Preview
1 Shayna Balch Santiago (SBN 304802)
E-Mail: ssantiago@fisherphillips.com
2 FISHER & PHILLIPS LLP
3200 N. Central Avenue, Suite 1550
3 Phoenix, Arizona 85012-2487
Telephone: (602) 281-3400
4 Facsimile: (602) 281-3401
5 Kathryn M. Evans (SBN 323190)
E-Mail: kmevans@fisherphillips.com
6 FISHER & PHILLIPS LLP
4747 Executive Drive, Suite 1000
7 San Diego, California 92121
Telephone: (858) 597-9600
8 Facsimile: (858) 597-9601
9 Attorneys for Defendants,
UCOMMG, LLC; Unified Communications Group, Inc.;
10 Kenneth W. Newbatt; Bianca Newbatt; Mitchell C.
Lipkin; Michael J. Bellas; Jimmie Garrett Baker, Jr.;
11 WesTele Utility Solutions, LLC; and Cynthia Baker
12 SUPERIOR COURT OF THE STATE OF CALIFORNIA
13 FOR THE COUNTY OF SANTA BARBARA - ANACAPA DIVISION
14 BUTLER AMERICA, LLC, a Delaware CASE NO.: 20CV03877
limited liability company, [Unlimited Jurisdiction]
15
Plaintiff, Assigned for all purposes to the
16 Honorable Donna D. Geck, Dept. 4
v.
17 DEFENDANTS’ REPLY TO PLAINTIFF’S
UCOMMG, LLC, a Nevada limited liability OPPOSITION TO DEFENDANTS’
18 company; UNIFIED COMMUNICATIONS MOTION FOR SANCTIONS PURSUANT
GROUP, INC., a dissolved Washington TO CODE OF CIVIL PROCEDURE
19 corporation; KENNETH W. NEWBATT, an SECTION 128.7
individual; BIANCA NEWBATT, an
20 individual; MITCHELL C. LIPKIN, an DATE: September 30, 2022
individual; MICHAEL J. BELLAS, an TIME: 10:00 a.m.
21 individual; JIMMIE GARRETT BAKER, JR., DEPT.: 4
an individual; WESTELE UTILITY
22 SOLUTIONS, LLC, a California limited Complaint Filed: November 20, 2020
liability company; and DOES 1 through 50, Removal Filed: January 4, 2021
23 inclusive, FAC Filed: April 16, 2021
SAC Filed: December 3, 2021
24 Defendants. Trial Date: Not Set
25
26
27
28
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 I. INTRODUCTION
2 Plaintiff Butler America, LLC’s belated and unilateral dismissal of its claims against
3 Defendants UCOMMG, LLC; Unified Communications Group, Inc.; WesTele Utility Solutions,
4 LLC; Kenneth Newbatt; Bianca Newbatt; Mitchell Lipkin; Michael Bellas; and Cindy Baker
5 (collectively “Defendants”) does not render Defendants’ Code of Civil Procedure section 128.7
6 sanctions motion moot and a ruling on the pending section 128.7 sanctions motion is therefore
7 necessary. (Eichenbaum v. Alon (2003) 106 Cal.App.4th 967, 975-976.)
8 After forcing Defendants to serve (and subsequently file) a section 128.7 sanctions
9 motion on Plaintiff on March 1, 2022, Plaintiff utterly failed to take advantage of the safe harbor
10 provision and, instead, forced Defendants to defend themselves before this Court for another six
11 (6) months and 21 days.1 In the intervening six (6) months and 21 days, Plaintiffs continued to
12 maintain its claim that there was no violation of section 128.7(b). Plaintiff also forced Defendants
13 to incur a tremendous amount of legal fees defending themselves including, but not limited to,
14 opposing discovery motions, responding to purported jurisdictional discovery requests, and
15 meeting and conferring on those discovery responses.
16 However, more than six months later, Plaintiff would now have this Court believe that its
17 dismissal had nothing to do with the pending sanctions motion. However, this Court is not
18 required to take Plaintiff’s proffered reason for dismissal at face value – especially since Plaintiff
19 tellingly filed its unilateral dismissal on the exact same day its opposition to Defendants’ section
20 128.7(b) sanctions motion was due.2
21
22 1
First, Defendants served a Motion for Rule 11 Sanctions on July 2, 2021, while the matter was still pending
before the district court. (Santiago Decl. ¶ 10, Ex. H.) After the remand to state court, Plaintiff was provided an
23 additional 21-day safe harbor period to withdraw the First Amended Complaint (“FAC”) when Defendants served
their section 128.7 motion on October 26, 2021. (Santiago Decl. ¶ 12.) Instead of withdrawing the FAC, Plaintiff
24 improperly filed its Second Amended Complaint (“SAC”), which the Court deemed filed as of December 3, 2021.
(Santiago Decl. ¶¶ 13-14.) Although Defendants’ position is that the filing of the SAC did not moot the then-
25 pending section 128.7 motion, in an effort to avoid any procedural arguments that the motion was moot and to
address new issues now before the Court based on Plaintiff’s re-filing of previously dismissed (and preempted)
26 claims in the SAC, Defendants provided a third safe-harbor period when they served the instant motion on March
1, 2022.
27
2
Plaintiff served its unilateral dismissal concurrently with its opposition to Defendants’ section 128.7 sanctions
28 motion at 11:40 p.m. on September 16, 2022.
1
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 As set forth above, Plaintiff’s unilateral dismissal of its claims against Defendants did not
2 moot the pending sanctions motion. However, in order to rule on the pending sanctions motion,
3 the Court must necessarily reach some of the underlying issues advanced by Defendants in
4 support of its request for sanctions, namely that: 1) the Court did not possess personal jurisdiction
5 over the non-resident Defendants, and 2) the claims contained in Plaintiff’s Second Amended
6 Complaint were preempted by CUTSA. These arguments were fully articulated by Defendants
7 in their motion to quash for lack of personal jurisdiction and demurrer to Plaintiff’s SAC. Both
8 of these motions are now fully briefed.3 Indeed, in the context of this case where out-of-state
9 Defendants contended they had no minimum contacts and no reasonable basis to be hauled into
10 a California court, the Court must review the issues presented in Defendants’ motion to quash
11 and demurrer and address whether Plaintiff’s conduct was sanctionable.
12 Sanctions are warranted because, as described in Defendants’ moving papers, Plaintiff
13 violated section 128.7(b). Plaintiff has not opposed Defendants’ showing that Plaintiff’s claims
14 are legally and factually frivolous and were filed without merit. Plaintiff’s abusive behavior and
15 bad faith litigation tactics should not be tolerated and Defendants’ motion for sanctions pursuant
16 to section 128.7 should be granted.
17 II. THIS COURT HAS JURISDICTION TO RULE ON DEFENDANTS’ MOTION
18 FOR SANCTIONS DESPITE PLAINTIFF’S UNILATERAL DISMISSAL
19 Plaintiff’s voluntary and unilateral dismissal of the action without prejudice does not
20
21
3
Defendants filed their demurrer to the SAC on January 3, 2022. Plaintiff filed its response on March 14, 2022.
22 Defendants filed their reply on March 18, 2022. Defendants filed their motion to quash on September 20, 2021.
Plaintiff filed its response on November 18, 2021, and claimed it needed to conduct jurisdictional discovery.
23 Defendants filed their reply on November 24, 2021. On December 3, 2021, the Court held a hearing and granted
Plaintiff leave to take discovery relating to personal jurisdiction, but ordered Plaintiff to file a supplemental brief
24 regarding the Motion to Quash by February 18, 2022. That deadline was subsequently extended to September 8,
2022. However, Plaintiff never complied with this deadline. Instead, Plaintiff failed to file supplemental briefing
25 of any kind and failed to substantively respond to Defendants’ motion to quash in any meaningful way. Instead,
having no facts to support personal jurisdiction over the non-resident Defendants despite taking nearly a year of
26 discovery, Plaintiff unilaterally dismissed the action eight days after the deadline to file supplemental briefing and
on the same date Plaintiff’s opposition to Defendants’ motion for sanctions was due. Based on Plaintiff’s failure to
27 substantively respond to Defendants’ motion to quash, this Court should accept Defendants’ motion to quash as
unopposed for purposes of resolving the underlying section 128.7 sanctions motion. (Cal. Rules of Court, rule
28 8.54(c); Sexton v. Superior Court (1997) 58 Cal.App.4th 1403, 1410.)
