Motion-Secondary: GOLDEN PACIFIC BANK, N.A. VS. BILLFLOAT, INC. ET AL

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BRUCE A. SCHEIDT, State Bar No. 155088
bscheidt@kmtg.com

CHRISTOPHER ONSTOTT, State Bar No. 225968

constott@kmtg.com
ERROL C. DAUIS, State Bar No. 279313

edauis@kmig.com

KRONICK, MOSKOVITZ, TIEDEMANN & GIRARD

A Professional Corporation
400 Capitol Mall, 27" Floor
Sacramento, California 95814
Telephone: (916) 321-4500
Facsimile: (916) 321-4555

Attorneys for Plaintiff/Cross-Defendant
GOLDEN PACIFIC BANK, N.A.

ELECTRONICALLY

FILED

Superior Court of Califomia,
County of San Francisco

07/20/2016
Clerk of the Court
BY-:ROMY RISK

Deputy Clerk

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO

GOLDEN PACIFIC BANK, N.A.,
Plaintiff,
v.

BILLFLOAT, INC., RYAN GILBERT, SEAN
O'MALLEY, and DOES 1-50, inclusive,

Defendants.

BILLFLOAT, INC.
Cross-Complainant,
ve

GOLDEN PACIFIC BANK, N.A., and ROES
1-50,

Cross-Defendants.

1473798,1 14023-004

 

Case No. CGC-16-549804

MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
GOLDEN PACIFIC BANK'S DEMURRER
TO CROSS-COMPLAINT

Judge: Hon. Hon. Harold E. Kahn
Date: August 19, 2016

Time: 9:30 a.m.

Dept: 302

Reservation No. 07190819-14

Case Transferred

from Sacramento County: January 11, 2016

Trial Date: None Set

GOLDEN PACIFIC BANK'S DEMURRER TO CROSS-COMPLAINTUk WwW WN

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TABLE OF CONTENTS
Page
I. INTRODUCTION Wwe ssesssscssesssessstsssetsssessnessnsssatsaseserssssessnsseneasesasesssssassuvssonseeseseveseseeasarasaressneas 1
I. PROCEDURAL BACKGROUND & PLEADINGS
A. BillFloat's Declaratory Relief Action in San Francisco Superior Court. wuss 1
B GPB's Complaint ...cccsssssssesssssscessesssesssesssesseccassssnsesssssssseassessteasassssneevesssrecsneesssseaseessee
Cc. BillFloat’s First Amended Complaint. ...0......ccessscsessessesessesesneeseeneeneeseeseeneesaceneensenee 1
D. This Court Transfers Venue of BillFloat's FAC to Sacramento County;
BillFloat Attempts to Evade This Court's Order By Dismissing its FAC
Without Eesjuaiee a and se eaeieatine th the Same Material aL peemnons i In Two
Separate Actions... soteee aoe 0s ssoveesneesnseseneseneed
E. BillFloat's Contra Costa Action Against the Individual Defendants.
BillFloat Dismisses the Contra Costa Action With Prejudice. ......ssssessssessseneceerteeneet
G. Cross- Complaint ree Same Material Aer as Contra Costa
Action... 7 sesecesastsnsecesecenes4
A. 1" Cause of Action for Breach of Fiduciary Duty, 11" Cause of Action for
Intentional Interference with Contractual Relations, 12" Cause of Action for
Intentional Interference with Prospective Economic Advantage, 14" Cause
of Action for Theft of Trade Secrets, and 15" Cause of Action Pursuant to
Business and Professions Code section 17200 are Barred. by Res Judicata
and Collateral Estoppel. .. tebe latefa bab aeaseetavetebetsrabeneeaetadetararstaratatansedenstearaaeratarst).
1. Cross-Complaint Alleges Same Primary Rights As Contra Costa Action...
2. The Contra Costa Action Resulted in a Final Judgment on the Merits... ee 7
3. GPB Is in Privity With the Contra Costa Defendants. ...........c:cesesseessessssseeseesneesense 7
4, Alternatively, BillFloat is Collaterally Estopped From Asserting Issues
Decided in the Contra Costa Action.......csssssssesessesssesseeseteseressencssessessnseansseesneesee 9
B. Qn 34, and 4" Causes of Action for Declaratory Relief Should Be
Dismissed Without Leave to Amend Because They are Not "Necessary or
Proper." ....cessessesessessssesersees sissussasenesnesaceneevesatanesvesecaessessseneeateseesssesnessnessreaees LO
Cc. 13” Cause of Action for Judicial Reference Should Be Dismissed Without
Leave to Amend Because It Merely Informs the Declaratory Relief Causes
Of ACtION. ...eessssssssessvessssesseesscssvecssssseseseessucssccsnscanesseseuecavecssseucanecasesareasnecanvessaseeseessse LO

1473798. 14023-004

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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
GOLDEN PACIFIC BANK'S DEMURRER TO CROSS-COMPLAINTCe nN DA HW B® YW NY

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G.

TABLE OF CONT. (Continued)

11" Cause of Action for Interference with Contractual Relations and 12"
Cause of Action for Intentional Interference with Prospective Economic

Relations Should Be Dismissed Without Leave to Amend Because GPB is

No Stranger to the Contracts, ..ssccssssessrersseearees

 

14" Cause of Action for Theft of Trade Secrets Should Be Dismissed
Without Leave to Amend Because BiliFloat Fails to Identify the Alleged
Trade Secrets.

5", 6", and 7" Causes of Action for Breach of Contract and 8", 9", and 10"
Causes of Action for Breach of the Implied Covenant Should Be Dismissed
for Uncertainty. ... Sasdederetetotetabereriesededatntedebatabarsasdatose fatal alahelatatdesesatatedetal ta

 

BillFloat's Entire Cross-Complaint Should Be Dismissed For Failure to
Satisfy a Required Contractual Condition Under the Marketing Agreement.

12

 

 

1473798.1 14023-004

ti
‘MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
GOLDEN PACIFIC BANK'S DEMURRER TO CROSS-COMPLAINTTABLE OF AUTHORITIES

Federal Cases

Amalgamated Sugar Co. v. NL Industries, Inc.

