Lynwood Investments CY Limited v. Konovalov et al, No. 3:2020cv03778 - Document 162 (N.D. Cal. 2022)

Court Description: ORDER GRANTING MOTION TO DISMISS. Defendants motion to dismiss the Amended Complaint is granted, and the First, Second, Fourth, Seventh, Eighth, Ninth, Twelfth, Thirteenth, and Fourteenth Claims for Relief are dismissed without further leave to amend. Signed by Judge Maxine M. Chesney on August 16, 2022. (mmclc3, COURT STAFF) (Filed on 8/16/2022)

Download PDF

1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 9 LYNWOOD INVESTMENTS CY LIMITED, Plaintiff, 10 v. United States District Court Northern District of California 11 12 Case No. 20-cv-03778-MMC ORDER GRANTING MOTION TO DISMISS Re: Dkt. No. 144 MAXIM KONOVALOV, et al., Defendants. 13 14 Before the Court is defendants Maxim Konovalov (“Konovalov”), Igor Sysoev 15 (“Sysoev”), Andrey Alexeev (“Alexeev”), Maxim Dounin (“Dounin”), Gleb Smirnoff 16 (“Smirnoff”), Angus Robertson (“Robertson”), NGINX, Inc. (BVI) (“NGINX BVI”), NGINX 17 Software, Inc., BV NGINX, LLC (“BV NGINX”), Runa Capital, Inc. (“Runa Capital”), 18 E.venture Capital Partners II, LLC (“E. Ventures”), and F5 Networks, Inc. (“F5”)’s 19 Consolidated Motion, filed May 27, 2021, “to Dismiss Plaintiff’s Amended Complaint” 20 (“AC”). Plaintiff, Lynwood Investments CY Limited (“Lynwood”), has filed opposition, to 21 which defendants have replied. The Court, having considered the papers filed in support 22 of and in opposition to the motion, rules as follows. 23 I. BACKGROUND 24 Lynwood alleges it is a “Cyprus limited liability company . . . prosecuting this action 25 in its capacity as the assignee of all rights and interests” of Rambler Internet Holding LLC 26 (“Rambler”), “one of the largest media companies and web portals in Russia.” (See AC 27 ¶¶ 73-74, 97.) Lynwood further alleges Sysoev was “a programming talent at Rambler” 28 who, in order to “solve Rambler-specific issues related to handling large volumes of web 1 server traffic,” developed “the popular web server software[1] that has become known 2 worldwide as Open Source NGINX.” (See AC ¶¶ 23-24.) In particular, Lynwood alleges 3 “Sysoev wrote his first line of NGINX-related software code” on October 23, 2001 (see 4 AC ¶ 23), and then spent “nine years of his Rambler employment working primarily on 5 Open Source NGINX” (see AC ¶ 195). United States District Court Northern District of California 6 According to Lynwood, although “Sysoev first publicly released . . . Open Source 7 NGINX in 2004, without authorization from Rambler,” Rambler “made a business decision 8 to permit Sysoev to continue releasing Open Source NGINX . . . because such releases 9 highlighted the technical achievements of Rambler and its employee Sysoev, which 10 inured to Rambler’s benefit for attracting top software programmers.” (See AC ¶¶ 34, 11 210.) Lynwood further alleges Rambler’s Chief Technology Officer (“CTO”), Konovalov, 12 “repeatedly misrepresented to [Rambler] that Open Source NGINX had no independent 13 commercial value or prospects for monetization” (see AC ¶ 17) and “that its only use for 14 Rambler was to solve Rambler’s internal technical issues . . . and to burnish Rambler’s 15 reputation as a worldwide leader in technology innovation” (see AC ¶ 16). As a result, 16 Lynwood alleges, “Rambler never undertook efforts to monetize or commercialize Open 17 Source NGINX” (see AC ¶ 319) and “did not object to Konovalov and Sysoev earning an 18 income off of Open Source NGINX” when they later separated from Rambler in 2011 (see 19 AC ¶ 324). 20 Allegedly unbeknownst to Rambler, however, Sysoev and eight other Rambler 21 software programmers, while “work[ing] together in a tight-knit department devoted to 22 product development within Rambler known as the Network Operation Center (‘NOC’) 23 that was ring-fenced from the rest of the company” and overseen by Konovalov, along 24 with Popov, Rambler’s Deputy Chief Technology Officer, and Smirnoff, Head of the NOC 25 Department (see AC ¶¶ 10-11), were “secretly develop[ing] proprietary, commercial 26 27 28 As explained by Lynwood, “web server software” is a type of software that analyzes requests to visit “a given web address” and “then ‘serves’ the requested web page back to the visitor.” (See AC ¶ 175.) 1 2 1 United States District Court Northern District of California 2 versions of NGINX software code,” which they called “NGINX Plus” (see AC ¶¶ 15, 215). Lynwood alleges that, at some point in time, Konovalov, Sysoev, and Smirnoff 3 (collectively, the “Disloyal Employees”), along with their “third-party acquaintances” 4 Alexeev and Dounin (all five, collectively, the “Team”) (see AC ¶ 99) “agreed that 5 together they would start their own company in San Francisco, California[,] to 6 commercialize Open Source NGINX by commercializing NGINX Plus and other 7 proprietary Open Source NGINX extensions, and then achieve their multimillion dollar 8 ‘exit’ or ‘payday’ by selling the entire NGINX Enterprise2 to a large U.S. technology 9 company” (see AC ¶ 214). Lynwood alleges that, in connection therewith, the Disloyal 10 Employees “orchestrated their resignations from Rambler” (see AC ¶¶ 25, 160), and that, 11 “by early April, 2011, when Konovalov and Sysoev were still employed by Rambler,” the 12 Team secured “venture funding” from Runa Capital and E. Ventures (see AC ¶ 20), then 13 formed “NGINX Software, Inc. on May 4, 2011[,] NGINX BVI on July 6, 2011[,] and 14 NGINX DE in August 2011” (see AC ¶ 550), and thereafter “achieved the ultimate object 15 of their conspiracy when they sold Rambler’s NGINX Enterprise to F5 through [a] 16 [m]erger [with NGINX BVI] for $670 million” (see AC ¶ 568), which merger agreement 17 “closed on May 8, 2019” (see AC ¶ 217). Lynwood alleges Robertson, who had “joined 18 NGINX [Software, Inc.] as CEO in 2012” (see AC ¶ 84), “joined F5 as a result of the 19 merger between F5 and NGINX BVI” (hereinafter, “2019 Merger”) (see AC ¶ 365). 20 21 Based on the above allegations, Lynwood in its AC, asserts twenty-five claims, sixteen of which have been stayed by prior order,3 leaving the following nine claims 22 23 24 25 26 27 28 As alleged in the AC, the “NGINX Enterprise” comprises “the purloined NGINXrelated business opportunities and enterprise, proprietary NGINX software (including NGINX Plus), Open Source NGINX, and related intellectual property and goodwill.” (See AC ¶ 19.) 2 3 By order filed October 1, 2020, the Honorable Lucy H. Koh, to whom the abovetitled action previously was assigned, ordered Lynwood to select from the initial Complaint, filed June 8, 2020, ten claims to litigate through trial, and stayed the remaining claims pending resolution of the ten selected claims. (See Order re: Case Narrowing, Dkt. No. 107.) In its AC, Lynwood does not re-assert one of the ten selected claims, namely, the initial Complaint’s First Claim for Relief, titled “Civil Conspiracy Among the Team, Robertson, Runa Capital, E. Ventures, NGINX BVI, NGINX DE, 3 1 subject to challenge by the instant motion: (1) First Claim for Relief, titled “Breach of 2 Employment Obligations Owed by Konovalov to Rambler,” (2) Second Claim for Relief, 3 titled “Breach of Employment Obligations Owed by Sysoev to Rambler,” (3) Fourth Claim 4 for Relief, titled “Breach of Konovalov’s Duty to Act Fairly and Honestly With Rambler,” 5 (4) Seventh Claim for Relief, titled “Aiding and Abetting by Runa Capital and E. Ventures 6 of the Disloyal Employees’ Fraud and Breaches of Their Duties of Honesty and Loyalty to 7 Rambler,” (5) Eighth Claim for Relief, titled “Aiding and Abetting by F5 of the Disloyal 8 Employees’ Fraud and Breaches of Their Duties of Honesty and Loyalty to Rambler,” (6) 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NGINX Software, Inc., and BV NGINX.” (See Compl., Dkt. No. 1.) The following sixteen claims, as now listed in the AC, have been stayed: (1) Third Claim for Relief, titled “Breach of Employment Obligations Owed by Smirnoff to Rambler,” (2) Fifth Claim for Relief, titled “Breach of the Duty to Act Fairly and Honestly With Rambler As To Sysoev and Smirnoff,” (3) Sixth Claim for Relief, titled “Aiding and Abetting by Alexeev and Dounin of the Disloyal Employees’ Breaches of Their Duties of Honesty and Loyalty to Rambler,” (4) Tenth Claim for Relief, titled “Tortious Interference with Contract Against Runa Capital and E. Ventures,” (5) Eleventh Claim for Relief, titled “Tortious Interference with Contract Against F5,” (6) Fifteenth Claim for Relief, titled “Berne Convention for the Protection of Literary and Artistic Works and the Copyright Act (17 U.S.C. § 101, et seq.) based on Contributory Copyright Infringement Against Defendants Runa Capital and E. Ventures,” (7) Sixteenth Claim for Relief, titled “Berne Convention for the Protection of Literary and Artistic Works and the Copyright Act (17 U.S.C. § 101, et seq.) based on Vicarious Copyright Infringement Against Defendants NGINX BVI, NGINX Software, Inc. and F5,” (8) Seventeenth Claim for Relief, titled “Cancellation of NGINX Trademark Registration, U.S. Reg. No. 4,196,757, and Payment of Damages for Fraud, 15 U.S.C. §§ 1064, 1119, 1120, as to NGINX Software, Inc. and F5,” (9) Eighteenth Claim for Relief, titled “Cancellation of NGINX (Stylized) Trademark Registration, U.S. Reg. No. 4,200,791 and Payment of Damages for Fraud, 15 U.S.C. §§ 1064, 1119, 1120 as to NGINX Software, Inc. and F5,” (10) Nineteenth Claim for Relief, titled “Cancellation of NGINX PLUS Trademark Registration, U.S. Reg. No. 4,837,175 and Payment of Damages for Fraud, 15 U.S.C. §§ 1064, 1119, 1120 as to NGINX DE, NGINX BVI and F5,” (11) Twentieth Claim for Relief, titled “Cancellation of NGINX Trademark Registration, U.S. Reg. No. 5,973,515 and Payment of Damages for Fraud, 15 U.S.C. §§ 1064, 1119, 1120 as to NGINX BVI and F5,” (12) Twenty-First Claim for Relief, titled “Cancellation of NGINX CONTROLLER Trademark Registration, U.S. Reg. No. 5,973,527 and Payment of Damages, 15 U.S.C. §§ 1064, 1119, 1120, as to NGINX BVI and F5,” (13) TwentySecond Claim for Relief, titled “Cancellation of NGINX UNIT Trademark Registration, U.S. Reg. No. 5,978,630 and Payment of Damages for Fraud, 15 U.S.C. §§ 1064, 1119, 1120 as to NGINX BVI and F5,” (14) Twenty-Third Claim for Relief, titled “False Advertising, 15 U.S.C. § 1125(a)(1)(B) as to All Defendants,” (15) Twenty-Fourth Claim for Relief, titled “Infringement of the NGINX, NGINX (Stylized) and NGINX PLUS Trademarks, 15 U.S.C. §§ 1125(a)(1)(A) as to All Defendants,” and (16) Twenty-Fifth Claim for Relief, titled “Unjust Enrichment as to All Defendants.” (See Pl. Lynwood Invest. CY Limited’s Submission in Compliance with Order re: Case Narrowing, Dkt. No. 110.) 