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Netapp, Inc. v. Nimble Storage, Inc.

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

January 29, 2015

NETAPP, INC., Plaintiff,
v.
NIMBLE STORAGE, INC., MICHAEL REYNOLDS, an individual, and Does 1-50, Defendants.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS, AND GRANTING MOTION TO STRIKE

LUCY H. KOH, District Judge.

Plaintiff NetApp, Inc. ("NetApp") has filed this suit against Defendants Nimble Storage, Inc. ("Nimble"), and Michael Reynolds ("Reynolds") (collectively, "Defendants"). See ECF No. 71 (Second Am. Compl.). Defendants move to dismiss all the claims that NetApp asserts against Nimble and Reynolds, except for a state law breach of contract claim and claims under 18 U.S.C. §§ 1030(a)(2)(C) and (a)(4). See ECF No. 74 ("Mot. Dismiss"). Defendants also move to strike certain factual allegations and a cause of action in NetApp's Second Amended Complaint. See ECF No. 73 ("Mot. Strike"). NetApp has opposed both motions. Having considered the parties' briefing, the record in this case, and the applicable law, the Court GRANTS IN PART AND DENIES IN PART the motion to dismiss and GRANTS the motion to strike, for the reasons stated below.

I. BACKGROUND

A. The Parties' Relationship

NetApp and Nimble are competing companies in the data storage industry. Second Am. Compl. ¶ 21. Defendant Reynolds is an Australian citizen and resident who works at Nimble Storage Australia Pty Limited ("Nimble AUS"), an entity related to Defendant Nimble. Id. ¶¶ 5-6. This lawsuit stems from NetApp's belief that "Nimble targeted NetApp talent and valuable confidential and non-confidential information to compete unfairly in the marketplace." Id. ¶ 27. 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. ¶ 21.

According to NetApp, Reynolds previously worked at Thomas Duryea Consulting ("TDC"), an "IT infrastructure consultancy business" in Australia. Id. ¶ 35. 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 to and use of its systems. Id. ¶¶ 37-42. Reynolds left TDC in April 2013, and took a job with Nimble AUS, where”NetApp alleges”Reynolds accessed NetApp databases repeatedly from June through August ” and used confidential and proprietary information to solicit business for Nimble. Id. ¶¶ 44-49.

B. Procedural History

On October 29, 2013, NetApp filed this lawsuit against Nimble, Reynolds, and former NetApp employees alleging multiple causes of action, including trespass to chattels and violations of the Computer Fraud and Abuse Act. ECF No. 1, ¶¶ 59-73. NetApp also alleged that Nimble was vicariously liable for Reynolds' actions. Id. ¶¶ 59-67. On December 20, 2013, the named Defendants collectively filed three motions to dismiss, arguing that NetApp failed to plead sufficient facts to support its claims, challenging personal jurisdiction as to Reynolds, and arguing that this Court lacked subject matter jurisdiction and supplemental jurisdiction over some of NetApp's claims. See ECF Nos. 22-24.

On January 10, 2014, NetApp filed its First Amended Complaint, adding three individual defendants. See First Am. Compl. ¶¶ 74-82. NetApp alleged violations of the Computer Fraud and Abuse Act (18 U.S.C. § 1030), trespass to chattels, trade secret misappropriation, breach of contract, intentional interference with contract and contractual relations, and unfair competition. See id. ¶¶ 83-176. NetApp also alleged that Nimble was vicariously liable for Reynolds' acts. See, e.g., id. ¶ 84. On January 17, 2014, the Court entered an order by stipulation in which NetApp agreed to withdraw its pending motions to dismiss NetApp's original complaint. ECF No. 39. 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 and raising jurisdictional issues. See ECF Nos. 40-42. 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). ECF No. 40. 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 the other defendants. See ECF No. 41. All of the former NetApp employees collectively moved to dismiss all of NetApp's allegations for lack of supplemental jurisdiction and for failure to state any claims, and also sought to join and incorporate by reference the motions filed by the other defendants. See ECF No. 42.

