 proprietary information, in its Opposition, SunPower argues that "California law clearly recognizes 7 a property right in" its non-trade secret. Opposition at 8. Accordingly, SunPower contends that its 8

Notwithstanding SunPower's failure to allege what information constitutes non-trade secret

Non-Trade Secret Claims should not be superseded. The Court is not persuaded. SunPower fails 9 to support its arguments with any case law recognizing a broad property right in non-trade secret 10 proprietary information. SunPower does cite to several cases, in which Courts allowed claims for

conversion, trespass to chattels, and common law unfair competition to proceed based on the misappropriation of intangible property, but these cases fail to support the conclusion that the non-13 trade secret proprietary information at issue here is property. 14

For example, SunPower cites the Ninth Circuit's decision in Kremen v. Cohen,337 F.3d 1024 (9th Cir. 2003)). Opposition at 8. In Kremen, after applying a three-part test, the Court 16 concluded that the owner of a website domain name had a property right in the domain name and 17 could therefore pursue a claim for conversion based on the Defendant's sale of the domain name to 18 another party. Id. at 1030 (concluding that plaintiff "had an intangible property right in his domain 19 name"); see also id. ("We apply a three-part test to determine whether a property right exists: 20

'First, there must be an interest capable of precise definition; second, it must be capable of 21 exclusive possession or control; and third, the putative owner must have established a legitimate 22 claim to exclusivity.'" (quoting G.S. Rasmussen & Assocs., Inc. v. Kalitta Flying Serv., Inc., 958 23

F.2d 896, 906 (9th Cir.1992)). Kremen's recognition that plaintiff had a property right in the 24 domain name does not support the broad proposition that "California law. recognizes a property 25 right in" non-trade secret information. Opposition at 8. 26

27 finding that the plaintiff had a "legitimate claim to exclusivity" as to the domain name. Kremen, 28

Moreover, Kremen's conclusion that the domain name was property was based in part on its

337 F.3d at 1030 (holding that plaintiff had an exclusive claim to the domain name and likening

"[r]egistering a domain name. [to] staking a claim to a plot of land at the title office"). Here, one 2 of the issues with SunPower's Non-Trade Secret Claims is that SunPower has failed to provide 3 sufficient information for the Court to conclude that: (1) SunPower has a "legitimate claim to 4 exclusivity" in the non-trade secret information, and (2) SunPower's basis for claiming an 5 exclusive right to such information is different from the grounds upon which the information might 6 be deemed a trade secret under CUTSA. 7

SunPower also cites Thrifty-Tel, Inc. v. Bezenek, 46 Cal. App. 4th 1559 (1996)). Opposition at 9. Thrifty-Tel held that a jury could have properly found defendants guilty of 9 trespass to a chattel where defendants "employed computer technology in their efforts to crack 10 plaintiff's access and authorization codes and make long distance phone calls without paying for

them." 46 Cal. App. 4th at 1563. Again, Thrifty-Tel does not stand for the broad proposition that SunPower has a property interest in all non-trade secret proprietary information. The holding in 13

Thrifty-Tell might be read as acknowledging that plaintiff had some property rights with respect to 14 the "confidential codes" used to gain access to plaintiff's computer systems. See id.1565-66 15

(holding that the jury could have found defendants liable for trespass to a chattel based on 16 defendants' "unauthorized use of personal property" where defendants used "intangible computer 17 access codes" to make long-distance calls (emphasis in original)). However, to the extent the 18 opinion in Thrifty-Tell suggests that plaintiff had a property interest in the access codes, this 19 property interest was based on the codes "confidential" nature (id. at 1565); thus, the relevant 20 property interest was qualitatively the same as an individual's interest in trade secret information. 21

As set forth in Silvaco, a claim based on the misappropriation of confidential information would 22 certainly be superseded by CUTSA. See Silvaco,184 Cal. App. 4th at 239 n. 22. Significantly, 23