4 1 Ninth Claim for Relief, titled “Tortious Interference with Contract Against Konovalov, 2 Robertson, NGINX Software, Inc., NGINX BVI, and NGINX DE,” (7) Twelfth Claim for 3 Relief, titled “Tortious Interference with Prospective Business Advantage Against All 4 Defendants,” (8) Thirteenth Claim for Relief, titled “Fraud Against the Disloyal Employees, 5 NGINX Software, Inc., NGINX DE and NGINX BVI,” and (9) Fourteenth Claim for Relief, 6 titled “Berne Convention for the Protection of Literary and Artistic Works and the 7 Copyright Act (17 U.S.C. § 101, et seq.) based on Direct Copyright Infringement Against 8 Defendants Konovalov, Sysoev, Alexeev, Dounin, Smirnoff, NGINX BVI, NGINX 9 Software, Inc., NGINX DE, Robertson and F5.” 10 United States District Court Northern District of California 11 II. LEGAL STANDARD Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure “can be 12 based on the lack of a cognizable legal theory or the absence of sufficient facts alleged 13 under a cognizable legal theory.” See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 14 699 (9th Cir. 1990). Rule 8(a)(2), however, “requires only ‘a short and plain statement of 15 the claim showing that the pleader is entitled to relief.’” See Bell Atlantic Corp. v. 16 Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). Consequently, “a 17 complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual 18 allegations.” See id. Nonetheless, “a plaintiff's obligation to provide the grounds of his 19 entitlement to relief requires more than labels and conclusions, and a formulaic recitation 20 of the elements of a cause of action will not do.” See id. (internal quotation, citation, and 21 alteration omitted). 22 In analyzing a motion to dismiss, a district court must accept as true all material 23 allegations in the complaint and construe them in the light most favorable to the 24 nonmoving party. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). “To 25 survive a motion to dismiss, a complaint must contain sufficient factual material, accepted 26 as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 27 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “Factual allegations must be 28 enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. at 555. 5 1 Courts “are not bound to accept as true a legal conclusion couched as a factual 2 allegation.” See Iqbal, 556 U.S. at 678 (internal quotation and citation omitted). 3 III. DISCUSSION United States District Court Northern District of California 4 By the instant motion, defendants seek an order dismissing, pursuant to Rule 5 12(b)(6) of the Federal Rules of Civil Procedure, each of the nine non-stayed claims. In 6 support thereof, defendants argue “Lynwood’s amended claims remain barred by the 7 applicable statutes of limitations,” “still fail to satisfy Rule 9(b)’s heightened pleading 8 requirements,” and “also fail[] to state a claim against defendants.” (See Defs.’ Mot. at 2- 9 3.) As set forth below, the Court finds Lynwood’s claims are either barred by the 10 applicable statutes of limitations or fail to state a claim, or both, and does not address 11 herein defendants’ remaining argument. 12 A. Time-Barred 1. Statutes of Limitations4 13 14 “A plaintiff must bring a cause of action within the limitations period after accrual of 15 the cause of action.” See River Colony Ests. Gen. P'ship v. Bayview Fin. Trading Grp., 16 Inc., 287 F. Supp. 2d 1213, 1221 (S.D. Cal. 2003). Generally, a cause of action accrues 17 at “the time when, under the substantive law, the wrongful act is done, or the wrongful 18 result occurs, and the consequent liability arises.” See Norgart v. Upjohn Co., 21 Cal. 4th 19 383, 397 (1999) (internal quotation, citation, and alteration omitted). In other words, the 20 statute of limitations typically begins to run “when the cause of action is complete with all 21 of its elements.” See id. 22 “A claim may be dismissed under Rule 12(b)(6) on the ground that it is barred by 23 the applicable statute of limitations only when the running of the statute is apparent on 24 the face of the complaint,” see Von Saher v. Norton Simon Museum of Art at Pasadena, 25 26 27 28 As noted in a prior order filed March 30, 2021, “[t]he parties agree that California law and U.S. federal law, not Russian law, supply the statutes of limitations in the instant case.” (See Order Granting Mot. to Dismiss with Leave to Amend (“March 30 Order”) at 29:20, Dkt. No. 135.) 4 6 1 592 F.3d 954, 969 (9th Cir. 2010) (internal quotation and citation omitted), only if “it 2 appears beyond doubt that the plaintiff can prove no set of facts that would establish the 3 timeliness of the claim,” see Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1207 4 (9th Cir. 1995). 5 As noted, Lynwood filed the instant action on June 8, 2020. 6 a. First and Second Claims for Relief – Breach of Employment Obligations Owed to Rambler 7 United States District Court Northern District of California 8 In its First Claim for Relief, Lynwood alleges Konovalov “breached his [contractual] 9 obligations to Rambler under the Konovalov Employment Agreement, the Rambler Code 10 of Ethics, [and] the Rambler Regulations” by “lying to Rambler about the value and utility 11 of Open Source NGINX . . . [,] by concealing from Rambler the Team’s scheme to steal 12 and then sell the NGINX Enterprise . . . [,] by encouraging, assisting, and persuading 13 Sysoev and Smirnoff to breach their obligations to Rambler . . . [,] by failing to protect 14 Rambler’s rights in the various intellectual property associated with Rambler’s NGINX 15 Enterprise,” and “by selling Rambler’s NGINX Enterprise for his own ill-gotten profits at 16 the exclusion of Rambler.” (See AC ¶¶ 576-80.)5 17 In its Second Claim for Relief, Lynwood alleges Sysoev, by the same above- 18 referenced acts, “breached his [contractual] obligations to Rambler under the Sysoev 19 Employment Agreement, Sysoev Separation Agreement, the Rambler Code of Ethics, the 20 Rambler Regulations.” (See AC ¶¶ 587-91.)6 21 22 The statute of limitations for breach of contract is four years, see Cal. Civ. Proc. Code § 337, and, a cause of action for breach of contract “generally accrues at the time 23 24 25 26 27 28 5 Lynwood does not allege the specific contractual provisions assertedly breached by the above-referenced conduct. Rather, Lynwood alleges Konovalov “owed Rambler duties of loyalty and honesty” (see AC ¶ 574), possibly relying on a provision in the Rambler Code of Ethics that “Management must conduct themselves honestly and ethically” (see AC ¶ 109) and its allegation that Konovalov, as CTO, was “part of Management” and signed a copy of the Code of Ethics (see AC ¶ 107). Lynwood does not, however, allege Sysoev was “part of Management” or that he signed a copy of the Code of Ethics. 6 7 1 of the breach, regardless of whether any damage is apparent or whether the injured party 2 is aware of its right to sue,” see Intermedics, Inc. v. Ventritex, Inc., 775 F. Supp. 1258, 3 1266 (N.D. Cal. 1991). As alleged in the AC, Konovalov and Sysoev breached their 4 contractual obligations “[b]y early 2010,” when “execution of [their] covert scheme was 5 well underway” (see AC ¶ 43), or, at the latest, in 2011, when they incorporated entities 6 from which they sold the NGINX Enterprise. 7 8 Accordingly, in the absence of an exception, the First and Second Claims for Relief are barred by the applicable statute of limitations. 9 b. Fourth Claim for Relief – Breach of Konovalov’s Duty to Act Fairly and Honestly with Rambler United States District Court Northern District of California 10 11 In its Fourth Claim for Relief, Lynwood alleges Konovalov, “by virtue of his senior 12 management position as CTO of Rambler,” owed Rambler “a heightened duty under . . . 13 Articles 53.1 and 53.3 of the Russian Civil Code . . . to act fairly and honestly vis-à-vis 14 Rambler and refrain from misappropriating corporate opportunities and assets such as 15 the NGINX Enterprise and to disclose any harmful actions he undertook to the detriment 16 of Rambler.” (See AC ¶¶ 605-06.) Lynwood alleges Konovalov “breached his duties . . . 17 by concealing from Rambler the scope of the NGINX Enterprise . . . , by participating in 18 the conspiracy with the Team whereby the Team misappropriated Rambler’s NGINX 19 Enterprise[,] and by covering up their actions through the destruction of evidence.” (See 20 AC ¶ 608.) Lynwood further alleges “Konovalov’s Article 53.1 and 53.3 duties continued 21 after he left the employment of Rambler.” (See AC ¶ 606.) 22 The parties agree Russian law governs the merits of this claim.7 They disagree, 23 however, as to whether heightened duties under Russian statutory law apply to 24 Konovalov. Further, defendants argue that, even if Konovalov owed Rambler any 25 26 27 28 7 Pursuant to Rule 44.1 of the Federal Rules of Civil Procedure, a district court, in determining foreign law, “may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence.” See Fed. R. Civ. P. 44.1. 8 1 heightened duties, “those duties ended with the termination of his employment with 2 Rambler” (see Defs.’ Mot. at 24:15-16), whereas Lynwood contends Konovalov’s “duties 3 survived separation from Rambler” (see Pl.’s Opp’n at 23-15-16). In support of Lynwood’s argument, Lynwood’s expert asserts “Russian law does United States District Court Northern District of California 4 5 not permit a company’s former . . . employee who falls within Article 53 . . . to take 6 actions that are in breach of trust of the former employee’s corporate position and result 7 in financial injury to the company,” and, in support thereof, cites two Russian cases in 8 which a former director was found to have acted in bad faith for failing to return the 9 company’s loan documents upon separating from the company. (See Decl. of Alexander 10 Christophoroff (“Christophoroff Decl.”) ¶¶ 95-96, Dkt. No. 124.) As defendants’ expert 11 points out, however, neither case stands for the broad proposition Lynwood argues here, 12 that Article 53 imposes on former employees a continuing “legal duty to act fairly and 13 honestly” (see AC ¶ 606) but, rather, are predicated on acts committed prior to departure 14 from the company and specific requirements pertaining to the maintaining of documents 15 under Russian law. Accordingly, even assuming, arguendo, Konovalov owed Rambler heightened 16 17 duties under Russian statutory law, the Court finds the existence of any such duty would 18 have ended in April 2011 when Konovalov left Rambler. 