Preview
1 Shayna Balch Santiago (SBN 304802) ELECTRONICALLY FILED
E-Mail: ssantiago@fisherphillips.com Superior Court of California
2 FISHER & PHILLIPS LLP County of Santa Barbara
3200 N. Central Avenue, Suite 1550 Darrel E. Parker, Executive Officer
3 Phoenix, Arizona 85012-2487 3/18/2022 6:48 PM
Telephone: (602) 281-3400 By: Yuliana Razo, Deputy
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 IN SUPPORT
UCOMMG, LLC, a Nevada limited liability OF DEMURRER TO PLAINTIFF’S
18 company; UNIFIED COMMUNICATIONS SECOND AMENDED COMPLAINT
GROUP, INC., a dissolved Washington
19 corporation; KENNETH W. NEWBATT, an [Filed concurrently with Declaration of
individual; BIANCA NEWBATT, an Kathryn M. Evans]
20 individual; MITCHELL C. LIPKIN, an
individual; MICHAEL J. BELLAS, an DATE: March 25, 2022
21 individual; JIMMIE GARRETT BAKER, JR., TIME: 10:00 a.m.
an individual; WESTELE UTILITY DEPT.: 4
22 SOLUTIONS, LLC, a California limited
liability company; and DOES 1 through 50, Complaint Filed: November 20, 2020
23 inclusive, FAC Filed: April 16, 2021
SAC Filed: December 3, 2021
24 Defendants. Trial Date: Not Set
25
26
27
28
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 I. INTRODUCTION
2 The purpose of the California Uniform Trade Secrets Act (“CUTSA”) is to replace the
3 “haphazard web” of theories of liability for the misappropriation of information with a uniform
4 scheme. To this end, the CUTSA displaces all non-contractual causes of action “based on”
5 allegations of misappropriation, which it defines to include wrongful acquisition, use, or
6 disclosure of information. Because Plaintiff’s non-contract causes of action are “based on”
7 Defendants’ purported wrongful acquisition, use, and/or disclosure of information, they are
8 preempted by the CUTSA.
9 Plaintiff opens its Opposition by admitting that that the causes of action in its SAC are
10 premised on Defendants’ supposed use of Plaintiff’s “confidential information.” (Oppo. p. 7.)
11 Plaintiff then contradictorily argues that its various non-contract causes of action are not
12 premised on the same general facts as a misappropriation claim. Despite Plaintiff’s inconsistent
13 statements otherwise, Plaintiff’s own Opposition highlights the fact that each of the non-contract
14 causes of action are premised on the allegation that Defendants improperly acquired and used
15 Plaintiff’s confidential information. Thus, the claims are preempted the CUTSA.
16 In addition to being preempted by the CUTSA, Plaintiff failed to allege sufficient facts to
17 support any of its causes of action, despite two previous attempts to amend. Crucially, Plaintiff’s
18 breach of contract causes of action are premised on trade secret misappropriation claims and the
19 SAC is void of any facts demonstrating what the alleged trade secrets are or how Defendants
20 misappropriated them. Defendants’ demurrer should be sustained without leave to amend.
21 II. PLAINTIFF’S NON-CONTRACT CAUSES OF ACTION MUST BE DISMISSED
22 A. Causes of Action Based on the Same Nucleus of Fact as Plaintiff’s
23 Misappropriation Allegations Are Preempted by the CUTSA
24 The parties agree that alternative claims based on the same nucleus of fact as a
25 misappropriation claim are preempted by the CUTSA. (K.C. Multimedia, Inc. v. Bank of America
26 Tech & Operations, Inc. (2009) 171 Cal.App.4th 939, 959, 962.) However, Plaintiff seems to
27 suggest that its causes of action can rest on the same allegations as a misappropriation claim if it
28 simply alleges “additional facts.” (Oppo. pp. 10-11.) This is incorrect. California courts have
1
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 “expressly rejected” the view that “a common law cause of action can be based on the same
2 nucleus of facts as the trade secret claim, so long as it alleges new facts, different injuries and
3 damages, or a different theory of liability.” (Qiang Wang v. Palo Alto Networks (N.D. Cal. Jan.
4 31, 2013) No. C 12-05579 WHA, 2013 WL 415615, at *4 (quoting K.C. Multimedia, supra, 171
5 Cal.App.4th at 957-59, fn. 7); Valvoline v. Instant Oil Change Franchising, Inc. v. RFG Oil, Inc.
6 (S.D. Cal. Aug. 5, 2013) No. 12-cv-2079-GPC-KSC, 2013 WL 4027858, at *7 [“Although a
7 displacement provision contained in the Model Uniform Trade Secrets Act (‘MUTSA’) may
8 allow plaintiffs in other jurisdictions to maintain separate causes of action where a claim for relief
9 includes other factual allegations in addition to misuse or misappropriation of trade secrets,
10 ‘California has rejected that particular provision of the uniform act in favor of an entirely
11 different one.’] (quoting K.C. Multimedia, supra, 171 Cal.App.4th at 956–59).)
12 The cases cited by Plaintiff are not to the contrary, because they involved non-
13 misappropriation claims that were truly factually independent from misappropriation allegations;
14 that is, the non-trade secret claims could be alleged without reference whatsoever to
15 misappropriation allegations. For example, in Angelica Textile Services, Inc. v. Park (2013) 220
16 Cal.App.4th 495, 500, the plaintiff accused its former vice president of altering of client contracts
17 to allow those customers to terminate the plaintiff’s services early for no penalty and disparaging
18 the plaintiff to a local bank, all while still employed by the plaintiff. (Ibid.) Accordingly, unlike
19 Plaintiff, Angelica relied on conduct other than the misappropriation of confidential client and
20 business information to assert its alternative common law claims.
21 Plaintiff’s other cited cases are also easily distinguishable. In Silvaco Data Sys. v. Intel
22 Corp. (2010) 184 Cal.App.4th 210, 241, the court held the plaintiff’s unfair competition claim
23 that was based on knowingly facilitating another in violation of a judicial injunction was not
24 preempted.1 In GeoData Systems Mgmt., Inc. v. American Pacific Plastic Fabricators, Inc. (C.D.
25 1
Silvaco’s unfair competition claim was based upon the defendants’ alleged violation of a judgment
against a third-party which including an injunction against the continued use of a specific technology,
26 thereby committing a contempt of court. (Silvaco, supra, 184 Cal.App.4th at pp. 216, 242) There is no
cause of action for aiding and abetting a breach of contract as Plaintiff seems to suggest in its Opposition.
