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NetApp, Inc. v. Nimble Storage, Inc.

United States District Court, N.D. California, San Jose Division

May 12, 2014

NETAPP, INC., Plaintiff,
v.
NIMBLE STORAGE, INC., MICHAEL REYNOLDS, an individual, DANIEL WEBER, an individual, SANDHYA KLUTE, an individual, TIMOTHY BINNING, an individual, NEIL GLICK, an individual, CHRISTOPHER ALDUINO, an individual, and Does 1-50, Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For NetApp, Inc., Plaintiff: David T. Xue, Patrick Shaw Salceda, Karineh Khachatourian, Duane Morris LLP, Palo Alto, CA.

For Nimble Storage, Inc., Defendant: Patrick Eugene Premo, LEAD ATTORNEY, Fenwick & West LLP, Mountain View, CA; Sebastian Elan Kaplan, Fenwick and West LLP, San Francisco, CA.

For Michael Reynolds, Defendant: Jaideep Venkatesan, LEAD ATTORNEY, Bergeson, LLP, San Jose, CA.

For Daniel Weber, Sandhya Klute, Neil Glick, an individual, Timothy Binning, an individual, Christopher Alduino, an individual, Defendants: Jaideep Venkatesan, LEAD ATTORNEY, Grace Y. Park, Bergeson, LLP, San Jose, CA.

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ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

LUCY H. KOH, United States District Judge.

Plaintiff NetApp, Inc. filed this suit against Defendants Nimble Storage, Inc. (" Nimble" ), Michael Reynolds, and former NetApp employees Daniel Weber, Sandhya Klute, Timothy Binning, Neil Glick, and Christopher Alduino (collectively, " employees" ). See ECF Nos. 1 (Compl.), 34 (First Am. Compl.). Nimble, Reynolds, and the group of employees have each moved to dismiss all claims against them on multiple grounds. See ECF Nos. 40, 41, 42. NetApp has opposed all motions and requested jurisdictional discovery in connection with Reynolds. The Court held a hearing on the motions on May 8, 2014. The Court addresses all four motions together. Having considered the briefing, the oral arguments, the record in this case, and applicable law, the Court GRANTS IN PART AND DENIES IN PART the motions for the reasons stated below.

I. BACKGROUND

A. NetApp's Lawsuit

NetApp and Nimble are competing companies in the data storage industry. First Am. Compl. ¶ 31. Defendants Weber, Klute, Binning, Glick, and Alduino are former NetApp employees who now work for Nimble. Id. ¶ ¶ 7-11. Defendant Reynolds is an Australian citizen and resident who works at Nimble Storage Australia Pty Limited, an entity related to Defendant Nimble (discussed below). Id. ¶ 6. This lawsuit stems from NetApp's belief that " Nimble targeted NetApp talent and proprietary and confidential information to compete unfairly in the marketplace." Id. ¶ 36. NetApp alleges that " Nimble has achieved rapid growth and customer adoption" by " rely[ing] heavily on foundational information as to the internal working of NetApp's products and its proprietary business processes." Id. ¶ 31.

According to NetApp, Reynolds previously worked at Thomas Duryea Consulting (" TDC" ), an " IT infrastructure consultancy business" in Australia. Id. ¶ 39. NetApp contracted with TDC for certain services, provided Reynolds with access to NetApp's computer systems, and offered Reynolds training courses available to NetApp employees, all subject to NetApp's restrictions on unauthorized access and use of its systems. See id. ¶ ¶ 41-46. Reynolds left TDC in April 2013 and took a job with Nimble where--NetApp alleges--he accessed NetApp databases repeatedly from June through August 2013 and used confidential, proprietary information to solicit business for Nimble. See id. ¶ ¶ 47-54.

Regarding its former employees sued here, NetApp claims that each person worked at NetApp until early- to mid-2013,

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before departing the company for Nimble. NetApp accuses each former employee of breaching a common " Proprietary Information and Inventions Agreement" by taking, copying, or destroying volumes of confidential NetApp data before leaving. See, e.g., id. ¶ ¶ 62 (alleging that Weber took " sales material; pricing models; sales strategies; and detailed customer information" ), 80 (alleging that " two days before his departure from NetApp, Glick took steps to delete and/or render unrecoverable, inaccessible, and/or unavailable NetApp Company Documents and Materials stored on his NetApp computer." ).