19 The statute of limitations for breach of fiduciary duty, however, is three years, 20 where, as here, the “gravamen of the complaint is that defendant’s acts constituted actual 21 or constructive fraud.” See Thomson v. Canyon, 198 Cal. App. 4th 594, 606-07 (2011) 22 (finding statute of limitations for breach of fiduciary duty is three years if breach is 23 fraudulent and four years if breach is nonfraudulent) (citing Cal. Civ. Proc. Code §§ 343, 24 338(d)). Accordingly, in the absence of an exception, the Fourth Claim for Relief likewise is 25 26 barred by the applicable statute of limitations. 27 // 28 // 9 c. Seventh, Eighth, and Thirteenth Claims for Relief – Aiding and Abetting of the Disloyal Employees’ Fraud and Breaches of Their Duties of Honesty and Loyalty to Rambler; Fraud 1 2 3 In its Seventh Claim for Relief, Lynwood alleges Runa Capital and E. Ventures 4 “had actual knowledge of the Disloyal Employees’ fraudulent conduct and breaches of 5 their Article 53 duties” (see AC ¶ 627) but nonetheless provided the Disloyal Employees 6 “with substantial assistance in achieving the ultimate goal of their conspiracy – the 7 misappropriation of Rambler’s NGINX Enterprise and its ultimate sale to F5 for their own 8 ill-gotten profits at the exclusion of Rambler” (see AC ¶ 631). United States District Court Northern District of California 9 In its Eighth Claim for Relief, Lynwood alleges F5 similarly knew about the Disloyal 10 Employee’s fraudulent conduct and breaches of duties, but nonetheless provided them 11 with substantial assistance in achieving their conspiracy. 12 In its Thirteenth Claim for Relief, Lynwood alleges the Disloyal Employees 13 “intentionally misrepresented to Rambler the value of Open Source NGINX and related 14 business opportunities” (see AC ¶ 713), “fraudulently concealed from Rambler the 15 existence of the lucrative business opportunities associated with Open Source NGINX 16 and NGINX Plus” as well as “the existence and ongoing development” of NGINX Plus 17 (see AC ¶¶ 714-15), and “fraudulently induced Rambler to continue investing resources 18 in Open Source NGINX and NGINX Plus” (see AC ¶ 716). Lynwood further alleges the 19 Disloyal Employees, along with NGINX Software, Inc., NGINX DE, and NGINX BVI, 20 “direct[ed] the theft of Rambler’s equipment and destruction of evidence.” (See AC 21 ¶ 718.) 22 The statute of limitations for fraud, see Cal. Civ. Proc. Code § 338(d), as well as 23 the statute for aiding and abetting fraud or a fraudulent breach of fiduciary duty, is three 24 years, see Am. Master Lease LLC v. Idanta Partners, Ltd., 225 Cal. App. 4th 1451, 1478 25 (2014) (noting “statute of limitations for a cause of action for aiding and abetting a tort 26 generally is the same as the underlying tort”), running from the date of “discovery, by the 27 aggrieved party, of the facts constituting the fraud,” see Cal. Civ. Proc. Code § 338(d). 28 Any of the above-referenced alleged fraudulent conduct, however, could not have 10 1 occurred later than November 2012, when Smirnoff, the last Disloyal Employee 2 remaining at Rambler, left the company, as “[a] fraud claim based upon the suppression 3 or concealment of a material fact must involve a defendant who had a legal duty to 4 disclose the fact,” see Hoffman v. 162 N. Wolfe LLC, 228 Cal. App. 4th 1178, 1186 5 (2014), and the Disloyal Employees no longer owed Rambler any such duty once they 6 left its employ. (See id. at 1187 (noting a duty arises if there is “a fiduciary relationship 7 between the parties” or “some sort of transaction between the parties,” e.g., “between 8 seller and buyer, employer and prospective employee, doctor and patient, or parties 9 entering into any kind of contractual agreement”).) United States District Court Northern District of California 10 Accordingly, whether the Seventh, Eighth, and Thirteenth Claims for Relief are 11 barred by the appliable statute of limitations is, absent an exception, dependent on 12 Lynwood’s showing with respect to discovery. 13 14 d. Ninth Claim for Relief – Tortious Interference with Contract In its Ninth Claim for Relief, Lynwood alleges “Sysoev and Rambler were parties to 15 and bound by the Sysoev Employment Agreement, the Sysoev Separation Agreement, 16 the Rambler Code of Ethics and the Rambler Regulations” (see AC ¶ 650), and 17 Konovalov, Robertson, NGINX Software, Inc., NGINX BVI, and NGINX DE, “through 18 2019, . . . actively encouraged and persuaded Sysoev to breach his obligations to 19 Rambler” (see AC ¶¶ 658-59). 20 The statute of limitations for tortious interference with contract is two years, see 21 DC Comics v. Pac. Pictures Corp., 938 F. Supp. 2d 941, 948 (C.D. Cal. 2013) (citing Cal. 22 Civ. Proc. Code § 339(1)), running from the “discovery of the loss or damage suffered by 23 the aggrieved party,” see Cal. Civ. Proc. Code § 339(1). 24 Here, however, any breach of the above-referenced contracts would have 25 occurred, at the latest, by 2011. See supra Section III.A.1.a. Consequently, any cause 26 of action for tortious interference would have occurred, at the latest, by that time as well. 27 See Trembath v. Digardi, 43 Cal. App. 3d 834, 836 (Ct. App. 1974) (noting “the accrual 28 date [for tortious interference with contract] could not be later than the actual breach of 11 1 the contract by the party who was wrongfully induced to breach”). Accordingly, whether the Ninth Claim for Relief is barred by the applicable statute 2 3 of limitations is, absent an exception, dependent on Lynwood’s showing with respect to 4 discovery. e. Twelfth Claim for Relief – Tortious Interference with Prospective Business Advantage 5 United States District Court Northern District of California 6 In its Twelfth Claim for Relief, Lynwood alleges Rambler “had a prospective 7 economic advantage in the form of the NGINX Enterprise that, but for [d]efendants’ 8 unlawful conduct detailed [in the AC], Rambler could have and would have sold for a 9 massive profit.” (See AC ¶ 692; see also AC ¶ 694 (alleging unlawful conduct “includ[ed], 10 without limitation, breaches of the Disloyal Employees’ duties of honesty and loyalty to 11 Rambler; aiding and abetting those breaches; fraud; aiding and abetting fraud; fraud on 12 the USPTO; tortious interference with contract; false advertising; [and] copyright 13 infringement”).) The statute of limitations for tortious interference with prospective business 14 15 advantage is two years, see Wild Rivers Waterpark Mgmt. LLC v. Katy WP Grp., LLC, 16 2019 WL 6998669, at *8 (C.D. Cal. Feb. 29, 2019) (citing Cal. Civ. Proc. Code § 339(1)), 17 running from the “discovery of the loss or damage suffered by the aggrieved party,” see 18 Cal. Civ. Proc. Code § 339(1). Although some of the above-cited allegations set forth conduct that, as discussed 19 20 above, could not have occurred later than the Disloyal Employees’ respective dates of 21 departure from Rambler, some of those allegations set forth conduct that is within two 22 years of the filing of the initial Complaint. (See, e.g., AC ¶ 759 (alleging “from 2013 23 through the present, the Direct Copyright Infringement Defendants . . . have introduced 24 20 or more commercial releases of NGINX Plus . . . based on . . . the Pre-2012 NGINX 25 Software”).) Accordingly, it is not apparent from the face of the AC that the Twelfth Claim for 26 27 Relief is barred by the statute of limitations. 28 // 12 1 2 In its Fourteenth Claim for Relief, Lynwood alleges it is “the owner by assignment, 3 of all right, title and interest in and to NGINX Plus and Open Source NGINX, in both 4 source code and executable form, conceived and/or developed before the end of 2011, 5 when Sysoev left the employ of Rambler (collectively, ‘Pre-2012 NGINX Software’), 6 including all copyright rights inherent therein or appurtenant thereto.” (See AC ¶ 745.) 7 United States District Court Northern District of California f. Fourteenth Claim for Relief – Direct Copyright Infringement The statute of limitations for copyright infringement is three years, see 17 U.S.C. 8 § 507(b), and where, as here, “creation rather than infringement is the gravamen of an 9 authorship claim, the claim accrues on account of creation, not subsequent infringement, 10 and is barred three years from ‘plain and express repudiation’ of authorship,” see 11 Aalmuhammed v. Lee, 202 F.3d 1227, 1230-31 (9th Cir. 2000); see also Seven Arts 12 Filmed Ent. Ltd. v. Content Media Corp. PLC, 733 F.3d 1251, 1254 (9th Cir. 2013) (noting 13 “as distinct from claims of infringement,” where “each new infringing act causes a new 14 claim to accrue,” claims of ownership “accrue only once”). Further, “an untimely 15 ownership claim will bar a claim for copyright infringement where the gravamen of the 16 dispute is ownership, at least where . . . the parties are in a close relationship.” See id. at 17 1258; see also id. at 1256-57 (finding parties in close relationship where they enter into a 18 business “deal” or “agreement”). 19 Repudiation requires “an act that is adverse to the party whose ownership is being 20 repudiated.” See Zahedi v. Miramax, LLC, 2021 WL 6882408, at *7 (C.D. Cal. Nov. 24, 21 2021); see also Aalmuhammed, 202 F.3d at 1231 (finding “movie credits plainly and 22 expressly repudiated authorship, by listing [plaintiff] far below the more prominent 23 names”). Here, defendants argue Sysoev plainly and expressly repudiated Rambler’s 24 ownership of copyright when he released Open Source NGINX in 2004 “without 25 authorization” from Rambler and “with a copyright notice containing a clear claim that he 26 held copyright in the software as its author—‘Copyright (C) 2002-2004 Igor Sysoev’” (see 27 Defs.’ Mot. at 8:19-22), which notice, defendants argue, was an “unequivocal act of 28 ownership” (see id. at 8:21-22). In response, Lynwood argues “[d]efendants never plainly 13 1 and expressly repudiated Rambler’s ownership of the Open Source NGINX,” because 2 “Sysoev’s copyright notice on Open Source NGINX reflected Sysoev’s authorship, not 3 ownership[,] which is distinct under Russian law.” (See Pl.’s Opp’n at 24:15-16, 20-21.) 4 The parties disagree as to whether such dispute is to be determined under Russian law 5 or federal law. United States District Court Northern District of California 6 As the Court has federal question jurisdiction in this case, “federal common law 7 applies to the choice-of-law inquiry.” See Abram v. C.R. England, Inc., 2020 WL 8 5077365, at *5 (C.D. Cal. Apr. 15, 2020). “Federal common law follows the Restatement 9 (Second) of Conflict laws,” see id., which provides that the law of the jurisdiction with “the 10 most significant relationship” to the property and parties determines the parties’ interests 11 in that property, see Restatement (Second) of Conflict of Laws § 222 (1971). 