2
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 deprive this Court of authority to impose sanctions. In Eichenbaum v. Alon (2003) 106
2 Cal.App.4th 967, 972, a defendant filed a demurrer, motion to strike, and two motions for
3 sanctions, including a motion pursuant to section 128.7. The plaintiff did not withdraw or correct
4 the operative complaint within the 21-day safe harbor period. (Ibid.) Instead, shortly before the
5 scheduled hearing on the defendant’s demurrer and motion to strike, the plaintiff filed a request
6 for dismissal of the action, without prejudice. (Id. at p. 983.) The court accordingly placed the
7 demurrer and motion to strike off calendar as moot, however it granted the motion for sanctions
8 under section 128.7. (Ibid.) The court noted that the voluntary dismissal of the action did not
9 deprive it of authority to impose sanctions because “the Plaintiff and his counsel did not utilize
10 the safe harbor period to withdraw the [FAC] and avoid sanctions. Instead, they opposed all of
11 Defendant’s motions and demurrer ...putting the Defendant through the time and expense of
12 replying to the oppositions and attending the hearings on the motions for sanctions.” (Id. at pp.
13 300.) The Court of Appeal ultimately affirmed the trial court’s imposition of sanctions,
14 concluding that plaintiff was “given the full latitude of the safe harbor period” and “belated
15 abandonment of the case does not fulfill the object of [section 128.7], and the policies favoring
16 allowance of sanctions remain extant notwithstanding the dismissal.” (Id. at pp. 301-302.)
17 Here, Plaintiff’s actions are nearly identical to that of the plaintiff in Eichenbaum.
18 However, in the present case, Plaintiff had the benefit of being served with three separate
19 sanctions motions and having three separate 21-day harbor provisions which Plaintiff did not
20 utilize. Despite being afforded the full safe harbor period, which expired the last time in March
21 2022, Plaintiff waited six months to file a belated and unilateral dismissal on September 16, 2022,
22 without prejudice, on the same day its opposition to Defendants’ motion for sanctions was due.
23 Plaintiff failed to take advantage of the safe harbor period and forced Defendants to fully brief
24 its demurrer, motion to quash for lack of jurisdiction, and motion for sanctions pursuant to section
25 128.7. Defendants were also forced to respond to over 70 written discovery requests relating to
26 jurisdiction and defend against two motions to compel further discovery responses brought by
27 Plaintiff. Indeed, Defendants were forced to incur fees and costs for an additional six months
28 defending against Plaintiff’s baseless allegations before Plaintiff unilaterally dismissed its
3
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 pending claims. Plaintiff’s belated abandonment of the case does not moot Defendants’ motion
2 and this Court retains jurisdiction to issue sanctions pursuant to section 128.7.
3 The U.S. Supreme Court has similarly ruled that a trial court has jurisdiction to grant a
4 sanctions motion under Rule 11 of the Federal Rules of Civil Procedure,4 notwithstanding that
5 the plaintiff had voluntarily dismissed the case after the motion was filed. (Cooter & Gell v.
6 Hartmarx Corp. (1990) 496 U.S. 384, 398.) “[A] voluntary dismissal does not eliminate the rule
7 11 violation. Baseless filing puts the machinery of justice in motion, burdening the courts and
8 individuals alike with needless expense and delay. Even if the careless litigant quickly dismisses
9 the action, the harm triggering Rule 11’s concerns has already occurred. Therefore, a litigant who
10 violates Rule 11 merits sanctions even after dismissal.” (Ibid.)
11 III. PLAINTIFF’S CLAIMS ARE FACTUALLY FRIVOLOUS, LEGALLY
12 FRIVOLOUS, AND PRESENTED FOR AN IMPROPER PURPOSE
13 A. Plaintiff’s Opposition Brief Ignores Plaintiff’s Frivolous and Improper Re-
14 Assertion of Preempted Claims in its SAC
15 While Plaintiff’s frivolous and improper re-assertion of otherwise preempted claims in
16 its SAC was a prominent argument advanced by Defendants in its section 128.7 motion for
17 sanctions, Plaintiff has nothing to say in response.
18 As briefed in Defendants’ opening section 128.7 sanctions motion, in its original
19 Complaint, Plaintiff asserted causes of action for conversion and intentional interference with
20 contractual relations. Plaintiff then dismissed those two claims when it filed its FAC, in addition
21 to dismissing a common law trade secret misappropriation claim. Plaintiff even admits in its
22 Opposition to this motion that “[t]he FAC removed three claims for relief which were
23 arguably preempted by Plaintiff’s Misappropriation of Trade Secrets Claim pursuant to
24 California Civil Code § 3426 et seq.” (Oppo. p. 9 [emphasis added].)
25 ///
26
27 4
“Code of Civil Procedure section 128.7 is modeled, almost word for word, on Rule 11 of the Federal Rules of
Civil Procedure. In examining the provisions of section 128.7, California courts may look to federal decisions
28 interpreting the federal rule. (Malovec v. Hamrell (1999) 70 Cal.App.4th 434, 440.)
4
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 However, despite this admission regarding preemption, Plaintiff incredibly used the SAC
2 to re-assert the very same causes of action for conversion and intentional interference with
3 contractual relations that it had previously dismissed and that it admits were “arguably
4 preempted.” The causes of action in the SAC are based on the very same theories as alleged in
5 the original Complaint. In light of the foregoing facts and admissions, Plaintiff has no basis to
6 argue that it had a reasonable belief that they were legally and factually supported.
7 As discussed in Peake v. Underwood (2014) 227 Cal.App.4th 428, 449, which is
8 discussed in detail in Defendants’ opening brief , this behavior is sanctionable. In filing the SAC,
9 Plaintiff engaged in conduct supporting the conclusion that Plaintiff (and/or its counsel) did not
10 consider its claims to have any valid basis. Plaintiff’s opposition is tellingly devoid of any
11 argument as to why its conduct is not sanctionable. Plaintiff has therefore not opposed
12 Defendants’ showing that sanctions pursuant to section 128.7 are warranted and Defendants’
13 motion should be granted on this basis alone.
14 B. Plaintiff’s Argument that Its Common Law Causes of Action Are Not
15 Preempted by the CUTSA Is Legally Frivolous
16 Plaintiff continues to incorrectly assert that its common law causes of action are not
17 preempted by the CUTSA. In doing so, Plaintiff blatantly ignores binding legal authority, despite
18 Defendants’ countless attempts to meet and confer with Plaintiff on this very issue.5
19 Even in its Opposition to Defendants’ motion for sanctions, Plaintiff continues to ignore
20 binding authority that its claims continue to be preempted despite its dismissal of its trade secret
21 cause of action. In Silvaco Data Sys. v. Intel Corp. (2010) 184 Cal.App.4th 210, 239 n.22,
22 disapproved on other grounds by Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, the Court
23 of Appeal explicitly held that the CUTSA supersedes claims based on the misappropriation of
24 information that does not satisfy the definition of trade secret under the CUTSA.6
25
26 5
These issues were all fully briefed in Defendants’ demurrer.