B. Procedural History

On October 29, 2013, NetApp filed this lawsuit, alleging a variety of claims against Nimble and individual defendants Reynolds, Weber, Klute, and other unnamed " Doe" defendants, based on alleged unauthorized access to NetApp's computer systems and theft of proprietary information.[1] Compl. ¶ ¶ 59-123. On December 20, 2013, the named Defendants collectively filed three motions to dismiss, arguing that NetApp failed to plead sufficient facts to support various claims and challenging subject matter jurisdiction, supplemental jurisdiction, and personal jurisdiction as to Reynolds. See ECF Nos. 22-24.

On December 23, 2013, NetApp filed a motion for leave to conduct jurisdictional discovery in connection with Reynolds's challenge to personal jurisdiction, along with a motion to expedite a hearing on its motion for leave. See ECF Nos. 26, 25. On January 6, 2014, Nimble and Reynolds each filed an opposition to NetApp's motion for jurisdictional discovery. See ECF Nos. 29, 30. On January 13, 2014, NetApp filed a reply in support of its discovery motion. See ECF No. 36. On January 7, 2014, Court denied NetApp's motion to expedite. See Order, ECF No. 33. On January 17, 2014, the Court entered an order by stipulation in which NetApp agreed to withdraw its motion for jurisdictional discovery without prejudice, subject to renewal after amending its complaint. See Order, ECF No. 39. The parties have since renewed their dispute over jurisdictional discovery. See Discovery Dispute Joint Report #1, ECF No. 43; Order, ECF No. 64.

On January 10, 2014, NetApp filed a First Amended Complaint, adding individual defendants Binning, Glick, and Alduino. See First Am. Compl. ¶ ¶ 74-82. NetApp pleaded claims against the various defendants for violations of the Computer Fraud and Abuse Act (18 U.S.C. § 1030, " CFAA" ), trespass to chattel, trade secret misappropriation, breach of contract, intentional interference with contract and contractual relations, and unfair competition. See id. ¶ ¶ 83-176.

On February 18, 2014, Defendants filed new motions to dismiss all claims in the First Amended Complaint, again challenging the sufficiency of NetApp's pleadings as to various claims and jurisdictional issues. Nimble sought to dismiss NetApp's state law claims due to lack of supplemental jurisdiction, and moved to dismiss all claims for failure to state a claim or--in the alternative--for a more definite statement under Rule 12(e). See ECF No. 40 (" Nimble Mot." ). Reynolds moved to dismiss for lack of personal jurisdiction and for failure to state any claim against him, and further sought to join and incorporate by reference the motions filed by Nimble and the individual Defendants. See ECF

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No. 41 (" Reynolds Mot." ). All of the former employee Defendants (Weber, Klute, Binning, Glick, and Alduino) collectively moved to dismiss for lack of supplemental jurisdiction and failure to state any claims, and also sought to join and incorporate by reference the motions filed by Nimble and Reynolds. See ECF No. 42 (" Employees Mot." ).

On March 27, 2014, NetApp filed an opposition to each motion to dismiss, along with supporting declarations and a request for judicial notice of certain facts related to Nimble's operations. See ECF Nos. 45 (" NetApp Reynolds Opp'n" ), 50 (" NetApp Employees Opp'n" ), 51 (" NetApp Nimble Opp'n" ), 49 (NetApp Request for Judicial Notice). On April 10, 2014, all Defendants filed replies. See ECF Nos. 58 (" Nimble Reply" ), 59 (" Employees Reply" ), 60 (" Reynolds Reply" ). The Court held a hearing on May 8, 2014.

II. LEGAL STANDARDS

A. Motion to Dismiss Under Rule 12(b)(6)

A complaint must contain " a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). If a plaintiff fails to plead " enough facts to state a claim to relief that is plausible on its face," the complaint may be dismissed for failure to state a claim upon which relief may be granted. Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Fed.R.Civ.P. 12(b)(6). " A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). " The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (internal quotation marks omitted). For purposes of ruling on a Rule 12(b)(6) motion, a court " accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

" Generally, the scope of review on a motion to dismiss for failure to state a claim is limited to the contents of the complaint." Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). However, a court need not accept as true allegations contradicted by judicially noticeable facts, Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and the " [C]ourt may look beyond the plaintiff's complaint to matters of public record" without converting the Rule 12(b)(6) motion into one for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). Nor is the court required to " 'assume the truth of legal conclusions merely because they are cast in the form of factual allegations.'" Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam) (quoting W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981)). Mere " conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); accord Iqbal, 556 U.S. at 678. Furthermore, " a plaintiff may plead herself out of court" if she " plead[s] facts which establish that [s]he cannot prevail on h[er] . . . claim." Weisbuch v. Cnty. of Los Angeles, 119 F.3d 778, 783 n.1 (9th Cir. 1997) (internal quotation marks omitted).