Thrifty-Tell was decided in 1996, fourteen years before Silvaco, and the Thrifty-Tell Courtnever 24 considered CUTSA or whether plaintiff's claims were superseded by CUTSA. 25

26 at 10. In Imax and City Solutions, the Ninth Circuit held that the plaintiffs in those cases could 27 proceed on theories of common law misappropriation, notwithstanding the fact that they were 28 unable to prevail on their trade secret claims. Imax, 152 F.3d at 1169; City Solutions, 365 F.3d at

Likewise, SunPower's citations to City Solutions and Imax are also unavailing. Opposition

842. One of the elements of a common-law misappropriation claim is that SunPower has "invested 2 substantial time and money in [the] development of its property." Imax, 152 F.3d at 1169. It could 3 be argued that the doctrine of common law misappropriation therefore establishes a property right 4 of sorts in the information that a party has "invested substantial time and money in" developing. 5

Id. However, SunPower has not alleged any facts regarding what the non-trade secret information 6 is, much less facts showing SunPower invested substantial time and money in developing this 7 information. Thus, even assuming a common law misappropriation claim could be maintained (i.e. 8 that such a claim is not superseded by CUTSA), SunPower's claim would fail. Moreover, even if 9

SunPower had alleged such facts and the Court were to accept the proposition that, pursuant to the 10 doctrine of common law misappropriation, SunPower may have a property interest in information

that Plaintiff "invested substantial time and money" in developing (id.), SunPower has failed to

identify any case concluding that this property right may support anything other than a common 13 law misappropriation claim (which Plaintiff has not alleged). Thus, Plaintiff's Non-Trade Secret 14

Claims (which allege conversion, trespass to chattels, etc.) would still fail.*fn7

4.The Wrongdoing Alleged in SunPower's Non-Trade Secret Claims Is Not Different from the Wrongdoing Alleged in SunPower's Trade

Secret Claim

SunPower also argues that its Non-Trade Secret Claims are not preempted because they

"require[] additional facts and legal requirements apart from the misappropriation of trade secrets" 19 and are therefore based on a different nucleus of fact than SunPower's Non-Trade Secret Claims. 20

Opposition at 6. The Court disagrees. As set forth above, the nucleus of fact test does not focus on 21 whether a non-CUTSA claim requires the pleading of different elements than the CUTSA claim, 22 but rather on whether "there is [a] material distinction between the wrongdoing alleged in a 23

[C]UTSA claim and that alleged in [the non-CUTSA] claim.." Convolve, 2006 WL 839022 at 24

*6; see also Mattel, Inc., 782 F. Supp. 2d at 986 (explaining that, under California law, a claim 2 may be superseded by CUTSA regardless of whether it "require[s] proof of 'additional elements'" 3

(citing K.C. Multimedia, 171 Cal.App.4th at 960)). Here, the Court concludes that there is no 4 material difference between the wrongdoing alleged in support of SunPower's Trade Secret Claim 5 and the wrongdoing alleged in support of SunPower's Non Trade Secret Claims. 6

7 the same factual allegations regarding Defendants' unauthorized access and use of SunPower's 8 information as SunPower's Trade Secret Claim. See Compl. ¶¶ 12-55 (alleging facts regarding 9

As an initial matter, the Court notes that SunPower's Non Trade Secret Claims incorporate

Defendants' misappropriation of SunPower's information); id. ¶ 63 (incorporating paragraphs 1-62 10 into SunPower's trade secret claim); id. ¶ 118 (incorporating paragraphs 1-117 into SunPower's

breach of confidence claim); id. ¶ 125 (incorporating paragraphs 1-124 into SunPower's conversion claim); id. ¶ 131 (incorporating paragraphs 1-131 into SunPower's trespass to chattels 13 claim); id. ¶ 138 (incorporating paragraphs 1-137 into SunPower's interference with prospective 14 business advantage by defendants); id. ¶ 146 (incorporating paragraphs 1-145 into SunPower's 15 common law unfair competition claim); id. ¶ 152 (incorporating paragraphs 1-151 into SunPower's 16 statutory unfair competition claim). 17

