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Beautiful Slides, Inc. v. Allen

United States District Court, N.D. California

August 31, 2017

BEAUTIFUL SLIDES, INC., et al., Plaintiff,
v.
MAY ALLEN, Defendants. MAY ALLEN, Counterclaimant,
v.
BEAUTIFUL SLIDES, INC., et al., Counterdefendants.

          ORDER GRANTING COUNTERDEFENDANTS' MOTION TO DISMISS COUNTERCLAIMS; AFFORDING COUNTERCLAIMANT LEAVE TO AMEND RE: DKT. NO. 19

          MAXINE M. CHESNEY, UNITED STATES DISTRICT JUDGE

         Before the Court is counterdefendants Beautiful Slides, Inc. (“BSI”) and Mitch Grasso's (“Grasso”) motion, filed May 1, 2017, to dismiss, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, four of the seven causes of action in counterclaimant May Allen's (“Allen”) counterclaim (“Counterclaim”). Allen has filed opposition, to which counterdefendants have replied. Having read and considered the papers filed in support of and in opposition to the motion, the Court rules as follows.[1]

         BACKGROUND

         On March 2, 2017, counterdefendants filed against Allen a complaint for declaratory relief, alleging Allen had “threatened to commence litigation” against them for “copyright infringement, conversion, misappropriation of trade secrets, breach of confidence, breach of contract, and fraud, ” which counterdefendants denied having committed. (See Complaint ¶ 29.) On April 10, 2017, Allen filed her Counterclaim, which pleading is the subject of the instant motion.

         In her Counterclaim, Allen alleges that she “works in software design, marketing, and product management, ” that Grasso “is a software coder by trade, ” and that Allen and Grasso “worked at VMware together.” (See Countercl. ¶¶ 8, 10.)[2] Allen alleges that Grasso, “[o]n or about 2014, ” talked “to Allen about developing new presentation software, ” that “Grasso did not have a differentiating idea, ” and that, “[i]n April 2014, ” when Allen “came up with a differentiating idea, ” she and Grasso “agreed to work together to develop the product and the business around it, ” which project they referred to as “Beautiful Slides.” (See id. ¶¶ 11, 12.) Allen further alleges that, “[i]n the subsequent months, ” she and Grasso “collaborated on the fundamental design of the application, its user interface, [and] its coloration, ” and that Allen made various contributions, such as “illustrated mock-ups, ” marketing ideas, and “feature improvements.” (See id. ¶¶ 13-14.)

         According to Allen, although she and Grasso had “few formal discussions . . . about the nature of their relationship, ” they “did have a discussion, in June 2014, ” during which “Allen suggested the parties come to a formal agreement in writing expressing the nature of their partnership, ” and that “Grasso did not controvert that the [p]arties were partners, nor co-founders in a new joint venture, ” instead “respond[ing] that a formal codification of [their] relationship was premature and unnecessary because [they] were friends, that there was trust in the relationship, and for that reason Grasso had no intent to ‘screw' over Allen.” (See id. ¶ 15.) Allen alleges she relied “on these representations in continuing to work with Grasso on the Beautiful Slides project” and that, “[f]rom both [p]arties perspective[, ] there clearly appeared to be a joint desire to work together to develop a new kind of presentation software for a profit.” (See id.)

         Allen further alleges that, although Grasso was “side-tracked” from June 2014 through March 2016, he “resurfaced” in March 2016, at which point their “joint venture was revived, ” and Allen “took the lead to take the initial version to the next level” by hiring “beta testers” and giving Grasso “tasks” concerning “changes that needed to be made”; she also “investigated office space” and “consulted” with Grasso as to hiring and whether to sell the intellectual party to a third party who had “expressed interest” in it. (See id. ¶¶ 17-19.)

         “By August 2016, ” Allen alleges, Grasso and Allen were “approaching [their respective] investor contacts” while “Allen continued to develop the business around the product.” (See id. ¶¶ 20-21.) At this point, according to Allen, Grasso “cut[] Allen completely out of the deal” by “form[ing] Beautiful Slides, Inc., ” (see id. ¶ 23), accepting investments from third parties who “did not know of Allen's existence as a partner in the Beautiful Slides project” (see id.), “assigning “intellectual property to the corporation” (see id. ¶ 29”), and “registering a copyright in a confusing manner, ” without “any mention of the partnership and/or Allen's authorship and/or other interest in the work, ” (see id.), after which he “instructed Allen to quit her current job so that she [could] work with him . . . as an ‘employee, '” to which Allen “naturally objected” (see id. ¶¶ 24-25).

         Based on the above allegations, Allen brings the following seven causes of action: (1) “Breach of Fiduciary Duty (Against Counter-Defendant Grasso), ” (2) “Conversion (Against All Counter-Defendants), ” (3) “Breach of Implied Contract (Against Counter-Defendant Grasso), ” (4) “Fraud by Intentional Misrepresentation and Concealment (Against Counter-Defendant Grasso, ” (5) “Declaratory Relief Re Copyright Authorship and Validity of Beautiful Slides Application (Against All Counter-Defendants), ” (6) “Declaratory Relief Re Copyright Authorship and Validity of Beautiful Slides Animations (Against All Counter-Defendants), ” and (7) “Declaratory Relief Re Copyright Authorship and Validity of Beautiful Slides Identity (Against All Counter-Defendants).”

         LEGAL STANDARD

         Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure “can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). Rule 8(a)(2), however, “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief.'” See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed.R.Civ.P. 8(a)(2)). Consequently, “a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.” See id. Nonetheless, “a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” See id. (internal quotation, citation, and alteration omitted).

         In analyzing a motion to dismiss, a district court must accept as true all material allegations in the complaint, and construe them in the light most favorable to the nonmoving party. See NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “Factual allegations must be enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. at 555. Courts “are not bound to accept as true a legal conclusion couched as a factual allegation.” See Iqbal, 556 U.S. at 678 (internal quotation and citation omitted).

         DISCUSSION

         Counterdefendants move to dismiss the First through Fourth Causes of Action on the asserted grounds that (1) the First, Second, and Third Causes of Action are preempted by the Copyright Act, (2) the Third Cause of Action fails to adequately allege the terms of an implied contract or any breach thereof, and (3) the Fourth Cause of Action fails to plead fraud with sufficient particularity.

         A. ...


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