6
Following Silvaco, district courts are in accord that common law claims, such as Plaintiff’s, based upon the
27 misappropriation of “confidential information” that does not rise to the level of trade secrets are preempted by the
CUTSA. (See, e.g., Strategic Partners, Inc. v. FIGS, Inc. (C.D. Cal. Aug. 10, 2021) No. 2:19-cv-02286-JWH-KSx,
28 2021 WL 4813645, at *5-6; SunPower Corp. v. SolarCity Corp., No. 12-CV-00694, 2012 WL 6160472, at *5–9
5
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 As detailed in Defendants’ moving papers, Plaintiff and its counsel cannot claim that they
2 are were somehow unaware of Silvaco’s holding. Defendants explained the Silvaco holding to
3 Plaintiff in Defendants’ reply in support of its demurrer to Plaintiff’s FAC filed on November
4 24, 2021, and again in a meet and confer email sent on December 29, 2021. Defendants further
5 explained the holding a third and fourth time in Defendants’ demurrer to Plaintiff’s SAC filed on
6 January 3, 2022 and in its reply to the demurrer filed on March 18, 2022. Finally, Defendants
7 explained the Silvaco holding in its moving papers in the instant motion filed on March 25, 2022.
8 Yet, in Plaintiff’s Opposition, Plaintiff fails to so much as acknowledge Silvaco. Instead,
9 Plaintiff only cites to non-binding district court decisions that pre-date Silvaco in support of its
10 continued argument that its common law claims are not preempted. (Oppo. p. 19.) Plaintiff’s
11 deliberate ignoring of binding legal authority reinforces the merits of Defendants’ sanctions
12 motion, as it is yet another example of Plaintiff’s misrepresentation, misinterpretation, and/or
13 exaggeration of relevant evidence and authority. “[M]isstatements of law and fact, coupled with
14 an improper purpose, can be sanctioned under the inherent power of the court.” (Fink v. Gomez
15 (9th Cir. 2001) 239, F.3d 989, 994.) Plaintiff’s continued assertion of preempted claims, which
16 is unsupported by existing law or a reasonable argument for a change of existing law, is subject
17 to sanctions.
18 C. Despite Five Months of Additional Discovery on the Issue of Personal
19 Jurisdiction, Plaintiffs Have Not Offered a Scintilla of Evidence That This
20 Court Has Personal Jurisdiction Over the Nonresident Defendants
21 As set forth in the moving papers, Plaintiff has continued to name six Nonresident
22
23
(N.D. Cal. Dec. 11, 2012); Artec Grp., Inc. v. Klimov, No. 15-CV-03449, 2016 WL 7157635, at *7 (N.D. Cal.
24 Dec. 8, 2016), amended, No. 15-CV-03449, 2016 WL 8223346 (N.D. Cal. Dec. 22, 2016); Total Recall Techs. v.
Luckey, No. C 15-02281, 2016 WL 199796, at *7 (N.D. Cal. Jan. 16, 2016); Loop AI Labs Inc. v. Gatti, No. 15-
25 CV-00798, 2015 WL 5158461, at *2–3 (N.D. Cal. Sept. 2, 2015); NetApp, Inc. v. Nimble Storage, Inc., 41
F.Supp.3d 816, 840 (N.D. Cal. 2014); Heller v. Cepia, L.L.C., 11-01146, 2012 WL 13572, at *7 (N.D. Cal. Jan. 4,
26 2012); Mattel, Inc. v. MGA Entm't, Inc., 782 F.Supp.2d 911, 986–87 (C.D. Cal. Jan. 5, 2011).) Indeed, “[T]here is
no rule why preemption turns on and off depending on whether a trade secret claim is actually pled.” (Barker v.
27 Insight Global, LLC (N.D. Cal. Nov. 21, 2017) 2017 WL 10504692, *4.) Such a rule would “defeat preemption by
allowing plaintiffs to intentionally omit CUTSA claims in favor of other claims.” (NetApp, Inc. v. Nimble Storage,
28 Inc. (N.D. Cal. 2014) 41 F.Supp.3d 816, 840.)
6
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 Defendants7—four individuals and two entities from Washington, Minnesota, and North
2 Carolina—in this lawsuit filed in California asserting violations of California law. Section 128.7
3 obligates Plaintiff to have conducted an investigation and had minimal facts supporting its
4 assertion of jurisdiction over these Nonresident Defendants prior to filing its lawsuit in California
5 state court.
6 Absent from Plaintiff’s Complaint, FAC, SAC, Opposition to Defendants’ motion to
7 quash and opposition to this motion are any facts supporting Plaintiff’s assertion of personal
8 jurisdiction over the Nonresident Defendants. Indeed, Plaintiff’s Opposition fails to detail any
9 investigation it, or its counsel, undertook at all to determine whether jurisdiction in California
10 was proper over the Nonresident Defendants. In fact, despite being granted more than five months
11 to conduct jurisdictional discovery and file supplemental briefing to support Plaintiff’s
12 opposition to Defendants’ motion to quash, Plaintiff failed to file any supplemental briefing by
13 the September 8, 2022 deadline and instead waited eight days to unilaterally dismiss the current
14 proceeding. Plaintiff’s failure to timely comply with the Court’s request for supplemental
15 briefing on the issue of personal jurisdiction should be interpreted by this Court as an admission
16 that Plaintiff never had any facts to support personal jurisdiction over the Nonresident Defendants
17 and the Court should treat Defendants’ motion to quash as unopposed for purposes of assessing
18 Defendants’ section 128.7 sanctions request.
19 At most, in Plaintiff’s response to Defendants’ sanctions motion, Plaintiff appears to
20 make the attenuated argument that because some of the Nonresident Defendants (Mr. Lipkin and
21 Mr. Bellas) worked for a company (Plaintiff) that at some point may have serviced clients in the
22 State of California, it must logically follow that this Court can exercise personal jurisdiction over
23 all six of the Nonresident Defendants. However, Plaintiff was required to demonstrate personal
24 jurisdiction over each Nonresident Defendant but has failed to do so. Plaintiff has not offered a
25 single fact other than speculation and lawyerly argument.
26
27
7
The Nonresident Defendants are UCOMMG, Unified Communications, Kenneth Newbatt, Bianca Newbatt,
28 Mitchell Lipkin, and Michael Bellas.
7
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 As to Defendants Michael Bellas and Mitchell Lipkin, Plaintiff’s one-sentence argument
2 falls woefully short of demonstrating general jurisdiction. Plaintiff states that Mr. Bellas and Mr.
3 Lipkin were employed by Plaintiff but ignores that Mr. Bellas was hired and worked for Plaintiff
4 in North Carolina and Mr. Lipkin was hired and worked for Plaintiff in Minnesota. (Bellas Decl.
5 ¶ 4; Lipkin Decl. ¶ 4.) Plaintiff also claims, without any evidentiary support, that Mr. Bellas and
6 Mr. Lipkin “made numerous trips to Plaintiff’s offices in California.” To the contrary, and as set
7 forth in the supporting declarations to Defendants’ motion to quash, the last time Mr. Lipkin was
8 in California was last year for a vacation. (Lipkin Decl. ¶ 3.) Prior to that, Mr. Lipkin hadn’t been
9 to California since 2015, when he was again there for a vacation. (Ibid.) Mr. Bellas last traveled
10 to California in February 2020 for a management meeting while was employed by Plaintiff.
11 (Bellas Decl. ¶ 4.) Mr. Bellas traveled to California once or twice a year while he was employed
12 by Plaintiff. (Ibid.)
13 Moreover, even if true, visits to a company headquarters by an employee are insufficient
14 as a matter of law to establish personal jurisdiction. (See, e.g., Szabo v. Medical Information
15 Bureau (1981) 127 Cal.App.3d 51, 56-57; Kourkene v. American BBR, Inc. (9th Cir. 1963) 313
16 F.2d 769; Frederick Fell, Inc. v. Superior Court (1973) 36 Cal.App.3d 93, 96.) Accordingly,
17 there is no basis for Plaintiff’s argument that any of the Nonresident Defendants are subject to
18 general jurisdiction in California.
