United States District Court, E.D. California
MEMORANDUM & ORDER RE: MOTION TO DISMISS
WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE.
Zoom Imaging Solutions, Inc. (“Zoom”) brings this
action against defendants Edward Roe, Maxwell Ramsay, Jon
Crossen, Corinne Fuerest, Andrew Alsweet, Kevin Toon, Jason
Peebler, Abigail Neal, Power Business Technology LLC
(“Power”), and Does 1 through 100, alleging that
defendants accessed and used Zoom's confidential
information to build and develop competitor Power's
business, in violation of defendants' employment
agreements, as well as state and federal law. Before the
court is defendants' Motion to Dismiss. (Docket No. 23.)
provides printing and imaging services to commercial
businesses. (Compl. at 3, ¶ 19.) Zoom's services
include the sale, installation, and servicing of digital
print and copy systems, print services, and software
develops, acquires, and maintains business information
related to its customers, including pricing information,
customer preferences and contract renewal information, as
well as Zoom's business, sales, and marketing strategies
(collectively the “Confidential Information”).
(Compl. at 4, ¶ 23.) Zoom's success is attributable
to its use of this information. Zoom therefore invests
substantial time, money, and effort developing, acquiring,
and maintaining this information. (Compl. at 4, ¶¶
Confidential Information is not generally known. (Compl. at
4, ¶ 25.) Because it gives Zoom a competitive advantage
over persons not in possession of this information, Zoom uses
reasonable and diligent efforts to maintain and protect the
Confidential Information. (Compl. at 4, ¶¶ 24, 27.)
Such protection includes multiple levels of restricted
access. (Compl. at 11, ¶ 55.)
Power is a competitor of Zoom founded by defendant Roe.
(Compl. at 8, ¶ 48.) All other named defendants
(collectively the “Individual Defendants”) worked
for Zoom in various capacities: Roe worked for Zoom as
President (Compl. at 4, ¶ 28); Peebler as Vice President
of Sales (Compl. at 5, ¶ 34), Ramsay and Crossen as
Regional Sales Managers (Compl. at 5, ¶¶ 29, 31);
Toon and Neal as Account Executives (Compl. at 5,
¶¶ 33, 35); Alsweet as a Senior Account Manager
(Compl. at 5, ¶ 32); and Fuerst as Zoom's Leasing
Administrator. (Compl. at 5, ¶ 30.)
2017, Roe signed an Executive Agreement (“2017
Executive Agreement”) where he promised to refrain from
using Confidential Information to solicit Zoom's
customers or employees for a period of two years after the
termination of his employment. (Compl. at 5, ¶ 36.)
Between 2005 and 2018, all Individual Defendants received and
acknowledged receipt of Zoom's employee handbook
(“Employee Handbook”). (Compl. at 6, ¶
37-45). The handbook required employees to safeguard
confidential information and prohibited employees from
removing, using, or sending copies of any company records
without prior approval of the President of Zoom. Id.
In 2019, Roe signed an employment separation agreement and
release (“2019 Separation Agreement”) which
prohibited Roe from making disparaging comments about Zoom
after his employment terminated. (Compl. at 7, ¶ 46.)
Roe founded Power in 2019. (Compl. at 8, ¶ 48.) While
still employed with Zoom, Roe solicited Zoom's employees
with job offers to work at Power. (Compl. at 8, ¶ 49.)
Before and after the Individual Defendants left Zoom for
Power, defendants “accessed, downloaded, and emailed
Zoom's confidential information and/or trade
secrets” (Compl. at 8, ¶ 50), including
customers' lease information (Compl. at 8, ¶ 50(a),
(d)), pricing formulas (Compl. at 8, ¶ 50(b)), business
plans (Compl. at 9, ¶ 50(c)), and files assigned to
defendant Crossen. (Compl. at 9, ¶ 50(e).) Defendants
accessed the information in a manner that exceeded Zoom's
authorization. (Compl. 1, ¶ 54.) With Zoom's
Confidential Information, defendants interfered with
plaintiff's contracts with at least 74 customers. (Compl.
at 10, ¶ 51.) Further, by transmitting and conveying
Zoom's information, defendants have diminished Zoom's
goodwill and standing among its customers. (Compl. at 10,
alleges the following nine causes of action: (1) breach of
contract, (2) breach of implied covenant of good faith and
fair dealing, (3) violation of the California Uniform Trade
Secrets Act, (4) violation of the Defend Trade Secrets Act,
(5) intentional interference with contractual relations, (6)
violation of the Computer Fraud and Abuse Act, (7) breach of
fiduciary duty, (8) breach of loyalty, and (9) unfair
Rule 12(b)(6) motion, the inquiry before the court is
whether, accepting the well-pleaded allegations in the
complaint as true and drawing all reasonable inferences in
the plaintiff's favor, the plaintiff has stated a claim
to relief that is plausible on its face. See Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). The court, however, is
“not required to accept as true allegations . . . that
are merely conclusory, unwarranted deductions of fact, or
unreasonable inferences.” Seven Arts Filmed
Entm't, Ltd. v. Content Media Corp. PLC, 733 F.3d
1251, 1254 (9th Cir. 2013). “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.
