-EFB (TEMP) Ikon Office Solutions, Inc. v. Rezente et al, No. 2:2010cv01704 - Document 103 (E.D. Cal. 2011)

Court Description: MEMORANDUM and ORDER denying 93 Motion to Dismiss signed by Judge William B. Shubb on 4/13/11. (Kaminski, H)
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-EFB (TEMP) Ikon Office Solutions, Inc. v. Rezente et al Doc. 103 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 13 14 15 NO. CIV. 2:10-1704 WBS EFB IKON OFFICE SOLUTIONS, INC., Plaintiff, MEMORANDUM AND ORDER RE: MOTION TO DISMISS v. MICHAEL REZENTE and CHRISTY FRIEND, 16 Defendants. 17 / 18 19 20 ----oo0oo---Plaintiff Ikon Office Solutions, Inc. (“Ikon”) brought 21 this action against defendants Michael Rezente and Christy Friend 22 arising out of defendants’ former employment with plaintiff. 23 Plaintiff’s Second Amended Complaint (“SAC”) alleges claims for 24 misappropriation of trade secrets under the California Uniform 25 Trade Secrets Act (“CUTSA”), Cal. Civ. Code §§ 3426-3426.11, 26 interference with prospective economic relations, and breach of 27 28 1 Dockets.Justia.com 1 duty of loyalty.1 2 is Christy Friend’s motion to dismiss the claims against her for 3 interference with prospective economic relations and breach of 4 duty of loyalty for failure to state a claim pursuant to Federal 5 Rule of Civil Procedure 12(b)(6). 6 I. (Docket No. 90.) Presently before the court Factual and Procedural Background Plaintiff sells, leases, and services office equipment 7 8 and systems including copiers and printers, and provides services 9 including technical support, document outsourcing, equipment 10 maintenance, and network facilities management. 11 Friend began working for plaintiff on October 22, 2008, in its 12 Sacramento, California, “Marketplace” as an Account Executive. 13 (Id. ¶ 6.) 14 plaintiff’s equipment, systems, and services, and the general 15 management of customer relationships and account services for 16 approximately 275 customers. 17 (SAC ¶ 2.) Friend was responsible for the sale and lease of (Id. ¶¶ 23-24.) Friend resigned from employment with plaintiff on July 18 13, 2009. (Id. ¶ 6.) 19 for Delta Copy Systems, Inc. (“DCSI”), a direct competitor of 20 plaintiff. 21 before her resignation, Friend deliberately delayed and failed to 22 conclude deals that she had “been working on for quite some time” 23 for plaintiff so that she could finalize them after her 24 resignation on behalf of DCSI. 25 allegedly failed to conclude any transactions for plaintiff in Plaintiff alleges that Friend now works (Id. ¶¶ 5, 8.) Plaintiff alleges that in the months (Id. ¶ 79, 82-83.) Friend 26 27 28 1 The court previously granted in part and denied in part defendants’ motion to dismiss the First Amended Complaint. (Dec. 9, 2010, Order (Docket No. 85).) 2 1 the twelve weeks prior to her resignation. (Id. ¶ 46.) Within a 2 few weeks of her employment with DCSI, though, Friend allegedly 3 stated that she had closed six deals for DCSI since joining the 4 company and had already transacted $100,000.00 in revenue. 5 (Id. ¶ 83.) 6 school district that she had been working on for five months on 7 behalf of plaintiff. 8 account was going to be transferred to another sales 9 representative weeks before Friend’s resignation as part of a One of those transactions was a new contract with a (Id. ¶¶ 49, 77.) When the school district 10 territory realignment, Rezente blocked the transfer, allegedly in 11 an attempt to delay the closing of the transaction. 12 The school district eventually signed a contract with DCSI. 13 (Id. ¶ 84.) 14 II. (Id. ¶ 78.) Discussion 15 On a motion to dismiss, the court must accept the 16 allegations in the complaint as true and draw all reasonable 17 inferences in favor of the plaintiff. 18 U.S. 232, 236 (1974), overruled on other grounds by Davis v. 19 Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 20 (1972). 