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MATHEWS &PEDDIBHOTLA LAW GROUP, PC
Soby M. Mathews (State Bar #208317)
39899 Balentine Dr., Ste. #
Newark, CA 94560
Telephone: ( 1949
O’NEILL & LIAN, LLP
Sean M. O’Neill, (State Bar #277854)
39899 Balentine Drive, Suite 200
Newark, CA 94560
Tel.: (510) 933
Fax: (510) 259
Email: sean@oneillandlian.com
Attorneys for Plaintiffs/Cross Complainant
Savi Technologies, Inc.
SUPERIOR COURT OF THE STATE OF CALIFORNI
FOR THE COUNTY OF SANTA CLARA
SAVI TECHNOLOGIES, INC., a Georgia Case No.: 1 268149
Corporation;
SAVI TECHNOLOGIES, INC.’S
Plaintiff, MEMORANDUM OF POINTS AND
Mathews & Peddibhotla Law Group, PC
AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER
39899 Balentine Dr., Ste. 380
WACKPRO, INC., a California TO WACKPRO, INC.’S SECOND, AND
Newark, CA 94560
Corporation, and DOES 1 through 100,
FOURTH CAUSES OF ACTION IN
Inclusive
SECOND AMENDED CROSS
Defendant COMPLAINT
Date: September 20, 2018
Time: 9:00am
Dept:
Judge: Kirwan
WACKPRO, INC., a California Complaint Filed: July 18, 2014
Corporation; Cross Complaint Filed: August 7, 2015
Cross Complainant, Trial Date: October 1, 2018
SAVI TECHNOLOGIES, INC., a Georgia
Corporation
Cross Defendant
SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS COMPLAINT.
1
Table of Contents
2 I. INTRODUCTION ........................................................................................... 5
3 II. FACTS ............................................................................................................. 5
4
III. ARGUMENT ................................................................................................. 6
5
A. The Fourth Cause of Action is preempted by the California Uniform Trade Secrets
6
7 Act. 7
8 1. The K.C. Multimedia, Inc. Court’s discussion on CUTSA preemption. 7
9
2. Fourth Cause of Action – Interference with Contractual Relations with
10
Riverpoint and SBP. 8
11
12 B. The Second Cause of Action must be dismissed because non-compete clauses are
13 void as a matter of law. 10
Mathews & Peddibhotla Law Group, PC
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39899 Balentine Dr., Ste. 380
2. The Fact That The Alleged Unlawful Competition Occurred While The ICA
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Newark, CA 94560
Was In Effect Is Not Enough To Save An Illegal Non-Compete. 11
16
17 4. There is No Trade Secret Exception to the Rule Against Non-Compete Clauses.
18 13
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C. Leave to amend should not be granted. 15
20
D. WackPro has failed to plead allegations that are any different from this those the
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22 court previously considered and dismissed. 15
23 IV.CONCLUSION .............................................................................................. 18
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SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
1
Table of Contents
2 Cases
3 Angelica Textile Services, Inc. v. Park (2013) 220 Cal.App.4th 495 ............................ 10, 11
4
Aubrey v. Tri-City Hospital (1992) 2 Cal.4th 962, 966-967 ................................................... 5
5
Callaway Golf Co. v. Dunlop Slazenger Group Americas, Inc. (2004) 318 F.Supp.2d, 216 6
6
7 Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564 ...................................... 9, 10
8 Edwards v. Arthur Andersen (2008) 44 Cal. 4th 937 ...................................................... 9, 12
9
Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400 ......................................................... 10
10
K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc. (2012) 171 Cal.App.4th
11
12 939.................................................................................................................................. 6, 7
13 Kelton v. Starvinski (2006) 138 Cal.App.4th 941 .................................................................. 9
Mathews & Peddibhotla Law Group, PC
14
Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310 ....................................................... 8
39899 Balentine Dr., Ste. 380
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Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 383 ............................................ 5
16
17 Phoenix Techs. Ltd. v. DeviceVM, (N.D. Cal. Dec. 8, 2009) No. C 09-04697, 2009 WL
18 4723400.............................................................................................................................. 6
19
Retirement Group v. Galante (2009) 176 Cal.App.4th 1226 .......................................... 9, 13
20
Schonfeldt v. State of Calif. (1998) 61 Cal.App.4th 1462 ................................................... 13
21
22 Serrano v. Priest (1971) 5 Cal.3d 584, 591 ........................................................................... 5
23 Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210 ........................................ 8
24
Tiedje v. Aluminum Taper Milling Co. (1956) 46 Cal.2d 450 ............................................... 9
25
VL Systems, Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th 708 ...................................... 10, 14
26
27 Statutes
28 3
SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
Business and Professions Code (“BPC”) § 16660 ........................................................ passim
1
2 C.C.P. §430.30(a)................................................................................................................... 5
3 C.C.P. §430.50 ....................................................................................................................... 5
4
Civ. Proc. (“C.C.P.”) §430.30(e) ........................................................................................... 3
5
Civil Code § 3426 ............................................................................................................ 8, 12
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Mathews & Peddibhotla Law Group, PC
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SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
I. INTRODUCTION
1
2
Savi Technologies, Inc. (“Savi”) will move this Court for an order for an order sustaining
3
its demurrer, without leave to amend, and dismissing Wackpro’s Second and Fourth Causes of
4
Action of the Second Amended Cross-Complaint (“SACC”) of WackPro, Inc. pursuant to Code
5
6 Civ. Proc. (“C.C.P.”) §430.30(e) on the grounds that the Second and Fourth Causes of Action
7 causes of action are preempted by the California Uniform Trade Secrets Act (“CUTSA”) and the
8 Second Cause of Action is barred because non-compete clauses are illegal and not enforceable
9
under California Business and Professions Code § 16600. Because these claims are preempted or
10
barred by statute, they fail to state facts sufficient to constitute a cause of action. Further WackPro
11
does not overcome the issues raised in this court’s February 13, 2018 Order. Therefore, Savi is
12
entitled to an order sustaining its demurrer, without leave to amend, and dismissing Wackpro’s