19 As to specific jurisdiction, the sole argument advanced by Plaintiff is that this Court has
20 specific jurisdiction because the Nonresident Defendants “purposefully directed their
21 intentionally tortious conduct at Plaintiff, a California resident.” (Oppo. pp. 14-15.) Glaringly
22 absent from the Opposition is any explanation, let alone evidence, of how each of the six
23 Nonresident Defendants expressly aimed such tortious conduct at California. Each defendant’s
24 “contacts” with the forum state must be evaluated separately. (See Calder v. Jones (1984) 465
25 U.S. 783, 790.) A non-resident defendant is not automatically subject to personal jurisdiction
26 based solely on actions in the forum state undertaken in his corporate capacity. (Id. at 790.)
27 Plaintiff’s Opposition made no attempt to distinguish between the four individual and two
28 corporate Nonresident Defendants.
8
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 Moreover, Plaintiff’s argument is expressly prohibited by the Supreme Court’s holding
2 in Walden v. Fiore (2014) 134 S.Ct. 1115, 1121. Indeed, every single case cited in Plaintiff’s
3 minimum contacts analysis precedes the Supreme Court’s holding in Walden. Plaintiff relies on
4 “the strength of [its] own forum connections, coupled with evidence suggesting [Defendants]
5 knew of those connections... Walden requires more.” (Axiom Foods, Inc. v. Acerchem
6 International, Inc. (9th Cir. 2017) 874 F.3d 1064, 1069.) Walden requires that the Court look to
7 Defendants’ “own contacts” with the forum, not to Defendants’ knowledge of a plaintiff’s
8 connections to the forum. (Walden, 134 S. Ct. at 1124-25.) Moreover, the California Supreme
9 Court has held that knowledge that harm will likely be suffered in the forum state, when
10 unaccompanied by other contacts, is too unfocused to justify personal jurisdiction. (Pavlovich v.
11 Superior Court (2002) 29 Cal.4th 262, 272.) Merely asserting that a defendant knew or should
12 have known that his intentional acts would cause harm in the forum state is not enough to
13 establish jurisdiction under the effects test. (Id. at pp. 270–271.)
14 Notably, Plaintiff has not and cannot allege any specific facts in this case that actually
15 relate to conduct by the Nonresident Defendants occurring in or aimed towards California. If
16 Plaintiff could allege such facts, it would have pled so in its Complaint or amended Complaint
17 and it surely would have highlighted these facts in its Opposition. However, Plaintiff did neither.
18 It is clear that Plaintiff engaged in little to no investigation with respect to who should be
19 a named as a defendant in this lawsuit and the factual allegations supporting its claims. A failure
20 to investigate prior to filing suit leads to a “file-first, investigate later” litigation style that is
21 subject to imposition of sanctions. (See also Jorgensen v. Taco Bell Corp. (1996) 50 Cal.App.4th
22 1398, 1403.) Plaintiff’s filing of its initial and amended complaints, which fail to include facts
23 supporting this Court’s jurisdiction over the Nonresident Defendants, violates section 128.7. (See
24 Love (Love v. The Mail on Sunday (C.D. Cal. July 13, 2006) No. CV05-7798ABCPJWX, 2006
25 WL 4046169, *6-7; Jones v. Campbell University (D.D.C. 2018) 322 F.Supp.3d 106, 109; Lipkin
26 v. Hunt (S.D.N.Y. 2008) 573 F.Supp.2d 836, 844.)
27 Bizarrely, Plaintiff’s Opposition contains a section entitled “The Authorities Cited by
28 Defendants Are Wholly Distinguishable” and discusses three cases: Sabek, Inc. v. Engelhard
9
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 Corp. (1998) 65 Cal. App. 4th 992, 1000-1001; Hendrix v. Naphtal (9th Cir. 1992) 971 F.2d 398,
2 400; and Perogeux, LLC v. Winkler (N.D. Cal. Mar. 15, 2017) Case No. 17-cv-00572 NC. (Oppo.
3 p. 16-17.) However, none of these cases are even cited in Defendants’ motion. Plaintiff entirely
4 failed to address any of the cases cited by Defendants as to why sanctions are appropriate due to
5 Plaintiff’s failure to properly investigate this Court’s jurisdiction over the Nonresident
6 Defendants.
7 D. Plaintiff’s Opposition Completely Fails to Address the False or Misleading
8 Statements and Complete Lack of Factual Support in the FAC and SAC
9 Finally, Defendants’ moving papers detailed multiple false or misleading statements
10 contained in Plaintiff’s SAC. (See Motion pp. 13-14.) Inclusion of false or misleading statements
11 in a pleading can also serve as the basis for sanctions. (Pipe Trades Council of N. Cal., U.A.
12 Local 159 v. Underground Contractors Ass’n of N. Cal. (9th Cir. 1987) 935 F.2d 1275, 1280-
13 81.) Plaintiff completely failed to address these points.
14 Similarly, Plaintiff’s Opposition utterly fails the address the fact that it failed to provide,
15 even after two attempts to amend, adequate factual support for any of the causes of action in its
16 FAC and SAC. It is therefore undisputed for purposes of this motion that Plaintiff included false
17 or misleading statements in its pleadings and failed to conduct an adequate investigation as to
18 any of its claims. Defendants’ motion should also be granted on this basis alone.
19 IV. CONCLUSION
20 For the foregoing reasons, as well as those set forth in their moving papers, Defendants
21 respectfully request that the Court grant their motion for sanctions pursuant to section 128.7.
22
23 DATE: September 22, 2022 FISHER & PHILLIPS LLP
24
25 By:
Shayna Balch Santiago
26 Kathryn M. Evans
Attorneys for Defendants
27
28
10
DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’
MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7
FP 45233324.2
1 PROOF OF SERVICE
(CCP §§1013(a) and 2015.5)
2
I, the undersigned, am at least 18 years old and not a party to this action. I am employed
3 in the County of San Diego with the law offices of Fisher & Phillips LLP and its business address
is 4747 Executive Drive, Suite 1000, San Diego, California 92121.
4
On September 22, 2022, I served the following document(s) DEFENDANTS’ REPLY
5 TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS
PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 128.7 on the person(s) listed
6 below by placing the original a true copy thereof enclosed in sealed envelope(s) addressed
as follows:
7
8 Cameron H. Totten T: (626) 744-1838
Armen Manasserian F: (626) 744-3167
9 CHORA YOUNG & MANASSERIAN LLP E: cameron@cym.law; armen@cym.law
650 Sierra Madre Villa Avenue, Suite 304
10 Pasadena, California 91107 Attorneys for Plaintiff, Butler America, LLC
11 [by MAIL] - I enclosed the document(s) in a sealed envelope or package addressed to
the person(s) whose address(es) are listed above and placed the envelope for collection
12 and mailing, following our ordinary business practices. I am readily familiar with this
business’s practice for collecting and processing correspondence for mailing. On the
13 same day that correspondence is placed for collection and mailing, it is deposited in the
ordinary course of business with the United States Postal Service in San Diego California,
14 in a sealed envelope with postage fully prepaid.
[by FAX] - Based on an agreement of the parties to accept service by fax transmission,
15 I faxed the document(s) to the person(s) at fax number(s) listed above from fax number
(858) 597-9601. The fax reported no errors. A copy of the transmission report is attached.
16 [by OVERNIGHT DELIVERY] - I enclosed the document(s) in an envelope or package
provided by an overnight delivery carrier and addressed to the person(s) at the address(es)
17 listed above. I placed the envelope or package for collection and overnight delivery at an
office or a regularly utilized drop box of the overnight carrier.
18 [by ELECTRONIC SERVICE] - Based on a court order or an agreement of the parties
to accept service by electronic transmission, I electronically served the document(s) to
19 the person(s) at the electronic service address(es) listed above.
20 I declare under penalty of perjury, under the laws of the State of California, that the
foregoing is true and correct.
21
Executed September 22, 2022, at San Diego, California.