27 (See AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, 949 [“alleging
the existence of a conspiracy or aiding and abetting activity does not turn a garden-variety contract cause
28 of action (against [the contracting party]) into a derivative tort cause of action [against the alleged
2
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 Cal. April 21, 2016) No. EDCV 15-04125VAP (JEMx), 2016 WL 6562064, at *7, the district
2 court held that the plaintiff’s breach of fiduciary duty claim was preempted by the CUTSA, but
3 the plaintiff’s tortious interference claims that were based on trademark infringement and
4 misrepresentations that the defendant owned the plaintiff’s patents were not preempted. (See also
5 Robert Half Intl.,Inc. v. Ainsworth (S.D. Cal. 2014) 68 F.Supp.3d 1178, 1190-1191 [tortious
6 interference claims preempted and breach of fiduciary duty claim based on defendant’s spending
7 large amount of time away from office and organizing and participating in coordinated scheme
8 to resign not preempted]; Kovesdy v. Kovesdy (N.D. Cal. Sept. 13, 2010) No. 10-02012, 2010
9 WL 3619826 , at *5 [UCL claim based on trademark infringement claim not preempted].) Here,
10 in contrast, none of Plaintiff’s claims could exist without Plaintiff’s allegations that Defendants
11 used Plaintiff’s “confidential information.”
12 According to Plaintiff’s Opposition, Plaintiff’s non-contract causes of action are based
13 on Defendants’ alleged “(1) solicitation of Plaintiff’s employees to breach their contractual
14 obligations to Plaintiff; (2) recruitment of Plaintiff’s managerial employers [sic] and technicians;
15 (3) undermining Plaintiff’s ability to fulfill the client’s needs; and (4) interfering with Plaintiff’s
16 business opportunities. (Oppo. p. 13.) But that is not what the SAC actually alleges. As actually
17 pleaded (rather than reimagined in the Opposition), the SAC alleges:
18 Conversion: “the Former Employee Defendants took Plaintiff’s confidential
information and documents and provided them to the Unified Defendants, WesTele and/or
19 others for their use as well as the use of the Defendants.” (SAC ¶ 80.)
20 Intentional Interference with Contractual Relations: “Defendants
intentionally shared and used Plaintiff’s confidential information, which was legally
21 wrongful as set forth above, for the purpose of interfering with Plaintiff’s contractual
relationship and entering into their own contractual relationships with Plaintiff’s clients.”
22 (SAC ¶ 87.)
23 Intentional Interference with Prospective Economic Advantage: “Defendants
intentionally shared and [sic] Plaintiff’s confidential information and documents, which
24 was legally wrongful as set forth above, and used and implemented the programs and
procedures within the confidential information and documents for the purpose of
25 interfering with Plaintiff’s economic relationships and entering into their own relationships
with Plaintiff’s clients.” (SAC ¶ 97.)
26
27
28 coconspirator or aider and abettor”].)
3
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 Unfair Business Practices Cause of Action: “Defendants have acquired and
used Plaintiff’s confidential information and documents through material
2 misrepresentations and omissions” and Defendants’ are “sharing and using Plaintiff’s
confidential information and documents.” (SAC ¶¶ 107, 109.)
3
4 Each and every cause of action is expressly premised on Defendants’ alleged use of
5 Plaintiff’s “confidential information” and is therefore preempted.
6 Plaintiff’s re-imagined basis for its causes of action are either not actually alleged in the
7 SAC or are, once again, based solely on misappropriation claims. For example, the only
8 “solicitation” the SAC alleges is that Defendant Bellas made a “recruiting pitch” to Plaintiff’s
9 I&R Director in September 2020 (three months after Defendant Bellas stopped working for
10 Plaintiff), however the Director opted to remain with Plaintiff. (SAC ¶ 54.) Making a recruiting
11 pitch to a former colleague is not unlawful. (Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244,
12 255 ["no actionable wrong is committed by a competitor who solicits his competitor's employees
13 or who hires away one or more of his competitor's employees who are not under contract, so long
14 as the inducement to leave is not accompanied by unlawful action”].)
15 Moreover, the SAC contains no allegations that there was inducement of the I&R Director
16 to breach any contractual obligation and there are no allegations regarding solicitation as to the
17 other seven Defendants. There are also no allegations that any Defendants “recruited” any
18 independent contractor technicians. The SAC simply alleges that twelve technicians on a list that
19 Plaintiff previously submitted to a customer were working for the “Unified Defendants” and that
20 three unnamed technicians told Plaintiff’s I&R Director they were resigning from Plaintiff and
21 going to “Unified.” (SAC ¶¶ 52, 54.) There are no facts or allegations demonstrating recruitment
22 (which, again, is not actionable unless accompanied by an unlawful action). (See Fortinet Inc. v.
23 FireEye Inc. (N.D. Cal. Sept. 30, 2014) No. 5:13-CV-02496-EJD, 2014 WL 4955087, at *9
24 [dismissing intentional interference claim based on conclusory allegations that the defendant
25 “solicited, induced, and encouraged employees” with no factual allegations as to how].)
26 Thirdly, Plaintiff offers no explanation as to what it means in its Opposition that
27 Defendants “undermined Plaintiff’s ability to fulfill the client’s needs.” Regardless, there are no
28 facts or allegations in the SAC to support such a claim. And finally, it is nonsensical and circular
4
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 for Plaintiff to argue that the factual basis for its intentional interference claims is Defendants’
2 “interfering with Plaintiff’s business opportunities.”
3 B. Binding California Authority Holds That the CUTSA Preempts Claims
4 Based on Misappropriation of “Confidential Information”
5 As held by the Court of Appeal, CUTSA preempts claims based on the misappropriation
6 of confidential information, whether or not that information meets the statutory definition of trade
7 secret. (Silvaco, supra, 184 Cal.App.4th at 239, fn 22.) This is because the “prime purpose of
8 [CUTSA] was to sweep away [the] bewildering web of rules and rationales and replace it with a
9 uniform set of principles for determining when one is—and is not—liable for acquiring,
10 disclosing or using information of value.” (Angelica, supra, 220 Cal.App.4th at p. 506.) This
11 purpose “would be grossly subverted by leaving alternative bases for liability intact.” (Silvaco,
12 supra, 184 Cal.App.4th at p. 234.)
13 To accomplish this goal, California law holds that “acquisition, disclosure or transfer of
14 information that does not fit [the] definition of trade secret does not give rise to liability, even
15 when that liability is couched in terms of a separate tort or statutory violation.” (Angelica, supra,
16 220 Cal.App.4th at p. 506.) Plaintiff’s sole reliance on two non-binding, federal district court
17 decisions that pre-date Silvaco and Angelica in support of its argument that CUTSA does not
18 preempt causes of action based on confidential information that is not a trade secret is unavailing.
19 (See Total Recall Techs. V. Luckey (N.D. Cal. Jan. 16, 2016) No C 15-02281 WHA, 2016 WL
20 199796, at *7 [“Every district court in our circuit to consider this aspect of Silvaco has held that
21 CUTSA supersedes claims based on the misappropriation of non-trade secret information[.]”].)
22 These contradictory decisions may not be followed in light of authority from the California Court
23 of Appeal, which is controlling. (People v. Beltran (2013) 56 Cal.4th 935, 953.)