12 Consequently, the law of the country with “the most significant relationship” to a work 13 controls the issue of ownership. See Itar-Tass Russian News Agency v. Russian Kurier, 14 Inc., 153 F.3d 82, 90 (2d Cir. 1998) (noting “[c]opyright is a form of property”). In 15 determining which country has “the most significant relationship” to a work, courts 16 consider as relevant factors “the nationality of the author and the place of initial creation 17 or publication.” See O'Reilly v. Valley Ent., Inc., 2011 WL 13258234, at *8 (N.D. Cal. Jan. 18 4, 2011), R. & R. adopted, 2011 WL 13260734 (N.D. Cal. Feb. 16, 2011); see also Lahiri 19 v. Universal Music & Video Distrib., Inc., 513 F. Supp. 2d 1172, 1176 n.4 (C.D. Cal. 2007) 20 (finding Indian law controlled issue of copyright ownership where work was “created in 21 India”); Itar-Tass, 153 F.3d at 90 (finding Russian law controlled issue of copyright 22 ownership where works were “created by Russian nationals and first published in 23 Russia”). Here, the author of the software is Sysoev, a Russian national, and the place 24 of initial creation is Russia. Consequently, Russia has the most significant relationship to 25 the work, and, accordingly, Russian law governs the above-referenced issue. 26 Although, under federal law, a copyright notice consists of the © symbol, the year 27 of first publication, and “the name of the owner of the copyright,” see 17 U.S.C. 28 § 401(b), under Russian law, a copyright notice consists of the © symbol, the year of first 14 1 publication, and “the name of the author or copyright owner,” see Irina Ozolina & 2 Anastasia Zalesova, Copyright: Russia, 11 (2022) (emphasis added). Here, as Lynwood 3 points out, the license terms below Sysoev’s copyright notice twice refer to the software’s 4 “author,” as opposed to the “copyright holder.” (See AC ¶ 376; see also Req. for Judicial 5 Notice (“RJN”) Ex. A, Dkt. No. 89.) Under such circumstances, the Court cannot 6 determine from the face of the AC that Sysoev’s copyright notice constituted a clear and 7 express repudiation of Rambler’s ownership. United States District Court Northern District of California 8 Defendants next argue that “[e]ven without the copyright notice, . . . Rambler’s 9 alleged ownership was plainly repudiated no later than . . . 2012” by Sysoev’s public 10 statements in an interview published in Free Software Magazine. (See Def.’s Mot. at 11 8:24-25, 9:2-6.) Repudiation of ownership, however, must be “communicated to the 12 claimant,” and Lynwood does not allege Rambler or Lynwood ever saw the 2012 13 interview. See Scorpio Music (Black Scorpio) S.A. v. Willis, 2013 WL 790940, at *2, *6 14 (S.D. Cal. Mar. 4, 2013) (denying motion to dismiss copyright ownership claim where 15 plaintiffs failed to show defendant “had actual notice” of copyright registrations and record 16 labels that allegedly constituted plain and express repudiation). 17 18 19 20 Accordingly, it is not apparent from the face of the AC that the Fourteenth Claim for Relief is barred by the statute of limitations. 2. Delayed Accrual In opposing the instant motion, Lynwood, as before, does not dispute the above- 21 listed limitations periods. Rather, again relying on theories that (1) the “2019 Merger was 22 the last overt act” in furtherance of an alleged conspiracy (see Pl.’s Opp’n at 2:24), (2) its 23 claims are “timely under the continuing violation doctrine” (see id. at 16:21), 24 (3) defendants’ “fraudulent concealment” delayed accrual (see id. at 11:4), and (4) its 25 claims are “timely under the discovery rule” (see id. at 16:17-18), it contends those 26 periods began to run at the time of the 2019 Merger and, in support thereof, has added 27 new factual allegations. 28 The Court discusses in turn below each such newly stated argument. 15 1 2 Under California law, civil conspiracy “is not a cause of action, but a legal doctrine 3 that imposes liability on persons who, although not actually committing a tort themselves, 4 share with the immediate tortfeasors a common plan or design in its perpetration.” See 5 Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 510-11 (1994). 6 United States District Court Northern District of California a. Last Overt Act “[W]hen a civil conspiracy is properly alleged and proved, the statute of limitations 7 does not begin to run on any part of a plaintiff’s claims [based thereon] until the ‘last overt 8 act’ pursuant to the conspiracy has been completed.” See Wyatt v. Union Mortg. Co., 24 9 Cal. 3d 773, 786 (1979); see also Kenworthy v. Brown, 248 Cal. App. 2d 298, 301 (Ct. 10 App. 1967) (noting “[a] cause of action based on a civil conspiracy accrues on the date of 11 the commission of the last overt act in pursuance of the conspiracy”). “For an act to be 12 an overt act delaying the commencement of the limitations period,” however, “it must be 13 performed in furtherance of the conspiracy,” see Risk v. Kingdom of Norway, 707 F. 14 Supp. 1159, 1170 (N.D. Cal. 1989), aff'd, 936 F.2d 393 (9th Cir. 1991), and, as relevant 15 to that determination, California law distinguishes “acts which are properly classifiable as 16 ‘overt acts’ in furtherance of the conspiracy” from “activities of conspirators after 17 perpetration of the principal object of the conspiracy which may evidence the prior 18 conspiracy,” see Livett v. F.C. Financial Assoc., 124 Cal. App. 3d 413, 419 (1981). 19 By order filed March 25, 2021, Judge Koh found Lynwood had not “alleged a 20 conspiracy,” let alone “a large, decades-long conspiracy whose object was to sell off the 21 NGINX Enterprise to a third party.” (See Order Granting Mots. to Dismiss with Leave to 22 Amend (“March 25 Order”) at 16:22, Dkt. No. 134.) In that regard, Judge Koh, noting a 23 “civil conspiracy claim requires an underlying tort,” found Lynwood “ha[d] not stated a 24 claim for the underlying torts” and “ha[d] not even specified the torts that the defendants 25 allegedly conspired to commit.” (See id. at 31:25, 32:6, 8-9.) 26 In the AC, Lynwood now alleges Konovalov, Sysoev, Alexeev, Dounin, Smirnoff, 27 Robertson, NGINX BVI, NGINX Software, Inc., NGINX DE, Runa Capital, and E. 28 Ventures “conspired to breach the Disloyal Employees’ duties to Rambler, to tortiously 16 1 interfere with Rambler’s contractual rights, to tortiously interfere with Rambler’s 2 prospective business advantage, and to defraud Rambler.” (See AC ¶¶ 569-70.) The 3 foregoing allegation does not specify the particular causes of action to which Lynwood 4 seeks to apply a theory of conspiracy and, for that reason alone, its reliance on the last 5 overt act doctrine is unavailing. United States District Court Northern District of California 6 In any event, given that a conspiracy terminates “when the substantive offense 7 underlying [the] conspiracy [i]s completed,” see People v. Williams, 97 Cal. App. 3d 382, 8 389 (Ct. App. 1979),8 and, given that, as previously discussed, the conduct on which the 9 Fourth,9 Seventh, Eighth, Ninth, and Thirteenth Claims for Relief are based could not 10 have occurred later than the Disloyal Employees’ respective dates of departure from 11 Rambler, see supra Sections III.A.1.b-d, any conspiracy relating to said claims could not 12 have extended past November 2012, when Smirnoff, the last Disloyal Employee 13 remaining at Rambler, left the company.10 14 15 Accordingly, to the extent Lynwood relies on the last overt act doctrine, it fails to show its claims are not barred by the applicable statutes of limitations. b. Continuing Violation Doctrine 16 17 18 “The continuing violation doctrine aggregates a series of wrongs or injuries for purposes of the statute of limitations, treating the limitations period as accruing for all of 19 20 21 22 23 24 25 26 27 28 Although People v. Williams dealt with a criminal conspiracy, “[t]he differences between civil and criminal conspiracies,” for purposes of statutes of limitations, are, as characterized by the California Supreme Court, essentially “beside the point.” See Wyatt, 24 Cal. 3d at 787; see also Livett, 124 Cal. App. 3d at 419 (finding “conclusions” regarding last overt act doctrine in “case [that] dealt with a criminal conspiracy . . . applicable as well to a civil conspiracy”). 8 9 As to the Fourth Claim for Relief, the only defendants that potentially could be held liable as co-conspirators are Sysoev and Smirnoff, as they are the only defendants whom Lynwood alleges owed the same duties as Konovalov to Rambler. See Applied Equip., 7 Cal. 4th at 511 (holding “liability arising from conspiracy presupposes that the coconspirator is legally capable of committing the tort, i.e., that he or she owes a duty to plaintiff recognized by law and is potentially subject to liability for breach of that duty”). 10 The First and Second Claims for Relief are not considered in the above analysis, as they are not tort claims, but, rather, breach of contract claims. (See Christophoroff Decl. ¶ 53 (stating both claims “allege contractual breaches”).) 17 1 them upon commission or sufferance of the last of them.” See Aryeh v. Canon Bus. 2 Sols., Inc., 55 Cal. 4th 1185, 1192 (2013). 3 In the March 25 and March 30 Orders, Judge Koh found “Lynwood d[id] not 4 plausibly allege that [d]efendants engaged in a series of continuing wrongs for nearly two 5 decades—from the time that Sysoev wrote the first line of the NGINX Software in 2001 6 until the F5 merger in 2019” (see, e.g., March 25 Order at 17:13-15), and that “Lynwood 7 d[id] not explain why the series of continuing wrongs was not complete in 2011, when the 8 NGINX Enterprise was allegedly stolen from Rambler” (see, e.g., id. at 31:18-19). United States District Court Northern District of California 9 In its opposition, the only argument Lynwood makes for the proposition that its 10 claims are timely under the continuing violation doctrine is that “[d]efendants’ violations 11 continued through F5’s misrepresentations to the United States Patent and Trademark 12 Office (‘USPTO’) in December 2019.” (See Pl.’s Opp’n at 16:19-21.) As noted earlier 13 herein, however, all claims relating to trademark violations, specifically, the Seventeenth 14 through Twenty-Second, and Twenty-Fourth Claims for Relief, have been stayed, and the 15 claims presently under consideration allege “a series of discrete, independently verifiable 16 and actionable wrongs,” see Aryeh, 55 Cal. 4th at 1198, all, as Judge Koh noted, ending 17 in 2011. 