13
Mathews & Peddibhotla Law Group, PC
14 Second and Fourth Causes of Action.
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II. FACTS
16
On or about March 22, 2012, Savi and WackPro entered into an Independent Contractor
17
Agreement (“the ICA”) whereby Savi would provide SAP consulting services to WackPro by
18
19 assisting in software development for WackPro’s clients. The ICA set forth general terms
20 governing the Parties’ contractual relationship, including Section 8 Confidentiality, Section 9,
21 Non-Disclosure, and Section 11 Non-Competition. The more particular details of the projects that
22
the Parties collaborated on were set forth in Addenda (“the Addenda”). The Addenda addressed
23
various terms of the Parties’ agreement, including: the scope of the work, contract duration,
24
pricing for services to be performed by Savi, and invoicing/payment procedures. Ultimately,
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26 WackPro failed to pay. Savi made repeated inquires to WackPro to determine why WackPro was
27 not paying the invoices that Savi presented and this lawsuit subsequently followed.
28 5
SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
This demurrer is a continuation of Savi’s Motion for Judgment on the Pleadings (“MJP”)
1
2 against WackPro’s Cross-Complaint against Savi, specifically as to causes of action for breach of
3 non-compete and intentional interference with prospective economic advantage. This court
4 granted Savi’s MJP on February 13, 2018. The court granted without leave to amend for the
5 interference claim and with leave to amend for the non-compete claim. WackPro filed a First
6
Amended Cross-Complaint but then on June 14, 2018, WackPro filed a Second Amended Cross
7
Complaint (“SACC”) which had a new version of the non-compete claim and a new interference
8
claim for Intentional Interference with Contractual Relations. After meeting and conferring with
9
10 counsel for WackPro, Savi brought this demurrer. (See O’Neill Declaration.)
11
III. ARGUMENT
12
The function of a demurrer is to test the legal sufficiency of the pleading. Owens v. Kings
13
Mathews & Peddibhotla Law Group, PC
Supermarket (1988) 198 Cal.App.3d 379, 383. A demurrer may be used by a party to challenge
14
39899 Balentine Dr., Ste. 380
15 defects that appear on the face of a pleading of from those matters outside the pleading that are
Newark, CA 94560
16 judicially noticeable. (C.C.P. §430.30(a).) California Code of Civil Procedure section 430.10(e) &
17 (f) allow for a demurrer when the pleading does not state sufficient facts or is ambiguous,
18
respectively.
19
A demurrer may be taken to the entire complaint or to any of the causes of action stated in the
20
complaint. (C.C.P. §430.50.) For the purposes of testing the sufficiency of the cause of action, the
21
demurrer assumes all material facts alleged in the complaint to be true. (Aubrey v. Tri-City
22
th
23 Hospital (1992) 2 Cal.4 962, 966-967; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) However, it
24 does not admit contentions deductions, or conclusions of law. (Id.)
25 WackPro’s Causes of Action are defective because they are either preempted by the
26
California Uniform Trade Secret Act (“CUTSA”) (the Fourth Cause of Action) or are based illegal
27
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SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
contractual provisions (the Second Cause of Action). Thus, the Court should grant Savi’s
1
2 demurrer, without leave to amend, against the Second and Fourth Cause of Action in WackPro’s
3 Cross-Complaint.
4
A. The Fourth Cause of Action is preempted by the California Uniform Trade
5
Secrets Act.
6
WackPro’s Fourth Causes of Action arises out of generally the same factual allegations as
7
8 its misappropriation claim. WackPro alleges that Savi used confidential information to interfere
9 with Wackpro’s business relationships by soliciting Wackpro’s clients. Notably, this same conduct
10 has been used as the factual basis for the Second Cause of Action for Misappropriation. However,
11 WackPro cannot legally sustain these common law causes of action because the California
12
legislature’s adoption of the CUTSA preempts common law claims based upon the same nucleus
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Mathews & Peddibhotla Law Group, PC
of fact as a trade secrets misappropriation claim. (K.C. Multimedia, Inc. v. Bank of Am. Tech. &
14
39899 Balentine Dr., Ste. 380
Operations, Inc. (2012) 171 Cal.App.4th 939.)
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16 1. The K.C. Multimedia, Inc. Court’s discussion on CUTSA preemption.
17
The K.C. Multimedia, Inc. Court notes that common law breaches of confidence causes of
18
action are preempted under CUTSA when the same facts supported both claims of
19
misappropriation and the breach of the duty of confidence. (Id., at 262.) The Court determined that
20
21 common law causes of action “were preempted where the allegations were based entirely on the
22 same factual allegations that form the basis of its trade secretes claim.” (Id. citing Callaway Golf
23 Co. v. Dunlop Slazenger Group Americas, Inc. (2004) 318 F.Supp.2d, 216, 220 [applying
24
California law].) In other words, preemption generally applies where “there is no material
25
distinction” between the wrongdoing underlying the CUTSA claim and the non-CUTSA claim.
26
(See Phoenix Techs. Ltd. v. DeviceVM, (N.D. Cal. Dec. 8, 2009) No. C 09-04697, 2009 WL
27
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SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
4723400, at *4.)