24 C. CUTSA Preemption Is Properly Determined at the Pleading Stage
25 Contrary to Plaintiff’s arguments that it is premature for the Court to dismiss its non-
26 contract causes of action, the determination of preemption under CUTSA is properly decided on
27 the face of the complaint. (Silvaco, supra, 184 Cal.App.4th at p. 238 [sustaining demurrer on
28 CUTSA preemption].) In its Opposition, Plaintiff cites two federal district court decisions in
5
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 support of its argument that dismissal is premature. (Oppo. p. 15.) In Silvaco, however, the court
2 explained that there is a “divergence between the law of [California] and the pleading rules
3 applied in federal cases ... where the dismissal of common law claims on the grounds of [CUTSA]
4 suppression was deemed ‘premature.’” (Ibid.) Rejecting the federal approach, the California
5 Court of Appeal concluded that “it is never ‘premature’ to require that the plaintiff allege facts
6 sufficient to constitute a viable cause of action.” (Id. at p. 239.)
7 D. It is Undisputed that Plaintiff’s Cause of Action for Conversion is Preempted
8 by the CUTSA and Plaintiff Failed to Allege Sufficient Facts to State a Claim
9 Plaintiff wholly failed to address the arguments in Defendants’ demurrer regarding its
10 cause of action for conversion. It is therefore undisputed for purposes of Defendants’ demurrer
11 that (1) Plaintiff’s conversion cause of action is preempted by the CUTSA; and (2) Plaintiff failed
12 to state a claim for conversion.
13 E. Plaintiff’s Intentional Interference Causes of Action Are Preempted by the
14 CUTSA and Plaintiff Failed to Allege Sufficient Facts to State a Claim
15 As discussed in Defendants’ demurrer, to plead this cause of action, Plaintiff must show
16 that the defendant engaged in an independently wrongful (i.e. unlawful as proscribed by some
17 constitutional, statutory, or other legal standard) act beyond the interference itself. (San Jose
18 Construction, Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528.)
19 In its Opposition, Plaintiff alleges the independently wrongful acts are “(1) the breach of
20 the employment and separation agreements; and (2) the violation of the CUTSA.” (Oppo. p. 18.)
21 Accordingly, Plaintiff directly admits that these causes of action are based on the CUTSA and
22 are, therefore, preempted. To the extent Plaintiff alleges this claim is based on the breach of
23 Defendant Bellas’ and Defendant Lipkin’s employment and separation agreements, those breach
24 of contract claims are in turn premised on trade secret misappropriation claims. (SAC ¶ 59, 70.)
25 Therefore, these claims are also preempted on this basis. Moreover, Plaintiff does not and cannot
26 allege breach of contract claims against the other six Defendants – UCOMMG, UCG, Kenneth
27 Newbatt, Bianca Newbatt, Cynthia Baker, and WesTele. Finally, Plaintiff states that it alleges
28 the disruption of its relationships with its clients. Plaintiff identifies no constitutional, statutory,
6
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 common law, or other legal standard as to why this constitutes an independently wrongful act.
2 There must be something about Defendants’ alleged interference with Plaintiff’s business
3 that sets it apart from ordinary customer solicitation—be that wrongful means or some other
4 differentiator—in order for it to be tortious. (See Moss, Adams & Co. v. Shilling (1986) 179
5 Cal.App.3d 124, 128-129 [former employees are prohibited from using trade secrets to announce
6 a change of employment to the former employer’s customers; however, they may do business
7 with a former employer’s customers with whom they became personally acquainted and
8 developed a business relationship while formerly employed].) The same point is well made in a
9 comment to the Restatement 2d of Torts § 766:
10 Inducement by offer of better terms Another method of inducing B to sever his
business relations with C is to offer B a better bargain that that which he has with
11 C ...A’s freedom to conduct his business in the usual manner, to advertise his
goods, to extol their qualities, to fix their prices and to sell them is not restricted
12 by the fact that B has agreed to buy similar goods from C. Even though A knows
of B’s contract with C, he may nevertheless send his regular advertising to B and
13 may solicit business in normal course. This conduct does not constitute
inducement of breach of the contract.
14
15 Accordingly, doing business with a former employer’s former customers or offering
16 below-cost pricing is not, of itself, wrongful. Here, other than “business in the usual manner,”
17 which is not actionable, Plaintiff’s complaint alleges only that Defendants wrongfully used
18 Plaintiff’s “confidential information.” Because claims based on use of “confidential information”
19 are preempted and Plaintiff has no other departure from “business in the usual manner” in support
20 of the claims in the SAC, Plaintiff’s intentional interference claims fail.
21 F. Plaintiff’s Cause of Action for Unfair Competition is Preempted by the
22 CUTSA and Plaintiff Failed to Allege Sufficient Facts to State a Claim
23 In its Opposition, Plaintiff admits that its unfair competition cause of action is based on
24 “Defendants wrongfully sharing and using the confidential information and documents ... for the
25 purpose of tortiously interfering with Plaintiff’s contractual relationship with its clients and its
26 prospective business advantage.” (Oppo. p. 18.) Thus, this claim is preempted. Plaintiff also
27 states that this claim is based on “Defendants wrongfully conspiring to divert business,
28 managerial employees, and independent contractors away from Plaintiff.” (Id.) As previously
7
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 discussed, there is no cause of action for these acts unless they are accompanied by an illegal or
2 wrongful act. Once again, Plaintiff does not identify any wrongful act other than Defendants’
3 alleged misappropriation of Plaintiff’s confidential information. Accordingly, Plaintiff’s unfair
4 competition claim is preempted, and Plaintiff has failed to allege sufficient facts to state a claim.
5 III. PLAINTIFF’S CONTRACT CAUSES OF ACTION MUST BE DISMISSED
6 A. Plaintiff Failed to Plead Sufficient Facts For Its Breach of Contract Claims
7 As set forth in the demurrer, Plaintiff failed to allege what law it claims applies to its
8 breach of contract claims. This deficiency has continued from the original Complaint, to the FAC,
9 to the SAC.2 This deficiency alone should result in dismissal of the claim. (See Barnes v.
10 AstraZeneca Pharmaceuticals LP (N.D. Ga. 2017) 253 F.Supp.3d 1168, 1172.) Notwithstanding
11 the foregoing, to the extent Plaintiff’s SAC can be read as alleging that the employment
12 agreements signed by Defendants Bellas and Lipkin are governed by California law, the contracts
13 are completely invalid due to the void non-solicitation and non-compete clauses contained in
14 each agreement. (Conversion Logic, Inc. v. Measured, Inc. et al. (C.D. Cal. Dec. 13, 2019) No.
