Zora Analytics, LLC v. Sakhamuri et al, No. 3:2013cv00639 - Document 31 (S.D. Cal. 2013)
Court Description: ORDER granting with leave to amend Defendant Srikanth Sakhamuri's 19 Motion to Dismiss; granting with leave to amend Defendant Cigniti, Inc's 21 Motion to Dismiss for Failure to State a Claim. Plaintiff has until 10/15/2013 to submit a second amended complaint if it so desires. Signed by Judge Jeffrey T. Miller on 9/9/2013. (jah)
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Zora Analytics, LLC v. Sakhamuri et al Doc. 31 JM 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 Case No.: 3:13-CV-639-JM (WMC) ZORA ANALYTICS, LLC, a California Limited Liability Company, ORDER GRANTING CIGNITI’S MOTION TO DISMISS WITH LEAVE TO AMEND; GRANTING SAKHAMURI’S MOTION TO DISMISS WITH LEAVE TO AMEND 12 13 14 15 16 SRIKANTH SAKHAMURI, an individual, CIGNITI, INC., a Texas Corporation, and DOES 1-10 inclusive, 17 18 On November 26, 2012, Plaintiff Zora Analytics, LLC (“Zora”) filed a 19 complaint against Srikanth Sakhamuri (“Sakhamuri”) in state court. Sakhamuri 20 was served on February 22, 2013 and removed this matter to federal court on 21 March 18, 2013. Zora filed an amended complaint in federal court on April 4, 22 2013, asserting allegations against an additional defendant, Cigniti, Inc. 23 (“Cigniti”) (and together with Sakhamuri, “Defendants”). Cigniti then submitted 24 a motion to dismiss Zora’s complaint as it relates to Cigniti pursuant to Federal 25 Rule of Civil Procedure (“Rule”) 12(b)(6) for failure to state a claim on May 1, 1 Dockets.Justia.com 1 2013, which this court granted with leave to amend on June 18, 2013. Zora filed a 2 second amended complaint (“SAC”) on July 12, 2013. On August 2, 2013, 3 Cigniti filed a motion to dismiss all claims, and Sakhamuri filed motions to 4 dismiss claims one through four. For the following reasons, the court GRANTS 5 Cigniti’s motion to dismiss and Sakhamuri’s motion to dismiss with leave to 6 amend. 7 I. BACKGROUND Zora is a California Limited Liability Company with its principal place of 8 9 business in San Diego, California. Sakhamuri was an independent contractor who 10 provided software services to Zora’s clients. Cigniti is a corporation with its 11 principal place of business in Irving, Texas. Zora originally contracted with AnanSys Software, Inc. (“AnanSys”) to 12 13 place software engineers at Zora. On April 1, 2009, AnanSys allegedly entered 14 into a written contract with Cigniti in which Cigniti agreed to provide AnanSys 15 with software engineers for Zora on AnanSys’ behalf (“Software Consulting 16 Agreement”). See Dkt. 16, Exh. 1. Sakhamuri, a Cigniti employee who was 17 working for Cigniti pursuant to an H-1B visa, was one such software engineer. 18 Zora alleges that Sakhamuri was a resident of California, although Sakhamuri 19 claims that he was a Texas resident. Zora is not explicitly mentioned in the 20 Software Consulting Agreement, but it does define the term “Client” to refer to 21 AnanSys’ clients. See Dkt. 16, Exh. 1. The Software Consulting Agreement required Cigniti and its personnel “to 22 23 abide by the Client’s Confidentiality Agreement/[Non-Disclosure Agreement 24 (“NDA”)].” See Dkt. 16, Exh. 1. It also contained a non-compete clause which 25 read: 2 1 2 3 4 [Cigniti] agrees that he/she will not perform any services for the client, outside of this contract, during the term of the contract and one (1) year thereafter. The term of the contract is outlined[d] in the “Term” section below. For purpose[s] of this Agreement, “Client” shall be defined as the project manager/division in the location where the Contractor is assigned to work hereunder. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Dkt. 16, Exh. 1. On April 16, 2009, Zora entered into a written contract to provide the State of Oregon Business Development Department (“OBDD”) with Data Warehouse Implementation. See Dkt. 16, Exh. 3. The contract was later extended by amendment five times for $415,000 (November 19, 2009 amendment), $420,000 (December 16, 2009), $420,000 (June 18, 2010), $605,000 (October 14, 2010), and $607,500 (December 10, 2010). See Dkt. 3, Exhs. 4-8. Zora assigned Sakhamuri to work on the OBDD project as Zora’s independent contractor. Zora alleges that the OBDD contract was worth approximately $607,500. See id. at 4. Zora also assigned Sakhamuri to National Railroad Passenger Corporation (“NRPC”), dba Amtrak, to perform vital SAP business solutions. Although no contract has been provided to the court, Zora alleges that Amtrak compensated Zora for $150,000 a year. See SAC at ¶ 16. On or around May 2011, Sakhamuri allegedly disappeared from a work project for Zora with the NRPC and did not have further contact with Zora regarding his remaining responsibilities on the OBDD project. See SAC ¶ 17. Zora alleges that Sakhamuri did not provide it with any notice or explanation about his departure. Zora further claims that the value of Sakhamuri’s services needed to complete the NPRC project was $150,000. See id. 25 3 1 On August 10, 2012, OBDD inadvertently sent a work order contract to 2 Zora with Sakhamuri listed as a key person assigned to the contract. See Dkt. 16, 3 Exh. 10, § 5. Later, on August 17, 2012, the project manager for OBDD, Jared 4 Cornman, sent an email to Zora and Sakhamuri, which listed Sakhamuri’s email 5 address as srikanth@nivas-technologies.com. See Dkt. 16, Exh. 9. This work 6 order did not contain email addresses with Cigniti’s domain name. 7 Zora contends that Sakhamuri breached the terms of the Software 8 Consulting Agreement by misappropriating Zora’s trade secrets, which he 9 acquired while he was serving as an independent contractor for Zora. The trade 10 secret purportedly included “the intellectual property of how to implement SAP 11 business management software to improve the efficiency and/or to add costs 12 savings to state and local governments.” See SAC ¶ 20. In addition, Zora gave 13 Sakhamuri access to its confidential bidding procedures, customer contact lists, 14 and intellectual property related to business intelligence solutions, which Zora 15 alleges that Sakhamuri later misappropriated. See id. 16 Zora further claims that Sakhamuri falsely represented that he was an 17 authorized agent or representative of Zora to the OBDD. Zora alleges that 18 Sakhamuri, Cigniti, and Nivas Technologies, Inc. (“Nivas”) were joint venturers, 19 stakeholders, alter egos, and co-conspirators who profited from business 20 opportunities originally intended for Zora. Zora estimates that it suffered 21 economic losses of $350,000 in 2012 on the OBDD project and $150,000 in 2013 22 on the NPRC project. 23 Accordingly, Zora asserts six claims against Sakhamuri and Cigniti: 24 (1) two breach of written contract claims against Cigniti; (2) violation of the 25 Lanham Act (15 U.S.C. § 1125(A)) against all Defendants; (3) intentional 4 1 interference with prospective economic advantage against all Defendants; (4) 2 unfair competition law (“UCL”) claim (Cal. Bus. & Prof. Code §§17200 et seq.) 3 against all Defendants; and (5) negligent hiring/supervision/training against 4 Cigniti only. 5 II. LEGAL STANDARD 6 To overcome a Rule 12(b)(6) motion, a plaintiff’s “[f]actual allegations 7 must be enough to raise a right to relief above the speculative level.” Bell Atl. 8 Corp. v. Twombly, 550 U.S. 544, 555 (2007). In evaluating the motion, the court 9 must construe the pleadings in the light most favorable to the non-moving party, 10 accepting as true all material allegations in the complaint and any reasonable 11 inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d 1023, 1028 (9th 12 Cir. 2003). The court should grant Rule 12(b)(6) relief only if the complaint lacks 13 either a “cognizable legal theory” or facts sufficient to support a cognizable legal 14 theory. See Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). 15 A facial challenge to a law does not require further facts to be developed because 16 it only constitutes a question of law. See Fortuna Enters. L.P. v. Los Angeles, 673 17 F. Supp. 2d 1000, 1003 (C.D. Cal. 2008). 18 III. DISCUSSION 19 A. Breach of Contract 20 “A cause of action for damages for breach of contract is comprised of the 21 following elements: (1) the contract, (2) plaintiff’s performance or excuse for 22 nonperformance, (3) defendant’s breach, and (4) the resulting damages to 23 plaintiff.” Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas., 116 Cal. App. 24 4th 1375, 1392 (2004) (quoting Careau & Co. v. Security Pacific Business Credit, 25 Inc., 222 Cal. App. 3d 1371, 1388 (1990)). 5 Zora, an alleged third-party beneficiary,1 asserts two separate breach of 1 2 contract claims: one against Cigniti for violating the spirit and scope of the 3 non-compete provision in the April 1, 2009 contract; and another claim against 4 Cigniti for failing to refund any payments for unsatisfactory job performance 5 when Cigniti’s personnel failed to complete assigned projects, directly competed 6 with AnanSys’ client (Zora), and billed for time spent on the job which furthered 7 the interests of Defendants Cigniti and Sakhamuri. Each Defendant’s arguments 8 against the breach of contract claims asserted against them are discussed in turn. 1. Cigniti 9 Citing to California Business and Professions Code § 16600, which 10 11 provides that “every contract by which anyone is restrained from engaging in a 12 lawful profession, trade, or business of any kind is to that extent void,” Cigniti 13 first argues that the “non-compete provisions are not enforceable in California 14 except in limited circumstances.” Cigniti MTD at 6. The only exceptions under 15 California law are when dealing with the dissolution of a partnership or the sale of 16 a business or limited liability company. See id. No exception applies here, so 17 Cigniti asserts that the non-compete agreement is necessarily broad. See id. Zora 18 has not addressed this argument in its opposition. The court agrees that Zora’s 19 claim for breaching the non-compete clause of the Software Consulting 20 Agreement is invalid and therefore dismisses this claim. Next, Cigniti argues that Zora’s second breach of contract claim is invalid 21 22 because Zora “has not pleaded that it had paid any more that should have been 23 24 25 1 In its June 18, 2013 order, the court previously concluded that Zora was a third-party beneficiary of the Software Consulting Agreement according to the facts alleged because the Software Consulting Agreement concerned the provision of services that Cigniti was supposed to provide on behalf of AnanSys. 6 1 refunded at this point nor has [Zora] pleaded that it had demanded a refund from 2 AnanSys.” See Cigniti MTD at 8. Zora responds by asserting that the 3 contractor’s job performance was unsatisfactory, that it was harmed by said 4 unsatisfactory performance, and that the harm is evidenced through discovery of 5 billing records and evidence of Sakhamuri’s departure without notice. See Opp. 6 Cigniti MTD at 8-9. 7 The court also finds that Zora’s second breach of contract claim fails to 8 state a claim. Simply put, “unsatisfactory job performance” does not constitute a 9 breach of the Software Consulting Agreement by Cigniti, who was not a party to 10 the Software Consulting Agreement and therefore could not have breached it. 11 Zora must allege, if true, that Cigniti formed a contract and that Cigniti breached a 12 clause of that contract. The court accordingly dismisses Zora’s second breach of 13 contract for failing to plead the basic elements of a breach of contract claim. 14 2. Sakhamuri 15 Plaintiff concedes that it has no valid breach of contract claim against 16 Sakhamuri. See Opp. Sakhamuri MTD at 6. Therefore, the court grants 17 Sakhamuri’s motion to dismiss this claim. 18 B. Lanham Act (15 U.S.C. § 1125(A)) 19 Under Section 43(a)(1)(A) of the Lanham Act, 20 21 22 23 24 25 (1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of facts, which-(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or 7 1 2 3 4 association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. 5 15 U.S.C. § 1125(a)(1). 6 Zora alleges that Defendants violated the Lanham Act when Sakhamuri 7 made misleading representations of fact to OBDD to obtain a government contract 8 from the state of Oregon to benefit himself and his “corporate sponsors.” SAC 9 ¶¶ 40, 41. Zora further alleges that “Cigniti profited from the misappropriation of 10 the business opportunity by leasing Sakhamuri to a third party, Nivas 11 Technologies, as part of a ‘packaged deal’ because Sakhamuri would bring OBDD 12 with him as a client to the new lessor of his services—Nivas.” See SAC ¶ 41. 