1
2 2. Fourth Cause of Action – Interference with Contractual Relations with
3 Riverpoint and SBP.
4
Much like the Third Cause of Action, the gravamen of the Fourth Cause of Action for
5
Interference with Contractual Relations with Riverpoint and SBP is the misappropriation of trade
6
secrets and is preempted by CUTSA. WackPro alleges that SAVI contacted SBP and Riverpoint,
7
8 instructed them to not pay WackPro, and, instead, to pay SAVI directly. (WackPro SACC ¶ 57-
9 65.) WackPro identifies its customer list and the customer contact information as trade secrets.
10 (SACC ¶ 52, 61, 63.)
11 Wackpro’s claim for Interference with Contractual Relations with Riverpoint and SBP simply
12
restates its claim for trade secret misappropriation. The gravamen of this cause of action is that
13
Savi misappropriated Plaintiffs’ trade secrets, which interfered with WackPro’s contractual
Mathews & Peddibhotla Law Group, PC
14
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relationship with Riverpoint and SBP. Savi allegedly used WackPro’s trade secrets to contact
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16 Riverpoint and SBP, induce Riverpoint and SBP to not pay WackPro, terminate their contract with
17 WackPro, and enter into a new contract with Savi directly. (Id.)
18 In order to know SBP and Riverpoint existed and to contact them, Savi would need knowledge
19
of WackPro’s customer lists. Knowing who WackPro’s clients are and allegedly using that
20
information to induce their breach is the misuse of a trade secret. Furthermore, it is obvious that in
21
order for Savi to “contact” Riverpoint and SBP, Savi would need their “contact information.”
22
Thus, contacting Riverpoint and SBP, in order to in order to induce them to breach their contracts
23
24 with WackPro is the misuse of a trade secret.
25 Accordingly, no material distinction exists between the wrongdoing alleged in Wackpro’s
26 CUTSA claim and that alleged in Wackpro’s claims for Interference with Contractual Relations
27
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SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
with Riverpoint and SBP.
1
2 “Factually, the conduct derives from the “same nucleus of facts” as the trade secrets claim, and
3 it is therefore preempted.” (K.C. Multimedia, Inc. 171 Cal.App.4th at 263.)
4 Misappropriation means “use of a trade secret of another without express or implied consent
5 by a person who … [used] a trade secret of another without express or implied consent by a person
6
who… [a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use
7
Again, the facts in this case are completely analogous to K.C. Multimedia, Inc. in that the
8
plaintiff-appellant pled a tortious interference with a contract cause of action relying on an
9
10 identical factual scenario: a party entrusted with certain confidential information, without consent
11 of the other party, used this confidential information in a way that damaged the other party. This is
12 the definition of trade secrets misappropriation under CUTSA, so it cannot be said that the facts
13
underlying WackPro’s Fourth Cause of Action are separate from WackPro’s Third Cause of
Mathews & Peddibhotla Law Group, PC
14
Action for trade misappropriation. Accordingly, the Court should dismiss WackPro’s Fourth
39899 Balentine Dr., Ste. 380
15
Newark, CA 94560
Cause of Action because it is preempted by CUTSA.
16
It is clear that the entirety of Wackpro’s claim is “either “based upon misappropriation of a
17
18 trade secret” (§ 3426.7, subd. (b)(2)) or they are based upon no legally significant events at all.”
19 (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 236 [109 Cal.Rptr.3d 27, 51], as
20 modified on denial of reh'g (May 27, 2010) disapproved of by Kwikset Corp. v. Superior Court
21
(2011) 51 Cal.4th 310.) As far as its interference claim is concerned, Wackpro does not identify
22
any conduct by Savi that “did not depend for its supposed wrongfulness on the use of trade
23
secrets.” (Id.)
24
25 The CUTSA claim therefore preempts this claim. As such, Wackpro’s claim for intentional
26 interference with contract is preempted and Savi is entitled to an order sustaining its demurrer,
27 without leave to amend, and dismissing Wackpro’s Fourth Cause of Action.
28 9
SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
1 B. The Second Cause of Action must be dismissed because non-compete clauses
2 are void as a matter of law.
3 WackPro alleges in its Second Cause of Action that the Parties’ Agreement included a
4
non-compete provision which provides in pertinent part that Savi was prohibited in engaging in
5
any “dealings whatsoever, either directly or indirectly through associates with any customer or
6
client of the Company or its subsidiaries or any person or firm with whom Consultant has made
7
8 contact in connection with his consulting activities for the Company . . . both during the term of
9 this Agreement and subsequent termination of this Agreement. (SACC, Exh. A, ¶ 11) However,
10 under Business and Professions Code § 16600, “every contract by which anyone is restrained from
11 engaging in a lawful profession, trade, or business of any kind is to that extent void.” (Business
12
and Professions Code (“BPC”) § 16660.) Clearly, this is a prohibited non-compete provision,
13
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prohibited by California law.
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“Noncompetition agreements are invalid under [Business and Professions Code] section 16600
15
Newark, CA 94560
16 in California even if narrowly drawn, unless they fall within the statutory exceptions of section[s]
17 16601,16602, or 16602.5” none of which is applicable in the current case. (Edwards v. Arthur
18 Andersen (2008) 44 Cal. 4th 937, 955.)
19
Non-compete and non-solicit of customers are both invalid under BPC § 16600. (Dowell v.
20
Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 575 [“Based on the foregoing it is clear that
21
the noncompete and nonsolicitation clauses in the agreements with Dowell and Chapman are void
22
and unenforceable under section 16600…”].)
23
24 Even thought there is a signed contract between Savi and Wackpro, parties cannot, through
25 agreement, ratification or conduct validate a contract that creates an illegal restraint on trade.