18 19 20 21 Accordingly, to the extent Lynwood relies on the continuing violation doctrine, it fails to show its claims are not barred by the applicable statutes of limitations. c. Fraudulent Concealment “The purpose of the fraudulent concealment doctrine is to prevent a defendant 22 from concealing a fraud until such a time as the party committing the fraud could plead 23 the statute of limitations to protect it.” See In re Animation Workers Antitrust Litig., 123 F. 24 Supp. 3d 1175, 1194 (N.D. Cal. 2015) (internal quotation, citation, and alteration omitted); 25 see also id. at 1200 (finding defendants concealed fraud where they “made misleading, 26 pretextual statements and took affirmative steps to keep the alleged conspiracy a 27 secret”). Consistent therewith, “[a] statute of limitations may be tolled if the defendant 28 fraudulently concealed the existence of a cause of action in such a way that the plaintiff, 18 1 acting as a reasonable person, did not know of its existence.” See Hexcel Corp. v. Ineos 2 Polymers, Inc., 681 F.3d 1055, 1060 (9th Cir. 2012). United States District Court Northern District of California 3 “The plaintiff bears the burden of pleading and proving fraudulent concealment.” 4 See In re Animation Workers, 123 F. Supp. 3d at 1194. To plead fraudulent 5 concealment, “a plaintiff must show that defendant affirmatively misled it, and that plaintiff 6 had neither actual nor constructive knowledge of the facts giving rise to its claim despite 7 its due diligence in trying to uncover those facts.” See In re Coordinated Pretrial Proc. in 8 Petroleum Prod. Antitrust Litig., 782 F. Supp. 487, 489 (C.D. Cal. 1991) (internal 9 quotation, citation, and alteration omitted). “A plaintiff's lack of knowledge of its claim is 10 essential to establish fraudulent concealment,” and “[o]nce the plaintiff has knowledge or 11 constructive knowledge of all the operative facts underlying its claim, the statute begins to 12 run.” See In re Cathode Ray Tube (CRT) Antitrust Litig., 2016 WL 8669891, at *5 (N.D. 13 Cal. Aug. 22, 2016). “Constructive knowledge exists when a plaintiff should have been 14 alerted to facts that, following duly diligent inquiry, could have advised it of its claim.” See 15 Petroleum Products, 782 F. Supp. at 493 (internal quotation and citation omitted); see 16 also Conmar Corp. v. Mitsui & Co. (U.S.A.), 858 F.2d 499, 502 (9th Cir. 1988) (noting 17 “[a]ny fact that should excite [plaintiff’s] suspicion is the same as actual knowledge of his 18 entire claim”). 19 In the March 25 and March 30 Orders, Judge Koh found “Lynwood ha[d] not 20 plausibly alleged that it did not have actual or constructive notice of the facts giving rise to 21 its claim” (see, e.g., March 25 Order at 19:9-10), in that the initial Complaint’s “allegations 22 support[ed] the conclusion that, as early as 2001, Rambler was aware of the value of the 23 NGINX Enterprise” (see, e.g., id. at 19:14-15) and that “as of 2011, Rambler was aware 24 that Sysoev, Konovalov, and the Team would exercise ownership rights over NGINX” 25 (see, e.g., id. at 20:2-3). 26 In the AC, Lynwood adds allegations that “Rambler and Lynwood located an 27 aging, non-descript server,” called the “Yam Server,” which was “located in an offsite 28 Rambler server farm that had been disconnected and had its data deleted,” and which 19 1 “the conspirators had commandeered for communicating between themselves and . . . 2 had never been integrated with Rambler’s company-wide email systems.” (See AC 3 ¶¶ 13-14.) Additionally, Lynwood now alleges that “Rambler was previously unaware of 4 the existence of the Yam Server,” which “contained a massive number of emails and 5 other materials” revealing the alleged conspiracy, and that it located said server “only 6 after one of the co-conspirators, Alexander Korotkov, came forward in 2019[,] blew the 7 whistle to Rambler and Lynwood concerning the conspirators scheme” (see AC ¶¶ 13- 8 15), and “disclosed to Rambler and Lynwood where to investigate” (see AC ¶ 445). United States District Court Northern District of California 9 Pointing to said allegations, Lynwood argues that “because the Disloyal 10 Employees used separate servers,” including the Yam Sever, “to carry out their 11 conspiracy and had wiped and stolen those severs” (see Pl.’s Opp’n at 14:12-13), 12 Rambler “could not have uncovered the conspirators’ scheme until Korotkov blew the 13 whistle in 2019” (see id. at 13:22-23). Irrespective of the allegedly “ring-fenced nature of 14 the Yam Server” (see AC ¶ 345) and the NOC department, however, other allegations in 15 the AC support the conclusion that Rambler had at least constructive knowledge of 16 sufficient facts giving rise to its claims long before 2019. 17 In particular, even if “Sysoev and Konovalov fraudulently concealed from Rambler 18 that they were contemplating the prospect of providing proprietary products such as 19 NGINX Plus” (see AC ¶ 323), both Sysoev and Konovalov, in their respective exit 20 interviews in April 2011, informed Rambler, that, upon resigning, they would be “earning 21 an income off of Open Source NGINX” (see AC ¶ 324), a statement that, given 22 Konovalov’s “repeated[] misrepresent[ation] to [Rambler] that Open Source NGINX had 23 no independent commercial value or prospects for monetization” (see AC ¶ 17), should 24 have put Rambler on inquiry notice that Sysoev’s and Konovalov’s representations that 25 they were not working on anything having commercial value were untrue.11 26 27 28 As Lynwood acknowledges, Rambler is “one of the largest media companies and web portals in Russia” (see AC ¶ 97), and “web server software like . . . Open Source NGINX,” while “provided on an open-source basis,” is typically “commercialized by offering proprietary fee-based enhanced enterprise features, functionality and services 20 11 1 2 through public filings, “NGINX Software, Inc. on May 4, 2011[,] NGINX BVI on July 6, 3 2011[,] and NGINX DE in August 2011” (see AC ¶ 550), that, starting in 2011, those 4 entities registered six different trademarks containing “NGINX” (see AC ¶¶ 803, 826, 851, 5 875, 895, 913), and that, starting in 2013, Sysoev and Konovalov, along with other 6 defendants, introduced “20 or more commercial releases of NGINX Plus and related 7 extensions” (see AC ¶ 759). 8 9 United States District Court Northern District of California Moreover, Lynwood alleges that the Team shortly thereafter proceeded to form, Additionally, Lynwood alleges, Sysoev, in a January 2012 interview with an online magazine, publicly described NGINX, Inc. as a “commercial entity” that was “going to 10 produce a set of paid extensions on top of the [O]pen [S]ource NGINX that would 11 constitute a viable commercial software product” (see RJN Ex. B at 4), and thereafter, on 12 August 22, 2013, “[t]he first formal announcement of the general commercial availability 13 of the initial release of NGINX Plus . . . was issued,” which stated, “NGINX Plus is the 14 fully supported, commercial version of NGINX” (see AC ¶ 740). 15 Under all of the above circumstances, even if Rambler did not have actual 16 knowledge of the defendants’ wrongdoing, it had sufficient information “to warrant an 17 investigation which, if reasonably diligent, would have led to the discovery” of the facts on 18 which the instant claims are based, namely, Konvalov and Sysoev’s development of 19 NGINX Plus while employed by Rambler and exercise of ownership rights therein. See 20 Hexcel, 681 F.3d at 1060 (noting “[f]ull knowledge often awaits discovery, and the very 21 notion of ‘inquiry notice’ implies something less than that”); see also Conmar, 858 F.2d at 22 504 (noting “there can be no fraudulent concealment where,” a plaintiff whose “suspicions 23 have been or should have been excited, . . . could have then confirmed his earlier 24 suspicion by a diligent pursuit of further information”). In sum, Lynwood had constructive 25 knowledge of the facts giving rise to its claims by 2011 or at least by 2013 but failed to 26 act diligently in discovering its claims. 27 28 relating to the web server software” (see AC ¶ 178) (emphasis added). 21 1 2 3 United States District Court Northern District of California 4 Accordingly, to the extent Lynwood relies on fraudulent concealment, it fails to show its claims are not barred by the applicable statutes of limitations. d. Discovery Rule Under California law, the discovery rule “postpones accrual of a cause of action 5 until the plaintiff discovers, or has reason to discover, the cause of action.” See Norgart, 6 21 Cal. 4th at 389. As discussed earlier herein, the discovery rule applies by statute to 7 the accrual of causes of action predicated on fraud, see Cal. Civ. Proc. Code § 338(d), as 8 well as to causes of action predicated on tortious interference with contract and 9 prospective business advantage, see Cal. Civ. Proc. Code § 339(1). Additionally, the 10 discovery rule has been held to apply to causes of action predicated on breach of 11 contract and breach of fiduciary duty. See Apr. Enterprises, Inc. v. KTTV, 147 Cal. App. 12 3d 805, 830 (Ct. App. 1983) (noting California courts apply discovery rule to breach of 13 contract actions involving fraud or misrepresentation); see id. at 827 (noting “[i]t is well- 14 settled that the discovery rule applies to causes of action involving the breach of a 15 fiduciary relationship”). 16 “A plaintiff discovers the cause of action the moment he at least suspects a factual 17 basis, as opposed to a legal theory, for the elements of the claim—in other words, when 18 [such] plaintiff suspects that someone has done something wrong to him.” See DC 19 Comics, 938 F. Supp. 2d at 951 (explaining “a plaintiff need not suspect facts supporting 20 each specific legal element of a particular cause of action”; noting “California courts look 21 to whether the plaintiffs have reason to at least suspect that a type of wrongdoing has 22 injured them”) (internal quotation, citation, and alteration omitted) (emphases in original). 23 A plaintiff “has reason to suspect when he has notice or information of circumstances to 24 put a reasonable person on inquiry.” See Norgart, 21 Cal. 4th at 398 (internal quotation 25 omitted). “So long as a suspicion exists, it is clear that the plaintiff must go find the facts; 26 [he] cannot wait for the facts to find [him].” See DC Comics, 938 F. Supp. 2d at 951. 27 28 In its opposition, Lynwood argues “[t]he facts establishing fraudulent concealment also render [its] claims timely under the discovery rule.” (See Pl.’s Opp’n at 16:17-18.) 