15 19-CV-05546, 2019 WL 6828283, at *6; WeRide Corp. v. Kun Huang (N.D. Cal. 2019) 379
16 F.Supp.3d 834, 852.) Plaintiff’s claims for breach of contract accordingly fail as a matter of law.
17 Moreover, and as discussed at length in Defendants’ demurrer, Plaintiff alleges that
18 Defendants Bellas and Lipkin breached their employment agreements by misappropriating
19 Plaintiff’s trade secrets. (SAC ¶¶ 59, 70) However, Plaintiff failed to plead sufficient facts
20 support its trade secret claims, including what the trade secrets are, how it took measures to
21 safeguard that information, and how each Defendant allegedly misappropriated the trade secrets.
22 These deficiencies are fatal to Plaintiff’s breach of contract claims. (See Becton, Dickinson &
23 Co. v. Cytek Biosciences, Inc. (N.D. Cal. May 21, 2018) No. 18-cv-00933-MMC, 2018 WL
24 2298500, at *8 [dismissing breach of contract claims based on alleged misappropriation where
25 the Complaint “fails to set forth, as to each individual defendant, the particular conduct on which
26 the claim against him/her is based.”]; Calsoft Labs, Inc. v. Panchumarthi (N.D. Cal. Jan. 31,
27
2
Nor do the contracts have a choice of law provision and Defendants Bellas and Lipkin reside outside of
28 California.
8
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 2020) 2020 WL 512123 at *6 [same].) While Plaintiff’s Opposition identifies a laundry list of
2 supposed “confidential information” there are zero facts demonstrating that the confidential
3 information constitutes a trade secret or that Defendant Bellas or Defendant Lipkin
4 misappropriated any trade secrets. (Oppo. p. 8.) Accordingly, Plaintiff’s breach of contract claims
5 must also be dismissed without leave to amend.
6 B. It is Undisputed that Plaintiff’s Breach of Implied Covenant of Good Faith
7 and Fair Dealing Claims Are Duplicative of Its Breach of Contract Claims
8 Plaintiff does not dispute that the allegations in its breach of implied covenant of good
9 faith and fair dealing claims do not differ from the allegations in its breach of contract claims.
10 (Oppo. pp. 16-17.) “If the allegations in a breach of implied covenant claim do not go beyond
11 the statement of mere contract breach and, relying on the same alleged facts, simply seek the
12 same damages or other relief already claimed in a companion contract cause of action, they may
13 be disregarded as superfluous as no additional claim is actually stated.” (Careau & Co. v. Security
14 Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) Accordingly, Plaintiff’s breach
15 of implied covenant claims should be dismissed without leave to amend.
16 Furthermore, as acknowledged by Plaintiff in its Opposition, an express contractual
17 relationship is required between the parties to state a claim for a breach of the implied covenant
18 of good faith and fair dealing. (Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc. (1992)
19 2 Cal.4th 342, 373.) As established above, to the extent Plaintiff is taking the position that
20 California law applies to the Bellas and Lipkin employment agreement, the agreements are
21 invalid due to the non-compete and non-solicitation clauses. (Conversion Logic, 2019 WL
22 6828283, at *6.) With no valid contractual relationship between the parties, Plaintiff’s implied
23 covenant claims also fail as a matter of law.
24 IV. LEAVE TO AMEND SHOULD BE DENIED BECAUSE ANY AMENDMENT
25 WOULD BE FUTILE
26 Plaintiff’s gamesmanship apparently knows no bounds. Plaintiff has repeatedly
27 represented that it could not properly allege a trade secret misappropriation cause of action and
28 that it did not intend to re-add its misappropriation cause of action or any new causes of action.
9
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
1 (Santiago Decl. ¶ 13, Ex. H; Evans Decl. ¶ 2, Ex. A.) Plaintiff now requests leave to amend to
2 force the Court and Defendants to endure yet another iteration of Plaintiff repeating previously
3 dismissed claims. Plaintiff already dismissed multiple causes of action from the Complaint when
4 it filed the FAC. Plaintiff then re-added those very same causes of action it previously dismissed
5 and dismissed the trade secret cause of action when it filed the SAC. And now Plaintiff requests
6 leave to file a Third Amended Complaint to re-add the same trade secret cause of action it already
7 dismissed. Enough is enough.
8 Leave to amend should not be granted where amendment would be futile. (Caliber
9 Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 374.) Amendment would be
10 futile here because Plaintiff already attempted twice (in the Complaint and FAC) to allege a trade
11 secret misappropriation cause of action. Plaintiff then improperly filed its SAC and voluntarily
12 dismissed that cause of action rather than respond to Defendants’ demurrer to its FAC. The Court
13 “construe[d] the filing of the SAC as a concession that the demurrer to the FAC is in some part
14 meritorious” and “deem[ed] the SAC as filed following the sustaining of the demurrer to the FAC
15 with leave to amend.” Moreover, the other amendments Plaintiff suggests are to add additional
16 claims that would be preempted by the CUTSA. (Mattel, Inc. v. MGA Entm’t, Inc. (C.D. Cal.
17 2011) 782 F.Supp.2d 911, 985 [breach of duty of loyalty preempted by the CUTSA]; GeoData
18 Systems, supra, 2016 WL 6562064, at *7 [breach of fiduciary duty preempted by the CUTSA].)
19 Plaintiff has failed to remedy the fatal and fundamental defects in its claims and this failure serves
20 only to further confirm that it would be futile to grant Plaintiff a fourth bite at the apple.
21 V. CONCLUSION
22 For the foregoing reasons, Defendants respectfully request the Court sustain the demurrer
23 in its entirety, without leave to amend.
24 DATE: March 18, 2022 FISHER & PHILLIPS LLP
25
26 By:
Shayna Balch Santiago
27 Kathryn M. Evans
Attorneys for Defendants
28
10
DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S
SECOND AMENDED COMPLAINT
FP 43468611.1
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 March 18, 2022, I served the following document(s) DEFENDANTS’ REPLY IN
5 SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT on
the person(s) listed below by placing the original a true copy thereof enclosed in sealed
6 envelope(s) addressed as follows:
7
Paul P. Young Tel: (626) 744-1838
8 Joseph Chora Fax: (626) 744-3167
Cameron H. Totten E-Mail: paul@cym.law; joseph@cym.law;
9 Armen Manasserian cameron@cym.law; armen@cym.law;
Scott O’Halloran scott@cym.law
10 CHORA YOUNG LLP
650 Sierra Madre Villa Ave, Suite 304 Attorneys for Plaintiff Butler America, LLC
11 Pasadena, California 91107
12 [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
13 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
14 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,
15 in a sealed envelope with postage fully prepaid.
[by FAX] - Based on an agreement of the parties to accept service by fax transmission,
16 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.
17 [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)
18 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.
19 [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
20 the person(s) at the electronic service address(es) listed above.
21 I declare under penalty of perjury, under the laws of the State of California, that the
foregoing is true and correct.
22
Executed March 18, 2022, at San Diego, California.