26 (Kelton v. Starvinski (2006) 138 Cal.App.4th 941, 946-947.) Moreover, “[a] contract made
27
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SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
contrary to public policy or against the express mandate of a statute may not serve as the
1
2 foundation of any action, either in law or equity.” (Id. at 949 citing Tiedje v. Aluminum Taper
3 Milling Co. (1956) 46 Cal.2d 450, 453-454).) Parties will be left where they are found when they
4 come to a court for relief. (Id. at 454.)
5
1. BPC § 16600 Applies To Corporations And Independent Contractors.
6
BPC § 16600 also applies to independent contractors. (Retirement Group v. Galante
7
(2009) 176 Cal.App.4th 1226, 1231 “…defendant Galante (who had also been an independent
8
contractor for TRG)…”) It also applies to contracts between corporations. (VL Systems, Inc. v.
9
10 Unisen, Inc. (2007) 152 Cal.App.4th 708, 710 [Consulting company brought breach of contract
11 action against client, alleging that client hired one of its consultants, in violation of no-hire
12 provision of contract. Court held no-hire provision unenforceable under section 16600.].)
13
Mathews & Peddibhotla Law Group, PC
2. The Fact That The Alleged Unlawful Competition Occurred While The
14
39899 Balentine Dr., Ste. 380
ICA Was In Effect Is Not Enough To Save An Illegal Non-Compete.
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16 WackPro Attempts to state that Savi had a duty to not compete during the course of the ICA.
17 At paragraph 20 of their complaint, Wackpro states: “The non-compete provision prohibits SAVI
18 from, "during the term of this Agreement ... [using] directly or indirectly, for its own benefit ...
19
customer or contact lists…” (SACC ¶ 20.) Non-compete and non-solicit clauses are both invalid
20
under BPC § 16600 and the statute does not make distinction based on when the non-compete is to
21
take effect. (Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th at 575.)
22
23 Employees are generally prohibited from competing with their employers (Labor Code § 2863;
24 “An employee who has any business to transact on his own account, similar to that entrusted to
25 him by his employer, shall always give the preference to the business of the employer.”) However,
26 this is based on the Labor Code, which governs employer-employee relationships, and an
27
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SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
employee’s duty of loyalty to their employer. (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th
1
2 400, 410-411.) Neither of these is applicable to Savi as Savi was not an employee of WackPro.
3 a. Angelic Textiles Is Inapplicable To This Case As An Independent
4 Contractor, Savi Owes No Duty Of Loyalty When Contracting With
5
Wackpro.
6
Wackpro will cite to Angelica Textile Services, Inc. v. Park as grounds for applying the
7
noncompete to Savi because the alleged unlawful competition occurred during the course of the
8
ICA; however, Angelica Textiles concerns an employee’s duty of loyalty to an employer during
9
10 the term of employment and specifically concerned a corporate office who owed a fiduciary duty
11 to the corporation.
12 “While California law does permit an employee to seek other employment and even to make
some ‘preparations to compete’ before resigning [citation], California law does not authorize
13
an employee to transfer his loyalty to a competitor. During the term of employment, an
Mathews & Peddibhotla Law Group, PC
14 employer is entitled to its employees' ‘undivided loyalty.’ [Citation.]” ([Citations.]) … In
39899 Balentine Dr., Ste. 380
particular, we note that as an officer of Angelica, Park owed the corporation a fairly
15 broad duty of loyalty … In sum, because Angelica's non-UTSA claims are based on Park's
Newark, CA 94560
conduct during his employment by Angelica, contrary to Emerald's argument, they are in no
16 sense barred by Business and Professions Code section 16600.” (Angelica Textile Services,
17 Inc. v. Park (2013) 220 Cal.App.4th 495, 509, as modified (Oct. 29, 2013), as modified on
denial of reh'g (Nov. 7, 2013).)
18
Any discussion of Angelica is irrelevant to this matter because Savi is a corporation and an
19
independent contractor to Wackpro, not an employee, and certainly not a corporate officer of
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21 WackPro. No California case or statute supports the claim that Independent Contractors owe a
22 duty of loyalty to a party with whom they contract. Thus, there is no claim for unlawful
23 competition, based on the noncompete provision, during the term of the ICA.
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3. It Does Not Matter That The Conduct Alleged Occurred Outside
25
California As The ICA Explicitly Calls For The Application Of
26
California Law As If The Conduct Occurred In California.
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SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI
TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF
ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT.
Paragraph 17 of the ICA, attached as Exhibit A of the SACC, states “Applicable Law. This
1
2 Agreement shall be governed and construed in accordance with the laws of the State of California
3 as if the Agreement were made in California for performance entirely within the State of
4 California.” (SACC, Exh. A, pg. 4, ¶17.)
5 Paragraph 17 forecloses any argument that the non-compete should apply because the
6
conduct in question occurred outside California. Even if all the conduct occurred outside of
7
California, the ICA treats it as occurring in California. It simply does not matter where certain
8
clients were or whether the conduct occurred in Indiana, Illinois, New Jersey, Georgia, or India as
9
10 the ICA calls for the application of California law.
11
4. There is No Trade Secret Exception to the Rule Against Non-Compete
12
Clauses.
