United States District Court, N.D. California
ORDER GRANTING MOTION TO DISMISS FIRST AMENDED
COMPLAINT RE: DKT. NO. 29
C. SPERO, CHIEF MAGISTRATE JUDGE
Veronica Foods Company ("Veronica Foods") brings
this action against Defendants Kurt Ecklin and Millpress
Imports LLC ("Millpress") alleging that Defendants
misappropriated Veronica Foods‘ trade secrets in
violation of both the federal Defend Trade Secrets Act
("DTSA, " 18 U.S.C. § 1836), and the
California Uniform Trade Secrets Act ("CUTSA, "
Cal. Civ. Code §§ 3426-3426.11, California‘s
implementation of the Uniform Trade Secrets Act
("UTSA") adopted in many states), by improperly
"using Ecklin‘s knowledge of [Veronica
Foods‘] trade secrets - knowledge that Ecklin acquired
solely through the course of his employment by Veronica
Foods." 1st Am. Compl. ("FAC, " dkt. 28)
¶ 6. Veronica Foods has amended its complaint once after
Defendants moved to dismiss. See generally Id.
Defendants now move to dismiss once again, arguing that
Veronica Foods fails to state a valid trade secrets claim
under either the DTSA or the CUTSA, and that Veronica Foods
improperly initiated this lawsuit as a means to exploit its
monopoly power in the market. See generally Mot.
(dkts. 29, 30). The Court held a hearing on May 26, 2017. For
the reasons detailed below, the Court GRANTS
Defendants‘ motion and DISMISSES Veronica Foods‘
first amended complaint with leave to further amend no later
than July 31, 2017.
Allegations and Claims of the First Amended Complaint
Foods has been in business since the 1920s and has operated
in Oakland, California since the 1930s. FAC ¶ 15.
"Currently, the heart of [Veronica Foods‘]
business is the bulk importation and sale of fresh,
estate-produced, extra virgin olive oils and Specialty
Products" such as balsamic vinegar. Id. ¶
16. Veronica Foods claims that it has "pioneered" a
"unique" business model "in which retail
stores purchase bulk quantities of extra virgin olive and
other Specialty Products; and only dispense the Products into
bottles after a consumer has decided to make a purchase,
" unlike other business models in the olive oil industry
in which retailers "still sell products pre-packed in
glass bottles or other containers." Id.
¶¶ 17, 18. In 2006, Veronica Foods began assisting
with the opening of stand-alone olive oil stores, and has
since assisted with the opening of over 800 stores in the
United States and Canada. Id. ¶ 19. Veronica
Foods has provided these stores with "guidance and
advice on matters such as location; lease terms; store
design, layout, and construction; and product selection,
" as well as training sessions for owners and employees.
Id. ¶ 20.
the course of its work with its suppliers and customer
stores, Veronica Foods contends it has created and compiled
three distinct groups of trade secret information, all of
which are at issue for this litigation. First, Veronica Foods
states it has created a "Customer List" or
"list of the stores to which it sells Specialty
Products, " which it contends is "unique"
because it "reflects] all of the work that Veronica
Foods put into assisting with the creation of its customer
stores, " and "represents a compilation of hundreds
of stores that have adopted the Veronica Foods business
model." Id. ¶¶ 20, 21, 24.
Veronica Foods also contends that what it refers to as its
"Confidential Business Information, " or
"extensive, confidential, information relating to its
business and customers, " is a trade secret developed
"only through years of working with its customer stores
and its suppliers, " and that Veronica Foods spent
"considerable time and resources in gathering and
compiling the Confidential Business Information."
Id. ¶¶ 25-26. According to Veronica Foods,
this Confidential Business Information includes:
(a) the name and contact information for the person(s) at
each Veronica Foods customer store responsible for purchasing
bulk olive oils and balsamic vinegars; (b) the ordering
history of each customer store, including records of the
types and quantities of Specialty Products purchased; (c)
other information regarding the particular needs,
characteristics, and preferences of each customer; (d)
billing and payment information for each customer; (e)
product information for Specialty Products; and (f) cost and
pricing information for the Specialty Products, including
information on profit margins.
Id. ¶ 25.