18 alleges in essence that Defendants violated SunPower's rights by acquiring, disclosing, and/or 19 using, without consent (i.e. misappropriating*fn8 ) SunPower's proprietary information. See id. ¶ 120-20

Leyden, Leary, Aguayo, Giannini, and Catchart in confidence, and that these Defendants breached 22 their confidence to SunPower by "disclos[ing] to others [SunPower's] non-trade secret proprietary 23 information"); id. ¶ 127 (alleging that Defendants were liable for conversion because they 24

"interfered with [SunPower's] ownership and possessory rights" in SunPower's non-trade secret 25 proprietary information and that Defendants have "exercis[ed] those rights as though they were" 26

Furthermore, while stated in various ways, each of SunPower's Non-Trade Secret Claims

22 (alleging that SunPower "disclosed its non-trade secret proprietary information" to Defendants 21

Defendants' own); id. ¶¶ 133-134 (alleging that Defendants were liable for trespass to chattels 2 because they "interfered with [SunPower's] ownership and/or possessory rights" in SunPower's 3 non-trade secret proprietary information and "deprived [SunPower] of its ability to exclusively 4 use" this information); id. ¶ 140-41 (alleging, in connection with interference with prospective 5 business advantage claim, that Individual Defendants "worked for [SunPower] and obtained 6

[Solarcity], [began] to use [SunPower's] customer information" to "convert [SunPower's] 8 customers to their own"); id. ¶ 149 (alleging that Defendants were liable for common-law unfair 9 competition because they "st[ole] [SunPower's] non-trade secret proprietary information, [and] 10 us[ed] [it] for [Defendants'] own purposes"); id. ¶ 154 (alleging that Defendants violated 11

[SunPower's] customer information during employment and[,] []after beg[inning] [to] work[] for 7

For the Northern District of California

California Business and Professions Code section 17200 by "stealing [SunPower's] non-trade 12 secret proprietary information" and "using [it] for [Defendants'] own purposes"). Accordingly, the 13

Claims is in essence the same wrongdoing as was alleged in connection with SunPower's Trade 15

Secret Claim. The Non-Trade Secret Claims are therefore supersedeed. See e.g. K.C. Multimedia, 16

Inc., 171 Cal. App. 4th at 960-62 (concluding that plaintiff's breach of confidence, interference 17 with contract, and statutory unfair competition claims were supersedeed because they "rest[ed] 18 squarely on [plaintiff's] factual allegations of trade secret misappropriation"). 19

SunPower argues that it would be "premature" to address the question of supersession at the

21 motion to dismiss stage. Opposition at 12. SunPower argues that the Court is required to accept 22

SunPower's factual allegations as true at the motion to dismiss stage. Id. (citing Thompson v. 23

Cir. 1996)). SunPower argues that its factual allegations establish that its Non-Trade Secret Claims 25 are based "only on non-trade secret intangible information" and that "California law recognizes a 26 property right in such information.." Id. Accordingly, SunPower argues that the "Court should 27 decline to reach the question of preemption until it can be determined whether the stolen 28 information fits under this definition." Id.

Court concludes that the wrongdoing alleged in connection with each of the Non-Trade Secret 14

5.Supersession is Properly Decided on a Motion to Dismiss

Davis, 295 F.3d 890, 895 (9th Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th 24

2 the issue of preemption at the motion to dismiss stage. See id. (citing e.g. Bryant, 2010 WL 3

3705668 at *22 (holding that the question of whether the "information alleged to have [been] 4 converted was 'made property by some provision of positive law,'. qualitatively" different than 5

CUTSA should be reserved for summary judgment or trial because "[r]esolving this question 6 requires analysis of the facts: namely, what the confidential or proprietary information is, how it 7 was converted, and the property interest alleged to have [been] harmed as a result of that 8 conversion"); Callaway Golf Co. v. Dunlop Slazenger Group Americas, Inc., 295 F.Supp.2d 430, 9