13
Mathews & Peddibhotla Law Group, PC
BPC § 16600 prohibits non-competes outside of certain statutory exceptions not appli
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MATHEWS &PEDDIBHOTLA LAW GROUP, PC Soby M. Mathews (State Bar #208317) 39899 Balentine Dr., Ste. # Newark, CA 94560 Telephone: ( 1949 O’NEILL & LIAN, LLP Sean M. O’Neill, (State Bar #277854) 39899 Balentine Drive, Suite 200 Newark, CA 94560 Tel.: (510) 933 Fax: (510) 259 Email: sean@oneillandlian.com Attorneys for Plaintiffs/Cross Complainant Savi Technologies, Inc. SUPERIOR COURT OF THE STATE OF CALIFORNI FOR THE COUNTY OF SANTA CLARA SAVI TECHNOLOGIES, INC., a Georgia Case No.: 1 268149 Corporation; SAVI TECHNOLOGIES, INC.’S Plaintiff, MEMORANDUM OF POINTS AND Mathews & Peddibhotla Law Group, PC AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER 39899 Balentine Dr., Ste. 380 WACKPRO, INC., a California TO WACKPRO, INC.’S SECOND, AND Newark, CA 94560 Corporation, and DOES 1 through 100, FOURTH CAUSES OF ACTION IN Inclusive SECOND AMENDED CROSS Defendant COMPLAINT Date: September 20, 2018 Time: 9:00am Dept: Judge: Kirwan WACKPRO, INC., a California Complaint Filed: July 18, 2014 Corporation; Cross Complaint Filed: August 7, 2015 Cross Complainant, Trial Date: October 1, 2018 SAVI TECHNOLOGIES, INC., a Georgia Corporation Cross Defendant SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS COMPLAINT. 1 Table of Contents 2 I. INTRODUCTION ........................................................................................... 5 3 II. FACTS ............................................................................................................. 5 4 III. ARGUMENT ................................................................................................. 6 5 A. The Fourth Cause of Action is preempted by the California Uniform Trade Secrets 6 7 Act. 7 8 1. The K.C. Multimedia, Inc. Court’s discussion on CUTSA preemption. 7 9 2. Fourth Cause of Action – Interference with Contractual Relations with 10 Riverpoint and SBP. 8 11 12 B. The Second Cause of Action must be dismissed because non-compete clauses are 13 void as a matter of law. 10 Mathews & Peddibhotla Law Group, PC 14 39899 Balentine Dr., Ste. 380 2. The Fact That The Alleged Unlawful Competition Occurred While The ICA 15 Newark, CA 94560 Was In Effect Is Not Enough To Save An Illegal Non-Compete. 11 16 17 4. There is No Trade Secret Exception to the Rule Against Non-Compete Clauses. 18 13 19 C. Leave to amend should not be granted. 15 20 D. WackPro has failed to plead allegations that are any different from this those the 21 22 court previously considered and dismissed. 15 23 IV.CONCLUSION .............................................................................................. 18 24 25 26 27 28 2 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. 1 Table of Contents 2 Cases 3 Angelica Textile Services, Inc. v. Park (2013) 220 Cal.App.4th 495 ............................ 10, 11 4 Aubrey v. Tri-City Hospital (1992) 2 Cal.4th 962, 966-967 ................................................... 5 5 Callaway Golf Co. v. Dunlop Slazenger Group Americas, Inc. (2004) 318 F.Supp.2d, 216 6 6 7 Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564 ...................................... 9, 10 8 Edwards v. Arthur Andersen (2008) 44 Cal. 4th 937 ...................................................... 9, 12 9 Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400 ......................................................... 10 10 K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc. (2012) 171 Cal.App.4th 11 12 939.................................................................................................................................. 6, 7 13 Kelton v. Starvinski (2006) 138 Cal.App.4th 941 .................................................................. 9 Mathews & Peddibhotla Law Group, PC 14 Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310 ....................................................... 8 39899 Balentine Dr., Ste. 380 15 Newark, CA 94560 Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 383 ............................................ 5 16 17 Phoenix Techs. Ltd. v. DeviceVM, (N.D. Cal. Dec. 8, 2009) No. C 09-04697, 2009 WL 18 4723400.............................................................................................................................. 6 19 Retirement Group v. Galante (2009) 176 Cal.App.4th 1226 .......................................... 9, 13 20 Schonfeldt v. State of Calif. (1998) 61 Cal.App.4th 1462 ................................................... 13 21 22 Serrano v. Priest (1971) 5 Cal.3d 584, 591 ........................................................................... 5 23 Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210 ........................................ 8 24 Tiedje v. Aluminum Taper Milling Co. (1956) 46 Cal.2d 450 ............................................... 9 25 VL Systems, Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th 708 ...................................... 10, 14 26 27 Statutes 28 3 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. Business and Professions Code (“BPC”) § 16660 ........................................................ passim 1 2 C.C.P. §430.30(a)................................................................................................................... 5 3 C.C.P. §430.50 ....................................................................................................................... 5 4 Civ. Proc. (“C.C.P.”) §430.30(e) ........................................................................................... 3 5 Civil Code § 3426 ............................................................................................................ 