(2d Cir. 1987) 825 F.2d 634 v..cccesesseseesssssssssessessessceseesssneesssseevesesansnessseneeseeanesesarenseese

Falbaum v. Pomerantz

(2d Cir, 2001) 19 Fed. Appx. 10 ..sssssecssssssecsseseresssessnsenneesseesscenessnscnccssecasersneosneeaneessnsernansnesenseesens

Friez v. First Am. Bank & Trust of Minot
(8th Cir. 2003) 324 F.3d S80... sss

 

Garcia Monagas v. De Arellano

(Ist Cir, 2012) 674 F.3d 45 ..ccesssssssseessessesseesesscescesneerosesseesssasenessesnsessssausenseseesecarsraasanscsrsseseyeanes

Hamro v. Shell Oil Co.
(9th Cir. 1982) 674 F.2d 784...

Headwaters Inc, v. U.S. Forest Service

(9th Cir. 2005) 399 F.3d 1047 ...ssecssecsssesseccsessssecsssesesenecesesseessnassessscsnecsnectssenssonssoumeesneesnueesnnansnens

Marin Tug & Barge, Inc. v. oe Petroleum, Inc.
(9th Cir. 2001) 271 F.3d 825... ee

Stan Lee Media Inc. v. Lee

(C.D.Cal., Aug. 23, 2012) No. 2:07-CV-00225, 2012 WL 4048871 ...esssesesscsseesennees

US. v. Gurley

(8th Cir. 1994) 43 F.3d 1188 .csssecssssesssecssesstssssssesseeesssssessssssesssssneesssessneneesseessieesnnecsnrecsnnenstess

State Cases

Adams v. San Joaquin County

(1958) 162 Cal.Appp.2d 271 ssesscssssssessssssseussesessssstensesesseinseesnsesneensteuseentene
Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers Cas, & Sur. Co.

of America

(2005) 133 Cal-App.4th 1319.0... cssecsessesssssesesnseseserenssneeessarsneesseneserassasavessssnesnes

Applied Equipment Corp. vy. Litton Saudi Arabia Ltd.

(1994) 7 Cal.4th 503 ccccscssssssssnseesssstssslnesneensesosnetsnetgeenseiaeeaqtnnenenennesaasnsennt

Bernstein v. Piller

(1950) 98 Cal. App.2d 44] o..essseccsssessssessecssssecsnneeconeeeoucssasansnecsneraseesaeiesseressaneescssvressssaesresnsts

1473798.1 14023-004 iii

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
GOLDEN PACIFIC BANK'S DEMURRER TO CROSS-COMPLAINT

 

Page(s)

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TABLE OF AUTHORITIES (Continued)
Page(s)
Boeken v. Philip Morris USA, Ine.

Cryolife, Inc. v. Sup. Ct.

(2003) 110 Cal.App.4th 1145., 15

 

Dillard v. McKnight
(1949) 34 Cal.2d 209.0... eeccesesssecsessessessssessnssscsesenesseescsseanesscsusssesneacesecarssessessavsnceneeaneenesansevennensen 5

Diodes, Inc. v. Franzen
(1968) 260 Cal. App.2d 244 ..o..esccsecssessssessessesetssessessessessesiesneeseessacesreneeveeasasecsnsteqsnessnececsrees 13, 14

DKN Holdings LLC v, Faerber
(2015) 61 Cal 4th 813 ..e.ssecssesecssescsssecssseessssesesssecssnecssnsessaseessessnessssetessessssesssssesssanssessssecssevecsssies |

Exxon Corp. v. Superior Court .
(1997) 51 Cal.App.4th 1672...ccsssecssessssssssssesssnessseessreesssessssressssassseesssessseessenersssncsssseesssueestsse 13

Fed. Home Loan Bank of San Francisco v. Countrywide Financial Corp.
(2013) 214 Cal.App.4th 1520.

 

Gabriel v. Wells Fargo Bank, N.A.
(2010) 188 Cal. App.4th 547......cccessssssesssesssssecssesesssesssssersssesssacesseesssveesseessssessonecssseessssreesesseesssseeeD)

Holcomb v, Wells Fargo Bank, N.A.
(2007) 155 Cal. App.4th 490 v..ccccssssssscccssssecssessessecesssnseseecesavanesescevensesesesivavesscevessevueeseeeernees 14

Kasparian yv. County of Los Angeles
(1995) 38 Cal App.4th 242....ccccctssssesecssseecssessssessssesssneessssesesesssecsssncssnecssnessssecesesssessnsecsssseassneee 2

Lazzarone v. Bank of America
(1986) 181 Cal. App.3d S81 .ccsscsssessesssscssesssesssssseesssssvesssesscessuesseersessersssesnsescesssssueessecessiesseesseesss 5

Lord v. Garland

_ (1946) 2T Cal.2d 840 ...secccsesecsrsssssnsecsnsccesnsccssscsssscsstecssnssssceassessasecsusesssesssaessssssssnasssssneecssssesessee LO

 

Marina Development Co. v. at oft ‘Los Angeles (
(1984) 155 Cal.App.3d 435... sevegenseenecenecesesasenaqanrenanennessecsanesnsetaceeseeanesnessaserasessnaranseseneeee lO

Meyer v. Sprint Spectrum L.P.

Miller v. R. K. A. Management Corp.
(1979) 99 Cal. App.3d 460...cccsscccsessssssssssscssnessessessssssssescceesecsenssssssseeeceesesesssutuassssssesuusssnasseeses 5

1473798.1 14023-004 iv

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
GOLDEN PACIFIC BANK'S DEMURRER TO CROSS-COMPLAINTCoe IN DA F WHY

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TABLE OF AUTHORITIES (Continued)

Mintz v. Blue Cross of California

(2009) 172 Cal.App.4th 1594... sesssssssesssessseessessnersatesneesecenacsusencsuesenesnscseneconesanessneesenneenerennesser

Osseous Technols. Of Am., Inc. v. DiscoveryOrtho Partners LLC

(2010) 191 Cal.App.4th 357

Proctor v. Vishay Intertechnology, Inc.