SunPower further argues that several courts facing similar allegations declined to resolve

437 (D. Del. 2003) ("[U]ntil it is shown that the information is entitled to trade secret protection, it 10 is premature to rule whether Dunlop's claims of conversion, unjust enrichment, patent title and

13 this case, the issue of whether SunPower's claims are superseded by CUTSA can and should be 14 determined on a motion to dismiss. As an initial matter, at least one other district court within this 15 district has determined whether claims are superseded by CUTSA at the motion to dismiss stage. 16

See Heller, 2012 WL 13572 at *7 (granting "Cepia's motion to dimiss Heller's common law 17 claims" based on the "the wrongful taking and use of confidential business and proprietary 18 information, regardless of whether such information constitutes trade secrets"). 19

20 regarding the nature of purportedly non-trade secret proprietary information, the Court thinks a 21 determination of whether SunPower's claims are superseded by CUTSA is appropriate in light of 22

Rule 8. As explained in Twombly and Iqbal, in order to satisfy Rule 8, a complaint must include 23 sufficient facts to "state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678 24

(quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads 25 factual content that allows the court to draw the reasonable inference that the defendant is liable for 26 the misconduct alleged." Id. Notably, several of the decisions SunPower cites predate Twombly 27 and Iqbal, which were decided in 2007 and 2009 respectively. See Opposition at 12 (citing 28 negligence are preempted under CUTSA.")).

Notwithstanding the decisions of the district courts cited above, the Court concludes that, in Moreover, in certain cases like the present where a plaintiff includes only vague allegations Genzyme Corp., 463 F.Supp.2d 949 (W.D. Wisc. 2006); Callaway, 295 F.Supp.2d at 437; Stone

Castle Fin., 191 F.Supp.2d 652, 658--659 (E.D. Va. 2002); Combined Metals of Chicago Ltd. 2

Here, SunPower's Non-Trade Secret Claims are based on SunPower's non-trade secret 4 proprietary information. In order for SunPower to prevail on its claims based on the 5 misappropriation of this information, SunPower must show that it actually had a property interest 6 in its non-trade secret proprietary information by virtue of some "positive law," and that that 7 interest is qualitatively different from any property interest conferred by CUTSA. Silvaco,184 8

P'ship v. Airtek, Inc., 985 F.Supp. 827, 830 (N.D. Ill. 1997)). 3

Cal. App. 4th at 239 n. 22. Absent such a showing, the Court cannot draw a "reasonable inference" 9 that SunPower is entitled to relief on its claims for breach of confidence, conversion, trespass to 10 chattels, interference with prospective business advantage, unfair competition, or statutory unfair competition. As set forth above in section IV(A)(3), SunPower has failed to allege facts sufficient for the Court to conclude that SunPower had a property interest in the non-trade secret information, 13 or that this interest is qualitatively different from the rights conferred by CUTSA. Accordingly, 14 rather than postpone this issue until summary judgment, the Court finds it appropriate to dismiss 15

SunPower's claims now. See Heller, 2012 WL 13572 at *7 (granting motion to dismiss where 16 plaintiff failed to "identif[y] any law that confers property rights on his non-trade secret 17 confidential information" (citing Silvaco, 184 Cal.App.4th at 236)). However, as will be discussed 18 in Section V, the Court will grant leave to amend.*fn9 19

21 seventh cause of action for interference with a prospective economic advantage fails because 22 SunPower has not alleged specific facts regarding with which customer relationship Defendants' 23 conduct interfered, but has instead alleged that SunPower "ha[d] an 'economic relationship' with 24 'many customers,' and that Defendants' actions disrupted such relationships." Motion at 18 (citing 25

B.SunPower's Interference with Prospective Business Advantage Claim Fails for Other Reasons

Defendants argue that, in addition to the preemption issues discussed above, SunPower's Compl. ¶¶ 138-45). Defendants argue that such allegations will not suffice because SunPower is 2 not permitted to allege that there was "interference that generally caused harm in the marketplace, 3 without naming any interfered-with third party." Id. (citing Westside Center Assoc. v. Safeway 4