8, 12 6 7 8 9 10 11 12 13 Mathews & Peddibhotla Law Group, PC 14 39899 Balentine Dr., Ste. 380 15 Newark, CA 94560 16 17 18 19 20 21 22 23 24 25 26 27 28 4 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. I. INTRODUCTION 1 2 Savi Technologies, Inc. (“Savi”) will move this Court for an order for an order sustaining 3 its demurrer, without leave to amend, and dismissing Wackpro’s Second and Fourth Causes of 4 Action of the Second Amended Cross-Complaint (“SACC”) of WackPro, Inc. pursuant to Code 5 6 Civ. Proc. (“C.C.P.”) §430.30(e) on the grounds that the Second and Fourth Causes of Action 7 causes of action are preempted by the California Uniform Trade Secrets Act (“CUTSA”) and the 8 Second Cause of Action is barred because non-compete clauses are illegal and not enforceable 9 under California Business and Professions Code § 16600. Because these claims are preempted or 10 barred by statute, they fail to state facts sufficient to constitute a cause of action. Further WackPro 11 does not overcome the issues raised in this court’s February 13, 2018 Order. Therefore, Savi is 12 entitled to an order sustaining its demurrer, without leave to amend, and dismissing Wackpro’s 13 Mathews & Peddibhotla Law Group, PC 14 Second and Fourth Causes of Action. 39899 Balentine Dr., Ste. 380 15 Newark, CA 94560 II. FACTS 16 On or about March 22, 2012, Savi and WackPro entered into an Independent Contractor 17 Agreement (“the ICA”) whereby Savi would provide SAP consulting services to WackPro by 18 19 assisting in software development for WackPro’s clients. The ICA set forth general terms 20 governing the Parties’ contractual relationship, including Section 8 Confidentiality, Section 9, 21 Non-Disclosure, and Section 11 Non-Competition. The more particular details of the projects that 22 the Parties collaborated on were set forth in Addenda (“the Addenda”). The Addenda addressed 23 various terms of the Parties’ agreement, including: the scope of the work, contract duration, 24 pricing for services to be performed by Savi, and invoicing/payment procedures. Ultimately, 25 26 WackPro failed to pay. Savi made repeated inquires to WackPro to determine why WackPro was 27 not paying the invoices that Savi presented and this lawsuit subsequently followed. 28 5 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. This demurrer is a continuation of Savi’s Motion for Judgment on the Pleadings (“MJP”) 1 2 against WackPro’s Cross-Complaint against Savi, specifically as to causes of action for breach of 3 non-compete and intentional interference with prospective economic advantage. This court 4 granted Savi’s MJP on February 13, 2018. The court granted without leave to amend for the 5 interference claim and with leave to amend for the non-compete claim. WackPro filed a First 6 Amended Cross-Complaint but then on June 14, 2018, WackPro filed a Second Amended Cross 7 Complaint (“SACC”) which had a new version of the non-compete claim and a new interference 8 claim for Intentional Interference with Contractual Relations. After meeting and conferring with 9 10 counsel for WackPro, Savi brought this demurrer. (See O’Neill Declaration.) 11 III. ARGUMENT 12 The function of a demurrer is to test the legal sufficiency of the pleading. Owens v. Kings 13 Mathews & Peddibhotla Law Group, PC Supermarket (1988) 198 Cal.App.3d 379, 383. A demurrer may be used by a party to challenge 14 39899 Balentine Dr., Ste. 380 15 defects that appear on the face of a pleading of from those matters outside the pleading that are Newark, CA 94560 16 judicially noticeable. (C.C.P. §430.30(a).) California Code of Civil Procedure section 430.10(e) & 17 (f) allow for a demurrer when the pleading does not state sufficient facts or is ambiguous, 18 respectively. 19 A demurrer may be taken to the entire complaint or to any of the causes of action stated in the 20 complaint. (C.C.P. §430.50.) For the purposes of testing the sufficiency of the cause of action, the 21 demurrer assumes all material facts alleged in the complaint to be true. (Aubrey v. Tri-City 22 th 23 Hospital (1992) 2 Cal.4 962, 966-967; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) However, it 24 does not admit contentions deductions, or conclusions of law. (Id.) 25 WackPro’s Causes of Action are defective because they are either preempted by the 26 California Uniform Trade Secret Act (“CUTSA”) (the Fourth Cause of Action) or are based illegal 27 28 6 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. contractual provisions (the Second Cause of Action). Thus, the Court should grant Savi’s 1 2 demurrer, without leave to amend, against the Second and Fourth Cause of Action in WackPro’s 3 Cross-Complaint. 4 A. The Fourth Cause of Action is preempted by the California Uniform Trade 5 Secrets Act. 6 WackPro’s Fourth Causes of Action arises out of generally the same factual allegations as 7 8 its misappropriation claim. WackPro alleges that Savi used confidential information to interfere 9 with Wackpro’s business relationships by soliciting Wackpro’s clients. Notably, this same conduct 10 has been used as the factual basis for the Second Cause of Action for Misappropriation. However, 11 WackPro cannot legally sustain these common law causes of action because the California 12 legislature’s adoption of the CUTSA preempts common law claims based upon the same nucleus 13 Mathews & Peddibhotla Law Group, PC of fact as a trade secrets misappropriation claim. (K.C. Multimedia, Inc. v. Bank of Am. Tech. & 14 39899 Balentine Dr., Ste. 380 Operations, Inc. (2012) 171 Cal.App.4th 939.) 15 Newark, CA 94560 16 1. The K.C. Multimedia, Inc. Court’s discussion on CUTSA preemption. 17 The K.C. Multimedia, Inc. Court notes that common law breaches of confidence causes of 18 action are preempted under CUTSA when the same facts supported both claims of 19 misappropriation and the breach of the duty of confidence. (Id., at 262.) The Court determined that 20 21 common law causes of action “were preempted where the allegations were based entirely on the 22 same factual allegations that form the basis of its trade secretes claim.” (Id. citing Callaway Golf 23 Co. v. Dunlop Slazenger Group Americas, Inc. (2004) 318 F.Supp.2d, 216, 220 [applying 24 California law].) In other words, preemption generally applies where “there is no material 25 distinction” between the wrongdoing underlying the CUTSA claim and the non-CUTSA claim. 