22 1 As explained above, however, Lynwood had reason to discover its claims by 2011 or at 2 least by 2013, the year the initial release of NGINX Plus was announced, but sat on its 3 rights until 2020, filing the instant action only after NGINX BVI was sold for $670 million in 4 2019. See supra Section III.A.2.c. 5 6 Accordingly, to the extent Lynwood relies on the discovery rule, it fails to show its claims are not barred by the applicable statutes of limitations. 3. Conclusion: Timeliness 7 8 As discussed above, all of the non-stayed claims, with the exception of the Twelfth 9 and Fourteenth Claims for Relief, are barred by the applicable statutes of limitations and, 10 United States District Court Northern District of California 11 accordingly, will be dismissed on that ground. Further, as set forth below, the Twelfth and Fourteenth Claims for Relief are 12 subject to dismissal for failure to state a claim, and, even if the Seventh, Eighth, Ninth, 13 and Thirteenth Claims for Relief were not time-barred, those claims with limited 14 exception12 are subject to dismissal on that ground as well. 15 B. Failure to State a Claim 1. Seventh Claim for Relief – Aiding and Abetting by Runa Capital and E. Ventures of the Disloyal Employees’ Fraud and Breaches of Their Duties of Honesty and Loyalty to Rambler 16 17 18 19 20 Lynwood contends California law governs this claim. Defendants contend Russian law governs,13 but argue that even under California law, the claim fails. Under California law, “[l]iability may be imposed on one who aids and abets the 21 commission of an intentional tort if the person (a) knows the other's conduct constitutes a 22 breach of duty and gives substantial assistance or encouragement to the other to so act 23 or (b) gives substantial assistance to the other in accomplishing a tortious result and the 24 12 25 The one exception is the Thirteenth Claim for Relief as alleged against the Disloyal Employees. 26 There is no dispute that under Russian law, a “standalone cause[] of action” for “aiding and abetting” does not exist. (See Reply Decl. of Alexander Muranov Pursuant to FRCP 44.1 in Support of Mot. to Dismiss Compl. (“Muranov Reply Decl.”) ¶ 42, Dkt. No. 129-1.) 27 28 13 23 1 person's own conduct, separately considered, constitutes a breach of duty to the third 2 person.” See Casey v. U.S. Bank Nat. Assn., 127 Cal. App. 4th 1138, 1144 (2005) 3 (internal quotation, citation, and alteration omitted). Here, Lynwood proceeds on the first 4 of the above two theories. (See AC ¶¶ 627, 631; see also Pl.’s Opp’n at 20:13-14 5 (arguing Runa Capital and E. Ventures “knew about the Disloyal Employees’ tortious 6 conduct and willingly aided and abetted it”).) United States District Court Northern District of California 7 “To satisfy the knowledge element, an aider and abettor must have actual 8 knowledge of the specific primary wrong the defendant substantially assisted.” See Diaz 9 v. Intuit, Inc., 2018 WL 2215790, at *6 (N.D. Cal. May 15, 2018); see also Casey, 127 10 Cal. App. 4th at 1147 (noting “suspicion and surmise do not constitute actual 11 knowledge”). Moreover, for purposes of pleading, “[b]oilerplate and conclusory 12 allegations are insufficient to establish that a [defendant] had actual knowledge.” See 13 Namer v. Bank of Am., N.A., 2017 WL 1180193, at *5 (S.D. Cal. Mar. 30, 2017) (granting 14 motion to dismiss aiding and abetting breach of fiduciary duty claim; finding plaintiff’s 15 “conclusory” allegations “fail[ed] to plausibly establish [defendant] had actual knowledge 16 of the alleged wrongful conduct”); see also Casey, 127 Cal. App. 4th at 1148, 1152 17 (affirming dismissal of aiding and abetting claim; finding “general allegation the 18 [defendant] banks knew the [fiduciaries] were involved in ‘wrongful or illegal conduct’ d[id] 19 not constitute sufficient pleading that the banks had actual knowledge the [fiduciaries] 20 were misappropriating funds,” the “specific primary violation” (emphases in original)). 21 By the March 25 Order, Judge Koh dismissed this claim, finding Lynwood’s 22 allegations were “conclusory” and “d[id] not plausibly establish” that Runa Capital and E. 23 Ventures “knew about the [Disloyal Employees’] alleged fraudulent conduct.” (See March 24 25 Order at 27:11-12.) Specifically, Judge Koh characterized as conclusory Lynwood’s 25 allegation that Runa Capital and E. Ventures “‘knew about the Disloyal Employees’ 26 obligations to Rambler and the Team’s fraudulent conduct against Rambler’ based on 27 their ‘extensive due diligence leading up to their . . . investment in October’” (see id. at 28 27:7-10), and found such allegation “especially insufficient in light of other allegations that 24 1 suggest[ed] that [Runa Capital and E. Ventures] believed the Disloyal Employees had not 2 engaged in fraudulent conduct,” specifically, allegations that Runa Capital and E. 3 Ventures’ funding term sheet required a legal opinion by the company’s counsel that 4 Konovalov, Sysoev, and Alexeev’s “activities ‘do not and will not conflict with any 5 agreement, commitment or other encumbrance placed on them by their current or former 6 employer’” (see id. at 27:16-18). United States District Court Northern District of California 7 In the AC, Lynwood repeats the above conclusory allegation as to Runa Capital’s 8 and E. Ventures’ knowledge, which, as Judge Koh found, is insufficient, and its new 9 allegations, which make reference only to Runa Capital, fare no better. In that regard, to 10 establish Runa Capital’s knowledge, Lynwood now alleges Runa Capital in February 11 2011 hired Rambler’s Director of Strategic Development, Dmitry Galperin (“Galperin”) 12 “explicitly for the purpose of encouraging and assisting Sysoev and Konovalov and 13 coordinating with them to carry out the conspirators’ common plan (i.e., the 14 misappropriation and subsequent sale of the NGINX Enterprise).” (See AC ¶ 61; see 15 also, e.g., AC ¶ 60 (alleging “Galperin left Rambler’s employment in furtherance of the 16 conspiracy”), ¶ 561 (alleging Runa Capital “hired [Galperin] in a deliberate move to gain 17 influence over the Team going forward”), ¶ 561 (alleging “Galperin provided Runa Capital 18 with detailed information of Rambler’s inner workings and the Team’s conspiracy”).) 19 None of those new allegations, however, are supported by factual allegations. 20 Accordingly, the Court finds Lynwood fails to state a claim against Runa Capital 21 and E. Ventures for aiding and abetting of the Disloyal Employees’ fraud and breaches of 22 their duties of honesty and loyalty. 24 2. Eighth Claim for Relief – Aiding and Abetting by F5 of the Disloyal Employees’ Fraud and Breaches of Their Duties of Honesty and Loyalty to Rambler 25 As with the Seventh Claim for Relief, the parties disagree as to whether California 23 26 law or Russian law governs the Eighth, and defendants again argue that even under 27 California law, the claim fails. 28 By the March 25 Order, Judge Koh dismissed this claim, finding Lynwood “ha[d] 25 United States District Court Northern District of California 1 not plausibly alleged that F5 . . . had actual knowledge” of the Disloyal Employees’ torts. 2 (See March 25 Order at 26:14-16.) Specifically, Judge Koh found Lynwood’s 3 “conclusory” allegations that “F5 had knowledge of the Disloyal Employees’ obligations 4 and the Team’s fraudulent conduct against Rambler ‘as a result of F5’s due diligence’ 5 prior to the [2019] [M]erger, and ‘as a sophisticated entity with international offices,’ . . . 6 d[id] not plausibly establish that F5 had knowledge of the alleged theft of the NGINX 7 Enterprise that occurred in 2011, years before the 2019 [M]erger” (see id. at 26:18-24), 8 and were “especially insufficient because other allegations suggest[ed] that F5 believed 9 the Disloyal Employees had not engaged in fraudulent conduct with respect to Rambler,” 10 namely, allegations that the merger agreement “represents and warrants that ‘no 11 employee or independent contractor of the Company or any Subsidiary is in breach of 12 any Contract with any former employer or other Person concerning Intellectual Property 13 Rights or confidentiality’” (see id. at 26:25-27:3). 14 In the AC, Lynwood repeats the above-referenced conclusory allegation as to F5’s 15 knowledge, and adds allegations that F5 conducted a “review of the Disloyal Employees’ 16 past employment and separation agreements with Rambler” (see AC ¶ 639), an “analysis 17 of Open Source NGINX and NGINX Plus along with the other proprietary NGINX 18 commercial add-on software developed from the purloined NGINX Enterprise” (see AC 19 ¶ 639), and a “review of the Disloyal Employees’ contemporaneous electronic 20 communications from the time when the Disloyal Employees were scheming to lift the 21 NGINX Enterprise out of Rambler” (see AC ¶ 640). According to Lynwood, the above- 22 referenced due diligence “revealed that the code commits by Sysoev for [Open Source 23 NGINX and NGINX Plus] were performed while he was a Rambler employee.” (See AC 24 ¶ 639.) In support thereof, Lynwood alleges that “a significant number of modifications to 25 Open Source NGINX,” namely, “2174 changes were committed . . . by Sysoev during a 26 standard business-hours workday window at Rambler.” (See AC ¶ 196.) The AC 27 contains no similar allegation as to NGINX Plus, however, and as discussed earlier 28 herein, defendants never concealed that they were working on Open Source NGINX. 26 1 2 to the development of NGINX Plus, actual knowledge requires “more than a vague 3 suspicion of wrongdoing,” see In re First All. Mortg. Co., 471 F.3d 977, 993 n.4 (9th Cir. 4 2006), and Lynwood fails to plausibly demonstrate F5 actually concluded or otherwise 5 knew the Disloyal Employees breached their duties or defrauded Rambler. See Casey, 6 127 Cal. App. 4th at 1149 (finding allegations that defendant banks knew fiduciaries 7 “were withdrawing money . . . with . . . forged checks,” and “carrying large, unreported 8 amounts of cash out of the bank in unmarked duffel bags” to “essentially allege[] the 9 banks knew something fishy was going on” (emphasis in original); finding such 10 11 United States District Court Northern District of California Moreover, even if such allegations suggest F5 may have had some suspicion as allegations insufficient to establish banks knew fiduciaries were misappropriating funds). Further, as Judge Koh found, Lynwood’s allegations are “especially insufficient” 12 (see March 25 Order at 26:25) given Lynwood’s other allegations indicating F5 13 reasonably acted on the assumption that the Disloyal Employees had not breached their 14 duties or defrauded Rambler. (See AC ¶ 403 (alleging merger agreement “contain[ed] a 15 number of representations and warranties” that Disloyal Employees were not in breach of 16 any contract with any former employer concerning intellectual property matters).) 