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Meggitt Orange County, Inc. v. Yongzhong

United States District Court, Central District of California

November 3, 2014

MEGGITT ORANGE COUNTY, INC., ET AL.
v.
NIE YONGZHONG, ET AL.

PROCEEDINGS (IN CHAMBERS): ORDER GRANTING MOTION FOR RECONSIDERATION AND PARTIALLY GRANTING MOTION TO DISMISS [266] [301]

HORABLE DAVID O. CARTER, JUDGE

Before the Court is Plaintiffs’ Motion for Reconsideration (Dkt. 266) and Defendants’ Motion to Dismiss (Dkt. 301). Having considered the written submissions, the Court hereby GRANTS the Motion for Reconsideration and partially GRANTS the Motion to Dismiss.

I. BACKGROUND

A. Factual History

Non-party Meggitt PLC is a British company that “indirectly own[s]” several subsidiaries, including non-party Meggitt (Xiamen) Sensors & Controls Co. Ltd. (“Meggitt Xiamen”). Second Am. Compl. (“SAC”) (Dkt. 163) ¶ 14. Meggitt PLC also owns Plaintiffs Meggitt (Orange County), Inc. (“Meggitt OC”)[1] and Meggitt (Maryland), Inc. (“Meggitt Maryland”) (together, “Plaintiffs”). Id.

Plaintiffs Meggitt OC and Meggitt Maryland manufacture sensors and accelerometers to measure vibration, shock, and pressure. Id. ¶ 13.

From October 2005 to August 2011, non-party Meggitt Xiamen employed Defendant Nie Yongzhong (“Mr. Nie”) as an engineer at its manufacturing facility located in Xiamen, China. Id. ¶ 14. During Mr. Nie’s employment, he had access to Meggitt OC and Meggitt Maryland’s trade secrets, including detailed assembly instructions, software code for automated calibration equipment, technical photographs, engineering drawings, and written test protocols. Id. ¶ 15. Mr. Nie agreed to not disclose or personally use any information obtained during his employment with Meggitt Xiamen, including information owned by Meggitt PLC, Meggitt OC, and Meggitt Maryland. Id. ¶ 16. While an employee of Meggitt Xiamen, Mr. Nie received mandatory training on Meggitt PLC’s Code of Conduct, which requires employees to “[p]rotect, and not seek personal gain through the inappropriate use of, the intellectual property and confidential information of the Company.” Id. ¶ 23.

Unbeknownst to Plaintiffs Meggitt OC and Meggitt Maryland—and one year prior to terminating his employment with Meggitt Xiamen—Mr. Nie founded Defendant Xiamen Niell Electronics Co. Ltd. (“Niell-Tech”). Id. ¶ 17. Before he terminated his employment, Mr. Nie visited Meggitt OC in California and regularly communicated with Meggitt OC personnel in California. Id. Niell-Tech now manufactures and markets sensors and accelerometers that have nearly identical specifications as several Meggitt OC and Meggitt Maryland products. Id. ¶ 18.

B. Procedural History

Meggitt OC filed the original complaint against Mr. Nie and Niell-Tech (together, “Defendants”) for trade secret misappropriation, unfair competition, conversion, and breach of duty of loyalty. Complaint (Dkt. 1) at 1. Soon after, Meggitt OC sought to preliminarily enjoin Niell-Tech from selling products using the proprietary trade secrets, and requested expedited discovery. See generally Mot. for Preliminary Injunction (Dkt. 16). The Court granted the preliminary injunction and expedited discovery on September 26, 2013. Order, Sept. 26, 2013 (Dkt. 43) at 1–2. The Ninth Circuit affirmed the Court’s grant of a preliminary injunction. Mandate, June 20, 2014 (Dkt. 197).

On February 19, 2014, with leave from the Court, Meggitt OC amended its complaint to add Meggitt Maryland as a co-plaintiff. See First Am. Compl. (Dkt. 122). On May 5, 2014, again with leave from the Court, Plaintiffs Meggitt OC and Meggitt Maryland filed the Second Amended Complaint, which removes the conversion and breach of duty of loyalty claims, but adds the federal false advertising claim. See SAC. Plaintiffs now bring three claims against Defendants: (1) trade secret misappropriation, in violation of the California Uniform Trade Secrets Act; (2) unfair competition under California Business and Professions Code §§ 17200, et seq. (“Unfair Competition Law” or “UCL”); and (3) false advertising under Section 43(a) of the Lanham Act. Id. ¶¶ 26– 48.

On July 17, 2014, the Court granted Defendants’ motion to dismiss the second amended complaint. Minute Order (Dkt. 244). There are now two related motions before the Court: Plaintiffs’ Motion for Reconsideration of the Court’s Order Dated July 17, 2014 (“Reconsideration Mot.”) (Dkt. 266) and Defendants’ Motion to Dismiss Plaintiffs’ Third Amended Complaint (“Dismissal Mot.”) (Dkt. 301). The Court will address them in turn.

II. Motion for Reconsideration

Plaintiffs move the Court to reconsider its July 17, 2014 order granting Defendants’ motion to dismiss under Rule 12(b)(7). See Reconsideration Mot. In that order, the Court held that non-party Meggitt PLC was a necessary and indispensable party because it appeared that Meggitt PLC, not ...


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