 

Page(s)

 

(2013) 213 Cal-App.4th 1258 ..cssssssssssssssstssssesetasesssseetseesnassietesettnstesetsceastnsesnete 9
Schessler v. Keck .
(1954) 125 Cal .App.2d 827 ccccsccssscsssssesssssssesstiastenseeneetnseetnseeineetasounteiastneinesastnant ul

Sych v. Insurance Co. of North America

(1985) 173 Cal. App.3d 321 .csccsssesressssssssesssssneescereseestesseneaseneecsssesseaneaneesesneeneeseeseeneeeneseenneesens 10

Travers v. Louden

(1967) 254 Cal. App.2d 926.....cssssscssessessessssssssessscesecsnecesessnsenecsucsnecsncessessavseneesseegsvessenecereceneessat

Vaillette v. Fireman's Fund Ins. Co.
(1993) 18 Cal.App.4th 680..

 

Walker v. Munro

(1960) 178 Cal-App.2d 67 ssessssssssssssssessessseensseinstiectsnsteesetinetineesneevnieieesintietinseinssit

Weikel v. TCW Realty Fund IT Holding Co.

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(1997) 55 Cal.App.4th 1234....cccccsssssscssssceessncecsneeetieseseenseeeieneeee
State Statutes
Civ. Code § 3426.1(d) susnsssnssesitnnniinnininnietntnieninieniiinstnnitnsinnisinnseee 13
Code of Civil Procedure § 430.10(8) sssssessressssseerecsrnsnsseserseerseesscseensseeseee 9,10
Code of Civil Procedure § 1060.00... cecsssessessetessscsnssnessnsssesseesscensessseuscanecsaneassosnsessecanvosssareayeensesess 10

Business and Professions Code § 17200.........

1473798.1 14023-004
MEMORANDUM

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GOLDEN PACIFIC BANK'S DEMURRER TO CROSS-COMPLAINTN

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I. INTRODUCTION

Defendant BillFloat, Inc.'s ("BillFloat") Cross-Complaint alleges that a "justiciable
controversy has arisen" between it and Plaintiff Golden Pacific Bank, N.A. ("GPB"). However,
the pleadings establish that BillFloat seeks to hold GPB liable for claims already decided in
BillFloat's prior lawsuit filed in Contra Costa County against officers and directors of GPB, parties
in privity with GPB. The Contra Costa lawsuit was dismissed with prejudice, precluding many
causes of action alleged in this action. Because the Cross-Complaint is defective beyond
amendment, for the reasons set forth below, the Court should sustain this demurrer without leave
to amend and dismiss the entire Cross-Complaint.

Il. PROCEDURAL BACKGROUND & PLEADINGS
A. BillFloat's Declaratory Relief Action in San Francisco Superior Court.

On August 28, 2015, BillFloat filed a complaint in San Francisco Superior Court seeking
declaratory relief and judicial reference against GPB ("Declaratory Relief Action"). (Request for
Judicial Notice in Support of Demurrer to Cross-Complaint ("RJN"), Attm. 1.) This action was
brought solely in response to GPB's Notice of Default. (See, RIN, Attm. 1, 139.)

B. GPB's Complaint,

On October 2, 2015, GPB filed its Complaint against BillFloat, its president Sean
O'Malley, and its Chief Executive Officer Ryan Gilbert in Sacramento County Superior Court
alleging numerous causes of action against BillFloat. Unlike BillFloat's Declaratory Relief
Action, the Complaint sought damages for numerous breaches of three separate agreements
between the parties, asserted a request for rescission relief, and alleged several torts. On
November 10, 2015, BillFloat moved to change venue of the Sacramento Action to San Francisco
County, based upon the residence of Defendants Gilbert and O'Malley. (RJN, Attm. 2.) The
action was ordered transferred to this Court on December 11, 2015. (RJN, Attm. 3.)

Cc BillFloat’s First Amended Complaint,

Rather than filing a cross-complaint to GPB's action, BillFloat instead, on November 3,

2015, filed a First Amended Complaint ("FAC") in its Declaratory Relief Action. (RJN, Attm. 4

("FAC").) The FAC materially altered the Declaratory Relief Action by alleging 15 causes of

1473798.1 14023-004 1

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action against GPB as well as five of GPB's officers and directors. (See, FAC, §f] 139-216.) The
FAC focused on transactions between BillFloat and GPB concerning the SmartBiz program jointly
run by BillFloat and GPB. (See, FAC, §] 21-46.) The FAC alleged causes of action for breach of
the Software License, Maintenance and Support Agreement ("License Agreement") and the First
Amended Joint Marketing Agreement ("Amended Marketing Agreement") that were at issue in
GPB's Complaint, and further alleged that BillFloat and GPB "entered into a joint venture
agreement" which included the "Joint Technology' owned by BF and GPB [which] is the 'method
for applying certain underwriting criteria for small business lending ... so it can be run on a
software platform." (FAC, J 127.)

On November 5, 2015, this Court issued an order granting BillFloat's application to

substitute in the FAC Defendants' Does | through 5 true names with GPB Directors and Officers:

1. Virginia Varela ("Ms. Varela"), an individual, in place and instead of "Doe 1";
2. Rick Fowler ('"Mr. Fowler"), an individual, in place and instead of "Doe 2";

3. Anthony Russo ("Mr. Russo"), an individual, in place and instead of "Doe 3";
4. David Roche ("Mr. Roche"), an individual, in place and instead of "Doe 4"; and

5. Kelly Wong ("Mr. Wong"), an individual, in place and instead of "Doe 5".
(RIN, Attm, 5.) The FAC alleged causes of action against GPB and the individual defendants for
(1) Theft of Trade Secrets; (2) Intentional Interference with Contractual Relations; (3) Intentional
Interference with Prospective Economic Relations; (4) Unfair, Unlawful and/or Fraudulent Acts or
Practices Pursuant to Business and Professions Code section 17200; and (5) Breach of Fiduciary

Duty. (FAC, ¥] 144-149, 176-214.)