The Court held a hearing on May 8, 2014, and on May 12, 2014, the Court granted in part and denied in part the various defendants' motions to dismiss. See ECF No. 66 ("Order"). The Court denied Reynolds' motion to dismiss for lack of personal jurisdiction, and Reynolds' motion to dismiss NetApp's claim for breach of contract and claims under §§ 1030(a)(2)(C) and (a)(4) of the CFAA. Id. at 21-22, 28-30, 31. However, the Court granted Reynolds' motion to dismiss with leave to amend NetApp's CFAA claim with respect to § 1030(a)(5) due to NetApp's failure to plead the statutorily-required element of "damage, " NetApp's claim of trespass to chattels, and claim of unfair competition. Id. With respect to NetApp's claims against Nimble, the Court granted with leave to amend Nimble's motion to dismiss all of NetApp's CFAA claims (on the grounds that NetApp failed to plead that Nimble was vicariously liable for Reynolds' actions), claim for trespass to chattels, and claim of unfair competition. Id. at 21-22, 28-30. The Court also declined to exercise supplemental jurisdiction over, and thus dismissed with prejudice, NetApp's state law claims against Nimble for trade secret misappropriation, intentional interference with contract and contractual relations, and unfair competition. Id. at 31. Finally, the Court declined to exercise supplemental jurisdiction over NetApp's claims for trade secret misappropriation, breach of contract, intentional interference with contract and contractual relations, and unfair competition against former NetApp employees Daniel Weber, Sandhya Klute, Timothy Binning, Neil Glick, and Christoper Alduino.[1] Id. at 27-28. The Court dismissed claims against these former employees with prejudice. Id. 24-27. The Court ordered NetApp to file an amended complaint within 21 days to cure the deficiencies identified in this First Amended Complaint. Id. at 32.

On June 2, 2014, NetApp timely filed its Second Amended Complaint. ECF No. 71. The Second Amended Complaint winnowed NetApp's original claims down to four: (1) violations of 18 U.S.C. §§ 1030(a)(2)(C), (a)(4), and (a)(5) asserted against Nimble and Reynolds; (2) trespass to chattels against Nimble and Reynolds; (3) breach of contract against Reynolds; and (4) unfair competition in violation of California Business and Professions Code §§ 17200, et seq. against Nimble and Reynolds. Id. ¶¶ 50-80. On June 19, 2014, Defendants filed the instant motion to dismiss. ECF No. 74. Also on June 19, 2014, Defendants moved to strike portions of the Second Amended Complaint that, according to Nimble, pertained exclusively to the state law claims that this Court previously dismissed for lack of supplemental jurisdiction. See ECF No. 73. On July 3, 2014, NetApp filed oppositions to both the motion to dismiss and motion to strike. ECF Nos. 75 ("Opp'n Mot. Strike") & 78 ("Opp'n Mot. Dismiss"). NetApp also filed declarations supporting its oppositions with various exhibits. ECF Nos. 76 & 79. Nimble filed replies in support of its two motions on July 10, 2014. ECF Nos. 80 ("Reply Mot. Dismiss") & 81 ("Reply Mot. Strike"). NetApp also filed a request for judicial notice related to its opposition to the motion to strike. ECF No. 77. Nimble also filed a request for judicial notice related to its motion to dismiss and motion to strike. ECF No. 82. NetApp also filed objections to evidence presented in Nimble's replies.[2] ECF Nos. 83 & 84.

Finally, on July 23, 2014, NetApp filed under seal an administrative motion for leave to file a sur-reply in opposition to Defendants' motions to dismiss and strike. ECF No. 85-3 ("Mot. File Surreply"). NetApp also filed a supporting declaration with various exhibits, some of which were filed under seal. ECF Nos. 85 & 86. Defendants filed an opposition on July 28, 2014 with a supporting declaration. ECF Nos. 88 & 89. This Court granted Nimble's motion for leave to file a sur-reply on August 4, 2014. ECF No. 95. On October 13, 2014, the Court ordered NetApp to file a supplemental brief on a narrow issue raised in Defendants' reply in support of its motion to dismiss. ECF No. 99. NetApp timely filed its supplemental brief on October 15, 2014. ECF No. 100 ("Supp. Brief").

II. LEGAL STANDARDS

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

A complaint may be dismissed as a matter of law due to lack of a cognizable legal theory, or insufficient facts to support a cognizable legal claim. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). 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 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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 (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, the "court 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, 1130 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 the complaint "plead[s] facts which establish that [the plaintiff] cannot prevail on [its]... claim." Weisbuch v. County of Los Angeles, 119 F.3d 778, 783 n.1 (9th Cir. 1997) (internal quotation marks omitted).