B. Motion to Dismiss Under Rule 12(b)(2) for Lack of Personal Jurisdiction

In a motion challenging personal jurisdiction under Rule 12(b)(2), the plaintiff,

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as the party seeking to invoke the jurisdiction of the federal court, has the burden of establishing that jurisdiction exists. See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). When the motion to dismiss constitutes a defendant's initial response to the complaint, the plaintiff need only make a prima facie showing that personal jurisdiction exists. See Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1285 (9th Cir. 1977). While a plaintiff cannot " 'simply rest on the bare allegations of its complaint,' uncontroverted allegations in the complaint must be taken as true [and] [c]onflicts between parties over statements contained in affidavits must be resolved in the plaintiff's favor." Schwarzenegger, 374 F.3d at 800 (quoting Amba Marketing Systems, Inc. v. Jobar International, Inc., 551 F.2d 784, 787 (9th Cir. 1977), and citing AT& T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996)).

C. Supplemental Jurisdiction

While a federal court may exercise supplemental jurisdiction over state-law claims " that are so related to claims in the action within [the court's] original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution," 28 U.S.C. § 1367(a), a court may decline to exercise supplemental jurisdiction where a state claim " substantially predominates over the claim or claims over which the district court has original jurisdiction," id. § 1367(c)(2); see also Albingia Versicherungs A.G. v. Schenker Int'l, Inc., 344 F.3d 931, 937-38 (9th Cir. 2003) (§ 1367(c) grants federal courts the discretion to dismiss state law claims when all federal claims have been dismissed). A court, in considering whether to retain supplemental jurisdiction, should consider factors such as " economy, convenience, fairness, and comity." Acri v. Varian Assocs., 114 F.3d 999, 1001 (9th Cir. 1997) (en banc) (internal quotation marks omitted).

D. Leave to Amend

" Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . that the complaint could not be saved by amendment." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). When dismissing a complaint for failure to state a claim, " a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)). Nonetheless, a court " may exercise its discretion to deny leave to amend due to . . . 'futility of amendment.'" Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir. 2010) (citation omitted).

III. DISCUSSION

Defendants present numerous legal theories that potentially dispose of various causes of action on multiple, interdependent grounds. Supplemental jurisdiction over NetApp's state law claims depends in part on the viability of its CFAA claim, which is the only federal cause of action and is asserted against only Nimble and Reynolds. Both of those Defendants challenge the sufficiency of the CFAA claims under Rule 12(b)(6), while Reynolds also challenges personal jurisdiction. The Court first addresses Reynolds's personal jurisdiction challenge, then the sufficiency of NetApp's CFAA claims, followed by supplemental jurisdiction, and the sufficiency of NetApp's remaining claims within the Court's jurisdiction.

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As an initial matter, the Court addresses NetApp's Request for Judicial Notice. ECF No. 49. While a district court generally may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion, a court may take judicial notice of documents referenced in the complaint, as well as matters in the public record, without converting a motion to dismiss into one for summary judgment. See Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). A matter may be judicially noticed if it is either " generally known within the trial court's territorial jurisdiction" or " can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b). NetApp requests judicial notice of four Nimble webpages and excerpts from a Nimble filing with the Securities and Exchange Commission. Khachakourian Decl. Exs. L, O-R (ECF Nos. 45-13, -16 to -19). Defendants have not opposed, and the materials are either referenced in the First Amended Complaint or matters in the public record. Accordingly, the Court grants NetApp's Request for Judicial Notice.

A. Personal Jurisdiction Over Reynolds

An Australian resident, Reynolds contends that this Court lacks personal jurisdiction over him. Reynolds Mot. at 6-14. NetApp argues primarily that the Court has specific personal jurisdiction based on Reynolds's efforts to access NetApp's computer systems in California, with only a cursory argument regarding general jurisdiction. NetApp Reynolds Opp'n at 6-14. The Court agrees with NetApp with respect to specific jurisdiction.

Where no applicable federal statute governs personal jurisdiction, the court applies the law of the state in which it sits. See Fed.R.Civ.P. 4(k)(1)(A); Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998). " Because California's long-arm jurisdictional statute is coextensive with federal due process requirements, the jurisdictional analyses under state law and federal due process are the same." Schwarzenegger, 374 F.3d at 800-01. " For a court to exercise personal jurisdiction over a nonresident defendant, that defendant must have at least 'minimum contacts' with the relevant forum such that the exercise of jurisdiction 'does not offend traditional notions of fair play and substantial justice.'" Id. at 801 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).

To determine whether a defendant's contacts with the forum state are sufficient to establish specific jurisdiction, the Ninth Circuit employs a three-part test:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. ...

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