Veronica Food contends its confidential "Supplier List,
" detailing information regarding its suppliers,
qualifies as a trade secret. Id. ¶ 30-36. This
Supplier List includes:
the suppliers and printers of the Specialty Glass Bottles; a
complete list of the Specialty Products that Veronica Foods
sells to its customer stores; the identities of the companies
from which Veronica Foods obtains those Specialty Products;
contact information for the person(s) at each supplier with
whom Veronica Foods works; and information concerning the
prices the suppliers charge to Veronica Foods for the
Specialty Products they provide.
Id. ¶ 30.
forming these lists and compiling this information, Veronica
Foods alleges it invested substantial time and effort to
create these business relationships, such that these lists
would be valuable to business competitors because they
uniquely reflect the rewards of Veronica Foods‘
investment. See Id. ¶¶ 24, 26-27, 33.
Veronica Foods additionally contends this information is
private and alleges that it has taken reasonable steps to
maintain the secrecy of these trade secrets by imposing
password protection of files, preventing remote access, and
requiring its employees to sign confidentiality agreements.
Id. ¶¶ 28-29, 35-36.
Veronica Foods contends that its "trade secrets are not
public information, " it acknowledges that there were
periodic public disclosures of supplier or customer
information. See Id. ¶¶ 40-43. For
example, Veronica Foods acknowledges that "certain
websites, including the 'Truth in Olive Oil‘
website, purport to identify stores selling Veronica Foods
olive oil, " but alleges that "any purported list
of Veronica Foods‘s customer stores available on line
is inaccurate, incomplete, and/or outdated, " such that
"[t]he full Customer List is not available from any
public source." Id. ¶ 41. Veronica Foods
further alleges that the "public sources do not reveal
any of the extensive, additional confidential information
relating to the Customer List, " such as "names and
contact information for the persons at customer stores
responsible for purchasing bulk olive oils and balsamics;
stores‘ ordering histories; other information regarding
stores‘ needs, characteristics, and preferences; or
stores‘ billing and payment information."
Id. ¶ 42. Similarly, while Veronica Foods
acknowledges past public disclosures of supplier information
in the form of "announcements relating to Veronica
Foods‘s relationships with individual suppliers"
that "may periodically be published on line, " it
alleges that its "complete Supplier List is not
publically [sic] available." Id. ¶ 43.
Veronica Foods also alleges that no public source has yet
revealed further confidential information related to
suppliers such as "a complete list of the names and
contact information for the persons with whom Veronica Foods
works in obtaining Specialty Products; the prices that
suppliers charge to Veronica Foods for the Specialty
Products; complete information on blends, formulations,
recipes, and chemical analysis for the Specialty Products; or
Veronica Foods‘s profit margins with respect to various
Specialty Products." Id. ¶ 43.
Ecklin worked for Veronica Foods in a customer service and
sales capacity from February 11, 2004 to October 25, 2015.
Id. ¶¶ 44, 46, 53. Prior to his employment
with Veronica Foods, Ecklin was required to sign a
confidentiality agreement that explicitly precludes
misappropriation of trade secrets, and which, according to
Veronica Foods, remains in full force per its original terms.
Id. ¶ 47. During his time working for Veronica
Foods, "Ecklin had regular contact with [its] customers;
learned extensive details about them; and acquired detailed
knowledge of the information included [sic] the Customer
List, the Supplier List and the compilation of Confidential
Business Information." Id. ¶ 46. Ecklin
eventually resigned from his position with Veronica Foods in
October 2015, allegedly informing Veronica Foods he had
"no direct interest in remaining in the food oils
arena." Id. ¶ 53. Despite this, Ecklin
began working with a direct competitor, Defendant MillPress,
in January 2016. Id. ¶¶ 53-54.
time of MillPress‘s incorporation, its president and
founder Tim Balshi was the proprietor of four retail stores
that purchased Specialty Products from Veronica Foods.
Id. ¶¶ 49- 50. MillPress subsequently
began supplying Balshi‘s retail stores as well as
persuading other stores to purchase from MillPress instead of
Veronica Foods. Id. ¶ 51.