B. Motion to Strike Under Rule 12(f)

Federal Rule of Civil Procedure 12(f) permits a court to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." A Rule 12(f) motion to strike serves to "avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial." Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). Motions to strike are generally disfavored and "should not be granted unless the matter to be stricken clearly could have no possible bearing on the subject of the litigation.... If there is any doubt whether the portion to be stricken might bear on an issue in the litigation, the court should deny the motion." Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F.Supp.2d 1048, 1057 (N.D. Cal. 2004) (citations omitted). "With a motion to strike, just as with a motion to dismiss, the court should view the pleading in the light most favorable to the nonmoving party." Id. "Ultimately, whether to grant a motion to strike lies within the sound discretion of the district court." Cruz v. Bank of New York Mellon, No. 12-CV-00846-LHK, 2012 WL 2838957, at *2 (N.D. Cal. July 10, 2012).

III. DISCUSSION

A. Requests for Judicial Notice

As an initial matter, the Court addresses both parties' requests for judicial notice. 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). Here, Nimble requests judicial notice of a certified transcript of the May 8, 2014 proceedings before this Court. See ECF No. 82. NetApp does not oppose, and the materials are matters in the public record. See Dawson v. Mahoney, 451 F.3d 550, 551 n.1 (9th Cir. 2006) (allowing for judicial notice of court orders and proceedings). Accordingly, the Court GRANTS Nimble's Request for Judicial Notice.

NetApp requests judicial notice of the Memorandum of Points and Authorities in Support of Nimble's Demurrer to Complaint and Motion to Strike Portions of Plaintiff's Complaint, filed in a concurrent action in Santa Clara County Superior Court. See Declaration of Patrick S. Salceda in Support of NetApp's Opposition to Defendants' Motion to Strike, Ex. J, ECF No. 76-10. Documents filed in previous and concurrent lawsuits are suitable for judicial notice under Rule of Evidence 201(b). See Dawson, 451 F.3d at 551 n.1. Accordingly, NetApp's request for judicial notice is GRANTED.

B. Defendants' Motion to Dismiss

Defendants assert several grounds to dismiss certain claims in NetApp's Second Amended Complaint. Defendants move to dismiss all of NetApp's CFAA and trespass to chattels claims against Nimble under the theory that NetApp does not allege sufficient facts showing that Nimble is vicariously liable for Reynolds' actions. Mot. Dismiss at 7. Defendants also move to dismiss NetApp's claim under § 1030(a)(5) of the CFAA on the grounds that NetApp does not allege a cognizable claim of "damage" within the meaning of the statute. Id. at 11-12. Finally, Defendants move to dismiss NetApp's claims of trespass to chattels and unfair competition on the grounds that these claims are superseded by the California Uniform Trade Secrets Act ("CUTSA"), and, as to NetApp's claim of trespass to chattels, on the grounds that NetApp fails to sufficiently plead the requisite damage. Id. at 12-15. The Court will first address NetApp's allegation that Nimble is vicariously liable for Reynolds' actions, then will address the sufficiency of NetApp's CFAA, trespass to chattels, and unfair competition claims.

1. Nimble's Vicarious Liability for Reynolds' Actions

NetApp alleges that Nimble is vicariously liable for NetApp's claims of trespass to chattels and violation of the CFAA, based on three theories. First, NetApp contends that Reynolds is Nimble's employee. Second, in the alternative NetApp claims that Nimble AUS, Nimble's Australian subsidiary and Reynolds' employer, is Nimble's alter ego. Third, with respect to NetApp's CFAA claim only, NetApp alleges that Nimble is liable for Reynolds' acts because Nimble and Reynolds engaged in a conspiracy. As discussed more fully below, the Court finds that NetApp has not sufficiently pled Nimble's vicarious liability on any of these grounds.