26 (See Phoenix Techs. Ltd. v. DeviceVM, (N.D. Cal. Dec. 8, 2009) No. C 09-04697, 2009 WL 27 28 7 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. 4723400, at *4.) 1 2 2. Fourth Cause of Action – Interference with Contractual Relations with 3 Riverpoint and SBP. 4 Much like the Third Cause of Action, the gravamen of the Fourth Cause of Action for 5 Interference with Contractual Relations with Riverpoint and SBP is the misappropriation of trade 6 secrets and is preempted by CUTSA. WackPro alleges that SAVI contacted SBP and Riverpoint, 7 8 instructed them to not pay WackPro, and, instead, to pay SAVI directly. (WackPro SACC ¶ 57- 9 65.) WackPro identifies its customer list and the customer contact information as trade secrets. 10 (SACC ¶ 52, 61, 63.) 11 Wackpro’s claim for Interference with Contractual Relations with Riverpoint and SBP simply 12 restates its claim for trade secret misappropriation. The gravamen of this cause of action is that 13 Savi misappropriated Plaintiffs’ trade secrets, which interfered with WackPro’s contractual Mathews & Peddibhotla Law Group, PC 14 39899 Balentine Dr., Ste. 380 relationship with Riverpoint and SBP. Savi allegedly used WackPro’s trade secrets to contact 15 Newark, CA 94560 16 Riverpoint and SBP, induce Riverpoint and SBP to not pay WackPro, terminate their contract with 17 WackPro, and enter into a new contract with Savi directly. (Id.) 18 In order to know SBP and Riverpoint existed and to contact them, Savi would need knowledge 19 of WackPro’s customer lists. Knowing who WackPro’s clients are and allegedly using that 20 information to induce their breach is the misuse of a trade secret. Furthermore, it is obvious that in 21 order for Savi to “contact” Riverpoint and SBP, Savi would need their “contact information.” 22 Thus, contacting Riverpoint and SBP, in order to in order to induce them to breach their contracts 23 24 with WackPro is the misuse of a trade secret. 25 Accordingly, no material distinction exists between the wrongdoing alleged in Wackpro’s 26 CUTSA claim and that alleged in Wackpro’s claims for Interference with Contractual Relations 27 28 8 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. with Riverpoint and SBP. 1 2 “Factually, the conduct derives from the “same nucleus of facts” as the trade secrets claim, and 3 it is therefore preempted.” (K.C. Multimedia, Inc. 171 Cal.App.4th at 263.) 4 Misappropriation means “use of a trade secret of another without express or implied consent 5 by a person who … [used] a trade secret of another without express or implied consent by a person 6 who… [a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use 7 Again, the facts in this case are completely analogous to K.C. Multimedia, Inc. in that the 8 plaintiff-appellant pled a tortious interference with a contract cause of action relying on an 9 10 identical factual scenario: a party entrusted with certain confidential information, without consent 11 of the other party, used this confidential information in a way that damaged the other party. This is 12 the definition of trade secrets misappropriation under CUTSA, so it cannot be said that the facts 13 underlying WackPro’s Fourth Cause of Action are separate from WackPro’s Third Cause of Mathews & Peddibhotla Law Group, PC 14 Action for trade misappropriation. Accordingly, the Court should dismiss WackPro’s Fourth 39899 Balentine Dr., Ste. 380 15 Newark, CA 94560 Cause of Action because it is preempted by CUTSA. 16 It is clear that the entirety of Wackpro’s claim is “either “based upon misappropriation of a 17 18 trade secret” (§ 3426.7, subd. (b)(2)) or they are based upon no legally significant events at all.” 19 (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 236 [109 Cal.Rptr.3d 27, 51], as 20 modified on denial of reh'g (May 27, 2010) disapproved of by Kwikset Corp. v. Superior Court 21 (2011) 51 Cal.4th 310.) As far as its interference claim is concerned, Wackpro does not identify 22 any conduct by Savi that “did not depend for its supposed wrongfulness on the use of trade 23 secrets.” (Id.) 24 25 The CUTSA claim therefore preempts this claim. As such, Wackpro’s claim for intentional 26 interference with contract is preempted and Savi is entitled to an order sustaining its demurrer, 27 without leave to amend, and dismissing Wackpro’s Fourth Cause of Action. 28 9 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. 1 B. The Second Cause of Action must be dismissed because non-compete clauses 2 are void as a matter of law. 3 WackPro alleges in its Second Cause of Action that the Parties’ Agreement included a 4 non-compete provision which provides in pertinent part that Savi was prohibited in engaging in 5 any “dealings whatsoever, either directly or indirectly through associates with any customer or 6 client of the Company or its subsidiaries or any person or firm with whom Consultant has made 7 8 contact in connection with his consulting activities for the Company . . . both during the term of 9 this Agreement and subsequent termination of this Agreement. (SACC, Exh. A, ¶ 11) However, 10 under Business and Professions Code § 16600, “every contract by which anyone is restrained from 11 engaging in a lawful profession, trade, or business of any kind is to that extent void.” (Business 12 and Professions Code (“BPC”) § 16660.) Clearly, this is a prohibited non-compete provision, 13 Mathews & Peddibhotla Law Group, PC prohibited by California law. 14 39899 Balentine Dr., Ste. 380 “Noncompetition agreements are invalid under [Business and Professions Code] section 16600 15 Newark, CA 94560 16 in California even if narrowly drawn, unless they fall within the statutory exceptions of section[s] 17 16601,16602, or 16602.5” none of which is applicable in the current case. (Edwards v. Arthur 18 Andersen (2008) 44 Cal. 4th 937, 955.) 19 Non-compete and non-solicit of customers are both invalid under BPC § 16600. (Dowell v. 20 Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 575 [“Based on the foregoing it is clear that 21 the noncompete and nonsolicitation clauses in the agreements with Dowell and Chapman are void 22 and unenforceable under section 16600…”].) 