D. This Court Transfers Venue of BillFloat's FAC to Sacramento County; BillFloat
Attempts to Evade This Court's Order By Dismissing its FAC Without Prejudice and
Bifurcating the Same Material Allegations In Two Separate Actions,

On November 23, 2015, GPB and the individual defendants brought a motion to change
venue of the FAC based on the fact that none of the defendants were San Francisco residents.
(RIN, Attm. 6.) On January 7, 2016, this Court granted the motion, finding "evidence which
establishes that at the commencement of the lawsuit, San Francisco was not the principal place of

business of Golden Pacific Bank, N.A. and that none of the defendants resided in San Francisco."

1473798.1 14023-004 2

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
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(RIN, Attm. 7, at 2:9-11.) The order transferring venue remains binding on BillFloat.

On January 22, 2016, BillFloat attempted to evade this Court's order by dismissing its FAC
without prejudice then refiling the same claims in two separate actions. (See, RJN, Attm. 8; RIN,
Attm, 9 (Cross-Compl.”); RIN, Attm. 10 ("Contra Costa Comp].").) On February 8, 2016,
BillFloat refiled the same allegations against GPB as a Cross-Complaint. (See, Cross-Compl.)
That same day, BillFloat filed a substantially similar action in Contra Costa County against the
same individual defendants in the FAC (the "Contra Costa Action"), (See, Contra Costa Compl.)
E. BillFtoat's Contra Costa Action Against the Individual Defendants.

Like BillFloat's FAC, the Contra Costa Action names Varela, Fowler, Russo, Roche, and
Wong ("Contra Costa Defendants") as defendants. (Compare RIN, Attm. 5, with Contra Costa
Compl.) Further, like the FAC, the Contra Costa Action alleges causes of action for (1) Theft of
Trade Secrets; (2) Intentional Interference with Contractual Relations; (3) Intentional Interference
with Prospective Economic Relations; (4) Unfair, Unlawful and/or Fraudulent Acts or Practices
Pursuant to Business and Professions Code section 17200; and (5) Breach of Fiduciary Duty.
(Compare FAC, {ff 144-149, 176-214, with Contra Costa Compl., {J 108-137.) Indeed, the Contra
Costa Action presented virtually the same material allegations because it was formally the FAC, as
the footer for the Contra Costa complaint and bears the caption: "PLAINTIFF BILLFLOAT,
INC.'S FIRST AMENDED COMPLAINT." (Compare FAC, {ff 11-43, 44-86, 106-110, 126-138,
with Contra Costa Compl., {ff 13-45, 47-89, 90-94, 95-107.)

On February 23, 2016, the Contra Costa Defendants moved to change venue on the basis
that BillFloat was estopped from bringing the action in any county other than Sacramento, as it
was subject to this Court's January 7, 2016 order transferring venue of the same material claims
and causes of action to Sacramento. (See, RJN, Attm. 11, at 1:3-9.) On April 27, 2016, the
Contra Costa Superior Court ordered the action transferred to Sacramento, finding that BiliFloat:

is bound by the order of the San Francisco Superior Court, filed on January 7, 2016.
This order determined that the proper venue for trial of [BillFloat's] claims is

Sacramento County. [BillFloat] cannot evade the order by dismissing the claims and
refiling them here in Contra Costa County.

(RIN, Attm, 12, at Exh. A, p. 2 [citations omitted].) The Contra Costa Superior Court also found

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that BillFloat "dismiss[ed] its claims and then bifurcat[ed] them between a cross-complaint in one
action and a separate complaint in this Contra Costa Superior Court action." (/d., at Exh. A, p. 3.)
FE. BillFloat Dismisses the Contra Costa Action With Prejudice.

On May 25, 2016, the Contra Costa Superior Court dismissed the Contra Costa Action
with prejudice pursuant to BillFloat's voluntary request for dismissal of the entire action and of all
parties and all causes of action. (RJN, Attm. 13.) On June 9, 2016, the Contra Costa Defendants
filed a Memorandum of Costs as the prevailing party. (RJN, Attm. 14.) BillFloat has not filed
any papers in the Contra Costa Action following entry of dismissal with prejudice.

G. Cross-Complaint Alleges Same Material Allegations as Contra Costa Action.

Like the FAC and Contra Costa Action, the Cross-Complaint alleges causes of action for
(1) Theft of Trade Secrets; (2) Intentional Interference with Contractual Relations; (3) Intentional
Interference with Prospective Economic Relations; (4) Unfair, Unlawful, and/or Fraudulent Acts
or Practices Pursuant to Business and Professions Code section 17200; and (5) Breach of
Fiduciary Duty. (Compare FAC, §f 144-149, 176-214, and Contra Costa Compl., | 108-137,
with Cross-Compl., ff 140-145, 188-214.) In fact, the Cross-Complaint mirrors the FAC in all
material respects, and BillFloat still refers to itself as "Plaintiff." (See, Cross-Compl., ff] 173, 175,
182, 187.) In bringing these exact same causes of action in the Cross-Complaint, BillFloat merely
replaces "Defendants" with "Cross-Defendants," such that they are used interchangeably as one
and the same. (Compare Cross-Compl., {{] 142-143, 145, 190-192, 194, 197-199, 202, 209-211,
213-214, with Contra Costa Compl., Jf 110-111, 113, 122-124, 126, 129-131, 134, 117-119, 136-
137.)

Moreover, BillFloat makes the same material allegations in the Cross-Complaint that it
made in the Contra Costa Complaint. (Compare Cross-Compl., {J 9-41, 42-84, 104-108, 127-139, .
with Contra Costa Compl., f{ 13-45, 47-89, 90-94, 95-107.) BillFloat merely replaces references
to "Better Finance and GPB" with "the Parties" in the Cross-Complaint. (Compare Cross-Compl.,
4132-40, 44, 46-48, with Contra Costa Compl., ff 36-44, 49, 51-53.) Notably, in making the
exact same material allegations in the Cross-Complaint and the Contra Costa Action, BillFloat

merely replaces "the Defendants” or "Ms. Varela" with either "GPB" or “Cross-Defendant," such

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that they are used interchangeably as one and the same, (Compare Cross-Compl., ff 46, 48, 74,

83-84, 129-139, with Contra Costa Compl., ff] 51, 53, 79, 88-89, 97-107.) By presenting the same

material allegations and causes of action in the Cross-Complaint, BillFloat now seeks to hold GPB

liable for acts alleged in the Contra Costa Action that have already been dismissed with prejudice.