Foods alleges that after Ecklin began work with MillPress,
Defendants "have been deliberately soliciting business
from stores they know to be customers of Veronica Foods-
taking advantage of Ecklin‘s knowledge of Veronica
Foods‘s Customer List, Confidential Business
Information, Supplier List, and the relationships that Ecklin
established with [Veronica Foods‘] customers while
working for Veronica Foods." Id. ¶ 54.
Veronica Foods further alleges that Defendants began using
these trade secrets "sometime before August of
2016" and that since late August 2016,
"approximately 20 customer stores, which are continuing
to sell olive oil and balsamic products to consumers, have
terminated their relationships with Veronica Foods, "
instead purchasing similar products from MillPress.
Id. ¶ 56. According to Veronica Foods,
Defendants have also used the Supplier List to attempt to
"get [Veronica Foods‘] suppliers, including but
not necessarily limited to the supplier who prints Specialty
Glass Bottles for Veronica Foods, to supply MillPress."
Id. ¶ 60. Veronica Foods contends that
"Defendants are continuing to improperly use Veronica
Food‘s trade secrets in soliciting [Veronica
Foods‘] customer stores, " such that
"Veronica Foods is continuing to lose customers and to
incur damages." Id. ¶ 62.
detailed above, Veronica Foods contends that it developed
three unique groups of trade secrets that Defendants
misappropriated: (1) the Customer List, (2) Confidential
Business Information, and (3) the Supplier List. See
Id. ¶¶ 15-43. Veronica Foods asserts that
Defendants‘ misappropriation of these trade secrets
gives rise to two causes of action-"misappropriation of
trade secrets in violation of California Civil Code §
3426 et seq., " (the CUTSA), and "misappropriation
of trade secrets in violation of 18 U.S. Code § 1836 et.
seq." (the DTSA). FAC ¶¶ 64-82 (capitalization
altered throughout). As a result of this misappropriation,
Veronica Foods claims that it is entitled to damages and
injunctive relief to prevent the continued use of trade
secrets. Id. ¶ 63.
respect to its CUTSA claim, Veronica Foods alleges that
Defendants violated the CUTSA through "their improper
use and disclosure of [Veronica Foods‘] trade secrets
and confidential business information." Id.
¶ 65. Veronica Foods further alleges that Ecklin
obtained access to these secrets while working for Veronica
Foods, that Ecklin was aware of his duty to maintain the
secrecy of these trade secrets obtained in the course of
employment with Veronica Foods, and that Defendants have
improperly used and disclosed-and continue to use and
disclose-Veronica Foods‘ trade secrets. Id.
¶¶ 67-71. Veronica Foods contends that it "has
suffered, and will continue to suffer, great harm and damage,
" such that it "is entitled to recover damages for
its actual losses; and/or is entitled to recover for the
unjust enrichment caused by Defendants‘
misappropriation of [Veronica Foods‘] trade
secrets." Id. ¶ 72. Finally, Veronica
Foods contends that because "Defendants‘ conduct
in misappropriating [Veronica Foods‘] trade secrets was
and continues to be willful and malicious, " exemplary
damages and an award of attorneys‘ fees are warranted.
Id. ¶ 74.
respect to the DTSA, Veronica Foods similarly alleges that
Defendants‘ "improper use and disclosure of
[Veronica Foods‘] trade secrets and confidential
information; including, but not necessarily limited to,
[Veronica Foods‘] Customer List, Confidential Business
Information, and Supplier List, " give rise to
liability. Id. ¶ 76. Veronica Foods contends
that while "Defendants began improperly using Veronica
Foods‘s trade secrets for their own benefit sometime
before August of 2016, " Defendants also "were
using trade secrets misappropriated from Veronica Foods when
they convinced Veronica Foods customer stores to switch their
business to MillPress in August of 2016, September of 2016,
November of 2016, January of 2017, and February of
2017." Id. ¶ 79. Once more, Veronica Foods
contends that its past and ongoing harms warrant damages and
injunctive relief, and that Defendants‘ actions were
"willful and malicious, " to justify exemplary
damages and a recovery of attorneys‘ fees. Id.