a. NetApp's Allegation that Reynolds is Nimble's Employee

The Court first addresses NetApp's claim that it has amended its complaint to now plead that Reynolds is a direct employee of Nimble, as opposed to an employee of Nimble AUS, a separate but related entity. NetApp's Second Amended Complaint describes Reynolds as "a Systems Engineer with Nimble in its Australian sales office." Second Am. Compl. ¶ 5. In its opposition, NetApp contends that this sufficiently alleges that "Reynolds is employed directly by Nimble." Opp'n Mot. Dismiss at 4-5 (emphasis in original). However, to the extent that NetApp now claims that Reynolds is Nimble's direct employee, this assertion contradicts what NetApp asserted in its First Amended Complaint. In its First Amended Complaint, NetApp alleged that Reynolds was a "Systems Engineer with Nimble Storage Australia Pty Limited..., the Australian proprietary company controlled by Nimble." First Am. Compl. ¶ 6. This Court, in ruling on Nimble's first-round motion to dismiss NetApp's First Amended Complaint on the issue of vicarious liability, ruled that "NetApp identified Nimble' and Nimble AUS' as separate (if related) entities." ECF No. 66, at 23. This Court also rejected NetApp's argument that "Reynolds was a Nimble employee" on the grounds that NetApp repeatedly pled "Reynolds' employment was with Nimble AUS." Id. (internal quotation marks omitted). The Court ultimately dismissed NetApp's claim of Nimble's vicarious liability with leave to amend.

When a court grants a party leave to amend a complaint on a motion to dismiss, "the amended complaint may only allege other facts consistent with the challenged pleading.'" Reddy v.Litton Indus., Inc., 912 F.2d 291, 297 (9th Cir. 1990) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)); Fourstar v. Murlak, No. CV 07-5892-ODW SS, 2010 WL 2163980, at *3 (C.D. Cal. Apr. 26, 2010) ("Leave to amend should be liberally granted, but an amended complaint cannot allege facts inconsistent with the challenged pleading."). Here, when this Court granted NetApp leave to amend its First Amended Complaint with respect to NetApp's claims of vicarious liability, NetApp did not have license to amend its pleading in a way that contradicted assertions NetApp made in its earlier complaint. However, by amending its complaint to plead that Reynolds was Nimble's direct employee instead of an employee of Nimble AUS, this is precisely what NetApp did. Therefore, the Court finds that NetApp fails to state a claim for Nimble's vicarious liability on the basis that Reynolds is a direct employee of Nimble. See Banaga v. Taylor Bean Mortgage Co., No. 11-4007 JSC, 2011 WL 5056985, at *4 (N.D. Cal. Oct. 24, 2011) (finding that plaintiff failed to state a claim when plaintiff's amended complaint contradicted plaintiff's earlier pleadings). Moreover, as discussed in Section III.B.1.d, infra, the documents NetApp cites in NetApp's sur-reply do not support NetApp's claim that Reynolds is in fact an employee of Nimble.

b. NetApp's Alter Ego Allegation

Alternatively, Nimble alleges that Nimble AUS, Reynolds' employer, is the alter ego of Nimble. See, e.g., Second Am. Compl. ¶ 6 ("Nimble is the alter ego of Nimble AUS where Nimble AUS is a mere shell and instrumentality of Nimble as a conduit for a single venture.") Under the alter ego theory of liability, a parent company may be held liable for its subsidiary's conduct. See S.E.C. v. Hickey, 322 F.3d 1123, 1128 (9th Cir. 2003). The Court applies the law of the forum state”here, California”in determining whether alter ego liability applies. Id. To "satisfy the alter ego exception to the general rule that a subsidiary and the parent are separate entities, the plaintiff must establish a prima facie case (1) that there is such unity of interest and ownership that the separate personalities [of the two entities] no longer exist; and (2) that failure to disregard [their separate identities] would result in fraud or injustice." Doe v. Unocal Corp., 248 F.3d 915, 926 (9th Cir. 2001) (internal quotation marks omitted) (alterations in original).