22
Amanda Funkhouser By:
23 Print Name Signature
24
25
26
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1
PROOF OF SERVICE
FP 45233324.2
Preview
1 Shayna Balch Santiago (SBN 304802) E-Mail: ssantiago@fisherphillips.com 2 FISHER & PHILLIPS LLP 3200 N. Central Avenue, Suite 1550 3 Phoenix, Arizona 85012-2487 Telephone: (602) 281-3400 4 Facsimile: (602) 281-3401 5 Kathryn M. Evans (SBN 323190) E-Mail: kmevans@fisherphillips.com 6 FISHER & PHILLIPS LLP 4747 Executive Drive, Suite 1000 7 San Diego, California 92121 Telephone: (858) 597-9600 8 Facsimile: (858) 597-9601 9 Attorneys for Defendants, UCOMMG, LLC; Unified Communications Group, Inc.; 10 Kenneth W. Newbatt; Bianca Newbatt; Mitchell C. Lipkin; Michael J. Bellas; Jimmie Garrett Baker, Jr.; 11 WesTele Utility Solutions, LLC; and Cynthia Baker 12 SUPERIOR COURT OF THE STATE OF CALIFORNIA 13 FOR THE COUNTY OF SANTA BARBARA - ANACAPA DIVISION 14 BUTLER AMERICA, LLC, a Delaware CASE NO.: 20CV03877 limited liability company, [Unlimited Jurisdiction] 15 Plaintiff, Assigned for all purposes to the 16 Honorable Donna D. Geck, Dept. 4 v. 17 DEFENDANTS’ REPLY TO PLAINTIFF’S UCOMMG, LLC, a Nevada limited liability OPPOSITION TO DEFENDANTS’ 18 company; UNIFIED COMMUNICATIONS MOTION FOR SANCTIONS PURSUANT GROUP, INC., a dissolved Washington TO CODE OF CIVIL PROCEDURE 19 corporation; KENNETH W. NEWBATT, an SECTION 128.7 individual; BIANCA NEWBATT, an 20 individual; MITCHELL C. LIPKIN, an DATE: September 30, 2022 individual; MICHAEL J. BELLAS, an TIME: 10:00 a.m. 21 individual; JIMMIE GARRETT BAKER, JR., DEPT.: 4 an individual; WESTELE UTILITY 22 SOLUTIONS, LLC, a California limited Complaint Filed: November 20, 2020 liability company; and DOES 1 through 50, Removal Filed: January 4, 2021 23 inclusive, FAC Filed: April 16, 2021 SAC Filed: December 3, 2021 24 Defendants. Trial Date: Not Set 25 26 27 28 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 I. INTRODUCTION 2 Plaintiff Butler America, LLC’s belated and unilateral dismissal of its claims against 3 Defendants UCOMMG, LLC; Unified Communications Group, Inc.; WesTele Utility Solutions, 4 LLC; Kenneth Newbatt; Bianca Newbatt; Mitchell Lipkin; Michael Bellas; and Cindy Baker 5 (collectively “Defendants”) does not render Defendants’ Code of Civil Procedure section 128.7 6 sanctions motion moot and a ruling on the pending section 128.7 sanctions motion is therefore 7 necessary. (Eichenbaum v. Alon (2003) 106 Cal.App.4th 967, 975-976.) 8 After forcing Defendants to serve (and subsequently file) a section 128.7 sanctions 9 motion on Plaintiff on March 1, 2022, Plaintiff utterly failed to take advantage of the safe harbor 10 provision and, instead, forced Defendants to defend themselves before this Court for another six 11 (6) months and 21 days.1 In the intervening six (6) months and 21 days, Plaintiffs continued to 12 maintain its claim that there was no violation of section 128.7(b). Plaintiff also forced Defendants 13 to incur a tremendous amount of legal fees defending themselves including, but not limited to, 14 opposing discovery motions, responding to purported jurisdictional discovery requests, and 15 meeting and conferring on those discovery responses. 16 However, more than six months later, Plaintiff would now have this Court believe that its 17 dismissal had nothing to do with the pending sanctions motion. However, this Court is not 18 required to take Plaintiff’s proffered reason for dismissal at face value – especially since Plaintiff 19 tellingly filed its unilateral dismissal on the exact same day its opposition to Defendants’ section 20 128.7(b) sanctions motion was due.2 21 22 1 First, Defendants served a Motion for Rule 11 Sanctions on July 2, 2021, while the matter was still pending before the district court. (Santiago Decl. ¶ 10, Ex. H.) After the remand to state court, Plaintiff was provided an 23 additional 21-day safe harbor period to withdraw the First Amended Complaint (“FAC”) when Defendants served their section 128.7 motion on October 26, 2021. (Santiago Decl. ¶ 12.) Instead of withdrawing the FAC, Plaintiff 24 improperly filed its Second Amended Complaint (“SAC”), which the Court deemed filed as of December 3, 2021. (Santiago Decl. ¶¶ 13-14.) Although Defendants’ position is that the filing of the SAC did not moot the then- 25 pending section 128.7 motion, in an effort to avoid any procedural arguments that the motion was moot and to address new issues now before the Court based on Plaintiff’s re-filing of previously dismissed (and preempted) 26 claims in the SAC, Defendants provided a third safe-harbor period when they served the instant motion on March 1, 2022. 27 2 Plaintiff served its unilateral dismissal concurrently with its opposition to Defendants’ section 128.7 sanctions 28 motion at 11:40 p.m. on September 16, 2022. 1 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 As set forth above, Plaintiff’s unilateral dismissal of its claims against Defendants did not 2 moot the pending sanctions motion. However, in order to rule on the pending sanctions motion, 3 the Court must necessarily reach some of the underlying issues advanced by Defendants in 4 support of its request for sanctions, namely that: 1) the Court did not possess personal jurisdiction 5 over the non-resident Defendants, and 2) the claims contained in Plaintiff’s Second Amended 6 Complaint were preempted by CUTSA. These arguments were fully articulated by Defendants 7 in their motion to quash for lack of personal jurisdiction and demurrer to Plaintiff’s SAC. Both 8 of these motions are now fully briefed.3 Indeed, in the context of this case where out-of-state 9 Defendants contended they had no minimum contacts and no reasonable basis to be hauled into 10 a California court, the Court must review the issues presented in Defendants’ motion to quash 11 and demurrer and address whether Plaintiff’s conduct was sanctionable. 12 Sanctions are warranted because, as described in Defendants’ moving papers, Plaintiff 13 violated section 128.7(b). Plaintiff has not opposed Defendants’ showing that Plaintiff’s claims 14 are legally and factually frivolous and were filed without merit. Plaintiff’s abusive behavior and 15 bad faith litigation tactics should not be tolerated and Defendants’ motion for sanctions pursuant 16 to section 128.7 should be granted. 17 II. THIS COURT HAS JURISDICTION TO RULE ON DEFENDANTS’ MOTION 18 FOR SANCTIONS DESPITE PLAINTIFF’S UNILATERAL DISMISSAL 19 Plaintiff’s voluntary and unilateral dismissal of the action without prejudice does not 20 21 3 Defendants filed their demurrer to the SAC on January 3, 2022. Plaintiff filed its response on March 14, 2022. 22 Defendants filed their reply on March 18, 2022. Defendants filed their motion to quash on September 20, 2021. Plaintiff filed its response on November 18, 2021, and claimed it needed to conduct jurisdictional discovery. 23 Defendants filed their reply on November 24, 2021. On December 3, 2021, the Court held a hearing and granted Plaintiff leave to take discovery relating to personal jurisdiction, but ordered Plaintiff to file a supplemental brief 24 regarding the Motion to Quash by February 18, 2022. That deadline was subsequently extended to September 8, 2022. However, Plaintiff never complied with this deadline. Instead, Plaintiff failed to file supplemental briefing 25 of any kind and failed to substantively respond to Defendants’ motion to quash in any meaningful way. Instead, having no facts to support personal jurisdiction over the non-resident Defendants despite taking nearly a year of 26 discovery, Plaintiff unilaterally dismissed the action eight days after the deadline to file supplemental briefing and on the same date Plaintiff’s opposition to Defendants’ motion for sanctions was due. Based on Plaintiff’s failure to 27 substantively respond to Defendants’ motion to quash, this Court should accept Defendants’ motion to quash as unopposed for purposes of resolving the underlying section 128.7 sanctions motion. (Cal. Rules of Court, rule 28 8.54(c); Sexton v. Superior Court (1997) 58 Cal.App.4th 1403, 1410.) 