Defendants' Motion to Dismiss and Request for Judicial
March 17, 2017, Defendants filed their present motion to
dismiss, arguing that the first amended complaint fails to
state claims for relief under both the DTSA and the CUTSA,
and that Veronica Foods "launched this baseless lawsuit
in an attempt to strangle its competitor in the cradle"
and "protect its monopoly power." See Mot.
at 1, 3. Defendants contend that Veronica Foods‘
allegations do not support a claim for misappropriation of
trade secrets where, as here, a plaintiff "has publicly
disclosed, year after year, for more than a half-decade, the
very information it now claims to be 'secret‘, and
where the FAC utterly fails to allege any improper conduct by
Defendants." Id. at 3.
argue that past disclosures of allegedly secret information
destroy any trade secret protection they might have had. As
examples of these public disclosures, Defendants point to
"a public list of more than 200 of [Veronica
Foods‘] customer stores" that Veronica Foods
itself maintains online, Veronica Foods‘ intentional
directing of traffic to customer lists via its blogs and
Facebook pages, Veronica Foods‘ periodic disclosure of
supplier identities via online announcements, further
disclosures regarding supplier and customer identities via
Facebook, and Veronica Foods‘ customers‘ public
disclosures regarding their relationship. Id. at
Defendants‘ Request for Judicial Notice
support of their argument that Veronica Foods disclosed
purportedly confidential business information, Defendants
request judicial notice of thirty-six exhibits, including
pages from Veronica Foods‘ website, Veronica
Foods‘ social media posts, media reports, and pages
from retailers‘ and other third parties‘
websites, on the basis that the information contained in such
materials "'can be accurately and readily determined
from sources whose accuracy cannot reasonably be
questioned.‘" See Defs.‘ Req. for
Judicial Notice ("Defs.‘ RJN, " dkt. 31)
¶ 37 (quoting Fed.R.Evid. 201(b)). The Court takes
judicial notice of exhibits showing Veronica Foods‘ own
disclosures through its websites and social media accounts,
because the Court can readily determine what Veronica Foods
has disclosed by accessing those publicly available online
sources. Id. Exs. 1, 2, 7, 10-27, 32; see,
e.g., W. Marine, Inc. v. Watercraft Superstore,
Inc., No. C11-04459 HRL, 2012 WL 479677, at *10 (N.D.
Cal. Feb. 14, 2012) (collecting cases taking judicial notice
of a party‘s own website). Those materials show that
Veronica Foods from time to time disclosed certain of its
olive oil and vinegar suppliers, retailers, and testing
standards. See Defs.‘ RJN Exs. 1, 2, 7, 10-27,
Court declines to take judicial notice of a purported
Veronica Foods newsletter because it is not clear how the
veracity of that exhibit "can be accurately and readily
determined" at the pleading stage. See Id. Ex.
9; Fed.R.Evid. 201(b). The Court also declines to take
judicial notice of media reports and third party websites.
See Defs.‘ RJN Exs. 3-6, 28-31, 33-36. Courts
may in some circumstances take judicial notice of news
reports solely "to 'indicate what was in the public
realm at the time, not whether the contents of those articles
were in fact true, ‘" Von Saher v. Norton
Simon Museum of Art at Pasadena, 592 F.3d 954, 960 (9th
Cir. 2009) (citation omitted), but without any independent
basis to determine the truth of the media reports at issue
here, they have no value in resolving the present motion. The
same principle applies to other third party websites-with the
exception of Exhibit 8, a list of Veronica Foods retailers
from the third party website truthinoliveoil.com, of which
the Court takes notice because Veronica Foods itself referred
the public to that site. See Defs.‘ RJN
Exhibit 10 (social media post by Veronica Foods linking to
the truthinoliveoil.com list and quoting that website‘s
statement that "all of these locations are supplied by
Veronica Foods"). Regardless, the materials that the
Court declines to consider are largely cumulative to the
relevant information provided by Veronica Foods‘ own
internet posts-i.e., that at least some of Veronica
Foods‘ retailers, suppliers, and standards had been
publicly disclosed-or have little if any relevance to the
present motion. See, e.g., id. Exs. 4, 5
(media reports regarding MillPress owner Balshi‘s
Arguments Regarding Veronica ...