Breach of Contract Claim (Count One)
claim for breach of contract arises out of three documents:
Defendant Roe's 2017 Executive Agreement, Defendant
Roe's 2019 Separation Agreement signed at the end of his
employment, and the Individual Defendants' Employee
Handbooks received on dates ranging from 2005 to 2018.
(Compl. at 12, ¶¶ 61, 62, 63.)
California, to allege a cause of action for breach of
contract, plaintiff must plead “(1) the existence of a
contract, (2) defendant's breach, (3) plaintiff's
performance or excuse for nonperformance, and (4) the
resulting damages to the plaintiff.” Oasis W.
Realty, LLC v. Goldman, 51 Cal.4th 811, 821 (2011).
Rule 10 of the Federal Rules of Civil Procedure, “each
claim founded on a separate transaction or occurrence . . .
must be stated in a separate count” if doing so
“would promote clarity.” Fed.R.Civ.P. 10(b).
“Courts have required separate counts where multiple
claims are asserted, where they arise out of separate
transactions or occurrences, and where separate statements
will facilitate a clear presentation.” Bautista v.
Los Angeles Cty., 216 F.3d 837, 840-41 (9th Cir. 2000).
Defendants object to plaintiff's “lumping” of
allegations related to three different contracts under a
single claim. (Motion to Dismiss at 6). The court agrees the
plaintiff must separate the claims.
alleges the violation of three different contracts by eight
named defendants, and up to 100 unnamed ones. Each of the
contracts under this claim constitutes a separate transaction
or occurrence. Most obviously, some of the Employee Handbook
agreements were signed over a decade before Roe signed the
Executive Agreement in 2017, and the Individual Defendants
other than Roe are not parties to defendant Roe's 2017
and 2019 agreements. Further, plaintiff has not alleged that
defendant Roe's 2019 Agreement, which prevents Roe from
making disparaging comments about Zoom, modifies or is
related to Roe's 2017 Executive Agreement, which governed
his confidentiality obligations during his employment. The
agreements at issue under this claim are therefore separate
the allegations for each contract in separate counts is
necessary for clarity and reviewability. This court has
previously dismissed complaints under Rule 10(b) where
“the claims do not identify which of the many factual
allegations apply to each specific claim.” Haney v.
Bondoc, No. CV 1-07-1222-GMS, 2009 WL 926887, at *2
(E.D. Cal. Apr. 3, 2009). Such is the case here. Under the
“Breach of Contract” heading in the Complaint,
plaintiff indiscriminately incorporates paragraphs 1 through
59 of the Complaint, quotes each of the three agreements, and
then asserts that “the Individual Defendants materially
breached each and every one of the obligations described
above by, among other things, acquiring, disclosing and using
Zoom's sensitive, confidential, and proprietary
information and trade secrets and failing to promptly return
all of Zoom's proprietary information upon termination of
each of their employment.” (Compl. at 14, ¶ 68.)
The allegations do not identify which actions violated which
contract. As it stands, the Complaint precludes
“meaningful review [of] the complaint, ”
Haney, 2009 WL 926887, at 2*, because the court
cannot determine what the claims purport to be or whether
they are well-pleaded. Separation of the allegations into
separate counts is therefore necessary for clarity.
Breach of Implied Covenant of Good Faith and Fair Dealing
California, there is “an implied covenant of good faith
and fair dealing in every contract that neither party will do
anything which will injure the right of the other to receive
the benefits of the agreement.” Reinhardt v. Gemini
Motor Transp., 879 F.Supp.2d 1138, 1144 (E.D. Cal. 2012)
(citing Kransco v. Am. Empire Surplus Lines Ins.
Co., 23 Cal.4th 390, 400 (2000)). To plead a breach of
the covenant of good faith and fair dealing plaintiff must
allege that “(1) the parties entered into a contract;
(2) the plaintiff fulfilled his obligations under the
contract; (3) any conditions precedent to the defendant's
performance occurred; (4) the defendant unfairly interfered
with the plaintiff's rights to receive the benefits of
the contract; and (5) the plaintiff was harmed by the
defendant's conduct.” Id.