2 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 deprive this Court of authority to impose sanctions. In Eichenbaum v. Alon (2003) 106 2 Cal.App.4th 967, 972, a defendant filed a demurrer, motion to strike, and two motions for 3 sanctions, including a motion pursuant to section 128.7. The plaintiff did not withdraw or correct 4 the operative complaint within the 21-day safe harbor period. (Ibid.) Instead, shortly before the 5 scheduled hearing on the defendant’s demurrer and motion to strike, the plaintiff filed a request 6 for dismissal of the action, without prejudice. (Id. at p. 983.) The court accordingly placed the 7 demurrer and motion to strike off calendar as moot, however it granted the motion for sanctions 8 under section 128.7. (Ibid.) The court noted that the voluntary dismissal of the action did not 9 deprive it of authority to impose sanctions because “the Plaintiff and his counsel did not utilize 10 the safe harbor period to withdraw the [FAC] and avoid sanctions. Instead, they opposed all of 11 Defendant’s motions and demurrer ...putting the Defendant through the time and expense of 12 replying to the oppositions and attending the hearings on the motions for sanctions.” (Id. at pp. 13 300.) The Court of Appeal ultimately affirmed the trial court’s imposition of sanctions, 14 concluding that plaintiff was “given the full latitude of the safe harbor period” and “belated 15 abandonment of the case does not fulfill the object of [section 128.7], and the policies favoring 16 allowance of sanctions remain extant notwithstanding the dismissal.” (Id. at pp. 301-302.) 17 Here, Plaintiff’s actions are nearly identical to that of the plaintiff in Eichenbaum. 18 However, in the present case, Plaintiff had the benefit of being served with three separate 19 sanctions motions and having three separate 21-day harbor provisions which Plaintiff did not 20 utilize. Despite being afforded the full safe harbor period, which expired the last time in March 21 2022, Plaintiff waited six months to file a belated and unilateral dismissal on September 16, 2022, 22 without prejudice, on the same day its opposition to Defendants’ motion for sanctions was due. 23 Plaintiff failed to take advantage of the safe harbor period and forced Defendants to fully brief 24 its demurrer, motion to quash for lack of jurisdiction, and motion for sanctions pursuant to section 25 128.7. Defendants were also forced to respond to over 70 written discovery requests relating to 26 jurisdiction and defend against two motions to compel further discovery responses brought by 27 Plaintiff. Indeed, Defendants were forced to incur fees and costs for an additional six months 28 defending against Plaintiff’s baseless allegations before Plaintiff unilaterally dismissed its 3 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 pending claims. Plaintiff’s belated abandonment of the case does not moot Defendants’ motion 2 and this Court retains jurisdiction to issue sanctions pursuant to section 128.7. 3 The U.S. Supreme Court has similarly ruled that a trial court has jurisdiction to grant a 4 sanctions motion under Rule 11 of the Federal Rules of Civil Procedure,4 notwithstanding that 5 the plaintiff had voluntarily dismissed the case after the motion was filed. (Cooter & Gell v. 6 Hartmarx Corp. (1990) 496 U.S. 384, 398.) “[A] voluntary dismissal does not eliminate the rule 7 11 violation. Baseless filing puts the machinery of justice in motion, burdening the courts and 8 individuals alike with needless expense and delay. Even if the careless litigant quickly dismisses 9 the action, the harm triggering Rule 11’s concerns has already occurred. Therefore, a litigant who 10 violates Rule 11 merits sanctions even after dismissal.” (Ibid.) 11 III. PLAINTIFF’S CLAIMS ARE FACTUALLY FRIVOLOUS, LEGALLY 12 FRIVOLOUS, AND PRESENTED FOR AN IMPROPER PURPOSE 13 A. Plaintiff’s Opposition Brief Ignores Plaintiff’s Frivolous and Improper Re- 14 Assertion of Preempted Claims in its SAC 15 While Plaintiff’s frivolous and improper re-assertion of otherwise preempted claims in 16 its SAC was a prominent argument advanced by Defendants in its section 128.7 motion for 17 sanctions, Plaintiff has nothing to say in response. 18 As briefed in Defendants’ opening section 128.7 sanctions motion, in its original 19 Complaint, Plaintiff asserted causes of action for conversion and intentional interference with 20 contractual relations. Plaintiff then dismissed those two claims when it filed its FAC, in addition 21 to dismissing a common law trade secret misappropriation claim. Plaintiff even admits in its 22 Opposition to this motion that “[t]he FAC removed three claims for relief which were 23 arguably preempted by Plaintiff’s Misappropriation of Trade Secrets Claim pursuant to 24 California Civil Code § 3426 et seq.” (Oppo. p. 9 [emphasis added].) 25 /// 26 27 4 “Code of Civil Procedure section 128.7 is modeled, almost word for word, on Rule 11 of the Federal Rules of Civil Procedure. In examining the provisions of section 128.7, California courts may look to federal decisions 28 interpreting the federal rule. (Malovec v. Hamrell (1999) 70 Cal.App.4th 434, 440.) 4 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 However, despite this admission regarding preemption, Plaintiff incredibly used the SAC 2 to re-assert the very same causes of action for conversion and intentional interference with 3 contractual relations that it had previously dismissed and that it admits were “arguably 4 preempted.” The causes of action in the SAC are based on the very same theories as alleged in 5 the original Complaint. In light of the foregoing facts and admissions, Plaintiff has no basis to 6 argue that it had a reasonable belief that they were legally and factually supported. 7 As discussed in Peake v. Underwood (2014) 227 Cal.App.4th 428, 449, which is 8 discussed in detail in Defendants’ opening brief , this behavior is sanctionable. In filing the SAC, 9 Plaintiff engaged in conduct supporting the conclusion that Plaintiff (and/or its counsel) did not 10 consider its claims to have any valid basis. Plaintiff’s opposition is tellingly devoid of any 11 argument as to why its conduct is not sanctionable. Plaintiff has therefore not opposed 12 Defendants’ showing that sanctions pursuant to section 128.7 are warranted and Defendants’ 13 motion should be granted on this basis alone. 14 B. Plaintiff’s Argument that Its Common Law Causes of Action Are Not 15 Preempted by the CUTSA Is Legally Frivolous 16 Plaintiff continues to incorrectly assert that its common law causes of action are not 17 preempted by the CUTSA. In doing so, Plaintiff blatantly ignores binding legal authority, despite 18 Defendants’ countless attempts to meet and confer with Plaintiff on this very issue.5 19 Even in its Opposition to Defendants’ motion for sanctions, Plaintiff continues to ignore 20 binding authority that its claims continue to be preempted despite its dismissal of its trade secret 21 cause of action. In Silvaco Data Sys. v. Intel Corp. (2010) 184 Cal.App.4th 210, 239 n.22, 22 disapproved on other grounds by Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, the Court 23 of Appeal explicitly held that the CUTSA supersedes claims based on the misappropriation of 24 information that does not satisfy the definition of trade secret under the CUTSA.6 25 26 5 These issues were all fully briefed in Defendants’ demurrer. 