Briefs and Other Related Documents
Softchoice Corp. v. En Pointe Technologies, Inc. Cal.Superior, 2006. Only the Westlaw citation is currently available.
Superior Court, Los Angeles County, California.
SOFTCHOICE CORPORATION Plaintiff,
v.
EN POINTE TECHNOLOGIES, INC. a Delaware Corporation; Robert Bogle, an individual, and Does 1 through 20, inclusive, Defendants.No. SC088295.
Nov. 13, 2006.
Stuart P. Jasper (91378), Jasper & Jasper, P.C., Irvine, California, Jacob J. Stettin (89315), Los Angeles, California, for Defendant En Pointe Technologies, Inc.
ORDER RULING ON DEMURRERS TO SECOND AMENDED COMPLAINT
ROSENBERG, J.
Unlimited
*1 There came on regularly for hearing the demurrers of defendants En Pointe Technologies, Inc. ("En Pointe"), Robert Bogle and Michelle Eckert. En Pointe appeared by Stuart P. Jasper, Bogle by W. Joseph Strapp, and Eckert by Paul D. Cass. Plaintiff Softchoice Corporation appeared by Aaron P. Sonnhalter. After consideration of the moving, opposition, and reply papers and the argument of counsel, the court rules as set forth below.
As to defendant En Pointe, the demurrer to the second cause of action for unfair competition under Bus. & Prof.Code § 17200 et seq. and to the sixth cause of action for aiding and abetting a breach of the duty of loyalty are sustained with ten days leave to amend.
Preemption of the UCL Claim
The Uniform Trade Secrets Act (UTSA) prohibits misappropriation of trade secrets as a statutory tort. Civil Code § 3426.7(b) provides:
"This title [the UTSA] does not affect (1) contractual remedies, whether or not based upon misappropriation of a trade secret, (2) other civil remedies that are not based upon misappropriation of a trade secret, or (3) criminal remedies, whether or not based upon misappropriation of a trade secret."
The scope of this preemption has not been determined by a California appellate court. However, there is persuasive authority on point.
Civil Code § 3425.7(b) has been held to preempt claims for unfair competition and unjust enrichment based on the same nucleus of facts as the plaintiff's claim for misappropriation of trade secrets. (Ernst Paper Products, Inc. v. Mobil Chemical Company, Inc. (C.D.Cal.1997) 1997 U.S. Dist. LEXIS 21781 1, 8-9.) The UCL is not a statute "relating to misappropriation of a trade secret, or any statute otherwise regulating trade secrets" within the meaning of Civ.Code § 3426.7(a). (Convolve, Inc. v. Compaq Computer Corp. (S.D.N.Y.2006) 2006 U.S. Dist. LEXIS 69425 1, 9 [applying California UTSA].) Accordingly, the USTA preempts UCL claims based on misappropriation of a trade secret. (Ibid.) The test is whether the other claims are based on the same nucleus of facts as the misappropriation of trade secrets claim. (Ernest Paper Products, supra, 1997 U.S. Dist. LEXIS 21781 at pp. 8-9.)
Here, if the other causes of action demurred to are mere restatements of the misappropriation of the trade secrets claim, the causes of action are duplicative and preempted by the UTSA.
Defendant Withdraws the Demurrer to the Third Cause of Action
In its reply, defendant withdraws the demurrer to the third cause of action for intentional interference with economic advantage.
Unfair Competition under Bus. & Prof.Code § 17200 [Second Cause of Action]
To state a cause of action under Bus. & Prof.Code § 17200, Plaintiff must allege the violation of an underlying law (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 619, 17 Cal.Rptr.2d 708), conduct in violation of an antitrust law or that significantly threatens or harms competition (Cel-Tech Communications, Inc. v. L.A. Cellular Tel. Co. (1999) 20 Cal.4th 163, 187, 83 Cal.Rptr.2d 548, 973 P.2d 527), or that members of the public are likely to be deceived (Comm. On Children's TV (1983) 35 Cal.3d 197, 211, 197 Cal.Rptr. 783, 673 P.2d 660). Here, to the extent plaintiff alleges violation of Civ.Code § 3426 in paragraph 67(d), the UTSA claim alleged in the first cause of action preempts the claim. Plaintiff argues, however, that it also has alleged independent grounds constituting "unfair business practices" including the unlawful act of intentionally interfering with economic advantage and aiding and abetting a breach of the duty of loyalty. (SAC ¶ 67(b) and (c).) Examining these claims, the harm alleged from interfering with economic advantage and aiding and abetting a breach of the duty of loyalty here is predicated on Bogle's alleged actions on behalf of En Pointe to lure Softchoice employees to En Pointe (SAC ¶ ¶ 78-79) and En Pointe's aiding and abetting of Bogle and Eckert in breaching a duty of loyalty to Softchoice to recruit Softchoice sales reps to work for En Pointe. (SAC ¶ ¶ 101-105.)