“Importantly, to state a claim for breach of the
implied covenant of good faith and fair dealing, a plaintiff
must identify the specific contractual provision that was
frustrated.” Ahmadi v. United Cont'l Holdings,
Inc., No. 1:14-CV-00264-LJO, 2014 WL 2565924, at *6
(E.D. Cal. June 6, 2014) (citing Plastino v. Wells Fargo
Bank, 873 F.Supp.2d 1179, 1191 (N.D.Cal.2012).
court must dismiss plaintiff's claim because it fails to
identify the specific contractual provision frustrated by
defendants' conduct. See id.; Plastino,
873 F.Supp.2d 1191; Perez v. Wells Fargo Bank, N.A., No.
C-11-02279 JCS, 2011 WL 3809808, at *18 (N.D. Cal. Aug.
29, 2011). Plaintiff merely incorporates by reference all
previous paragraphs, including the three contracts. (Compl.
at 15, ¶ 73.) Plaintiff then lists, in one paragraph,
around eight different collective actions by defendants that
allegedly breached the implied covenant of good faith and
fair dealing. (Compl. at 15, ¶ 75.) The Complaint does
not identify the contract or the provision the
defendants' conduct frustrates. The court cannot
evaluate, for example, what the “benefits of the
contract” are without a reference to the contract. See
Reinhardt, 879 F.Supp.2d at 1144; see also, e.g.,
Ahmadi, 2014 WL 2565924, at *6 (identifying the
benefits of a contract to determine if plaintiff correctly
alleges that defendant's conduct interfered with such
benefits). The court must therefore dismiss this claim.
Misappropriation of Trade Secrets in Violation of the
California Uniform Trade Secrets Act (Count Three)
state a valid claim for misappropriation of trade secrets
under the California Uniform Trade Secrets Act (CUTSA), Cal.
Civ. Code §§ 3426 et seq., a plaintiff must allege
that “(1) the plaintiff owned a trade secret, (2) the
defendant acquired, disclosed, or used the plaintiff's
trade secret through improper means, and (3) the
defendant's actions damaged the plaintiff.” E.
& J. Gallo Winery v. Instituut Voor Landbouw-En
Visserijonderzoek, No. 117CV00808DADEPG, 2018 WL
2463869, at *3 (E.D. Cal. June 1, 2018 (quoting Cytodyn,
Inc. v. Amerimmune Pharm., Inc., 160 Cal.App.4th 288,
do not contest that plaintiff has sufficiently pleaded
improper acquisition or disclosure of alleged trade secrets,
including, for example, disclosure of information to
defendant Power beyond the authorization granted by the
Employee Handbook. (Compl. at 17 ¶¶ 82, 86); cf. E.
& J. Gallo Winery, 2018 WL 2463869, at *6
(“[B]ecause defendants were allegedly given access to
plaintiffs' trade secrets pursuant to a non-disclosure
agreement, plaintiffs must plead facts which, if proven to be
true, would show that the defendant used the information in a
manner not authorized by the parties' agreement.”).
Defendants also do not contest that the allegations
sufficiently plead damages. (See Compl. at ¶¶ 59,
88.) Defendants contest only whether plaintiff has
sufficiently identified the trade secrets at issue.
Identification of Trade Secrets -- Legal Standard
“trade secret” under the CUTSA is defined as
“information, including a formula, pattern,
compilation, program, device, method, technique, or process
that: (1) [d]erives independent economic value, actual or
potential, from not being generally known to the public or to
other persons who can obtain economic value from its
disclosure or use; and (2) [i]s the subject of efforts that
are reasonable under the circumstances to maintain its
secrecy.” Cal. Civ. Code § 3426.1(d).
pleading stage, “a plaintiff need not ‘spell out
the details of the trade secret.'” Alta
Devices, Inc. v. LG Elecs., Inc.,343 F.Supp.3d 868, 881
(N.D. Cal. 2018) (quoting Autodesk, Inc. v. ZWCAD
Software Co., 2015 WL 2265479, at *5 (N.D. Cal. May 13,
2015)); see also E. & J. Gallo, 2018 WL 2463869,
at *3. “To so require would mean that the complainant
would have to destroy the very thing for which he sought
protection by making public the secret itself.” TMX
Funding, Inc. v. Impero Techs., Inc., No. C 10-00202
JF (PVT), 2010 WL 2509979, at *3 (N.D. Cal. June 17, 2010).
However, “the complaint must do more than describe the
subject matter of the trade secrets in a ‘vague and
conclusory' manner.” E. & J. Gallo, 2018 WL
2463869, at *3 (quoting Bladeroom Grp. v. Facebook, Inc.,
No. 5:15-cv-01370-EJD, 2015 WL 8028294, at *3 (N.D. Cal.
Dec. 7, 2015). The plaintiff must “describe the subject
matter of the trade secret with sufficient ...