6 Following Silvaco, district courts are in accord that common law claims, such as Plaintiff’s, based upon the 27 misappropriation of “confidential information” that does not rise to the level of trade secrets are preempted by the CUTSA. (See, e.g., Strategic Partners, Inc. v. FIGS, Inc. (C.D. Cal. Aug. 10, 2021) No. 2:19-cv-02286-JWH-KSx, 28 2021 WL 4813645, at *5-6; SunPower Corp. v. SolarCity Corp., No. 12-CV-00694, 2012 WL 6160472, at *5–9 5 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 As detailed in Defendants’ moving papers, Plaintiff and its counsel cannot claim that they 2 are were somehow unaware of Silvaco’s holding. Defendants explained the Silvaco holding to 3 Plaintiff in Defendants’ reply in support of its demurrer to Plaintiff’s FAC filed on November 4 24, 2021, and again in a meet and confer email sent on December 29, 2021. Defendants further 5 explained the holding a third and fourth time in Defendants’ demurrer to Plaintiff’s SAC filed on 6 January 3, 2022 and in its reply to the demurrer filed on March 18, 2022. Finally, Defendants 7 explained the Silvaco holding in its moving papers in the instant motion filed on March 25, 2022. 8 Yet, in Plaintiff’s Opposition, Plaintiff fails to so much as acknowledge Silvaco. Instead, 9 Plaintiff only cites to non-binding district court decisions that pre-date Silvaco in support of its 10 continued argument that its common law claims are not preempted. (Oppo. p. 19.) Plaintiff’s 11 deliberate ignoring of binding legal authority reinforces the merits of Defendants’ sanctions 12 motion, as it is yet another example of Plaintiff’s misrepresentation, misinterpretation, and/or 13 exaggeration of relevant evidence and authority. “[M]isstatements of law and fact, coupled with 14 an improper purpose, can be sanctioned under the inherent power of the court.” (Fink v. Gomez 15 (9th Cir. 2001) 239, F.3d 989, 994.) Plaintiff’s continued assertion of preempted claims, which 16 is unsupported by existing law or a reasonable argument for a change of existing law, is subject 17 to sanctions. 18 C. Despite Five Months of Additional Discovery on the Issue of Personal 19 Jurisdiction, Plaintiffs Have Not Offered a Scintilla of Evidence That This 20 Court Has Personal Jurisdiction Over the Nonresident Defendants 21 As set forth in the moving papers, Plaintiff has continued to name six Nonresident 22 23 (N.D. Cal. Dec. 11, 2012); Artec Grp., Inc. v. Klimov, No. 15-CV-03449, 2016 WL 7157635, at *7 (N.D. Cal. 24 Dec. 8, 2016), amended, No. 15-CV-03449, 2016 WL 8223346 (N.D. Cal. Dec. 22, 2016); Total Recall Techs. v. Luckey, No. C 15-02281, 2016 WL 199796, at *7 (N.D. Cal. Jan. 16, 2016); Loop AI Labs Inc. v. Gatti, No. 15- 25 CV-00798, 2015 WL 5158461, at *2–3 (N.D. Cal. Sept. 2, 2015); NetApp, Inc. v. Nimble Storage, Inc., 41 F.Supp.3d 816, 840 (N.D. Cal. 2014); Heller v. Cepia, L.L.C., 11-01146, 2012 WL 13572, at *7 (N.D. Cal. Jan. 4, 26 2012); Mattel, Inc. v. MGA Entm't, Inc., 782 F.Supp.2d 911, 986–87 (C.D. Cal. Jan. 5, 2011).) Indeed, “[T]here is no rule why preemption turns on and off depending on whether a trade secret claim is actually pled.” (Barker v. 27 Insight Global, LLC (N.D. Cal. Nov. 21, 2017) 2017 WL 10504692, *4.) Such a rule would “defeat preemption by allowing plaintiffs to intentionally omit CUTSA claims in favor of other claims.” (NetApp, Inc. v. Nimble Storage, 28 Inc. (N.D. Cal. 2014) 41 F.Supp.3d 816, 840.) 6 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 Defendants7—four individuals and two entities from Washington, Minnesota, and North 2 Carolina—in this lawsuit filed in California asserting violations of California law. Section 128.7 3 obligates Plaintiff to have conducted an investigation and had minimal facts supporting its 4 assertion of jurisdiction over these Nonresident Defendants prior to filing its lawsuit in California 5 state court. 6 Absent from Plaintiff’s Complaint, FAC, SAC, Opposition to Defendants’ motion to 7 quash and opposition to this motion are any facts supporting Plaintiff’s assertion of personal 8 jurisdiction over the Nonresident Defendants. Indeed, Plaintiff’s Opposition fails to detail any 9 investigation it, or its counsel, undertook at all to determine whether jurisdiction in California 10 was proper over the Nonresident Defendants. In fact, despite being granted more than five months 11 to conduct jurisdictional discovery and file supplemental briefing to support Plaintiff’s 12 opposition to Defendants’ motion to quash, Plaintiff failed to file any supplemental briefing by 13 the September 8, 2022 deadline and instead waited eight days to unilaterally dismiss the current 14 proceeding. Plaintiff’s failure to timely comply with the Court’s request for supplemental 15 briefing on the issue of personal jurisdiction should be interpreted by this Court as an admission 16 that Plaintiff never had any facts to support personal jurisdiction over the Nonresident Defendants 17 and the Court should treat Defendants’ motion to quash as unopposed for purposes of assessing 18 Defendants’ section 128.7 sanctions request. 19 At most, in Plaintiff’s response to Defendants’ sanctions motion, Plaintiff appears to 20 make the attenuated argument that because some of the Nonresident Defendants (Mr. Lipkin and 21 Mr. Bellas) worked for a company (Plaintiff) that at some point may have serviced clients in the 22 State of California, it must logically follow that this Court can exercise personal jurisdiction over 23 all six of the Nonresident Defendants. However, Plaintiff was required to demonstrate personal 24 jurisdiction over each Nonresident Defendant but has failed to do so. Plaintiff has not offered a 25 single fact other than speculation and lawyerly argument. 26 27 7 The Nonresident Defendants are UCOMMG, Unified Communications, Kenneth Newbatt, Bianca Newbatt, 28 Mitchell Lipkin, and Michael Bellas. 7 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 As to Defendants Michael Bellas and Mitchell Lipkin, Plaintiff’s one-sentence argument 2 falls woefully short of demonstrating general jurisdiction. Plaintiff states that Mr. Bellas and Mr. 3 Lipkin were employed by Plaintiff but ignores that Mr. Bellas was hired and worked for Plaintiff 4 in North Carolina and Mr. Lipkin was hired and worked for Plaintiff in Minnesota. (Bellas Decl. 5 ¶ 4; Lipkin Decl. ¶ 4.) Plaintiff also claims, without any evidentiary support, that Mr. Bellas and 6 Mr. Lipkin “made numerous trips to Plaintiff’s offices in California.” To the contrary, and as set 7 forth in the supporting declarations to Defendants’ motion to quash, the last time Mr. Lipkin was 8 in California was last year for a vacation. (Lipkin Decl. ¶ 3.) Prior to that, Mr. Lipkin hadn’t been 9 to California since 2015, when he was again there for a vacation. (Ibid.) Mr. Bellas last traveled 10 to California in February 2020 for a management meeting while was employed by Plaintiff. 11 (Bellas Decl. ¶ 4.) Mr. Bellas traveled to California once or twice a year while he was employed 12 by Plaintiff. (Ibid.) 13 Moreover, even if true, visits to a company headquarters by an employee are insufficient 14 as a matter of law to establish personal jurisdiction. (See, e.g., Szabo v. Medical Information 15 Bureau (1981) 127 Cal.App.3d 51, 56-57; Kourkene v. American BBR, Inc. (9th Cir. 1963) 313 16 F.2d 769; Frederick Fell, Inc. v. Superior Court (1973) 36 Cal.App.3d 93, 96.) Accordingly, 17 there is no basis for Plaintiff’s argument that any of the Nonresident Defendants are subject to 18 general jurisdiction in California. 19 As to specific jurisdiction, the sole argument advanced by Plaintiff is that this Court has 20 specific jurisdiction because the Nonresident Defendants “purposefully directed their 21 intentionally tortious conduct at Plaintiff, a California resident.” (Oppo. pp. 14-15.) Glaringly 22 absent from the Opposition is any explanation, let alone evidence, of how each of the six 23 Nonresident Defendants expressly aimed such tortious conduct at California. Each defendant’s 24 “contacts” with the forum state must be evaluated separately. (See Calder v. Jones (1984) 465 25 U.S. 783, 790.) A non-resident defendant is not automatically subject to personal jurisdiction 26 based solely on actions in the forum state undertaken in his corporate capacity. (Id. at 790.) 