United States District Court, N.D. California
CALSOFT LABS, INC. and PVR TECHNOLOGIES, INC., Plaintiffs,
VENKATA PANCHUMARTHI and TRUINFO TECHNOLOGIES INC., Defendants.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH
LEAVE TO AMEND RE: DKT. NO. 15
NATHANAEL M. COUSINS UNITED STATES MAGISTRATE JUDGE.
the Court is defendants Venkata Panchumarthi and Truinfo
Technologies, Inc.'s motion to dismiss plaintiffs Calsoft
Labs, Inc. and PVR Technologies, Inc.'s first amended
complaint. See Dkt. No. 15. Because Plaintiffs'
complaint fails to allege specific facts to support their
allegations, the Court GRANTS Defendants' motion to
dismiss with leave to amend.
Factual Allegations in the Complaint
is a technology company. See Dkt. No. 14
(“FAC”) ¶ 11. In February 2016, Calsoft
purchased PVR, a biostatistics and statistical programming
services company, from Panchumarthi, the former owner and CEO
of PVR. Id. ¶¶ 12, 14. To assist the
acquisition transition, Calsoft hired Panchumarthi as the CEO
of PVR pursuant to an Employment Agreement. Id.
¶ 16. In addition, as part of the acquisition,
Panchumarthi was prohibited from disclosing confidential
Calsoft information, soliciting Calsoft's customers and
employees, and competing with Calsoft in certain business
activities pursuant to the parties' Purchase Agreement.
Id. ¶ 14. But Panchumarthi did not intend to
honor those restrictions and instead intended to unfairly
compete with Calsoft. Id. ¶¶ 15, 17, 23.
Panchumarthi's employment with PVR was terminated on
August 31, 2018. Id. ¶ 18.
September 4, 2018, Calsoft and PVR hired Truinfo-another
company owned and operated by Panchumarthi-as an independent
contractor. Id. ¶ 19. The parties'
Contractor Agreement prohibited Panchumarthi and Truinfo from
disclosing confidential information and soliciting Calsoft
and PVR's customers and employees. Id. The
Contractor Agreement also prohibited Panchumarthi from
competing against Calsoft in certain business activities.
Id. ¶ 21. Neither Panchumarthi nor Truinfo
intended to honor those responsibilities. Id. ¶
December 31, 2018, the parties terminated the Contractor
Agreement. Id. ¶ 24. Under that agreement,
Truinfo was required to turn over to Plaintiffs “all
documents, papers and other matters in its possession or
under its control that relate to [Calsoft] or its end
Clients.” Id. Plaintiffs also terminated
Panchumarthi's access to their confidential information,
email and data servers, electronic files, and intellectual
property in January 2019. Id. ¶ 25.
February 11, 2019, Panchumarthi contacted GoDaddy Inc. and
requested a password reset for his former email account,
which was owned by PVR. Id. ¶ 27. Panchumarthi
identified himself as an agent of Plaintiffs by using a
confidential PIN for authorization. Id. ¶¶
27, 29. GoDaddy then sent Panchumarthi a one-time password to
access the email account. Id. ¶ 28.
Panchumarthi then accessed Plaintiffs' email and data
servers to copy and delete confidential information.
Id. ¶¶ 31, 32.
February 26, 2019, Plaintiffs discovered that Panchumarthi
had changed the password to his PVR email account because he
had changed the password without their knowledge.
Id. ¶ 29.
10, 2019, Calsoft initiated this lawsuit in Santa Clara
County Superior Court. See Dkt. No. 1 at 6. After
Defendants removed the lawsuit to this Court on the basis of
diversity jurisdiction (see Id. at 3), Calsoft filed
a first amended complaint and added co-plaintiff PVR.
See Dkt. No. 14.
their first amended complaint, Plaintiffs allege claims for:
(1) breach of fiduciary duty; (2) conversion; (3) fraud; (4)
violation of California's Unfair Competition Law
(“UCL”), Cal. Bus. & Prof. Code §§
17200 et seq.; (5) intentional interference with
contract; (6) intentional interference with prospective
economic relations; (7) trade secrets misappropriation; (8)
breach of the Purchase Agreement; (9) breach of the
Employment Agreement; (10) breach of the Contractor
Agreement; (11) breach of the covenant of good faith and fair
dealing; (12) violation of the Computer Fraud and Abuse Act
(“CFAA”), 18 U.S.C. §§ 1030 et
seq.; and (13) conspiracy to violate CFAA. See
moved to dismiss the majority of Plaintiffs' claims on
September 11, 2019. See Dkt. No. 15. All parties
have consented to the jurisdiction of a magistrate judge.
See Dkt. Nos. 10, 11; see also Dkt. No. 23
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).
Under Rule 8(a), a complaint must include a short and plain
statement showing that the pleader is entitled to relief.
See Fed. R. Civ. P. 8(a). 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). The Court 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). 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). The claim also
“must contain sufficient allegations of underlying
facts to give fair notice and to enable the opposing party to
defend itself effectively.” Starr v. Baca, 652
F.3d 1202, 1216 (9th Cir. 2011).
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).
Breach of Fiduciary Duty
their first claim, Plaintiffs accuse Defendants of breaching
their fiduciary duty. See FAC ¶¶ 33-38.
“The elements of a cause of action for breach of
fiduciary duty are the existence of a fiduciary duty, its
breach, and damage proximately caused by that breach.”
City of Atascadero v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 68 Cal.App.4th 445, 483 (1998).
fiduciary relationship is any relation existing between
parties to a transaction wherein one of the parties is in
duty bound to act with the utmost good faith for the benefit
of the other party.” Wolf v. Superior Court,
107 Cal.App.4th 25, 29 (2003) (quotations omitted).
“[B]efore a person can be charged with a fiduciary
obligation, he must either knowingly undertake to act on
behalf and for the benefit of another, or must enter into a
relationship which imposes that undertaking as a matter of
law.” City of Hope Nat'l Med. Center v.
Genetech, Inc., 43 Cal.4th 375, 386 (2008) (quoting
Comm. on Children's Television, Inc. v. Gen. Foods
Corp., 35 Cal.3d 197, 221 (1983)). “Traditional
examples of fiduciary relationships in the commercial context
include trustee/beneficiary, directors and majority
shareholders of a corporation, business partners, joint
adventurers, and agent/principal.” Wolf, 107
Cal App. 4th at 30.
Plaintiffs allege that “[a] fiduciary relationship
existed between plaintiffs and defendants because defendants
acted as agents [and] corporate officers . . . .” FAC
¶ 34. From February 2016 to August 2018, Panchumarthi
was the CEO of PVR. See Id. ¶¶ 16- 18.
“[O]fficers of corporations who participate in the
management of the corporation are considered fiduciaries as a
matter of law.” Los Angeles Mem'l Coliseum
Comm. v. Insomniac, Inc., 233 Cal.App.4th 803, 834
(2015) (citing GAB Bus. Servs. v. Lindsey & Newsom
Claim Servs., 83 Cal.App.4th 409, 421 (2000)). Although
an officer's fiduciary duty to their employer generally
ends upon their resignation (GAB, 83 Cal.App.4th at
421), officers are charged with a continuing duty to protect
privileged and confidential information even after they leave
the company. AlterG, ...