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TGG Management Company, Inc. v. Petraglia

United States District Court, S.D. California

January 14, 2020

JOHN PETRAGLIA, et al., Defendants.



         Plaintiff TGG Management Company, Inc. (“TGG”) filed a complaint against eight Defendants: John Petraglia, Megan Zerba, Garrett Tapken, Erik Rhoades, Sayva Solutions, Inc., Bubbly Brands, LLC, Sash Group, Inc., and Holiday Foliage, Inc. TGG alleges, inter alia, trade secret misappropriation. Soon after filing its complaint, TGG filed a motion for preliminary injunction, requesting the Court enjoin Defendants from accessing or using TGG's trade secret information. (“PI Mot., ” ECF No. 23.) TGG seeks a preliminary injunction against all of the above Defendants except for Defendant Rhoades. (See ECF No. 56.) The Court permitted TGG to engage in limited, expedited discovery for the purposes of its Motion. (ECF No. 48.)

         Defendants Bubbly Brands, Sash Group, Holiday Foliage, and Sayva Solutions filed oppositions to the Motion for Preliminary Injunction. (ECF Nos. 51, 52, 53.) TGG filed a reply in support of the motion. (ECF No. 59.) Because TGG's reply contained new information that it had received in discovery (and that Defendants had not yet had a chance to respond to), the Court permitted sur-replies. Bubbly Brands, Sash Group, Holiday Foliage, and Sayva filed sur-replies. (ECF Nos. 72, 73, 77.)[1]

         The Court held oral argument on the Motion on January 2, 2020. For the foregoing reasons, the Court GRANTS IN PART TGG's Motion. The injunction is detailed on the last page of this Order.

         I. BACKGROUND

         Plaintiff TGG provides management accounting and business advisory services for business clients. (PI Mot. at 1.) TGG was founded in 2006 by its current CEO Matt Garrett. Over time, TGG alleges Mr. Garrett and others developed what they call “The TGG Way”- “a proven set of accounting and finance best practices, processes and procedures, specially designed electronic tools, and other trade secrets, coupled with financial guidance, to ensure the financial health and success of TGG's clients.” (“Garrett Decl., ” ECF No. 23-1, ¶ 9.) The TGG Way “uses an objective and measurable system for implementing accounting best practices, quality control, and client and team communications. It is at the center of TGG's brand, and is what differentiates TGG from its competition.” (PI Mot. at 4.) The TGG Way and TGG's trade secrets give TGG a competitive advantage. (Id.)

         Defendant John Petraglia began working for TGG in January 2016. (Garrett Decl. ¶ 41.) By virtue of his role, Petraglia had access to some of TGG's confidential trade secret information. Petraglia left TGG in April 2019 and began working for Defendant Sayva Solutions, Inc. (Id. ¶¶ 43, 45.) Similarly, Defendant Megan Zerba began working for TGG in June 2013, had access to trade secret information while at TGG, and now also works for Sayva. Upon their departure, both Petraglia and Zerba refused to sign TGG's Reminder of Confidentiality and Nonsolicitation form. (Id. ¶¶ 44, 48.) On Sayva's website, Petraglia is listed as the CFO of Sayva's Accounting Services and Zerba is listed as the Controller. (Id. ¶ 8.) TGG alleges “Sayva provides outsourced professional services such as accounting, specialized project consulting, and full-time recruiting services.” (PI Mot. at 3.) TGG alleges that as a result of Petraglia and Zerba's actions, Sayva has built an accounting division that directly competes with TGG. (Id.) Sayva combats this assertion, and its CEO declares that Sayva started its accounting services line of business in September 2017 (without the help of any current or former TGG employees). (“Buell Decl., ” ECF No. 53-4 ¶¶ 7, 11.) Petraglia was hired in June 2019 as a Managing Director. (Id. ¶ 16.) Zerba, Petraglia and seven others currently form Sayva's accounting services group. (Id. ¶ 17.)

         After Petraglia and Zerba left, TGG hired the Berkeley Research Group to conduct a forensic analysis of Petraglia's and Zerba's TGG-issued laptops. (Garrett Decl. ¶ 62.) David Jiminez of Berkeley concluded that before Petraglia left TGG, he connected a personal external USB storage device to his TGG laptop and accessed various files. (“Jiminez Decl., ” ECF No. 23-24 ¶ 12.) TGG analyzed the list of files Petraglia accessed and concludes, “[t]he files . . . are sweeping and include many of TGG's most valuable assets and proprietary trade secrets.” (PI Mot. at 10.) Petraglia also emailed himself various TGG materials. (Id.) Zerba similarly copied various TGG files onto a personal USB storage device before leaving TGG. (Jiminez Decl. ¶ 14.)