23 24 Even thought there is a signed contract between Savi and Wackpro, parties cannot, through 25 agreement, ratification or conduct validate a contract that creates an illegal restraint on trade. 26 (Kelton v. Starvinski (2006) 138 Cal.App.4th 941, 946-947.) Moreover, “[a] contract made 27 28 10 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. contrary to public policy or against the express mandate of a statute may not serve as the 1 2 foundation of any action, either in law or equity.” (Id. at 949 citing Tiedje v. Aluminum Taper 3 Milling Co. (1956) 46 Cal.2d 450, 453-454).) Parties will be left where they are found when they 4 come to a court for relief. (Id. at 454.) 5 1. BPC § 16600 Applies To Corporations And Independent Contractors. 6 BPC § 16600 also applies to independent contractors. (Retirement Group v. Galante 7 (2009) 176 Cal.App.4th 1226, 1231 “…defendant Galante (who had also been an independent 8 contractor for TRG)…”) It also applies to contracts between corporations. (VL Systems, Inc. v. 9 10 Unisen, Inc. (2007) 152 Cal.App.4th 708, 710 [Consulting company brought breach of contract 11 action against client, alleging that client hired one of its consultants, in violation of no-hire 12 provision of contract. Court held no-hire provision unenforceable under section 16600.].) 13 Mathews & Peddibhotla Law Group, PC 2. The Fact That The Alleged Unlawful Competition Occurred While The 14 39899 Balentine Dr., Ste. 380 ICA Was In Effect Is Not Enough To Save An Illegal Non-Compete. 15 Newark, CA 94560 16 WackPro Attempts to state that Savi had a duty to not compete during the course of the ICA. 17 At paragraph 20 of their complaint, Wackpro states: “The non-compete provision prohibits SAVI 18 from, "during the term of this Agreement ... [using] directly or indirectly, for its own benefit ... 19 customer or contact lists…” (SACC ¶ 20.) Non-compete and non-solicit clauses are both invalid 20 under BPC § 16600 and the statute does not make distinction based on when the non-compete is to 21 take effect. (Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th at 575.) 22 23 Employees are generally prohibited from competing with their employers (Labor Code § 2863; 24 “An employee who has any business to transact on his own account, similar to that entrusted to 25 him by his employer, shall always give the preference to the business of the employer.”) However, 26 this is based on the Labor Code, which governs employer-employee relationships, and an 27 28 11 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. employee’s duty of loyalty to their employer. (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 1 2 400, 410-411.) Neither of these is applicable to Savi as Savi was not an employee of WackPro. 3 a. Angelic Textiles Is Inapplicable To This Case As An Independent 4 Contractor, Savi Owes No Duty Of Loyalty When Contracting With 5 Wackpro. 6 Wackpro will cite to Angelica Textile Services, Inc. v. Park as grounds for applying the 7 noncompete to Savi because the alleged unlawful competition occurred during the course of the 8 ICA; however, Angelica Textiles concerns an employee’s duty of loyalty to an employer during 9 10 the term of employment and specifically concerned a corporate office who owed a fiduciary duty 11 to the corporation. 12 “While California law does permit an employee to seek other employment and even to make some ‘preparations to compete’ before resigning [citation], California law does not authorize 13 an employee to transfer his loyalty to a competitor. During the term of employment, an Mathews & Peddibhotla Law Group, PC 14 employer is entitled to its employees' ‘undivided loyalty.’ [Citation.]” ([Citations.]) … In 39899 Balentine Dr., Ste. 380 particular, we note that as an officer of Angelica, Park owed the corporation a fairly 15 broad duty of loyalty … In sum, because Angelica's non-UTSA claims are based on Park's Newark, CA 94560 conduct during his employment by Angelica, contrary to Emerald's argument, they are in no 16 sense barred by Business and Professions Code section 16600.” (Angelica Textile Services, 17 Inc. v. Park (2013) 220 Cal.App.4th 495, 509, as modified (Oct. 29, 2013), as modified on denial of reh'g (Nov. 7, 2013).) 18 Any discussion of Angelica is irrelevant to this matter because Savi is a corporation and an 19 independent contractor to Wackpro, not an employee, and certainly not a corporate officer of 20 21 WackPro. No California case or statute supports the claim that Independent Contractors owe a 22 duty of loyalty to a party with whom they contract. Thus, there is no claim for unlawful 23 competition, based on the noncompete provision, during the term of the ICA. 24 3. It Does Not Matter That The Conduct Alleged Occurred Outside 25 California As The ICA Explicitly Calls For The Application Of 26 California Law As If The Conduct Occurred In California. 27 28 12 SAVI TECHNOLOGIES, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF SAVI TECHNOLOGIES, INC.’S DEMURRER TO WACKPRO, INC.’S SECOND, AND FOURTH CAUSES OF ACTION IN THEIR SECOND AMENDED CROSS-COMPLAINT. Paragraph 17 of the ICA, attached as Exhibit A of the SACC, states “Applicable Law. This 1 2 Agreement shall be governed and construed in accordance with the laws of the State of California 3 as if the Agreement were made in California for performance entirely within the State of 4 California.” (SACC, Exh. A, pg. 4, ¶17.) 5 Paragraph 17 forecloses any argument that the non-compete should apply because the 6 conduct in question occurred outside California. Even if all the conduct occurred outside of 7 California, the ICA treats it as occurring in California. It simply does not matter where certain 8 clients were or whether the conduct occurred in Indiana, Illinois, New Jersey, Georgia, or India as 9 10 the ICA calls for the application of California law. 11 4. There is No Trade Secret Exception to the Rule Against Non-Compete 12 Clauses. 13 Mathews & Peddibhotla Law Group, PC BPC § 16600 prohibits non-competes outside of certain statutory exceptions not appli