23
Amanda Funkhouser By:
24 Print Name Signature
25
26
27
28
1
PROOF OF SERVICE
FP 43468611.1
Preview
1 Shayna Balch Santiago (SBN 304802) ELECTRONICALLY FILED E-Mail: ssantiago@fisherphillips.com Superior Court of California 2 FISHER & PHILLIPS LLP County of Santa Barbara 3200 N. Central Avenue, Suite 1550 Darrel E. Parker, Executive Officer 3 Phoenix, Arizona 85012-2487 3/18/2022 6:48 PM Telephone: (602) 281-3400 By: Yuliana Razo, Deputy 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 IN SUPPORT UCOMMG, LLC, a Nevada limited liability OF DEMURRER TO PLAINTIFF’S 18 company; UNIFIED COMMUNICATIONS SECOND AMENDED COMPLAINT GROUP, INC., a dissolved Washington 19 corporation; KENNETH W. NEWBATT, an [Filed concurrently with Declaration of individual; BIANCA NEWBATT, an Kathryn M. Evans] 20 individual; MITCHELL C. LIPKIN, an individual; MICHAEL J. BELLAS, an DATE: March 25, 2022 21 individual; JIMMIE GARRETT BAKER, JR., TIME: 10:00 a.m. an individual; WESTELE UTILITY DEPT.: 4 22 SOLUTIONS, LLC, a California limited liability company; and DOES 1 through 50, Complaint Filed: November 20, 2020 23 inclusive, FAC Filed: April 16, 2021 SAC Filed: December 3, 2021 24 Defendants. Trial Date: Not Set 25 26 27 28 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 I. INTRODUCTION 2 The purpose of the California Uniform Trade Secrets Act (“CUTSA”) is to replace the 3 “haphazard web” of theories of liability for the misappropriation of information with a uniform 4 scheme. To this end, the CUTSA displaces all non-contractual causes of action “based on” 5 allegations of misappropriation, which it defines to include wrongful acquisition, use, or 6 disclosure of information. Because Plaintiff’s non-contract causes of action are “based on” 7 Defendants’ purported wrongful acquisition, use, and/or disclosure of information, they are 8 preempted by the CUTSA. 9 Plaintiff opens its Opposition by admitting that that the causes of action in its SAC are 10 premised on Defendants’ supposed use of Plaintiff’s “confidential information.” (Oppo. p. 7.) 11 Plaintiff then contradictorily argues that its various non-contract causes of action are not 12 premised on the same general facts as a misappropriation claim. Despite Plaintiff’s inconsistent 13 statements otherwise, Plaintiff’s own Opposition highlights the fact that each of the non-contract 14 causes of action are premised on the allegation that Defendants improperly acquired and used 15 Plaintiff’s confidential information. Thus, the claims are preempted the CUTSA. 16 In addition to being preempted by the CUTSA, Plaintiff failed to allege sufficient facts to 17 support any of its causes of action, despite two previous attempts to amend. Crucially, Plaintiff’s 18 breach of contract causes of action are premised on trade secret misappropriation claims and the 19 SAC is void of any facts demonstrating what the alleged trade secrets are or how Defendants 20 misappropriated them. Defendants’ demurrer should be sustained without leave to amend. 21 II. PLAINTIFF’S NON-CONTRACT CAUSES OF ACTION MUST BE DISMISSED 22 A. Causes of Action Based on the Same Nucleus of Fact as Plaintiff’s 23 Misappropriation Allegations Are Preempted by the CUTSA 24 The parties agree that alternative claims based on the same nucleus of fact as a 25 misappropriation claim are preempted by the CUTSA. (K.C. Multimedia, Inc. v. Bank of America 26 Tech & Operations, Inc. (2009) 171 Cal.App.4th 939, 959, 962.) However, Plaintiff seems to 27 suggest that its causes of action can rest on the same allegations as a misappropriation claim if it 28 simply alleges “additional facts.” (Oppo. pp. 10-11.) This is incorrect. California courts have 1 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 “expressly rejected” the view that “a common law cause of action can be based on the same 2 nucleus of facts as the trade secret claim, so long as it alleges new facts, different injuries and 3 damages, or a different theory of liability.” (Qiang Wang v. Palo Alto Networks (N.D. Cal. Jan. 4 31, 2013) No. C 12-05579 WHA, 2013 WL 415615, at *4 (quoting K.C. Multimedia, supra, 171 5 Cal.App.4th at 957-59, fn. 7); Valvoline v. Instant Oil Change Franchising, Inc. v. RFG Oil, Inc. 6 (S.D. Cal. Aug. 5, 2013) No. 12-cv-2079-GPC-KSC, 2013 WL 4027858, at *7 [“Although a 7 displacement provision contained in the Model Uniform Trade Secrets Act (‘MUTSA’) may 8 allow plaintiffs in other jurisdictions to maintain separate causes of action where a claim for relief 9 includes other factual allegations in addition to misuse or misappropriation of trade secrets, 10 ‘California has rejected that particular provision of the uniform act in favor of an entirely 11 different one.’] (quoting K.C. Multimedia, supra, 171 Cal.App.4th at 956–59).) 12 The cases cited by Plaintiff are not to the contrary, because they involved non- 13 misappropriation claims that were truly factually independent from misappropriation allegations; 14 that is, the non-trade secret claims could be alleged without reference whatsoever to 15 misappropriation allegations. For example, in Angelica Textile Services, Inc. v. Park (2013) 220 16 Cal.App.4th 495, 500, the plaintiff accused its former vice president of altering of client contracts 17 to allow those customers to terminate the plaintiff’s services early for no penalty and disparaging 18 the plaintiff to a local bank, all while still employed by the plaintiff. (Ibid.) Accordingly, unlike 19 Plaintiff, Angelica relied on conduct other than the misappropriation of confidential client and 20 business information to assert its alternative common law claims. 21 Plaintiff’s other cited cases are also easily distinguishable. In Silvaco Data Sys. v. Intel 22 Corp. (2010) 184 Cal.App.4th 210, 241, the court held the plaintiff’s unfair competition claim 23 that was based on knowingly facilitating another in violation of a judicial injunction was not 24 preempted.1 In GeoData Systems Mgmt., Inc. v. American Pacific Plastic Fabricators, Inc. (C.D. 25 1 Silvaco’s unfair competition claim was based upon the defendants’ alleged violation of a judgment against a third-party which including an injunction against the continued use of a specific technology, 26 thereby committing a contempt of court. (Silvaco, supra, 184 Cal.App.4th at pp. 216, 242) There is no cause of action for aiding and abetting a breach of contract as Plaintiff seems to suggest in its Opposition. 27 (See AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, 949 [“alleging the existence of a conspiracy or aiding and abetting activity does not turn a garden-variety contract cause 28 of action (against [the contracting party]) into a derivative tort cause of action [against the alleged 2 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 Cal. April 21, 2016) No. EDCV 15-04125VAP (JEMx), 2016 WL 6562064, at *7, the district 2 court held that the plaintiff’s breach of fiduciary duty claim was preempted by the CUTSA, but 3 the plaintiff’s tortious interference claims that were based on trademark infringement and 4 misrepresentations that the defendant owned the plaintiff’s patents were not preempted. (See also 5 Robert Half Intl.,Inc. v. Ainsworth (S.D. Cal. 2014) 68 F.Supp.3d 1178, 1190-1191 [tortious 6 interference claims preempted and breach of fiduciary duty claim based on defendant’s spending 7 large amount of time away from office and organizing and participating in coordinated scheme 8 to resign not preempted]; Kovesdy v. Kovesdy (N.D. Cal. Sept. 13, 2010) No. 10-02012, 2010 9 WL 3619826 , at *5 [UCL claim based on trademark infringement claim not preempted].) Here, 10 in contrast, none of Plaintiff’s claims could exist without Plaintiff’s allegations that Defendants 11 used Plaintiff’s “confidential information.” 