Til. LEGAL ARGUMENT

A. 1% Cause of Action for Breach of Fiduciary Duty, 11" Cause of Action for Intentional
Interference with Contractual Relations, 12” Cause of Action for Intentional
Interference with Prospective Economic Advantage, 14” Cause of Action for Theft of

Trade Secrets, and 15” Cause of Action Pursuant to Business and Professions Code
section 17200 are Barred by Res Judicata and Collateral Estoppel.

"Res judicata bars a cause of action that was or could have been litigated in a prior

 

proceeding if: '(1) the present action is on the same cause of action as the prior proceeding; (2) the
prior proceeding resulted in a final judgment on the merits; and (3) the parties in the present action
or parties in privity with them were parties to the prior proceeding."" (Fed. Home Loan Bank of
San Francisco v. Countrywide Financial Corp. (2013) 214 Cal.App.4th 1520, 1527 ["Res judicata
precludes piecemeal litigation by splitting a single cause of action or relitigation of the same cause
of action..."]; see also, Dillard vy. McKnight (1949) 34 Cal.2d 209, 214.) "A demurrer is to be
sustained if the action is barred by the absolute defense of res judicata and such defense appears
from the face of the complaint or from matters of which the court may or must take judicial
notice." (Miller v. R. K. A, Management Corp. (1979) 99 Cal.App.3d 460, 465; see also,
Lazzarone v. Bank of America (1986) 181 Cal.App.3d 581, 590.)

1. Cross-Complaint Alleges Same Primary Rights As Contra Costa Action.

California courts apply the "primary rights' theory" to determine whether two
proceedings involve identical causes of action for purposes of claim preclusion.
For purposes of res judicata, a cause of action consists of the plaintiff's primary
right to be free from a particular injury, the defendant's corresponding primary
duty and the defendant's wrongful act in breach of that duty. The violation of a
primary right gives rise to only a single cause of action. [T]he "cause of action" is
based upon the harm suffered, as opposed to the particular theory asserted by the
litigant. Even where there are multiple legal theories upon which recovery might
be predicated, one injury gives rise to only one claim for relief. Hence a
judgment for the defendant is a bar to a subsequent action by the plaintiff based
on the same injury to the same right, even though he presents a different legal
ground for relief. Thus, under the primary rights theory, the determinative factor
is the harm suffered. When two actions involving the same parties seek
compensation for the same harm, they generally involve the same primary right.

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(Fed. Home Loan Bank, supra, 214 Cal.App.4th at 1530-31 [quotations and citations omitted].)

Here, the Cross-Complaint alleges identical causes of action alleged in the Contra Costa
Action: "Breach of Fiduciary Duty," "Intentional Interference with Contractual Relations,"
"Intentional Interference with Prospective Economic Relations," Theft of Trade Secrets," and
"Unfair, Unlawful, and/or Fraudulent Acts or Practices Pursuant to Business and Professions Code
section 17200" are repeated in in the Cross-Complaint almost verbatim, (Compare Contra Costa
Compl., {J 108-137, with Cross-Compl., §f 140-145, 188-202, 206-214.) Indeed, BillFloat merely
replaces "Defendants" with "Cross-Defendants" such that they are used interchangeably as one
and the same. (Compare Contra Costa Compl., fff 110-111, 113, 122-124, 126, 129-131, 134,
117-119, 136-137, with Cross-Compl., fF 142-143, 145, 190-192, 194, 197-199, 202, 209-211,
213-214.) Further, the relief sought as to these causes of action are identical: "direct damages,"
"consequential damages," and "punitive damages" for "breaches of fiduciary duty;" "damages" for
"theft of trade secrets" "interference with contract," and "interference with prospective economic
advantage;" and "restitution," "disgorgement," and "an injunction under Business and Professions
Code section 17200."' (Compare Contra Costa Compl., Prayer for Relief, {f 1-9, with Cross-
Compl., Prayer for Relief, # 1-3, 7-8, 11-15.)

_ Although BillFloat asserts claims in the Cross-Complaint beyond those alleged in the
Contra Costa Action, the gravamen of both pleadings is identical. Both are premised on
transactions between BillFloat and GPB concerning the SmartBiz program. (Compare Cross-
Compl., {J 9-84, 104-108, 127-139, with Contra Costa Compl., {J 13-45, 47-107.) Both allege
that BillFloat and GPB "entered into the Joint Venture Agreement, first manifested in part in the
Marketing Agreement, and later in the Amended Marketing Agreement" which included "the
‘Joint Technology’ owned by BF and GPB [which] is the 'method for applying certain underwriting
criteria for small business lending ... so it can be rin‘ona software platform." (Cross-Compl., J

128; Contra Costa Compl., 196.) BillFloat had the opportunity to assert'in the Contra Costa

' Although the Cross-Complaint's Prayer for Relief does not include a request for an injunction under
Business and Professions Code section 17200, BillFloat nonetheless alleges that it is “entitled to an .
injunction against Cross-Defendants" under its Fifteenth Cause of Action. (Cross-Compl., {] 214.)

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Action the same claims it now asserts against GPB in the Cross-Complaint. (See, Weikel v. TCW
Realty Fund II Holding Co. (1997) 55 Cal.App.4th 1234, 1245 ["For purposes of this analysis, it is
of no moment whether the identical causes of action were in fact litigated in [the prior

proceeding]; all that is required is that [plaintiff] have had the opportunity to litigate them in [the
prior proceeding]."].) Thus, because the Cross-Complaint asserts the same primary rights already
asserted in the Contra Costa Action, res judicata should apply.