*2 The harms are personal to plaintiff, and are alleged generally only in paragraph 65(a). However, from the remainder of the allegations, no facts are set forth to allege that defendants have engaged in the conduct claimed as to any other competitor or indeed that defendants have engaged in employee-poaching more than one time. This does not significantly threaten or harm competition but only a single competitor. The remedy for the conduct alleged is via the direct cause of action for interfering with economic advantage and aiding and abetting a breach of the duty of loyalty, which have been alleged separately in the SAC, rather than via Bus. & Prof.Code § 17200.
The only applicable case cited by plaintiff, Courtesy Temporary Service, Inc. v. Camacho, does not aid plaintiff's cause. In that case, the finding was simply that where employees of a business resign and form a competing business that profits nearly exclusively from clients of the old business, the conduct can be enjoined as unfair competition. "The cases are legion holding that a former employee's use of confidential information obtained from his former employer to compete with him and to solicit the business of his former employer's customers is regarded as unfair competition." (Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278, 1292, 272 Cal.Rptr. 352, citing, e.g., Greenly v. Cooper (1978) 77 Cal.App.3d 382, 391-392, 143 Cal.Rptr. 514.) Here, however, it is not customers that were "stolen," but employees that were hired. The hiring of experienced employees from a competitor is not an unfair business practice, without more. Further, where this has occurred only on one occasion, it is not conduct in violation of an antitrust law or that significantly threatens or harms competition within the meaning of Bus. & Prof.Code § 17200. (Cel-Tech Communications, Inc. v. L.A. Cellular Tel. Co. (1999) 20 Cal.4th 163, 187, 83 Cal.Rptr.2d 548, 973 P.2d 527.)
The lone allegation that is arguably unfair, immoral, unethical, oppressive, and unscrupulous is the alleged use, or misuse, of trade secret information. (SAC ¶ 71.) However, this states nothing more than a claim for misappropriation of trade secrets. Thus, this cause of action is preempted by the UTSA as pleaded.
Sixth Cause of Action for Aiding and Abetting a Breach of the Duty of Loyalty
"Liability may also be imposed on one who aids and abets the commission of an intentional tort if the person (a) knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person's own conduct, separately considered, constitutes a breach of duty to the third person." (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 846, 33 Cal.Rptr.2d 438, citing Rest.2d Torts § 876, subds. (b), (c), emphasis added.)
Defendants argue that (1) the plaintiff insufficiently alleges knowledge that the other's conduct constitutes breach of a duty by alleging only "awareness," and (2) that no substantial assistance or encouragement is alleged. Actual knowledge of the specific wrongful act that constituted the breach of fiduciary duty defendant purportedly aided and abetted is required. (Casey v. U.S. Bank Nat'l Assn. (2005) 127 Cal.App.4th 1138, 1147, 26 Cal.Rptr.3d 401.)
*3 Here, plaintiff sufficiently alleges that En Pointe assisted with and encouraged the activity. (SAC ¶ 105.) However, plaintiff only alleges that "En Pointe was aware that Bogle and Eckert owed Softchoice a duty of loyalty while they was [sic] employed by Softchoice." (SAC ¶ 101.) While conduct of Mr. Bogle and Ms. Eckert is thereafter substantially pleaded, no further allegations charging En Pointe with actual knowledge that either Mr. Bogle's or Ms. Eckert's conduct constitutes a breach of duty is alleged, although En Pointe was arguably aware of where Bogle, Eckert, Haskovec, Christian, and Stelzer were employed prior to working for En Pointe, and there is an allegation that a meeting of former Softchoice employees occurred at En Pointe's Los Angeles office on December 27, 2005. (SAC ¶ 102(e).)
It is sufficient for a pleading to "allege generally that defendants had actual knowledge of a specific primary violation." (Casey v. U.S. Bank Nat. Assn., supra, 127 Cal.App.4th at p. 1148, 26 Cal.Rptr.3d 401 [citation omitted].) However, although the SAC provides ample details of the improper conduct of Mr. Bogle and Ms. Eckert in breaching their duty of loyalty to plaintiff while still employed by plaintiff, it fails to establish that En Pointe had actual knowledge of the breach of fiduciary duty in which Mr. Bogle and Ms. Eckert allegedly participated.
Plaintiff shall have twenty days within which to amend.
IT IS SO ORDERED.
Cal.Superior,2006.
Softchoice Corp. v. En Pointe Technologies, Inc.
Not Reported in Cal.Rptr.3d, 2006 WL 3350798 (Cal.Superior)
Briefs and Other Related Documents (Back to top)
SC088295 (Docket) (Jan. 17, 2006)
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