12 According to Plaintiff’s Opposition, Plaintiff’s non-contract causes of action are based 13 on Defendants’ alleged “(1) solicitation of Plaintiff’s employees to breach their contractual 14 obligations to Plaintiff; (2) recruitment of Plaintiff’s managerial employers [sic] and technicians; 15 (3) undermining Plaintiff’s ability to fulfill the client’s needs; and (4) interfering with Plaintiff’s 16 business opportunities. (Oppo. p. 13.) But that is not what the SAC actually alleges. As actually 17 pleaded (rather than reimagined in the Opposition), the SAC alleges: 18 Conversion: “the Former Employee Defendants took Plaintiff’s confidential information and documents and provided them to the Unified Defendants, WesTele and/or 19 others for their use as well as the use of the Defendants.” (SAC ¶ 80.) 20 Intentional Interference with Contractual Relations: “Defendants intentionally shared and used Plaintiff’s confidential information, which was legally 21 wrongful as set forth above, for the purpose of interfering with Plaintiff’s contractual relationship and entering into their own contractual relationships with Plaintiff’s clients.” 22 (SAC ¶ 87.) 23 Intentional Interference with Prospective Economic Advantage: “Defendants intentionally shared and [sic] Plaintiff’s confidential information and documents, which 24 was legally wrongful as set forth above, and used and implemented the programs and procedures within the confidential information and documents for the purpose of 25 interfering with Plaintiff’s economic relationships and entering into their own relationships with Plaintiff’s clients.” (SAC ¶ 97.) 26 27 28 coconspirator or aider and abettor”].) 3 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 Unfair Business Practices Cause of Action: “Defendants have acquired and used Plaintiff’s confidential information and documents through material 2 misrepresentations and omissions” and Defendants’ are “sharing and using Plaintiff’s confidential information and documents.” (SAC ¶¶ 107, 109.) 3 4 Each and every cause of action is expressly premised on Defendants’ alleged use of 5 Plaintiff’s “confidential information” and is therefore preempted. 6 Plaintiff’s re-imagined basis for its causes of action are either not actually alleged in the 7 SAC or are, once again, based solely on misappropriation claims. For example, the only 8 “solicitation” the SAC alleges is that Defendant Bellas made a “recruiting pitch” to Plaintiff’s 9 I&R Director in September 2020 (three months after Defendant Bellas stopped working for 10 Plaintiff), however the Director opted to remain with Plaintiff. (SAC ¶ 54.) Making a recruiting 11 pitch to a former colleague is not unlawful. (Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 12 255 ["no actionable wrong is committed by a competitor who solicits his competitor's employees 13 or who hires away one or more of his competitor's employees who are not under contract, so long 14 as the inducement to leave is not accompanied by unlawful action”].) 15 Moreover, the SAC contains no allegations that there was inducement of the I&R Director 16 to breach any contractual obligation and there are no allegations regarding solicitation as to the 17 other seven Defendants. There are also no allegations that any Defendants “recruited” any 18 independent contractor technicians. The SAC simply alleges that twelve technicians on a list that 19 Plaintiff previously submitted to a customer were working for the “Unified Defendants” and that 20 three unnamed technicians told Plaintiff’s I&R Director they were resigning from Plaintiff and 21 going to “Unified.” (SAC ¶¶ 52, 54.) There are no facts or allegations demonstrating recruitment 22 (which, again, is not actionable unless accompanied by an unlawful action). (See Fortinet Inc. v. 23 FireEye Inc. (N.D. Cal. Sept. 30, 2014) No. 5:13-CV-02496-EJD, 2014 WL 4955087, at *9 24 [dismissing intentional interference claim based on conclusory allegations that the defendant 25 “solicited, induced, and encouraged employees” with no factual allegations as to how].) 26 Thirdly, Plaintiff offers no explanation as to what it means in its Opposition that 27 Defendants “undermined Plaintiff’s ability to fulfill the client’s needs.” Regardless, there are no 28 facts or allegations in the SAC to support such a claim. And finally, it is nonsensical and circular 4 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 for Plaintiff to argue that the factual basis for its intentional interference claims is Defendants’ 2 “interfering with Plaintiff’s business opportunities.” 3 B. Binding California Authority Holds That the CUTSA Preempts Claims 4 Based on Misappropriation of “Confidential Information” 5 As held by the Court of Appeal, CUTSA preempts claims based on the misappropriation 6 of confidential information, whether or not that information meets the statutory definition of trade 7 secret. (Silvaco, supra, 184 Cal.App.4th at 239, fn 22.) This is because the “prime purpose of 8 [CUTSA] was to sweep away [the] bewildering web of rules and rationales and replace it with a 9 uniform set of principles for determining when one is—and is not—liable for acquiring, 10 disclosing or using information of value.” (Angelica, supra, 220 Cal.App.4th at p. 506.) This 11 purpose “would be grossly subverted by leaving alternative bases for liability intact.” (Silvaco, 12 supra, 184 Cal.App.4th at p. 234.) 13 To accomplish this goal, California law holds that “acquisition, disclosure or transfer of 14 information that does not fit [the] definition of trade secret does not give rise to liability, even 15 when that liability is couched in terms of a separate tort or statutory violation.” (Angelica, supra, 16 220 Cal.App.4th at p. 506.) Plaintiff’s sole reliance on two non-binding, federal district court 17 decisions that pre-date Silvaco and Angelica in support of its argument that CUTSA does not 18 preempt causes of action based on confidential information that is not a trade secret is unavailing. 19 (See Total Recall Techs. V. Luckey (N.D. Cal. Jan. 16, 2016) No C 15-02281 WHA, 2016 WL 20 199796, at *7 [“Every district court in our circuit to consider this aspect of Silvaco has held that 21 CUTSA supersedes claims based on the misappropriation of non-trade secret information[.]”].) 22 These contradictory decisions may not be followed in light of authority from the California Court 23 of Appeal, which is controlling. (People v. Beltran (2013) 56 Cal.4th 935, 953.) 