2. The Contra Costa Action Resulted in a Final Judgment on the Merits.

"(F]or purposes of applying the doctrine of res judicata..,, a dismissal with prejudice is the
equivalent of a final judgment on the merits, barring the entire cause of action. [Citations.] 'The
statutory term ‘with prejudice’ clearly means the plaintiff's right of action is terminated and may
not be revived... [A] dismissal with prejudice ... bars any future action on the same subject
matter." (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 793; see also, Fed. Home
Loan Bank, supra, 154 Cal-Rptr.3d at 875, 879 ["Dismissal with prejudice is determinative of the
issues in the action and precludes the dismissing party from litigating those issues again."].)

On May 25, 2016, the Contra Costa Superior Court entered dismissal of the Contra Costa
Action with prejudice as requested by BillFloat. (RJN, Attm. 13.) Thus, for purposes of res
judicata, the Contra Costa Action resulted in a final judgment on the merits.

3. GPB Is in Privity With the Contra Costa Defendants.

Res judicata applies "to the relitigation of the same cause of action between the same
parties or those in privity with them." (DKW Holdings LLC v, Faerber (2015) 61 Cal.4th 813,
825, reh'g denied (Aug. 12, 2015).) "[P]rivity requires the sharing of an identity or community of
interest, with adequate representation of that interest in the first suit, and circumstances such that
the nonparty should reasonably have expected to be bound by the first suit. A nonparty alleged to
be in privity must have an interest so similar to the party's interest that the party acted as the
nonparty’s virtual representative in the first action." (/d. at 826 [quotations and citations omitted].)

Here, GPB is in privity with the Contra Costa Defendants since all interests at stake in the
Contra Costa Action stem from the alleged "joint venture" between GPB and BiilFloat:

Mt

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This case has arisen because of a joint venture between Better Finance and non-

party Golden Pacific Bank, N.A. ("GPB"), The named Defendants herein are

Officers and/or Directors of GPB, and owed and owe fiduciary duties to Better

Finance arising out of the joint venture, which they breached in many respects,

including but not limited to, taking Better Finance's trade secrets, interfering with

Better Finance's contracts and prospective economic advantage, [and] engaging in

unfair, unlawful, and/or fraudulent business practices...
(Contra Costa Compl., { 8.) Further, as BillFloat alleges, the Contra Costa Defendants acted
within the course and scope of their duties as officers and directors of GPB:

each Defendant, both fictitiously and actually named, was the principal, agent, or

employee of the other Defendants, and acting as either such principal or with the

course and scope of such employment or agency, took some part in the acts or

omissions hereinafter set forth by reason of which each Defendant, both

fictitiously and actually named, is liable to Plaintiff ....
(Contra Costa Compl., { 10; ef Cross-Compl., J 8; compare, Contra Costa Compl., {ff 48, 51-54,
72; 97, with Cross-Compl., ff 43, 46-49, 67, 129.) Further, in making identical material
allegations, BillFloat merely replaces "Ms. Varela" or "Defendants" with "GPB" or "Cross-
Defendant," such that they are the same party representing the same interests. (Compare Cross-
Compl., { 46, 48, 74, 83-84, 129-139, with Contra Costa Compl., ff 51, 53, 79, 88-89, 97-107.)

As alleged, the Contra Costa Defendants’ fiduciary duties arise solely from the "Joint
Venture Agreement" between BillFloat and GPB. BillFloat alleges the same bases for liability,
pursuant to the same agreements, against the Contra Costa Defendants and GPB. Accordingly, the
Contra Costa Defendants were GPB's "virtual representative" in the Contra Costa Action. If
BillFloat had prevailed in the Contra Costa Action, GPB would have reasonably expected to be
bound by that judgment as suit was brought against the individuals in their corporate capacities.
Thus, the Contra Costa Defendants, as officers and directors of the corporation, are in privity with
GPB. (See, e.g., Garcia Monagas v, De Arellano (1st Cit. 2012) 674 F.3d 45, 53-54 ["A suit
against individuals in their corporate capacities effectively operates as a suit against the
corporation itself.... Hence, the weight of authority is that an individual sued in his or her
corporate capacity as an officer or director of a corporation is in privity with the corporation");
Stan Lee Media Inc. v. Lee (C.D.Cal., Aug. 23, 2012) No. 2:07-CV-00225, 2012 WL 4048871, at
*4, affd on other grounds (9th Cir. 2014) 585 Fed. Appx. 597 [finding privity between corporation

and its officers and directors where the parties "embody the traditional concept of corporation-

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officer privity described in Headwaters."]; Headwaters Inc. v. U.S. Forest Service (9th Cir. 2005)
399 F.3d 1047, 1052-53 ["Privity, traditionally, arose from a limited number of legal relationships
in which two parties have identical or transferred rights with respect to a particular legal interest,
chiefly: ... corporations and their officers or shareholders."]; Friez v. First Am. Bank & Trust of
Minot (8th Cir. 2003) 324 F.3d 580, 582 ["Although officers are generally treated as separate from
a corporation for purposes of preclusion, they may be in privity with a corporation if they are
named as defendants in their capacity as officers."]; Falbaum v. Pomerantz (2d Cir. 2001) 19
Fed.Appx. 10, 14 [finding officers and directors in privity with corporation as they “acted as
agents" of corporation]; U.S. v. Gurley (8th Cir. 1994) 43 F.3d 1188, 1197, cert. den. (1995) 516
U.S. 817 ["directors, officers, and shareholders may be in privity with a corporation and thereby
assert a res judicata defense if ‘they are named as defendants solely in their capacity as directors,'
officers, and shareholders."]; Amalgamated Sugar Co, v. NL Industries, Inc. (2d Cir. 1987) 825
F.2d 634, 640-641, cert. den. (1987) 484 U.S. 992 [privity found to exist between a corporation's
board of directors and its shareholders as "a finding of privity...depends on whether, under the
circumstances, the interests of the nonparty were adequately represented")

Thus, res judicata bars BillFloat's First, Eleventh, Twelfth, Fourteenth, and Fifteenth
Causes of Action since they were already litigated in the Contra Costa Action. As such, the Court

has no jurisdiction and should dismiss them with prejudice. (Code Civ. Proc., § 430.10(a).)