13 Zora claims that Sakhamuri’s LinkedIn profile, in which Sakhamuri identifies 14 himself as a Cigniti employee. See SAC, Exh. 2. In its opposition to Cigniti’s 15 motion to dismiss, Zora explains that it “alleges two theories: (1) that Sakhamuri 16 as an agent of Cigniti and/or other co-conspirator(s) and/or employer(s) 17 misappropriated Zora’s intellectual property; and (2) that Sakhamuri as an agent 18 of Cigniti and/or other co-conspirator(s) and/or employer(s)s was guilty of 19 ‘passing off’ Sakhamuri’s professional services (computer consulting) as one in 20 [sic] the same as Zora’s.” Opp. Cigniti MTD at 10. 21 1. Cigniti 22 Cigniti argues that Zora’s Lanham Act claim against Cigniti fails to state a 23 claim because Zora “has not even described what action Cigniti allegedly took in 24 this misrepresentation.” Cigniti MTD at 9. In addition, Cigniti notes that it never 25 received the work order sent to Sakhamuri and Zora, and no evidence indicates 8 1 that Cigniti was even aware of this work order. Cigniti also asserts that Zora has 2 not provided any facts indicating that Cigniti was involved other than a conclusory 3 statement that Cigniti somehow knew that Sakhamuri misappropriated the OBDD 4 contract. See id. 5 The court again finds Zora’s allegations to be lacking. Although Zora may 6 yet have a claim under the Lanham Act, Zora has not alleged any role of Cigniti in 7 assisting or encouraging Sakhamuri to violate the Lanham Act. Zora’s claims 8 regarding agency are opaque and insufficient to save this claim, but Zora may 9 elect to include these clarifications in an amended complaint. 10 2. Sakhamuri 11 Sakhamuri argues that his alleged misrepresentation of himself as an agent 12 does not constitute a violation of the Lanham Act because such claims only reach 13 misrepresentations concerning products or services. To support this argument, 14 Sakhamuri relies on Monoflo International, Inc. v. Sahm, 726 F. Supp. 121 (E.D. 15 Va. 1989), which found that a sales agent’s misrepresentations regarding his status 16 as a company’s exclusive sales agent would not tend to falsely represent anything 17 about the quality, nature, or characteristic of any product or service. See id. at 18 123. Although the court conceded that “misrepresentations concerning a party’s 19 status or commercial relationships may tend, in other contexts, to mislead or 20 create confusion about a product or service,” the court found that the Lanham Act 21 did not apply to false representations concerning the relationship between the two 22 parties. 23 24 In addition, Sakhamuri also argues that Zora’s allegations “are wholly without merit and lack the requisite factual support.” Sakhamuri MTD at 12. 25 9 1 Without alleging facts, Sakhamuri argues that Zora is merely speculating that he 2 represented himself as Zora’s agent. See Sakhamuri MTD at 12. 3 Zora argues that it has a valid Lanham Act claim against Sakhamuri 4 because he was “passing off” his professional services as one and the same as 5 Zora’s professional services. See Opp. Sakhamuri MTD at 7. Zora, however, 6 provides insufficient factual allegations supporting its theory that Sakhamuri and 7 Cigniti conspired to misappropriate Zora’s intellectual property. Unlike Monoflo, 8 Sakhamuri was essentially both salesman and the product itself, thereby satisfying 9 the Lanham Act’s requirement that a false representation concern goods or 10 11 services. Here, the court finds that Zora has not pled a valid Lanham Act claim 12 against Sakhamuri pursuant to Zora’s first “passing off” theory. The court notes 13 that the work order mentions only Covendis and Sakhamuri. That OBDD 14 intended to contract with Zora when Zora is not mentioned anywhere in the work 15 order is not clear from the complaint. The email at issue was sent to a Zora 16 employee, Ciji Anand, as well as two Nivas employees, including Sakhamuri. 