17 Although Lynwood now alleges F5’s “negotiating an indemnity from NGINX BVI for any 18 breaches in NGINX BVI’s representations and warranties regarding the NGINX 19 intellectual property” shows F5 had “actual knowledge” that the “NGINX Enterprise was 20 owned by Rambler” (see AC ¶ 406), such conclusory allegation constitutes no more than 21 speculation and, consequently, its reliance thereon is unavailing. 22 Moreover, all of the above allegations pertain to knowledge allegedly acquired 23 seven to eight years after the Disloyal Employees allegedly breached their duties to act 24 fairly and honestly with Rambler, which duties and allegedly fraudulent conduct, as 25 discussed earlier herein, would have ended when Konovalov, Sysoev, and Smirnoff 26 resigned from Rambler in, respectively, April 2011, December 2011, and November 27 2012. See supra Sections III.A.1.b-c. 28 Accordingly, the Court finds Lynwood fails to state a claim against F5 for aiding 27 1 and abetting of the Disloyal Employees’ fraud and breaches of their duties of honesty and 2 loyalty. 4 3. Ninth Claim for Relief – Tortious Interference with Contract Against Konovalov, Robertson, NGINX Software, Inc., NGINX BVI, and NGINX DE 5 Lynwood contends California law governs this claim. Defendants contend Russian 3 6 United States District Court Northern District of California 7 law governs,14 but argue that even under California law, the claim fails. To state a claim for tortious interference with contract under California law, a 8 plaintiff must allege: “(1) a valid contract between plaintiff and a third party; (2) 9 defendant's knowledge of this contract; (3) defendant's intentional acts designed to 10 induce a breach or disruption of the contractual relationship; (4) actual breach or 11 disruption of the contractual relationship; and (5) resulting damage.” See Pac. Gas & 12 Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126 (1990). Conclusory allegations 13 that the defendant was aware of the contract are insufficient to state a claim. See Sun 14 Grp. U.S.A. Harmony City, Inc. v. CRRC Corp. Ltd., 2018 WL 10689420, at *11 (N.D. 15 Cal. July 9, 2018) (granting motion to dismiss claim for interference with contractual 16 relations where plaintiff “fail[ed] to plead any non-conclusory facts to show that any of 17 the[] [d]efendants were aware of the [contract]”). 18 By the March 25 Order, Judge Koh dismissed this claim as to NGINX Software, 19 Inc. and NGINX BVI,15 finding Lynwood “never allege[d] that [they] were aware of the 20 contracts between [Sysoev] and Rambler.” (See March 25 Order at 28:15-16.)16 21 Specifically, Judge Koh found “[t]he only allegation that Lynwood makes on this point is 22 that ‘Konovalov’s knowledge concerning Sysoev’s ongoing obligations to Rambler is 23 24 25 26 27 28 There is no dispute that under Russian law, a “standalone cause[] of action” for tortious interference with contract does not exist. (See Muranov Reply Decl. ¶ 42.) 14 15 At the time Judge Koh issued her order, NGINX DE was in default and, to date, remains so. 16 By the March 30 Order, Judge Koh dismissed this claim as to Konovalov and Robertson as untimely, but did not go on to address those defendants’ argument that Lynwood also failed to state a claim. 28 1 imputed onto the NGINX Conspirators[17] and/or the NGINX Conspirators otherwise knew 2 of Sysoev’s ongoing obligations,’” which allegation she described as “conclusory.” (See 3 id. at 28:17-20.) United States District Court Northern District of California 4 In the AC, Lynwood repeats the above-referenced conclusory allegation (see AC 5 ¶ 656) and, in support thereof, citing Herzog v. Cap. Co., 27 Cal. 2d 349, 353 (1945), 6 asserts that “[u]nder California law, the knowledge of an agent is imputed to the 7 principal.” (See Pl.’s Opp’n at 22:6-7.) In Herzog, however, the court found it was “clear” 8 that the agent “was acting within the scope of his authority” when he engaged in the 9 allegedly tortious acts, see Herzog, 27 Cal. 2d at 353, whereas here, the AC includes no 10 factual allegations upon which such a finding could be based in that, as discussed below, 11 the AC contains no allegations specifying the acts constituting the alleged tortious 12 interference. Consequently, as to NGINX Software, Inc., NGINX BVI, and NGINX DE, 13 Lynwood fails to state a claim for tortious interference with contract. 14 Next, as to Konovalov and Robertson, Lynwood fails to allege any “intentional acts 15 designed to induce a breach” of Sysoev’s contractual obligations. See Jenni Rivera 16 Enterprises, LLC v. Latin World Ent. Holdings, Inc., 36 Cal. App. 5th 766, 788-89 (2019) 17 (where manager of celebrity, by disclosing information to producers of TV series based 18 on celebrity’s life, allegedly breached agreement restricting disclosure of celebrity’s 19 personal information, TV series producers’ intentional acts of “making payments” to 20 manager as executive producer of series, and “marketing [series] to promote [his] role in 21 its production” sufficed to support reasonable inference that producers induced manager 22 to breach nondisclosure agreement by participating in series production) (internal 23 quotation, citation, and alteration omitted). Although Lynwood sets forth in the AC 24 various acts committed by Sysoev in breach of his contractual obligations, Lynwood’s 25 only allegation as to Konovalov and Robertson is that they “intended to cause Sysoev to 26 27 28 17 In the initial Complaint, NGINX BVI, NGINX Software, Inc., BV NGINX, and NGINX DE are collectively referred to as the “NGINX Conspirators.” (See Compl. ¶ 538, Dkt. No. 1.) 29 1 breach his obligations to Rambler” (see AC ¶ 660) and “actively encouraged and 2 persuaded Sysoev to breach his obligations to Rambler” (see AC ¶¶ 658-59), which 3 conclusory allegations, absent factual support, are insufficient. Accordingly, the Court finds Lynwood fails to state a claim for tortious interference 4 5 with contract. 6 4. Twelfth Claim for Relief – Tortious Interference with Prospective Business Advantage Against All Defendants 7 Lynwood contends California state law applies to this claim. Defendants contend 8 United States District Court Northern District of California 9 Russian law governs,18 but argue that even under California law, the claim fails. 10 To state a claim for tortious interference with prospective business advantage, a 11 plaintiff must allege: “(1) an economic relationship between the plaintiff and some third 12 party, with the probability of future economic benefit to the plaintiff; (2) the defendant's 13 knowledge of the relationship; (3) intentional acts on the part of the defendant designed 14 to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm 15 to the plaintiff proximately caused by the acts of the defendant.” See Westside Ctr. 16 Assocs. v. Safeway Stores 23, Inc., 42 Cal. App. 4th 507, 521–22 (1996). To plead such 17 a claim for tortious interference, “it is essential that the plaintiff allege facts showing that 18 the defendant interfered with the plaintiff's relationship with a particular individual.” See 19 UMG Recordings, Inc. v. Glob. Eagle Ent., Inc., 117 F. Supp. 3d 1092, 1117 (C.D. Cal. 20 2015). 21 By the March 25 Order, Judge Koh dismissed this claim as to NGINX BVI, NGINX 22 Software, Inc, BV NGINX, E. Ventures, Runa Capital, and F5, finding “Lynwood failed to 23 plead an existing economic relationship with an identifiable buyer.” (See March 25 Order 24 at 29:19-20.)19 25 26 27 28 There is no dispute that under Russian law, a “standalone cause[] of action” for tortious interference with prospective business advantage does not exist. (See Muranov Reply Decl. ¶ 42.) 18 19 By the March 30 Order, Judge Koh dismissed this claim as to Konovalov, Sysoev, Alexeev, Dounin, Smirnoff, and Robertson as untimely, but did not go on to 30 United States District Court Northern District of California 1 In the AC, Lynwood now lists a number of companies the Team had identified in 2 early 2011 as potential buyers of the NGINX Enterprise. (See AC ¶ 697 (alleging “the 3 Team identified the following potential purchasers of the fully financed and developed 4 NGINX Enterprise . . .”).) Lynwood fails to allege, however, the Team had a relationship 5 with any of those companies, let alone that Rambler had such a relationship. Rather, 6 Lynwood alleges Rambler “would have had many options” and “the same or similar 7 opportunities” to sell the NGINX Enterprise (see AC ¶¶ 696, 699), which allegations do 8 not suffice to allege Rambler had “an existing economic relationship with an identifiable 9 buyer.” (See March 25 Order at 29:19); Westside, 42 Cal. App. 4th at 523 (dismissing 10 claim where plaintiff alleged defendant “interfered not with a particular sale but with 11 [plaintiff’s] ‘opportunity’ to sell the property for its true value”); see also UMG Recordings, 12 117 F. Supp. 3d at 1117 (finding “[a]llegations that a defendant interfered with a 13 relationship with an as yet unidentified customer will not suffice”) (internal quotation and 14 citation omitted).20 15 Lynwood’s allegations that Rambler had relationships with an American company, 16 “Google AdWords,” since 2013, and two Russian companies, “Yandex” and “Mail.ru,” 17 since 2015 (see AC ¶¶ 703-04), likewise are unavailing, as a claim for tortious 18 interference with prospective business advantage requires “knowledge of the existence of 19 a relationship on the part of the defendant,” see Westside, 42 Cal. App. 4th at 526, and 20 Lynwood fails to allege defendants knew of Rambler’s purported relationships with any of 21 the aforementioned companies. 22 Accordingly, the Court finds Lynwood fails to state a claim for tortious interference 23 24 address those defendants’ argument that Lynwood also failed to state a claim. 25 Although Lynwood argues “the NGINX Enterprise was owned by Rambler and therefore Lynwood can rely on the relationships between the NGINX Enterprise and third parties for purposes of its tortious interference claim” (see Pl.’s Opp’n at 22:20-22), Lynwood cites no authority for such proposition, and, in any event, Lynwood, as noted, does not allege any defendant or “the NGINX Enterprise” actually had a relationship with any 2011 buyer, only that potential buyers had been identified. 26 27 28 20 31 1 with prospective business advantage. 2 5. Thirteenth Claim for Relief – Fraud Against the Disloyal Employees, NGINX Software, Inc., NGINX DE and NGINX BVI 3 United States District Court Northern District of California 4 Lynwood contends California state law applies to this claim. Defendants contend 5 Russian law governs,21 but argue that even under California law, the claim fails. 