Petersen-Dean Inc. v. Folk

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS RE: DKT. NO. 33

          NATHANAEL M. COUSINS United States Magistrate Judge.

         Defendants move to dismiss Petersen-Dean’s Lanham Act claims, RICO claims, and all claims against Wendi Zubillaga. Petersen-Dean alleges that defendants copied, retained, and are currently using material from Petersen-Dean’s corporate hard drives, and that this material is protected by copyright and trademark laws. Defendants are former employees of Petersen-Dean who have formed a competing business. The defendants’ motion to dismiss is GRANTED in part and DENIED in part.

         I. BACKGROUND

         In 2009, Petersen-Dean purchased Old Country Roofing and Solar (“OCR”), from defendant, Dieter Folk. Dkt. No. 1, Complaint ¶ 16. Petersen-Dean alleges that Dieter Folk established a sole proprietorship called JAJ Roofing in 1992 or earlier, which was the registered owner of a California contractor’s license. Compl. ¶ 17. JAJ Roofing was the supervising contractor for OCR’s jobs. Compl. ¶ 17. The purchase agreement between OCR and Petersen-Dean includes the sale of all of OCR’s assets, including trade secrets, Case No. 15-cv-05522-NC trademarks, copyrights and intellectual property. Compl. ¶ 16. However, it does not explicitly refer to JAJ Roofing name. Keegan Decl. at ¶ 4, Exh. B.^[1]

         Defendants Dieter Folk, Jeffrey Maxfield and Bryce Robicheau were OCR employees, and they joined Petersen-Dean after the sale. Compl. ¶ 18. Dieter Folk signed an initial five-year term employment contract with Petersen-Dean running through January 15, 2014. Compl. ¶ 18. The employment agreement contained a non-competition clause valid until January 15, 2014, and a non-disclosure clause, which barred Folk from disclosing Petersen-Dean’s confidential information until January 15, 2019 (five years after the employment period ended). Compl. ¶ 20. Petersen-Dean and Folk entered into an extension of Folk’s employment agreement in December 2013, for another five years. Compl. ¶ 21.

         Petersen-Dean alleges that in January 2015, defendants began contacting Petersen-Dean’s employees, customer, vendors, and other contacts and conveyed incorrect statements about Petersen-Dean’s financial status. Compl. ¶ 22. On April 9, 2015, Petersen-Dean terminated Wendi Zubillaga’s employment. Compl. ¶ 7. From April 9, 2015, to June 1, 2015, defendants each resigned from Petersen-Dean. Compl. ¶ 23. On May 7, 2015, JAJ Roofing Inc. was registered with the California Secretary of State. Compl. ¶ 24.

         Petersen-Dean alleges that defendants took a large amount of copyrighted material in both electronic and hard copy formats and some electronic hardware before they resigned. Compl. ¶ 25.

         Subsequently, Citadel, the name defendants’ new business operates under, used the JAJ Roofing sole proprietorship’s contractor’s license number on its commercial advertisement. Compl. ¶ 59. Petersen-Dean alleges that Citadel misled potential customers, and built up its competing business through use of Petersen-Dean’s trademark and copyrighted materials. Compl. ¶¶ 40, 63.

         On December 2, 2015, Petersen-Dean filed this lawsuit alleging a variety of claims against Citadel and individual defendants Folk, Maxfield, Robicheau, and Zubillaga. The complaint includes six causes of actions: (1) willful copyright infringement; (2) contributory copyright infringement; (3) Computer Fraud and Abuse Act (“CFAA”) violation, 18 U.S.C. §1030; (4) Lanham Act § 43(a), 15 U.S.C. § 1125(a) Violations; (5) aiding and abetting federal law violations; and (6) Racketeer Influenced and Corrupt Organization Act (“RICO”), 18 U.S.C. § 1962 (c). Prior to this lawsuit, the parties were engaged in a parallel state action in Alameda County Superior Court. Compl. ¶ 28. On December 15, 2015, defendants moved to dismiss Petersen-Dean’s Lanham Act claims, RICO claims, and all claims against individual defendant Wendi Zubillaga. Dkt. No. 33.

         All parties have consented to the jurisdiction of a magistrate judge. Dkt. No. 20, 13.

         II. LEGAL STANDARD

         A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). On a motion to dismiss, all allegations of material fact are taken as true and construed in the light most favorable to the non-movant. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). The Court, however, need not accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

         Although a complaint need not allege detailed factual allegations, it must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when it “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).

         If a court grants a motion to dismiss, leave to amend should be granted unless the pleading could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).

         III. DISCUSSION

         Defendants move to dismiss Petersen-Dean’s (A) Lanham Act claim; (B) RICO claim; and (C) claims against defendant Wendi Zubillaga. The Court will address each in turn.

         A. Lanham Act Claims

         To allege trademark infringement, Petersen-Dean must allege: (1) that it has a valid, protectable trademark, and (2) that defendant’s use of the mark is likely to cause confusion. Applied Info. Scis. Corp. v. eBay, Inc., 511 F.3d 966, 969 (9th Cir. 2007). Defendants argue (1) that JAJ Roofing cannot be a valid trademark because it contains personal marks; (2) JAJ Roofing was ...