17 Still, nothing in either the work order or email suggests that OBDD intended to 18 contract with Zora or that Sakhamuri had represented himself as Zora’s employee. 19 That he provided OBDD with a non-Zora domain work email suggests that OBDD 20 was likely aware that Sakhamuri was now working for a different employer. 21 Moreover, these facts do not suggest that Sakhamuri had misrepresented the 22 identity of his employer. 23 Zora’s second theory alleging a conspiracy between Sakhamuri and Cigniti 24 similarly fails. Zora has alleged insufficient facts about the alleged conspiracy 25 other than that it existed, which cannot serve as the basis for a claim. 10 1 // 2 C. Intentional Interference With Prospective Economic Advantage 3 The elements for intentional interference with prospective economic 4 advantage are: “(1) an economic relationship between the plaintiff and some third 5 party, with the probability of future economic benefit to the plaintiff; (2) the 6 defendant’s knowledge of the relationship; (3) intentional acts on the part of the 7 defendant designed to disrupt the relationship; (4) actual disruption of the 8 relationship; and (5) economic harm to the plaintiff proximately caused by the acts 9 of the defendant.” Westside Center Associates v. Safeway Stores 23, Inc., 42 10 Cal. App. 4th 507, 521(1996) (citing Youst v. Longo, 43 Cal. 3d 64, 71 n. 6 11 (1987); Blank v. Kirwan, 39 Cal. 3d 311, 330 (1985); Buckaloo v. Johnson, 14 12 Cal. 3d 815, 827 (1975)). For a defendant’s actions to be “wrongful,” the conduct 13 must be “independently actionable.” Korea Supply Co. v. Lockheed Martin 14 Corp., 29 Cal. 4th 1134, 1158-59 (2003). 15 Zora alleges that Sakhamuri and Cigniti knew of Zora’s relationship with 16 OBDD. Zora further claims that the Defendants “intended to disrupt [this] 17 relationship by having Sakhamuri pose as an authorized agent for Zora when 18 OBDD sought a contract renewal from Zora.” SAC ¶ 47. In addition, Zora 19 alleges that “Cigniti knew of Sakhamuri’s plans to disrupt the relationship and 20 benefited by selling Sakhamuri’s services to Nivas Technologies with the OBDD 21 contract ‘bundled’ with Sakhamuri’s temporary employment contract as a ‘leased 22 worker.’” Id. Zora explains that, as a result, “[t]he relationship between Zora and 23 OBDD was, in fact, disrupted when Zora lost out on the contract renewal, the 24 opportunity for which was concealed by Sakhamuri and Cigniti.” SAC ¶ 49. 25 1. Cigniti 11 1 Here, again, Cigniti argues that its alleged role in the conspiracy is unclear. 2 See Cigniti MTD at 10. Specifically, Cigniti contends that Zora “has made the 3 unreasonable leap, based on two emails that are not addressed to Cigniti and show 4 no indication that Cigniti was even aware of their existence, that Cigniti somehow 5 was in conspiracy with Sakhamuri to sell the contract to Nivas along with 6 Sakhamuri’s services.” Id. at 10. Zora merely replies that “Sakhamuri, through 7 Cigniti, intentionally misrepresented himself to OBDD to usurp a lucrative 8 government contract from Zora, causing damages to Zora for at least the cost of 9 the contract with OBDD, and subject to proof upon further discovery.” Opp. 10 Cigniti MTD at 11. The court finds that Zora, if it is able to, must further allege 11 Cigniti’s role in assisting or encouraging Sakhamuri to interfere with Zora’s 12 prospective economic advantage. The court cannot determine Cigniti’s role from 13 the facts currently alleged by Zora. Accordingly, this claim against Cigniti is 14 dismissed. 15 2. Sakhamuri 16 Sakhamuri contends that Zora had not adequately pled the elements of an 17 intentional interference with prospective economic advantage claim. First, he 18 argues that Oregon solicited and acceptance of bids for “IT-related” services, and 19 that Zora was not guaranteed to win the next contract. See Sakhamuri MTD at 14. 