6 To state a claim for fraud under California law, a plaintiff must allege: “(1) 7 misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge 8 of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; 9 and (5) resulting damage.” See Hoffman, 228 Cal. App. 4th at 1185-86. In addition, as 10 noted, “[a] fraud claim based upon the suppression or concealment of a material fact 11 must involve a defendant who had a legal duty to disclose the fact.” See id. at 1186. 12 By the March 25 Order, Judge Koh dismissed this claim as to NGINX BVI and 13 NGINX Software, Inc., finding “Lynwood ha[d] not pled a duty that [those entities] owed to 14 Rambler.” (See March 25 Order at 30:9-10.)22 In that regard, Judge Koh noted said 15 defendants were “competitors of Rambler with no fiduciary or transactional ties to 16 Rambler.” (See id. at 30:10-11.) 17 In the AC, Lynwood again fails to plead NGINX Software, Inc., NGINX BVI, and 18 NGINX DE owed any duty to Rambler. Rather, Lynwood now alleges that, because 19 Sysoev and Smirnoff were “principals” of NGINX Software, Inc., NGINX BVI, and NGINX 20 DE, their “duties to disclose their fraudulent conduct were imputed” to those entities. 21 (See AC ¶ 722.) In support of said proposition, Lynwood, citing In re Tesla, Inc. Sec. 22 Litig., 477 F. Supp. 3d 903, 926 (N.D. Cal. 2020), argues “a corporation can be liable for 23 the fraud committed by its officers, so long as the officer commits it within the scope of 24 25 26 27 28 There is no dispute that under Russian law, a “standalone cause[] of action” for “fraudulent misrepresentation and/or fraudulent concealment” does not exist. (See Muranov Reply Decl. ¶ 42.) 21 22 By the March 30 Order, Judge Koh dismissed this claim as to the Disloyal Employees as untimely, but did not go on to address those defendants’ argument that Lynwood also failed to state a claim. 32 United States District Court Northern District of California 1 his or her employment” (see Pl.’s Opp’n at 22:26-28) and, similarly, citing Bank of New 2 York v. Fremont Gen. Corp., 523 F.3d 902, 911 (9th Cir. 2008), argues “an employee’s 3 knowledge will generally be imputed to the corporation so long as the employee is acting 4 within the scope of his or her employment” (see Pl.’s Opp’n at 23:3-4). In both those 5 cases, however, there was no question that the corporate officer, when engaged in the 6 allegedly wrongful conduct, was acting in the scope of his employment with the corporate 7 defendant and that the corporate defendant itself owed a duty to the plaintiff therein, 8 namely, a duty under the Securities Exchange Act of 1934, see In re Tesla, 477 F. Supp. 9 3d at 921, and a duty under a written contract, see Bank of New York, 523 F.3d at 911. 10 Here, by contrast, the alleged wrongful conduct on the part of Sysoev and 11 Smirnoff, namely, false representations and concealment, was committed in the scope of 12 their employment at Rambler, not in the scope of their employment at NGINX Software, 13 Inc., NGINX BVI, and NGINX DE, and Lynwood cites no case supporting its contention 14 that their duty to Rambler, as employees of Rambler, can be imputed to an entity that 15 owes no such duty. 16 Accordingly, the Court finds Lynwood fails to state a claim for fraud as alleged 17 against NGINX Software, Inc., NGINX BVI, and NGINX DE. Although the Court has not 18 found Lynwood fails to state a claim for fraud as alleged against the Disloyal Employees, 19 that claim, as discussed earlier herein, is time-barred. See supra Section III.A.3. 20 21 22 6. Fourteenth Claim for Relief – Direct Copyright Infringement Against Defendants Konovalov, Sysoev, Alexeev, Dounin, Smirnoff, NGINX BVI, NGINX Software, Inc., NGINX DE, Robertson and F5 To state a claim for copyright infringement, a plaintiff must allege: “(1) ownership 23 of a valid copyright, and (2) copying of constituent elements of the work that are original.” 24 See Feist Publications, Inc. v. Rural Tel. Serv. Inc., 499 U.S. 340, 361 (1991). Further, a 25 plaintiff “must identify with specificity which work or works were copied” and specify 26 “which [d]efendant is alleged to have infringed which particular copyright.” See Iglesia Ni 27 Cristo v. Cayabyab, 2018 WL 4674603, at *6-7 (N.D. Cal. Sept. 26, 2018). 28 By the March 25 Order, Judge Koh dismissed this claim as to NGINX BVI, NGINX 33 1 Software, Inc., BV NGINX, Runa Capital, E. Ventures, and F5, finding Lynwood “failed to 2 plausibly allege” that they “copied the constituent elements of the work.” (See March 25 3 Order at 30:21-22.)23 Specifically, Judge Koh, noting a plaintiff “must identify which 4 [d]efendant is alleged to have infringed which particular copyright,” found Lynwood 5 “lump[ed] all the defendants together without stating which entity or person copied the 6 work.” (See id. at 30:22-23, 31:1-2.) Moreover, Judge Koh found Lynwood’s allegations 7 that Runa Capital and E. Ventures “bought into the plan and funded it,” rather than 8 “copied the work,” to “belie the notion that all defendants copied the work.” (See id. at 9 31:4-6.) United States District Court Northern District of California 10 The Court first notes that Lynwood fails to adequately identify in the AC which 11 particular work or works were copied.24 Lynwood now identifies the copyrighted work as 12 “Pre-2012 NGINX Software,” which it defines as “NGINX Plus and Open Source NGINX, 13 in both source code and executable form, conceived and/or developed before the end of 14 2011, when Sysoev left the employ of Rambler.” (See AC ¶ 745; see also AC ¶ 15 15 (defining “NGINX Plus” as “proprietary NGINX software code”); ¶ 9 (defining “Open 16 Source NGINX” as “NGINX software released to the public as ‘open source’ code”).) 17 Although Lynwood argues “the term ‘Pre-2012 NGINX Software’ is precise because it 18 identifies the specific iterations of Open Source NGINX and NGINX Plus that Sysoev 19 wrote as works for hire under Russian law while he was employed by Rambler” (see Pl.’s 20 Opp’n at 25:5-7 (citing AC ¶¶ 25, 191)), no such specific iterations can be identified from 21 the paragraphs Lynwood cites in support of such allegation. (See AC ¶ 25 (alleging 22 23 24 25 26 27 28 23 By the March 30 Order, Judge Koh dismissed this claim as to Konovalov, Sysoev, Alexeev, Dounin, Smirnoff, and Robertson as untimely, but did not go on to address those defendants’ argument that Lynwood also failed to state a claim. 24 Although Judge Koh did not reach the issue in connection with her assessment of the initial Complaint, inadequacy of identification was raised as a ground for dismissal at that time. (See Mot. to Dismiss, filed Sept. 30, 2020, by Defs. Maxim Konovalov, Igor Sysoev, Andrey Alexeev, Maxim Dounin, Gleb Smirnoff, Angus Robertson at 12:25-26, Dkt. No. 106; Mot. to Dismiss, filed Aug. 28, 2020, by Defs. F5 Networks, Inc., NGINX, Inc. (BVI) and NGINX Software, Inc. at 16:11-18:8, Dkt. No. 88.) 34 United States District Court Northern District of California 1 Sysoev “claims to have written ninety-seven (97) percent of Open Source NGINX”); ¶ 191 2 (alleging Sysoev “has maintained that he authored ninety-seven percent of Open Source 3 NGINX as of 2011”).) Moreover, Lynwood’s definition fails for the additional reason that it 4 includes software “conceived” but not developed at Rambler. See L. v. Sony Music Ent., 5 Inc., 448 F.3d 1134, 1140 (9th Cir. 2006) (noting “[c]opyright protects original works of 6 authorship fixed in any tangible medium of expression”). 7 Equally, if not more, importantly, Lynwood, in alleging infringement, again lumps 8 together all defendants against whom the claim is brought, in this instance, Konovalov, 9 Sysoev, Smirnoff, Alexeev, Dounin, NGINX Software, Inc., NGINX BVI, NGINX DE, 10 Robertson, and F5, i.e., the newly named “Direct Copyright Infringement Defendants.” 11 (See, e.g., AC ¶ 755 (alleging “[t]he Direct Copyright Infringement Defendants have 12 engaged in and are engaging in reckless, blatant, willful, and repeated infringement of 13 [p]laintiff’s copyright rights”); ¶ 759 (alleging “[t]he Direct Copyright Infringement 14 Defendants . . . have introduced 20 or more commercial releases of NGINX Plus”).) 15 Such collective allegations do not suffice to plead a viable infringement claim. See 16 Bravado Int'l Grp. Merch. Servs. v. Cha, 2010 WL 2650432, at *6 (C.D. Cal. June 30, 17 2010) (dismissing claim where plaintiff “lumped all [d]efendants together” and “d[id] not 18 demonstrate which groups infringed which . . . copyrights”; noting “it is not the [c]ourt’s 19 responsibility to sort them out for [p]laintiff”). 20 Accordingly, the Court finds Lynwood fails to state a claim for copyright 21 infringement. 22 IV. CONCLUSION 23 For the reasons set forth above, defendants’ motion to dismiss the AC is hereby 24 GRANTED, and the First, Second, Fourth, Seventh, Eighth, Ninth, Twelfth, Thirteenth, 25 and Fourteenth Claims for Relief are hereby DISMISSED without further leave to amend. 26 (See March 25 Order at 33:4-6 (warning “failure to cure deficiencies identified herein or 27 identified in the instant motions to dismiss or the Individual Defendants’ motion to 28 dismiss, will result in dismissal of the deficient claims with prejudice”; dismissing claims in 35 1 initial Complaint corresponding to Seventh, Eighth, Ninth, Twelfth, Thirteenth, and 2 Fourteenth Claims for Relief); March 30 Order at 37:5-8 (warning “failure to cure 3 deficiencies identified in this Order, the [March 25 Order], the instant motion to dismiss, 4 or the F5 Entities’ and Outside Investors’ motions to dismiss, will result in dismissal of the 5 deficient claims with prejudice”; dismissing claims in initial Complaint corresponding to 6 First, Second, Fourth, Ninth, Twelfth, Thirteenth, and Fourteenth Claims for Relief).)25 7 8 IT IS SO ORDERED. 9 10 Dated: August 16, 2022 MAXINE M. CHESNEY United States District Judge United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25 Although NGINX DE is, as noted, in default and has not moved to dismiss the AC (see Clerk’s Notice of Entry of Default Against Def. NGINX, Inc. (DE), Dkt. No. 71), the Court also dismisses as to NGINX DE those claims that are asserted against it, specifically, the Ninth, Twelfth, Thirteenth, and Fourteenth Claims for Relief. See Silverton v. Dept of Treasury, 644 F.2d 1341, 1345 (9th Cir. 1981) (holding, where court grants motion to dismiss complaint as to moving defendants, court may dismiss complaint against non-moving defendant “in a position similar to that of moving defendants”). 36

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.