21 contain sufficient factual matter, accepted as true, to ‘state a 22 claim to relief that is plausible on its face.’” 23 Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949 (2009) (quoting 24 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 25 “plausibility standard,” however, “asks for more than a sheer 26 possibility that a defendant has acted unlawfully,” and where a 27 complaint pleads facts that are “merely consistent with” a 28 defendant’s liability, it “stops short of the line between Scheuer v. Rhodes, 416 “To survive a motion to dismiss, a complaint must 3 Ashcroft v. This 1 possibility and plausibility.” Iqbal, 129 S. Ct. at 1949 2 (quoting Twombly, 550 U.S. at 556-57) (internal quotation mark 3 omitted). In general, a court may not consider items outside the 4 5 pleadings upon deciding a motion to dismiss, but may consider 6 items of which it can take judicial notice. 7 F.3d 1370, 1377 (9th Cir. 1994). 8 notice of facts “not subject to reasonable dispute” because they 9 are either “(1) generally known within the territorial Barron v. Reich, 13 A court may take judicial 10 jurisdiction of the trial court or (2) capable of accurate and 11 ready determination by resort to sources whose accuracy cannot 12 reasonably be questioned.” 13 may properly be taken of matters of public record outside the 14 pleadings. 15 Cir. 1986) (taking judicial notice of a motion to dismiss in a 16 separate suit). 17 notice of several items on this docket; as these are matters of 18 public record, the court will take judicial notice of them. 19 20 A. Fed. R. Evid. 201. Judicial notice MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Plaintiff has asked the court to take judicial Breach of Duty of Loyalty Claim Plaintiff alleges that Friend breached her duty of 21 loyalty by recruiting others to leave Ikon, failing to inform 22 Ikon of her conflict of interest, deliberately stalling and 23 preventing the transaction of business and the closing of 24 potential deals in order to steer and close the deals on behalf 25 of DCSI, and encouraging potential Ikon customers to delay or 26 reject concluding any deal with Ikon. (SAC ¶ 134.) 27 The elements of a cause of action for breach of a duty 28 of loyalty are: “(1) the existence of a relationship giving rise 4 1 to a duty of loyalty; (2) one or more breaches of that duty; and 2 (3) damage proximately caused by that breach.” 3 v. Luu, 150 Cal. App. 4th 400, 410 (6th Dist. 2007). 4 loyalty requires an agent “to act loyally for the principal’s 5 benefit in all matters connected with the agency relationship.” 6 Id. at 411. Huong Que, Inc. The duty of Employees owe a duty of loyalty to their employers. 7 8 See Stokes v. Dole Nut Co., 41 Cal. App. 4th 285, 295 (3d Dist. 9 1995) (“[D]uring the term of employment, an employer is entitled 10 to its employees’ undivided loyalty. . . . 11 is breached . . . when the employee takes action which is 12 inimical to the best interests of the employer.”) (citations and 13 internal quotation marks omitted). 14 The duty of loyalty Plaintiff’s allegations regarding Friend’s recruitment 15 of other employees are insufficient to constitute breach of 16 loyalty, as the recruitment allegedly took place after Friend’s 17 employment, and thus her duty of loyalty, ended. 18 67.) 19 while employed for plaintiff are sufficient to state a claim. 20 During her employment, a relationship between Friend and 21 plaintiff existed giving rise to a duty of loyalty, and she 22 allegedly breached that duty by not only failing to do her job 23 but actively preventing deals that it was job to make. 24 alleges that these breaches resulted in damages of lost business. 25 (Id. ¶ 135.) 26 (See SAC ¶¶ 47, However, the allegations regarding her obstruction of deals Plaintiff Friend argues that the allegations concerning the delay 27 and prevention of deals during her employment are preempted by 28 CUTSA, which provides the exclusive remedy for trade secret 5 1 misappropriation under California law. See Silvaco Data Sys. v. 2 Intel Corp., 184 Cal. App. 4th 210, 236 (6th Dist. 2010) (“We 3 thus reaffirm that CUTSA provides the exclusive civil remedy for 4 conduct falling within its terms, so as to supersede other civil 5 remedies ‘based upon misappropriation of a trade secret.’”) 