4, Alternatively, BillFloat is Collaterally Estopped From Asserting Issues
Decided in the Contra Costa Action.

Collateral estoppel precludes relitigation of issues argued and decided in prior
proceedings. Traditionally, we have applied the doctrine only if several threshold
requirements are fulfilled. First, the issue sought to be precluded from relitigation
must be identical to that decided in a former proceeding. Second, this issue must
have been actually litigated in the former proceeding. Third, it must have been
necessarily decided in the former proceeding. Fourth, the decision in the former
proceeding must be final and on the merits. Finally, the party against whom
preclusion is sought must be the same as, or in privity with, the party to the
former proceeding.

(Proctor v. Vishay Intertechnology, Inc. (2013) 213 Cat.App.4th 1258, 1272 [quotations and
citations omitted]; see also, Gabriel v. Wells Fargo Bank, N.A. (2010) 188 Cal.App.4th 547, 556.)

Issues that have been settled by voluntary dismissal with prejudice constitutes actual litigation for

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collateral estoppel purposes. (Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers
Cas. & Sur. Co. of America (2005) 133 Cal.App.4th 1319, 1333-34.)

Based on the res judicata analysis above, collateral estoppel is a separate basis for barring
the issues raised in the Cross-Complaint that are identical to those decided in the Contra Costa
Action. Those issues were actually litigated and decided by the Contra Costa Superior Court as a
result of BillFloat's dismissal with prejudice of the entire Contra Costa Action. Thus, the decision
in the Contra Costa Action is final and on the merits, BillFloat, the party who raised the issues in
the Contra Costa Action, now attempts to raise identical issues in the Cross-Complaint. Therefore,
collateral estoppel bars BillFloat's First, Eleventh, Twelfth, Fourteenth, and Fifteenth Causes of
Action because the issues raised in support of those causes of action are identical to the issues
already litigated in the Contra Costa Action. Thus, the Court has no jurisdiction of the subject of

these causes of action and should dismiss them with prejudice. (Code Civ. Proc., § 430.10(a).)

B. 2", 3", and 4" Causes of Action for Declaratory Relief Should Be Dismissed Without
Leave to Amend Because They are Not "Necessary or Proper."

Code of Civil Procedure section 1060, which provides that a court "may make a binding
declaration" of a litigant's rights or duties, "must be read together with section 1061," which states:
"The court may refuse to [grant declaratory relief] in any case where its declaration or
determination is not necessary or proper at the time under all the circumstances." (Meyer v. Sprint
Spectrum L.P. (2009) 45 Cal.4th 634, 647 [emphasis in original].) A declaratory relief cause of
action “must allege facts from which the court may determine that an actual controversy relating to
legal rights and duties of the respective parties exists." (Lord v. Garland (1946) 27 Cal.2d 840,
851.) The purpose of declaratory relief is to eliminate "uncertainties and controversies which
might result in future litigation." (Marina Development Co. v. County of Los Angeles (1984) 155
Cal.App.3d 435, 443.) Declaratory relief operates prospectively and is not a proper cause of
action for the redress of past wrongs. (See, Sych v. Insurance Co. of North America (1985) 173
Cal.App.3d 321, 329 n. 5; Travers v. Louden (1967) 254 Cal.App.2d 926, 931.) "[T]Jhere is no
basis for declaratory relief where only past wrongs are involved. Hence, where there is an accrued

cause of action for an actual breach of contract or other wrongful act, declaratory relief may be

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denied." (Osseous Technols. Of Am., Inc. v, DiscoveryOrtho Partners LLC (2010) 191
Cal.App.4th 357, 366 [quoting 5 Witkin, Cal. Procedure (5th ed. 2008) Pleadings, § 869, p. 284].)

Here, BillFloat alleges that an actual controversy relating to its legal rights and duties
exists as to GPB's Notice of Default, which demanded that BillFloat cure its past contract breaches
as a condition precedent before GPB could file an action to redress BillFloat's wrongful past
actions. (See, Cross-Compl., {{f 4, 84-86, 88, 91, 93, 96, 98.) The Cross-Complaint concedes
GPB's Notice of Default "alleg[es] four instances where Better Finance is alleged to have breached
the Amended Marketing Agreement." (Cross-Compl., § 84.) Thus, the allegations in the Cross-
Complaint and attached Notice of Default establish that BillFloat's causes of action for declaratory
relief are based solely on alleged breaches of a written contract that have already ripened.

In addition, BillFloat's causes of action for declaratory relief allege that an "actual,
justiciable controversy exists between the Parties as to their respective rights and obligations
arising under the Joint Venture Agreement," "Amended Marketing Agreement,” and "License
Agreement, requiring declaratory relief." (See, Cross-Compl., {f 4, 147, 149, 151.) However,
BillFloat's Fifth, Sixth, and Seventh Causes of Action allege past breaches of those same
agreements. (See, Cross-Compl., {J 152-166.) "A declaratory action is usually unnecessary
where an adequate remedy exists under some other form of action." (Walker v. Munro (1960) 178
Cal.App.2d 67, 76, superseded on other grounds by Lockyer v. City and County of San Francisco
(2004) 33 Cal.4th 1055; see also, Schessler vy. Keck (1954) 125 Cal.App.2d 827, 837 ["Permission
to resort to declaratory relief is a matter of sound discretion of the court. Such an action is usually
unnecessary where an adequate remedy exists under some other form of action."].)

Thus, there is no basis for declaratory relief for causes of action for past breaches of
contract have already accrued; the only question is whether those contracts were breached.
Because only past wrongs are involved, BillFloat's Second, Third, and Fourth Causes of Action
are not necessary or proper, and the Court should dismiss them since other remedies exist and are
available to BillFloat which are as "speedy and adequate or as well suited to [BillFloat's] needs as
declaratory relief." (See, Adams v. San Joaquin County (1958) 162 Cal.App.2d 271, 274 [cause of

action for declaratory relief dismissed without leave to amend].)