27 Plaintiff’s Opposition made no attempt to distinguish between the four individual and two 28 corporate Nonresident Defendants. 8 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 Moreover, Plaintiff’s argument is expressly prohibited by the Supreme Court’s holding 2 in Walden v. Fiore (2014) 134 S.Ct. 1115, 1121. Indeed, every single case cited in Plaintiff’s 3 minimum contacts analysis precedes the Supreme Court’s holding in Walden. Plaintiff relies on 4 “the strength of [its] own forum connections, coupled with evidence suggesting [Defendants] 5 knew of those connections... Walden requires more.” (Axiom Foods, Inc. v. Acerchem 6 International, Inc. (9th Cir. 2017) 874 F.3d 1064, 1069.) Walden requires that the Court look to 7 Defendants’ “own contacts” with the forum, not to Defendants’ knowledge of a plaintiff’s 8 connections to the forum. (Walden, 134 S. Ct. at 1124-25.) Moreover, the California Supreme 9 Court has held that knowledge that harm will likely be suffered in the forum state, when 10 unaccompanied by other contacts, is too unfocused to justify personal jurisdiction. (Pavlovich v. 11 Superior Court (2002) 29 Cal.4th 262, 272.) Merely asserting that a defendant knew or should 12 have known that his intentional acts would cause harm in the forum state is not enough to 13 establish jurisdiction under the effects test. (Id. at pp. 270–271.) 14 Notably, Plaintiff has not and cannot allege any specific facts in this case that actually 15 relate to conduct by the Nonresident Defendants occurring in or aimed towards California. If 16 Plaintiff could allege such facts, it would have pled so in its Complaint or amended Complaint 17 and it surely would have highlighted these facts in its Opposition. However, Plaintiff did neither. 18 It is clear that Plaintiff engaged in little to no investigation with respect to who should be 19 a named as a defendant in this lawsuit and the factual allegations supporting its claims. A failure 20 to investigate prior to filing suit leads to a “file-first, investigate later” litigation style that is 21 subject to imposition of sanctions. (See also Jorgensen v. Taco Bell Corp. (1996) 50 Cal.App.4th 22 1398, 1403.) Plaintiff’s filing of its initial and amended complaints, which fail to include facts 23 supporting this Court’s jurisdiction over the Nonresident Defendants, violates section 128.7. (See 24 Love (Love v. The Mail on Sunday (C.D. Cal. July 13, 2006) No. CV05-7798ABCPJWX, 2006 25 WL 4046169, *6-7; Jones v. Campbell University (D.D.C. 2018) 322 F.Supp.3d 106, 109; Lipkin 26 v. Hunt (S.D.N.Y. 2008) 573 F.Supp.2d 836, 844.) 27 Bizarrely, Plaintiff’s Opposition contains a section entitled “The Authorities Cited by 28 Defendants Are Wholly Distinguishable” and discusses three cases: Sabek, Inc. v. Engelhard 9 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 Corp. (1998) 65 Cal. App. 4th 992, 1000-1001; Hendrix v. Naphtal (9th Cir. 1992) 971 F.2d 398, 2 400; and Perogeux, LLC v. Winkler (N.D. Cal. Mar. 15, 2017) Case No. 17-cv-00572 NC. (Oppo. 3 p. 16-17.) However, none of these cases are even cited in Defendants’ motion. Plaintiff entirely 4 failed to address any of the cases cited by Defendants as to why sanctions are appropriate due to 5 Plaintiff’s failure to properly investigate this Court’s jurisdiction over the Nonresident 6 Defendants. 7 D. Plaintiff’s Opposition Completely Fails to Address the False or Misleading 8 Statements and Complete Lack of Factual Support in the FAC and SAC 9 Finally, Defendants’ moving papers detailed multiple false or misleading statements 10 contained in Plaintiff’s SAC. (See Motion pp. 13-14.) Inclusion of false or misleading statements 11 in a pleading can also serve as the basis for sanctions. (Pipe Trades Council of N. Cal., U.A. 12 Local 159 v. Underground Contractors Ass’n of N. Cal. (9th Cir. 1987) 935 F.2d 1275, 1280- 13 81.) Plaintiff completely failed to address these points. 14 Similarly, Plaintiff’s Opposition utterly fails the address the fact that it failed to provide, 15 even after two attempts to amend, adequate factual support for any of the causes of action in its 16 FAC and SAC. It is therefore undisputed for purposes of this motion that Plaintiff included false 17 or misleading statements in its pleadings and failed to conduct an adequate investigation as to 18 any of its claims. Defendants’ motion should also be granted on this basis alone. 19 IV. CONCLUSION 20 For the foregoing reasons, as well as those set forth in their moving papers, Defendants 21 respectfully request that the Court grant their motion for sanctions pursuant to section 128.7. 22 23 DATE: September 22, 2022 FISHER & PHILLIPS LLP 24 25 By: Shayna Balch Santiago 26 Kathryn M. Evans Attorneys for Defendants 27 28 10 DEFENDANTS’ REPLY TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CCP SECTION 128.7 FP 45233324.2 1 PROOF OF SERVICE (CCP §§1013(a) and 2015.5) 2 I, the undersigned, am at least 18 years old and not a party to this action. I am employed 3 in the County of San Diego with the law offices of Fisher & Phillips LLP and its business address is 4747 Executive Drive, Suite 1000, San Diego, California 92121. 4 On September 22, 2022, I served the following document(s) DEFENDANTS’ REPLY 5 TO PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION FOR SANCTIONS PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 128.7 on the person(s) listed 6 below by placing the original a true copy thereof enclosed in sealed envelope(s) addressed as follows: 7 8 Cameron H. Totten T: (626) 744-1838 Armen Manasserian F: (626) 744-3167 9 CHORA YOUNG & MANASSERIAN LLP E: cameron@cym.law; armen@cym.law 650 Sierra Madre Villa Avenue, Suite 304 10 Pasadena, California 91107 Attorneys for Plaintiff, Butler America, LLC 11 [by MAIL] - I enclosed the document(s) in a sealed envelope or package addressed to the person(s) whose address(es) are listed above and placed the envelope for collection 12 and mailing, following our ordinary business practices. I am readily familiar with this business’s practice for collecting and processing correspondence for mailing. On the 13 same day that correspondence is placed for collection and mailing, it is deposited in the ordinary course of business with the United States Postal Service in San Diego California, 14 in a sealed envelope with postage fully prepaid. [by FAX] - Based on an agreement of the parties to accept service by fax transmission, 15 I faxed the document(s) to the person(s) at fax number(s) listed above from fax number (858) 597-9601. The fax reported no errors. A copy of the transmission report is attached. 16 [by OVERNIGHT DELIVERY] - I enclosed the document(s) in an envelope or package provided by an overnight delivery carrier and addressed to the person(s) at the address(es) 17 listed above. I placed the envelope or package for collection and overnight delivery at an office or a regularly utilized drop box of the overnight carrier. 18 [by ELECTRONIC SERVICE] - Based on a court order or an agreement of the parties to accept service by electronic transmission, I electronically served the document(s) to 19 the person(s) at the electronic service address(es) listed above. 20 I declare under penalty of perjury, under the laws of the State of California, that the foregoing is true and correct. 21 Executed September 22, 2022, at San Diego, California. 22 Amanda Funkhouser By: 23 Print Name Signature 24 25 26 27 28 1 PROOF OF SERVICE FP 45233324.2