20 Next, Sakhamuri argues that Zora had failed to plead that Sakhamuri 21 engaged in an independently wrongful act, which must be wrongful by some legal 22 measure other than the fact of the interference itself. See Della Penna v. Toyota 23 Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 392-93 (1995) (“[A] plaintiff seeking 24 to recover for alleged interference with prospective economic relations has the 25 burden of pleading and proving that the defendant’s interference was wrongful ‘by 12 1 some measure beyond the fact of the interference itself.’”). Sakhamuri asserts that 2 another company out-bidding Zora does not constitute the legal measure on which 3 an impermissible interference with prospective economic advantage can be based. 4 See San Francisco Design Center Assocs. v. Portman Cos., 41 Cal. App. 4th 29, 5 42 (1995) (“[I]n the absence of prohibition by statute, illegitimate means, or some 6 other unlawful element, a defendant seeking to increase his own business may cut 7 rates or prices, allow discounts or rebates, enter into secret negotiations behind the 8 plaintiff’s back, refuse to deal with him or threaten to discharge employees who 9 do, or even refuse to deal with third parties unless they cease dealing with the 10 plaintiff, all without incurring liability.”) (quoting A-Mark Coin Co. v. Gen. Mills, 11 Inc., 148 Cal. App. 3d 312, 324 (1983)). 12 Zora counters only that “Sakhamuri intentionally misrepresented himself to 13 OBDD to usurp a lucrative government contract from Zora, causing damages to 14 Zora for at least the cost of the contract with OBDD, and subject to proof upon 15 further discovery.” Sakhamuri MTD at 8. The court agrees misrepresentation of 16 agency is an independently wrongful act that could serve as the basis for an 17 intentional interference with prospective economic advantage claim. However, 18 the court finds that Zora has failed to provide any facts regarding Sakhamuri’s 19 alleged misrepresentation. The court therefore dismisses this claim. 20 D. Negligent Hiring/Supervision/Training (Against Cigniti Only) 21 “An employer may be liable to a third person for the employer’s negligence 22 in hiring or retaining an employee who is incompetent or unfit.” Roman Catholic 23 Bishop v. Superior Court, 42 Cal. App. 4th 1556, 1565 (1996) (citing 24 Underwriters Ins. Co. v. Purdie, 145 Cal. App. 3d 57, 69 (1983)). As further 25 explained by the Second Restatement of Agency, “[t]he principal may be 13 1 negligent because he has reason to know that the servant or other agent, because 2 of his qualities, is likely to harm others in view of the work or instrumentalities 3 entrusted to him. If the dangerous quality of the agent causes harm, the principal 4 may be liable under the rule that one initiating conduct having an undue tendency 5 to cause harm is liable therefor.” Restatement (Second) of Agency, §213 cmt. d; 6 see also Doe v. Capital Cities, 50 Cal. App. 4th 1038, 1054 (1996) (“Liability is 7 based upon the facts that the employer knew or should have known that hiring the 8 employee created a particular risk or hazard and that particular harm 9 materializes.”). However, “an employer does not owe a plaintiff a duty of care in 10 a negligent hiring and retention action for an injury or other harm inflicted by a 11 former employee on the plaintiff even though that employee, as in this case, 12 initially met the plaintiff while employed by the employer.” Phillips v. TLC 13 Plumbing, Inc., 172 Cal. App. 4th 1133, 1144 (2009). 14 Cigniti again contends that Zora’s SAC does not allege any facts (e.g. past 15 behavior) indicating that Cigniti knew or should have known that Sakhamuri 16 would cause harm. See Cigniti MTD at 12. Cigniti also claims that Plaintiff has 17 provided no facts indicating that Sakhamuri was working for Cigniti at the time 18 and notes that Sakhamuri’s email suggests that he was in fact working for Nivas at 19 the time of the allegedly tortious behavior. Either he was an employee or an 20 independent contractor. Until this is clarified in the amended complaint, the 21 motion to dismiss the negligence claim on the employer-employee theory should 22 be granted. 23 24 Zora only responds that “Cigniti negligently allowed Sakhamuri’s misconduct to occur by failing to supervise and control Sakhamuri, and [that 25 14 1 Zora] plan[s] to focus its investigation and discovery to discover the true nature of 2 said liability.” Opp. Cigniti MTD at 13. 