The first prong of the alter ego test”whether there is a unity of interest and ownership such that the separate personalities of the two entities no longer exist”"has alternatively been stated as requiring a showing that the parent controls the subsidiary to such a degree as to render the latter the mere instrumentality of the former." Id. (internal quotation marks omitted). Specifically, where a "parent dictates [e]very facet [of the subsidiary's] business”from broad policy decision to routine matters of day-to-day operation[], " the unity of interest and ownership test is satisfied. Doe, 248 F.3d at 926-27 (quoting Rollins Burdick Hunter of S. Cal., Inc. v. Alexander & Alexander Servs., Inc., 206 Cal.App.3d 1, 11 (1988)) (alteration in original). Similarly, "direct evidence of manipulative control by the parent of its subsidiaries" is illustrative of an alter ego relationship. Inst. of Veterinary Pathology, Inc. v. California Health Labs., Inc., 116 Cal.App.3d 111, 120 (Ct. App. 1981). Finally, "inadequate capitalization of a subsidiary may alone be a basis for holding the parent corporation liable for the acts of the subsidiary." Slottow v. American Cas. Co. of Reading, Pa., 10 F.3d 1355, 1360 (9th Cir. 1993). However, the Ninth Circuit has stated that "[a] parent corporation may be directly involved in financing and macro-management of its subsidiaries... without exposing itself to a charge that each subsidiary is merely its alter ego." Doe, 248 F.3d at 927.

In assessing the first prong of the alter ego theory, the Court examines whether there is: (1) the commingling of funds and other assets; (2) holding out by one entity that it is liable for the debts of another; (3) identical equitable ownership of the two companies; (4) use of the same offices and employees; (5) use of one company as a mere shell for the other; (6) inadequate capitalization; (7) lack of segregation of corporate records; and (8) identical directors and officers. Miller v. Int'l Bus. Machines Corp., C02-2118 MJJ, 2006 WL 2792416, at *5 (N.D. Cal. Sept. 26, 2006) (citing Sonora Diamond Corp. v. Superior Court, 83 Cal.App.4th 523, 539 (2000)). "To sufficiently allege a theory of alter ego, plaintiffs must provide more than labels and conclusions'”[f]actual allegations must be enough to raise a right to relief above the speculative level.'" Hoang v. Vinh Phat Supermarket, Inc., No. CIV. 2:13-00724 WBS, ” WL 4095042, at *14 (E.D. Cal. Aug. 13, 2013) (quoting Twombly, 550 U.S. at 555).

Here, NetApp makes twelve allegations that NetApp claims show there is a unity of interest and ownership between Nimble and Nimble AUS: (1) that Nimble controls the business and daily operations of Nimble AUS; (2) that Nimble AUS' regulatory filings declare it is 100 percent owned by Nimble; (3) that Nimble is the sole member of Nimble AUS, and that three of Nimble's executives are members of Nimble AUS' board of directors; (4) that Nimble's regulatory filings refer to Nimble's Australian operations as a "sales office"; (5) that Nimble claims in a press release that it has employees in Australia; (6) that Nimble handles administrative tasks for Nimble AUS, such as recruitment, legal defense, insurance, and discipline; (7) that Nimble is paying Reynolds' attorney's fees and controlling his defense; (8) that contracts are made in the name of Nimble and not Nimble AUS; (9) that Nimble AUS does not pay taxes for conducting business in Australia; (10) that Nimble AUS does not have separate email or a website apart from Nimble; (11) that Nimble issues all press releases on behalf of Nimble AUS; and (12) according to corporate filings, Nimble recognized Nimble AUS' revenue as its own. Second Am. Compl. ¶ 6.

As a preliminary matter, NetApp fails to explain how several of its allegations”such as that Nimble handles certain administrative tasks for Nimble AUS, that Nimble is paying Reynolds' attorney's fees, or that Nimble issues press releases on behalf of Nimble AUS”are relevant to the eight factors in the unity of interest and ownership inquiry. See Sonora Diamond Corp., 83 Cal.App.4th at 538-39. NetApp states that these allegations are "indisputably... indicative of alter ego." Opp'n Mot. Dismiss at 9. However, NetApp does not otherwise explain how these alleged facts are applicable. Moreover, an allegation that Nimble and Nimble AUS share certain administrative functions, such as policies related to recruitment, legal defense, insurance, and discipline, is not indisputably indicative of alter ego. See Tomaselli v. Transamerica Ins. Co., 25 Cal.App.4th 1269, 1285 (1994) (noting there is no alter ego liability where, inter alia, parent and subsidiary shared internal policies). In addition, NetApp does not cite any authority (and this Court did not locate any) which suggests that a parent-subsidiary's joint issuance of press releases, or the parent's payment of the attorney's fees and control of the legal defense of a subsidiary's employee, is illustrative of an alter ego relationship. Put another way, without more explanation, NetApp's factual allegations do not suggest that Nimble "dictates every facet of [Nimble AUS'] business”from broad policy decision to routine matters of day-to-day operations, " which is what the Ninth Circuit requires to satisfy the unity of interest and ownership test. Doe, 248 F.3d at 926-27.