Stores 23, Inc., 42 Cal. App. 4th 507, 527-28 (1996) (interference claim insufficient where 5 potential market alleged as lost relationships; rejecting 'interference with the market' theory)). 6

SunPower argues that Defendants should not be permitted to claim "that they do not know who 7 these customers are because they stole SunPower's customer information.." Opposition at 13. 8

The Court agrees with Defendants. SunPower has not identified any specific customer

9 relationship with which SolarCity interfered, nor alleged any facts regarding how SolarCity 10 interfered with those customer relationships (beyond allegations that SolarCity misappropriated 11

proprietary information regarding SunPower's customers, allegations which, as discussed above, 12 are superseded by CUTSA). See Westside Center Assoc., 42 Cal. App. 4th at 527-28 (holding that 13 plaintiff's intentional interference with prospective economic advantage claim failed where 14 plaintiff failed to identify "an existing relationship with an identifiable buyer" or to specify the 15

"factual basis upon which to determine whether the plaintiff was likely to have actually received 16 the expected benefit"). Accordingly SunPower's interference with prospectie business advantage 17 claim is dismissed. 18

Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend "shall be freely

20 given when justice so requires," bearing in mind "the underlying purpose of Rule 15 to facilitate a 21 decision on the merits, rather than on the pleadings or technicalities." Lopez v. Smith, 203 F.3d 22

1122, 1127 (9th Cir.2000) (en banc) (internal quotation marks and alterations omitted). When 23 dismissing a complaint for failure to state a claim, "'a district court should grant leave to amend 24 even if no request to amend the pleading was made, unless it determines that the pleading could not 25 possibly be cured by the allegation of other facts.'" Id. at 1130 (quoting Doe v. United States, 58 26

F.3d 494, 497 (9th Cir.1995)). Generally, leave to amend shall be denied only if allowing 27 amendment would unduly prejudice the opposing party, cause undue delay, or be futile, or if the 28

V.LEAVE TO AMEND UNDER RULE 15(A)

moving party has acted in bad faith. Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 2 (9th Cir.2008). 3

4 proprietary information is made property by some law other than CUTSA, or (2) SunPower's Non-5

Trade Secret Claims are predicated on something other than the misappropriation of information of 6 value. The Court believes SunPower may be able to amend its complaint to include allegations 7 showing SunPower has some property interest in the purported non-trade secret information, or that 8

Here, SunPower has failed to allege facts showing that: (1) SunPower's non-trade secret

SunPower's Non-Trade Secret Claims are premised on something other than the misappropriation 9 of information of value such that they are not superseded. Accordingly, the Court grants leave to 10 amend. See Lopez, 203 F.3d at 1127 (holding that leave to amend "shall be freely given when justice so requires"). 12

14 to amend, as to SunPower's: (1) fourth cause of action for breach of confidence (see id. ¶¶ 118-15

124), (2) fifth cause of action for conversion (see id. ¶¶ 125-130), (3) sixth cause of action for 16 trespass to chattels (see id. ¶¶ 131-137), (4) seventh cause of action for tortious interference with 17 prospective economic advantage (see id. ¶¶ 138-145); (5) eighth cause of action for common law 18 unfair competition (see id. ¶¶ 146-151); and (6) ninth cause of action for unfair competition under 19

California Business & Professions Code section 17200 (id. ¶¶ 152-155). SunPower may file an 20 amended complaint addressing the deficiencies identified herein, within 21 days of this Order. 21

Court pursuant to Federal Rule of Civil Procedure 15. If SunPower fails to file an amended 23 complaint within 21 days of this Order or to cure the deficiencies addressed in this Order, these 24 claims will be dismissed with prejudice. 25

VI.CONCLUSION

For the foregoing reasons, Defendants' Partial Motion to Dismiss is GRANTED, with leave SunPower may not add new claims or parties without seeking Defendants' consent or leave of the 22

IT IS SO ORDERED.


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