24 C. CUTSA Preemption Is Properly Determined at the Pleading Stage 25 Contrary to Plaintiff’s arguments that it is premature for the Court to dismiss its non- 26 contract causes of action, the determination of preemption under CUTSA is properly decided on 27 the face of the complaint. (Silvaco, supra, 184 Cal.App.4th at p. 238 [sustaining demurrer on 28 CUTSA preemption].) In its Opposition, Plaintiff cites two federal district court decisions in 5 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 support of its argument that dismissal is premature. (Oppo. p. 15.) In Silvaco, however, the court 2 explained that there is a “divergence between the law of [California] and the pleading rules 3 applied in federal cases ... where the dismissal of common law claims on the grounds of [CUTSA] 4 suppression was deemed ‘premature.’” (Ibid.) Rejecting the federal approach, the California 5 Court of Appeal concluded that “it is never ‘premature’ to require that the plaintiff allege facts 6 sufficient to constitute a viable cause of action.” (Id. at p. 239.) 7 D. It is Undisputed that Plaintiff’s Cause of Action for Conversion is Preempted 8 by the CUTSA and Plaintiff Failed to Allege Sufficient Facts to State a Claim 9 Plaintiff wholly failed to address the arguments in Defendants’ demurrer regarding its 10 cause of action for conversion. It is therefore undisputed for purposes of Defendants’ demurrer 11 that (1) Plaintiff’s conversion cause of action is preempted by the CUTSA; and (2) Plaintiff failed 12 to state a claim for conversion. 13 E. Plaintiff’s Intentional Interference Causes of Action Are Preempted by the 14 CUTSA and Plaintiff Failed to Allege Sufficient Facts to State a Claim 15 As discussed in Defendants’ demurrer, to plead this cause of action, Plaintiff must show 16 that the defendant engaged in an independently wrongful (i.e. unlawful as proscribed by some 17 constitutional, statutory, or other legal standard) act beyond the interference itself. (San Jose 18 Construction, Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528.) 19 In its Opposition, Plaintiff alleges the independently wrongful acts are “(1) the breach of 20 the employment and separation agreements; and (2) the violation of the CUTSA.” (Oppo. p. 18.) 21 Accordingly, Plaintiff directly admits that these causes of action are based on the CUTSA and 22 are, therefore, preempted. To the extent Plaintiff alleges this claim is based on the breach of 23 Defendant Bellas’ and Defendant Lipkin’s employment and separation agreements, those breach 24 of contract claims are in turn premised on trade secret misappropriation claims. (SAC ¶ 59, 70.) 25 Therefore, these claims are also preempted on this basis. Moreover, Plaintiff does not and cannot 26 allege breach of contract claims against the other six Defendants – UCOMMG, UCG, Kenneth 27 Newbatt, Bianca Newbatt, Cynthia Baker, and WesTele. Finally, Plaintiff states that it alleges 28 the disruption of its relationships with its clients. Plaintiff identifies no constitutional, statutory, 6 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 common law, or other legal standard as to why this constitutes an independently wrongful act. 2 There must be something about Defendants’ alleged interference with Plaintiff’s business 3 that sets it apart from ordinary customer solicitation—be that wrongful means or some other 4 differentiator—in order for it to be tortious. (See Moss, Adams & Co. v. Shilling (1986) 179 5 Cal.App.3d 124, 128-129 [former employees are prohibited from using trade secrets to announce 6 a change of employment to the former employer’s customers; however, they may do business 7 with a former employer’s customers with whom they became personally acquainted and 8 developed a business relationship while formerly employed].) The same point is well made in a 9 comment to the Restatement 2d of Torts § 766: 10 Inducement by offer of better terms Another method of inducing B to sever his business relations with C is to offer B a better bargain that that which he has with 11 C ...A’s freedom to conduct his business in the usual manner, to advertise his goods, to extol their qualities, to fix their prices and to sell them is not restricted 12 by the fact that B has agreed to buy similar goods from C. Even though A knows of B’s contract with C, he may nevertheless send his regular advertising to B and 13 may solicit business in normal course. This conduct does not constitute inducement of breach of the contract. 14 15 Accordingly, doing business with a former employer’s former customers or offering 16 below-cost pricing is not, of itself, wrongful. Here, other than “business in the usual manner,” 17 which is not actionable, Plaintiff’s complaint alleges only that Defendants wrongfully used 18 Plaintiff’s “confidential information.” Because claims based on use of “confidential information” 19 are preempted and Plaintiff has no other departure from “business in the usual manner” in support 20 of the claims in the SAC, Plaintiff’s intentional interference claims fail. 21 F. Plaintiff’s Cause of Action for Unfair Competition is Preempted by the 22 CUTSA and Plaintiff Failed to Allege Sufficient Facts to State a Claim 23 In its Opposition, Plaintiff admits that its unfair competition cause of action is based on 24 “Defendants wrongfully sharing and using the confidential information and documents ... for the 25 purpose of tortiously interfering with Plaintiff’s contractual relationship with its clients and its 26 prospective business advantage.” (Oppo. p. 18.) Thus, this claim is preempted. Plaintiff also 27 states that this claim is based on “Defendants wrongfully conspiring to divert business, 28 managerial employees, and independent contractors away from Plaintiff.” (Id.) As previously 7 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 discussed, there is no cause of action for these acts unless they are accompanied by an illegal or 2 wrongful act. Once again, Plaintiff does not identify any wrongful act other than Defendants’ 3 alleged misappropriation of Plaintiff’s confidential information. Accordingly, Plaintiff’s unfair 4 competition claim is preempted, and Plaintiff has failed to allege sufficient facts to state a claim. 5 III. PLAINTIFF’S CONTRACT CAUSES OF ACTION MUST BE DISMISSED 6 A. Plaintiff Failed to Plead Sufficient Facts For Its Breach of Contract Claims 7 As set forth in the demurrer, Plaintiff failed to allege what law it claims applies to its 8 breach of contract claims. This deficiency has continued from the original Complaint, to the FAC, 9 to the SAC.2 This deficiency alone should result in dismissal of the claim. (See Barnes v. 10 AstraZeneca Pharmaceuticals LP (N.D. Ga. 2017) 253 F.Supp.3d 1168, 1172.) Notwithstanding 11 the foregoing, to the extent Plaintiff’s SAC can be read as alleging that the employment 12 agreements signed by Defendants Bellas and Lipkin are governed by California law, the contracts 13 are completely invalid due to the void non-solicitation and non-compete clauses contained in 14 each agreement. (Conversion Logic, Inc. v. Measured, Inc. et al. (C.D. Cal. Dec. 13, 2019) No. 15 19-CV-05546, 2019 WL 6828283, at *6; WeRide Corp. v. Kun Huang (N.D. Cal. 2019) 379 16 F.Supp.3d 834, 852.) Plaintiff’s claims for breach of contract accordingly fail as a matter of law. 17 Moreover, and as discussed at length in Defendants’ demurrer, Plaintiff alleges that 18 Defendants Bellas and Lipkin breached their employment agreements by misappropriating 19 Plaintiff’s trade secrets. (SAC ¶¶ 59, 70) However, Plaintiff failed to plead sufficient facts 20 support its trade secret claims, including what the trade secrets are, how it took measures to 21 safeguard that information, and how each Defendant allegedly misappropriated the trade secrets. 