3 The court again agrees that Zora has failed to meet the pleading 4 requirements. Zora has not pled any facts indicating that Cigniti knew or should 5 have known that Sakhamuri would act in a certain manner, such as past behavior 6 indicating that he was an unfit employee. Thus, the court dismisses Zora’s 7 negligent hiring, supervision, or training claim against Cigniti. 8 E. UCL Claim 9 To assert a UCL Law claim, a plaintiff must identify an unfair business 10 practice. A claim brought under California Business & Professions § 17200 must 11 also “constitute[] conduct that is ‘unlawful, unfair, or fraudulent.’” Puentes v. 12 Wells Fargo Home Mortg., Inc., 160 Cal. App. 4th 638, 645 (2008). 13 Unfortunately, California’s case law on the definition of “unfairness” 14 appears to be inconsistent. On one hand, Bardin v. DaimlerChrysler Corp., 136 15 Cal. App. 4th 1255, 1260-61 (2006), defines unfairness as a “practice [that] is 16 immoral, unethical, oppressive, unscrupulous or substantially injurious to 17 consumers.” See id. at 1268. To analyze whether a practice is unfair, Bardin 18 requires that courts “weigh the utility of the defendant’s conduct against the 19 gravity of the harm to the alleged victim.” Id. (citing Smith v. State Farm Mutual 20 Automobile Ins. Co., 93 Cal. App. 4th 700, 718-19 (2001)). Other courts have 21 held that the “unfairness” must be tethered to specific constitutional, statutory, or 22 regulatory provisions. See e.g., Scripps Clinic v. Superior Court, 108 Cal. App. 23 4th 917, 939 (2003). 24 25 15 1 Zora alleges that Defendants’ material misrepresentations and acts of 2 concealment regarding Sakhamuri’s employer are unlawful, unfair, and fraudulent 3 business practices prohibited by the UCL. 4 1. Cigniti 5 Cigniti argues that Zora has not identified any unfair business practice in 6 which Cigniti has allegedly engaged. The court notes that it has dismissed all 7 other claims alleged against Cigniti in the SAC, so Zora has no basis for asserting 8 a UCL violation based on unlawful conduct. The court further finds that Zora has 9 not identified any other independently unfair or fraudulent business practices. The 10 court therefore dismisses Zora’s UCL claim against Cigniti. 11 2. Sakhamuri 12 Sakhamuri argues that Zora cannot assert a UCL claim against him because 13 the UCL applies to acts that occurred in California. Sakhamuri relies on Sullivan 14 v. Oracle Corp., 51 Cal. 4th 1191, 1209 (2011), which held that the UCL did not 15 apply to wage-and-hour claims by out-of-state employees against a 16 California-based employer even though the decisions regarding wages in that case 17 were made in California. Sakhamuri notes that Zora has not pled any facts 18 indicating that the actions at issue in this matter occurred in California. See 19 Sakhamuri MTD at 17-18. In fact, Sakhamuri claims that he and Cigniti were 20 both Texas residents at the time of the actions allegedly constituting a UCL 21 violation. See id. at 18. Moreover, the customer at issue was the state of Oregon. 22 See id. 23 24 Zora responds that he has made a prima facie case for a UCL violation because he has stated a prima facie case for a violation of the Lanham Act. See 25 16 1 Opp. Sakhamuri MTD at 10. Zora does not address Sakhamuri’s 2 extraterritoriality argument. 3 The court finds that Zora has not pled any facts indicating that Sakhamuri’s 4 actions occurred in or were at least substantially related to acts that occurred in 5 California. Without such facts, the court concludes that reasoning analogous to 6 that in Sullivan applies and no UCL claim may be asserted. Zora’s UCL claim is 7 therefore dismissed. 8 IV. CONCLUSION 9 For the aforementioned reasons, Cigniti’s motion to dismiss for failure to 10 state a claim is GRANTED with leave to amend. In addition, Sakhamuri’s motion 11 to dismiss is GRANTED. Zora has until October 15, 2013 to submit a second 12 amended complaint if it so desires. 13 14 IT IS SO ORDERED. DATED: September 9, 2013 ____________________________ ____________________________ _ _ Jeffrey T. Miller Jeffrey Miller r y United States District Judge United 15 16 17 18 19 20 21 22 23 24 25 17
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