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Cc 13" Cause of Action for Judicial Reference Should Be Dismissed Without Leave to
Amend Because It Merely Informs the Declaratory Relief Causes of Action,
BillFloat's only basis for seeking judicial reference is to inform the declaratory relief cause

of action by determining the amount of money owed as a result of the alleged breaches of contract

described in the Notice of Default. (See, Cross-Compl., {{] 5, 87.) Because declaratory relief is
not necessary or proper, as shown above, the Court should dismiss this cause of action for judicial
reference without leave to amend.

D. 11" Cause of Action for Interference with Contractual Relations and 12" Cause of

Action for Intentional Interference with Prospective Economic Relations Should Be
Dismissed Without Leave to Amend Because GPB is No Stranger to the Contracts.

Alternatively, BillFloat's causes of action for interference with contractual and prospective
economic relations fail because "only 'a stranger to [the] contract! may be liable for interfering
with it." (Mintz v. Blue Cross of California (2009) 172 Cal.App.4th 1594, 1603.) "The tort duty
not to interfere with the contract falls only on strangers — interlopers who have no legitimate
interest in the scope or course of the contract's performance." (Applied Equipment Corp. v, Litton
Saudi Arabia Lid. (1994) 7 Cal.4th 503, 514.) "[T]he same rationale should also bar prosecution
of the tort of interference with prospective economic advantage against a party to the relationship
from which the plaintiff's anticipated economic advantage would arise." (Kasparian v. County of
Los Angeles (1995) 38 Cal.App.4th 242, 262.) "California law has long recognized that the core
of intentional interference business torts is interference with an economic relationship by a third-
party stranger to that relationship, so that an entity with a direct interest or involvement in that
relationship is not usually liable for harm caused by pursuit of its interests." (Marin Tug & Barge,
Inc, v. Westport Petroleum, Inc, (9th Cir. 2001) 271 F.3d 825, 832.)

Here, BillFloat alleges that GPB and BillFloat had a “Joint Venture" by which GPB owed
fiduciary duties to BillFloat in their business dealings. (See, Cross-Compl., {J 33, 128, 129, 141.)
BillFloat further alleges that it had contracts and “economic relationship[s] that probably would
have resulted in an economic benefit" with "one or more large retail concerns," and GPB
interfered with them. (Cross-Compl., ff 189, 191, 196, 199.) However, as a result of the Joint

Venture, GPB had a direct interest and involvement in these prospective relationships.

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The fees from these prospective economic relationships were to be earned as a result of,
and "[o]ver the expected life of the Amended Marketing Agreement and the License Agreement,"
which BillFloat alleges are synonymous with the Joint Venture. (Cross-Compl., § 108.) As such,
GPB was no "stranger to the contract." (Exxon Corp. v. Superior Court (1997) 51 Cal.App.4th
1672, 1688 [gasoline franchisor "has a clear financial interest in its dealers and therefore is
privileged to 'interfere' with the contract"); Hamro v. Shell Oil Co. (9th Cir. 1982) 674 F.2d 784,
790 [finding that corporation could not interfere with prospective economic advantage where it
“had the requisite financial interest [because it] owned the property in question and had a financial
interest in receiving profits from the sale"].) Thus, BillFloat's Eleventh Cause of Action for
Intentional Interference with Contractual Relations and Twelfth Cause of Action for Intentional
Interference with Prospective Economic Relations should be dismissed without leave to amend.
E. 14'" Cause of Action for Theft of Trade Secrets Should Be Dismissed Without Leave

to Amend Because BillFloat Fails to Identify the Alleged Trade Secrets,

Alternatively, BillFloat's Cross-Complaint is uncertain and fails to state facts sufficient to
constitute a cause of action for theft of trade secrets. The Uniform Trade Secrets Act (Civil Code
section 3426, et seq.) defines a trade secret as:

information, including a formula, pattern, compilation, program, device, method,

technique, or process, that: (1) Derives 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) Is the subject of

efforts that are reasonable under the circumstances to maintain its secrecy.

(Civ. Code § 3426.1(d).) A party seeking to protect trade secrets 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 knowledge of those persons who are skilled in the trade, and to permit the
defendant to ascertain at least the boundaries within which the secret lies." (Diodes, Inc. v.
Franzen (1968) 260 Cal.App.2d 244, 253.)

One who seeks to protect his trade secrets from wrongful use or disclosure ...

must ... allege the ultimate facts showing the existence of a trade secret or other

confidential data to state such a cause of action. An averment simply that the

plaintiff has a ‘secret process' is a bare legal conclusion.... [T]he complainant

should 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
knowledge of those persons who are skilled in the trade, and to permit the

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defendant to ascertain at least the boundaries within which the secret lies.
(Id., 260 Cal.App.2d at 252-253.)

Here, BillFloat provides a one-sentence description of its trade secret: "Cross-Complainant
owned trade secrets, including, but not limited to, customer and contact lists, and the underwriting
model that Cross-Complainant developed for use with the BELIEF System." (Cross-Compl., J
207.) Thus, BillFloat fails to provide any information beyond a mere legal conclusion. This
single sentence fails to "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 knowledge of those
persons who are skilled in the trade" and does nothing to permit GPB to “ascertain at least the
boundaries within which the secret lies." (Diodes, Inc., supra, 260 Cal.App.2d at 253.) In
addition, BillFloat's alleged "customer and contact lists” fails to identify any customers or contacts
whose names were allegedly obtained from its secret list, making it ripe for demurrer. (See e.g.,
Bernstein v. Piller (1950) 98 Cal.App.2d 441, 444 [affirming order sustaining demurrer to
complaint alleging "wrongful use of plaintiffs' secret lists and processes" where "complaint was
uncertain...because it does not give... the names or any of them of the customers or clients
defendants allegedly obtained from the secret and confidential list of plaintiffs’ customers."].)

Accordingly, BillFloat fai