         As to the other Defendants, Defendant Garrett Tapken previously worked for TGG and now works for TGG's former client, Tosdal law Firm. (Garrett Decl. ¶¶ 50-53.) Defendants Bubbly Brands, Sash Group, and Holiday Foliage are former clients of TGG. After Petraglia and Zerba left TGG, these former clients began disengagement from TGG. TGG believes the entities are working with Sayva (through Petraglia and Zerba), who is likely using TGG's trade secrets to perform accounting services for the clients. Sayva agrees only that it has provided Bubbly Brands, Sash Group, and Holiday Foliage “periodic accounting documents that reflect the actual financial state of their respective companies” but asserts that neither it or its employees have used TGG's proprietary material. (Buell Decl. ¶¶ 22, 25- 32.)

         Holiday Foliage periodically now works with Sayva, and it specifies that this is because when Zerba and Petraglia left TGG, Holiday Foliage did not feel its financial interests were being taken care of, so it disengaged with TGG. (“Sayva and HF Opp'n, ” ECF No. 53, at 6.) Holiday Foliage has received periodic accounting documents from Sayva that are identical to the financial information that TGG provided Holiday Foliage when it was TGG's client. (Id.) Sash Group also was a former TGG client, but it disengaged and began working with Sayva. (“Sash Opp'n, ” ECF No. 52, at 4.) “The only documents Sash Group has received from Sayva are typical accounting documents reflecting the financial status of Sash Group.” (Id. at 5.) Sash Group no longer works with Sayva or any other accounting firm. (Id. at 4.) Finally, Bubbly Brands previously used TGG (specifically, Petraglia) for its bookkeeping and accounting services. (“Urbani Decl., ” ECF No. 51-1, ¶ 11.) Bubbly Brands now receives that same service from Sayva. (Id. ¶ 13.)

         TGG moves for a preliminary injunction on: (1) its trade secret misappropriation claim (against all Defendants); (2) its Computer Fraud and Abuse Act claim (against Petraglia, Zerba, and Sayva); (3) its Computer Data Access and Fraud Act claim (against Petraglia and Zerba).


         Federal Rule of Civil Procedure 65 governs the issuance of preliminary injunctions. A preliminary injunction is an equitable remedy aimed at preserving the status quo and at preventing the occurrence of irreparable harm during the course of litigation. See Fed. R. Civ. P. 65. “A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). A preliminary injunction is an “extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Id. at 22.

         III. ANALYSIS

         A. Notice of the Sought Preliminary Injunction

         Defendants Petraglia, Zerba, and Tapken have not filed oppositions to the Motion for Preliminary Injunction. A court may issue a preliminary injunction only on notice to the adverse party. Fed.R.Civ.P. 65(a)(1). Thus, the Court must ensure the Defendants are on notice of the Motion before proceeding.

         Petraglia and Zerba were served with the preliminary injunction by mail to their place of employment-Sayva Solutions. (ECF No. 23-26.) Further, counsel for Sayva and Holiday Foliage now represents Petraglia and Zerba. (“Tencer Decl., ” ECF No. 77-1, ¶ 6.) Therefore, the Court concludes that Petraglia and Zerba are on notice of TGG's Motion for Preliminary Injunction.[2]

         Further, Defendant Tapken appeared in this matter, (see ECF Nos. 41, 45) but did not file an opposition to the Motion. Because Tapken appeared in this matter, is represented by an attorney, and that attorney received electronic notice of TGG's Motion, Tapken is also on notice of the Motion. The Court now turns to the merits of the Motion.

         B. Likelihood of Success on the Merits

         TGG must establish it will prevail on the merits of its claims. The Court first turns to TGG's claims under the Defend Trade Secrets Act (“DTSA”) and the California Uniform Trade Secrets Act (“CUTSA”). To state a claim for misappropriation of trade secrets under CUTSA, a plaintiff must allege: (1) the existence and ownership of a trade secret, and (2) misappropriation of the trade secret. Pellerin v. Honeywell Int'l, Inc., 877 F.Supp.2d 983, 988 (S.D. Cal. 2012) (citation omitted). A claim for misappropriation under the DTSA has substantially similar elements. See 18 U.S.C. § 1836.

         1. Trade Secret

         In establishing the existence of a trade secret, “[a] plaintiff need not ‘spell out the details of the trade secret, '” Autodesk, Inc. v. ZWCAD Software Co., No. 5:14-cv-1409-EJD, 2015 WL 2265479, at *5 (N.D. Cal. May 13, 2015), but must “describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.” Pellerin, 877 F.Supp.2d at 988 (quoting Diodes, Inc. v. Franzen, 260 Cal.App. 2d 244, 253 (1968)). Both the DTSA and CUTSA define a “trade secret” as:

all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if-(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information;

18 U.S.C. § 1839(3); see also Cal. Civ. Code § 3426.1(d). TGG lists the trade secrets at issue in this case as:

(1) Quickbooks accounting file (containing TGG's accounting/financial records, income statements, and customer records/lists)
(2) Quality assurance materials (containing TGG's best practices for providing accounting to businesses)
(3) Proprietary sales and marketing materials (containing templates TGG uses to make sales proposals, as well as lists of prospective clients)
(4) Utilization report
(5) Training materials (used to train staff on how to carry out the TGG Way)
(6) financial models, templates, and ...

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