22 These deficiencies are fatal to Plaintiff’s breach of contract claims. (See Becton, Dickinson & 23 Co. v. Cytek Biosciences, Inc. (N.D. Cal. May 21, 2018) No. 18-cv-00933-MMC, 2018 WL 24 2298500, at *8 [dismissing breach of contract claims based on alleged misappropriation where 25 the Complaint “fails to set forth, as to each individual defendant, the particular conduct on which 26 the claim against him/her is based.”]; Calsoft Labs, Inc. v. Panchumarthi (N.D. Cal. Jan. 31, 27 2 Nor do the contracts have a choice of law provision and Defendants Bellas and Lipkin reside outside of 28 California. 8 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 2020) 2020 WL 512123 at *6 [same].) While Plaintiff’s Opposition identifies a laundry list of 2 supposed “confidential information” there are zero facts demonstrating that the confidential 3 information constitutes a trade secret or that Defendant Bellas or Defendant Lipkin 4 misappropriated any trade secrets. (Oppo. p. 8.) Accordingly, Plaintiff’s breach of contract claims 5 must also be dismissed without leave to amend. 6 B. It is Undisputed that Plaintiff’s Breach of Implied Covenant of Good Faith 7 and Fair Dealing Claims Are Duplicative of Its Breach of Contract Claims 8 Plaintiff does not dispute that the allegations in its breach of implied covenant of good 9 faith and fair dealing claims do not differ from the allegations in its breach of contract claims. 10 (Oppo. pp. 16-17.) “If the allegations in a breach of implied covenant claim do not go beyond 11 the statement of mere contract breach and, relying on the same alleged facts, simply seek the 12 same damages or other relief already claimed in a companion contract cause of action, they may 13 be disregarded as superfluous as no additional claim is actually stated.” (Careau & Co. v. Security 14 Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) Accordingly, Plaintiff’s breach 15 of implied covenant claims should be dismissed without leave to amend. 16 Furthermore, as acknowledged by Plaintiff in its Opposition, an express contractual 17 relationship is required between the parties to state a claim for a breach of the implied covenant 18 of good faith and fair dealing. (Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc. (1992) 19 2 Cal.4th 342, 373.) As established above, to the extent Plaintiff is taking the position that 20 California law applies to the Bellas and Lipkin employment agreement, the agreements are 21 invalid due to the non-compete and non-solicitation clauses. (Conversion Logic, 2019 WL 22 6828283, at *6.) With no valid contractual relationship between the parties, Plaintiff’s implied 23 covenant claims also fail as a matter of law. 24 IV. LEAVE TO AMEND SHOULD BE DENIED BECAUSE ANY AMENDMENT 25 WOULD BE FUTILE 26 Plaintiff’s gamesmanship apparently knows no bounds. Plaintiff has repeatedly 27 represented that it could not properly allege a trade secret misappropriation cause of action and 28 that it did not intend to re-add its misappropriation cause of action or any new causes of action. 9 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 1 (Santiago Decl. ¶ 13, Ex. H; Evans Decl. ¶ 2, Ex. A.) Plaintiff now requests leave to amend to 2 force the Court and Defendants to endure yet another iteration of Plaintiff repeating previously 3 dismissed claims. Plaintiff already dismissed multiple causes of action from the Complaint when 4 it filed the FAC. Plaintiff then re-added those very same causes of action it previously dismissed 5 and dismissed the trade secret cause of action when it filed the SAC. And now Plaintiff requests 6 leave to file a Third Amended Complaint to re-add the same trade secret cause of action it already 7 dismissed. Enough is enough. 8 Leave to amend should not be granted where amendment would be futile. (Caliber 9 Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 374.) Amendment would be 10 futile here because Plaintiff already attempted twice (in the Complaint and FAC) to allege a trade 11 secret misappropriation cause of action. Plaintiff then improperly filed its SAC and voluntarily 12 dismissed that cause of action rather than respond to Defendants’ demurrer to its FAC. The Court 13 “construe[d] the filing of the SAC as a concession that the demurrer to the FAC is in some part 14 meritorious” and “deem[ed] the SAC as filed following the sustaining of the demurrer to the FAC 15 with leave to amend.” Moreover, the other amendments Plaintiff suggests are to add additional 16 claims that would be preempted by the CUTSA. (Mattel, Inc. v. MGA Entm’t, Inc. (C.D. Cal. 17 2011) 782 F.Supp.2d 911, 985 [breach of duty of loyalty preempted by the CUTSA]; GeoData 18 Systems, supra, 2016 WL 6562064, at *7 [breach of fiduciary duty preempted by the CUTSA].) 19 Plaintiff has failed to remedy the fatal and fundamental defects in its claims and this failure serves 20 only to further confirm that it would be futile to grant Plaintiff a fourth bite at the apple. 21 V. CONCLUSION 22 For the foregoing reasons, Defendants respectfully request the Court sustain the demurrer 23 in its entirety, without leave to amend. 24 DATE: March 18, 2022 FISHER & PHILLIPS LLP 25 26 By: Shayna Balch Santiago 27 Kathryn M. Evans Attorneys for Defendants 28 10 DEFENDANTS’ REPLY IN SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT FP 43468611.1 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 March 18, 2022, I served the following document(s) DEFENDANTS’ REPLY IN 5 SUPPORT OF DEMURRER TO PLAINTIFF’S SECOND AMENDED COMPLAINT on the person(s) listed below by placing the original a true copy thereof enclosed in sealed 6 envelope(s) addressed as follows: 7 Paul P. Young Tel: (626) 744-1838 8 Joseph Chora Fax: (626) 744-3167 Cameron H. Totten E-Mail: paul@cym.law; joseph@cym.law; 9 Armen Manasserian cameron@cym.law; armen@cym.law; Scott O’Halloran scott@cym.law 10 CHORA YOUNG LLP 650 Sierra Madre Villa Ave, Suite 304 Attorneys for Plaintiff Butler America, LLC 11 Pasadena, California 91107 12 [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 13 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 14 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, 15 in a sealed envelope with postage fully prepaid. [by FAX] - Based on an agreement of the parties to accept service by fax transmission, 16 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. 17 [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) 18 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. 19 [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 20 the person(s) at the electronic service address(es) listed above. 21 I declare under penalty of perjury, under the laws of the State of California, that the foregoing is true and correct. 22 Executed March 18, 2022, at San Diego, California. 23 Amanda Funkhouser By: 24 Print Name Signature 25 26 27 28 1 PROOF OF SERVICE FP 43468611.1