6 (quoting Cal. Civ. Code § 3426.7), disapproved of on other 7 grounds by Kwikset Corp. v. Sup. Ct., 51 Cal. 4th 310 (2011); see 8 also Gabriel Techs. Corp. v. Qualcomm Inc., No. 08cv1992, 2009 WL 9 3326631, at *11 (S.D. Cal. Sept. 3, 2009). CUTSA preempts all 10 common law claims that are “based on the same nucleus of facts as 11 the misappropriation of trade secrets claim for relief.” 12 Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 13 Cal. App. 4th 939, 958 (6th Dist. 2009) (quoting Digital Envoy, 14 Inc. v. Google, Inc., 370 F. Supp. 2d 1025, 1035 (N.D. Cal. 15 2005)) (internal quotation marks omitted). 16 K.C. In other words, preemption generally applies where 17 “there is no material distinction” between the wrongdoing 18 underlying the CUTSA claim and the non-CUTSA claim. 19 Techs. Ltd. v. DeviceVM, No. C 09-04697, 2009 WL 4723400, at *4 20 (N.D. Cal. Dec. 8, 2009) (quoting Convolve, Inc. v. Compaq 21 Computer Corp., No. 00 CV 5141, 2006 WL 839022, at *6 (S.D.N.Y. 22 Mar. 31, 2006) (applying California law)). 23 remedies that are not based upon misappropriation of a trade 24 secret” and contractual or criminal remedies are not preempted. 25 Cal. Civ. Code § 3426.7(b). 26 See Phoenix “[O]ther civil The facts relevant to plaintiff’s breach of duty of 27 loyalty claim are distinct from those relevant to the 28 misappropriation claim. Plaintiff alleges in its 6 1 misappropriation of trade secrets claim that defendants took 2 plaintiff’s customer lists and other alleged trade secrets to 3 DCSI and used the trade secret information to make sales on 4 behalf of DCSI. 5 essentially based on allegations that during her employment, 6 Friend sabotaged her work for plaintiff; the misappropriation 7 claim is based on allegations that Friend took and used trade 8 secrets in her new employment. 9 based on the same nucleus of facts, plaintiff’s loyalty claim is 10 13 The loyalty claim is Because these allegations are not not preempted. 11 12 (See SAC ¶¶ 90-125.) Accordingly, the court will deny Friend’s motion to dismiss the breach of duty of loyalty claim against her.2 B. 14 Interference with Prospective Economic Relations Claim The elements of a claim of intentional interference 15 with prospective economic relations are: (1) an economic 16 relationship between the plaintiff and a third party, with the 17 probability of future economic benefit to the plaintiff; (2) 18 knowledge by the defendant of the relationship; (3) intentional 19 acts by the defendant designed to disrupt the relationship; (4) 20 actual disruption of the relationship; and (5) economic harm 21 proximately caused by the acts of the defendant. 22 Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1153 (2003). 23 part of the third element, the plaintiff “must plead and prove as 24 part of its case-in-chief that the defendant not only knowingly Korea Supply As 25 2 26 27 28 Defense counsel made a passing reference to a “causation and damages” argument at oral argument without fully explaining what the argument entailed. The court finds that plaintiff sufficiently alleged causation and damages to survive the motion to dismiss, and will not speculate as to what else counsel may have meant by that argument. 7 1 interfered with the plaintiff’s expectancy, but engaged in 2 conduct that was wrongful by some legal measure other than the 3 fact of interference itself.” 4 U.S.A., Inc., 11 Cal. 4th 376, 393 (1995); Korea Supply Co., 29 5 Cal. 4th at 1154. 6 Della Penna v. Toyota Motor Sales, Plaintiff alleges that Friend interfered in several 7 unidentified economic relationships as well as the relationship 8 with the school district by sabotaging the completion of deals 9 while working for plaintiff and then completing identical deals 10 on behalf of DCSI soon after her resignation. 11 certainly alleged that Friend had knowledge of these 12 relationships, that the relationships were actually disrupted, 13 and that plaintiff was harmed by Friend’s acts in that it lost 14 business. 