In addition, many of NetApp's alleged facts are typical of the parent-subsidiary relationship and, without more, are not suggestive of a unity of interest and ownership. First, NetApp alleges that Nimble owns 100 percent of Nimble AUS. Second. Am. Compl. ¶ 6. However, "100% control" of a subsidiary by a parent "does not by itself make a subsidiary the alter ego of the parent." Harris Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122, 1135 (9th Cir. 2003); see also Tomaselli, 25 Cal.App.4th at 1285 (noting there is no alter ego liability where, inter alia, parent company owned 100 percent of the subsidiary's stock).

Second, NetApp alleges that "Nimble recognizes Nimble AUS' revenue as its own as stated in its corporate filings." Second Am. Compl. ¶ 6. Again, however, the fact that a parent corporation reports the financial results of its subsidiaries in the parent's financial statements is not proof of an alter ego relationship, even in situations where additional unity of interest and ownership factors are alleged. See, e.g., Inst. of Veterinary Pathology, 116 Cal.App.3d at 119 (no unity of interest where, inter alia, the parent reported the financial results of its subsidiary, owned 100 percent of the stock of a subsidiary, there were interlocking directors and executives, and the parent maintained administrative records of the subsidiary).

Third, NetApp contends that three Nimble executives are directors of Nimble AUS. Second Am. Compl. ¶ 6. However, overlap between a parent's and a subsidiary's directors or executive leadership alone is not suggestive of a unity of interest and ownership. This is because "[i]t is considered a normal attribute of ownership that officers and directors of the parent serve as officers and directors of the subsidiary." Sonora Diamond Corp., 83 Cal.App.4th at 548-49 (citing United States v. Bestfoods, 524 U.S. 51, 69 (1998)); Kramer Motors, Inc. v. British Leyland, Ltd., 628 F.2d 1175, 1177 (9th Cir. 1980) (fact that some directors and executives of parent company sat on board of subsidiary did not support alter ego theory of liability because the record "does not show that executives and directors of the [parent] ever controlled the [subsidiary] board or formed a board majority"). Here, NetApp does not allege that Nimble's directors or officers controlled Nimble AUS, or formed a board majority. Accordingly, NetApp has merely alleged some intercorporate connections between Nimble and Nimble AUS, which is not sufficient to satisfy the unity of interest or ownership test. Inst. of Veterinary Pathology, 116 Cal.App.3d at 120 (no alter ego liability where plaintiff "only establishes intercorporate connections between Revlon, USV, and NHL. [Plaintiff] fails to set forth any direct evidence of Revlon's manipulative control of its subsidiaries which would require imposition of liability.").

NetApp's most direct argument as to why its allegations show an alter ego relationship is that Nimble AUS is a mere "marketing conduit" for Nimble. In support of this assertion, NetApp points to its allegations that "Nimble characterizes Nimble AUS as a sales office' which uses Nimble's website and email, and also contracts under Nimble's name." Opp'n Mot. Dismiss at 11. Based on these allegations, NetApp argues, "for customer (i.e., marketing) purposes, Nimble AUS and Nimble are one and the same." Id. NetApp is correct that the Ninth Circuit has stated "where a parent corporation uses its subsidiary as a marketing conduit' and attempts to shield itself from liability based on its subsidiaries' activities... the alter-ego test is satisfied." Doe, 248 F.3d at 926 (quoting United States v. Toyota Motor Corp., 561 F.Supp. 354, 359 (C.D. Cal. 1983)). Although Doe enunciates the rule, Doe does not explain what constitutes a "marketing conduit." Rather, Doe cites to Toyota Motor for the proposition that use of a subsidiary as a "marketing conduit" can satisfy the alter ego test. See Doe, 248 F.3d at 926 (citing Toyota Motor Corp., 561 F.Supp. at 359). In Toyota Motor, the district court denied Toyota's motion to dismiss for lack of personal jurisdiction. In so doing, the court found that a parent corporation in Japan could be subject to personal jurisdiction in California where the parent's California subsidiary (1) was the exclusive importer of the parent's vehicles; (2) all sales were "FOB ...


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