15 sufficiently alleged that the relationships contained the 16 probability of future economic benefit or that Friend committed 17 any independently wrongful acts to disrupt the relationships. 18 Plaintiff has However, the parties dispute whether plaintiff has With respect to the first element, the tort of 19 interference with prospective economic relations applies to 20 “interference with existing noncontractual relations which hold 21 the promise of future economic advantage. 22 protects the expectation that the relationship eventually will 23 yield the desired benefit, not necessarily the more speculative 24 expectation that a potentially beneficial relationship will 25 eventually arise.” 26 Inc., 42 Cal. App. 4th 507, 524 (5th Dist. 1996); see id. at 527 27 (“Without an existing relationship with an identifiable buyer, 28 [the plaintiff’s] expectation of a future sale was ‘at most a In other words, it Westside Ctr. Assocs. v. Safeway Stores 23, 8 1 hope for an economic relationship and a desire for future 2 benefit’” (quoting Blank v. Kirwan, 39 Cal. 3d 311, 331 (1985)); 3 Roth v. Rhodes, 25 Cal. App. 4th 530, 546 (4th Dist. 1994) 4 (holding that, in doctor’s lawsuit based on defendants’ refusal 5 to lease office space to him, doctor failed to allege requisite 6 “existing relationship” because future patients were merely 7 “speculative”). 8 9 Plaintiff has sufficiently alleged that its economic relationship with the school district contained the probability 10 of future economic benefit. 11 Rezente blocked a transfer of the school district account so that 12 she could remain on the account. 13 the school district for five months on a contract on behalf of 14 plaintiff, and yet DCSI signed a contract with the school 15 district within weeks of Friend’s arrival. 16 survive a motion to dismiss by plausibly alleging that the school 17 district would have signed the contract with plaintiff but for 18 Friend’s actions. 19 Before Friend resigned, she and Friend had been working with This is sufficient to California regulations generally requiring school 20 districts to allocate contracts based on a competitive bidding 21 process, see Cal. Pub. Contract Code § 20111, do not alter the 22 court’s conclusion that plaintiff has sufficiently alleged the 23 probability of future economic benefit. 24 the bidding requirement exist. 25 cannot determine, based on the facts alleged, whether the school 26 district contract would be subject to the competitive bidding 27 requirement. 28 allege sufficient facts, accepted as true, to state a plausible Several exceptions to See id. § 20118. The court Plaintiff is required on a motion to dismiss to 9 1 claim to relief, not to disprove every set of facts that could 2 potentially keep it from succeeding on that claim. 3 129 S. Ct. at 1949. 4 alleged the first element. 5 See Iqbal, Accordingly, plaintiff has sufficiently As to the third element, independently wrongful conduct 6 designed to disrupt the relationship, the California Supreme 7 Court has explained that “an act is independently wrongful if it 8 is unlawful, that is, if it is proscribed by some constitutional, 9 statutory, regulatory, common law, or other determinable legal 10 standard.” Korea Supply Co., 29 Cal. 4th at 1159. The wrongful conduct plaintiff alleges Friend engaged 11 12 in includes the conduct the court found to be sufficiently 13 alleged in the breach of duty of loyalty claim: preventing 14 contracts from reaching completion while in plaintiff’s employ. 15 The alleged breach of the duty of loyalty is sufficient to show 16 that Friend allegedly engaged in conduct that was wrongful in 17 itself. 18 interference with prospective economic relations claim and the 19 court will deny Friend’s motion to dismiss that claim. 20 Accordingly, plaintiff has sufficiently pled its IT IS THEREFORE ORDERED that Christy Friend’s motion to 21 dismiss the interference with prospective economic relations and 22 breach of duty of loyalty claims against her in plaintiff’s 23 Second Amended Complaint be, and the same hereby is, DENIED. 24 DATED: April 13, 2011 25 26 27 28 10