MICHAEL M. ANELLO, District Judge.
On April 7, 2017, Plaintiff Physician's Surrogacy, Inc. filed this action alleging multiple causes of action against Defendants Kenia German, Glory Nash, Veronica Munoz, Jessica Simas, Xochitl Rachelle Macias, Claudia Escamilla, Karla Jimenez, Rafael Martinez, and Esmeralda Leon. See Doc. No. 1. Via five separate motions to dismiss, Defendants move to dismiss Plaintiff's claims for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), and for insufficient service of process pursuant to Federal Rule of Civil Procedure 12(b)(5). See Doc. Nos. 4, 14, 15, 17, 19. Also, Defendants German and Leon move to strike state law claims pursuant to California's anti-SLAPP statute, California Code of Civil Procedure § 425.16. See Doc. Nos. 16, 18. Lastly, Plaintiff moves for a preliminary injunction. See Doc. No. 13. The Court took the matters under submission on the briefs and without oral argument pursuant to Civil Local Rule 7.1.d.1. For the following reasons, the Court
Plaintiff makes the following allegations.
Plaintiff has expended "significant time and resources creating and developing proprietary business methods and systems for surrogate intake and recruiting as well as various work product related to intake, including, but not limited to, surrogacy applications, screening forms, and surrogacy case checklists." Compl. ¶ 19. For that reason, Plaintiff requires employees to sign the Proprietary Information and Innovation Assignment Agreement ("PIIAA"), which "identifies Plaintiff's proprietary information and trade secrets," such as Plaintiff's "surrogate lists," and requires employees to maintain the confidentiality of that information, both during and after employment. Compl. ¶¶ 20, 51. The PIIAA also prohibits employees, during the term of their employment, from "engag[ing] in any employment or business activity which is competitive with, or would otherwise conflict with, [the employees'] employment" without Plaintiff's "express written consent." Compl. ¶ 52. Further, for one year after the date of termination of their employment with Plaintiff, the PIIAA prohibits former employees from soliciting or attempting to solicit any of Plaintiff's employees to terminate their employment with Plaintiff, or inducing or attempting to induce any person or entity "to terminate a relationship with" Plaintiff "or interfere with [Plaintiff's] business relationships." Compl. ¶ 55. The PIIAA also prohibited the use of "Proprietary Information to solicit or attempt to solicit the business of any customer . . . of the Company" who, "at the time of termination or one (1) year immediately prior thereto, was doing business with the Company, or listed on the Company's customer . . . list, if the result of the solicitation of business would be any reduction in the business which would have been transacted between the Company and such [entity]." Compl. ¶ 55.
Defendant German began working for Plaintiff as a recruiter on April 1, 2016, and was promoted to a "Senior Surrogacy Recruiter" shortly thereafter. Compl. ¶ 22. In that position, Defendant German "supervised recruiting, screening, and approval of applications by potential surrogates, as well as the overall surrogacy process once surrogates were approved and had signed contracts with Plaintiff." Compl. ¶ 22. Defendant German "worked with a team of subordinate employees," including Defendants Nash, Simas, Macias, and Munoz. Compl. ¶ 22. "Immediately after her employment commenced in the spring of 2016," Defendant German formulated a plan to terminate her employment with Plaintiff and form a competitive surrogacy agency. Compl. ¶ 23. Defendant "conspired with the other Defendants in this action" to do so. Compl. ¶ 23.
Beginning on approximately April 5, 2016, "Defendants misappropriated a significant amount of [Plaintiff's] proprietary information and trade secrets." Compl. ¶¶ 24, 25. "All of Plaintiff's information regarding applications, screening, identification of surrogates and matching with intended parents is stored on Plaintiff's computer systems, including its own server." Compl. ¶ 18. Accordingly, Defendants emailed the proprietary information "from [Plaintiff's] computers and work email accounts, to an outside Gmail email address at rsmcsurrogacy@gmail.com, which Ms. German (and/or the other Defendants) created in or around early 2016." Compl. ¶ 24. For example, "Defendants emailed lists of Plaintiff's surrogates and potential surrogates, as well as Plaintiff's proprietary business forms, including intake forms, surrogacy applications and other proprietary documents." Compl. ¶ 24. Also, on or around April 29, 2016, Defendant German sent emails to an email address belonging to her husband, Defendant Martinez, with copies of proprietary information such as "email templates for various surrogacy-related scenarios, surrogacy FAQs, intake forms, benefit lists and job descriptions." See Compl. ¶ 24. Defendant Martinez bought computer hardware to store the information.
At some point, Defendants Escamilla and Jimenez, who are Defendant German's sisters-in-law, began to use the email address "rsmcsurrogacy@gmail.com" to email Plaintiff's potential surrogates and surrogates who had already entered into contracts with Plaintiff. Defendants told the recipients that the email address was a new address for Plaintiff, and solicited information from them under the pretenses that they were acting on Plaintiff's behalf. In those emails, the sender was listed as "RSMC Fertility." See Compl. § 26. Defendants chose to use "RSMC" in the name of the sender and in the email address in order to "intentionally confuse Plaintiff's surrogates and potential surrogates" into thinking that they were communicating with Plaintiff's employees. See Compl. ¶ 26. Further, Defendant Escamilla signed her name on emails as "Assitant [sic] to Kenia German, Surrogate Program Director, and included Plaintiff's RSMC logo and address." See Compl. ¶ 28. Plaintiff alleges that Defendants ultimately used the email address to "induce surrogates to breach their Acceptance Agreements with Plaintiff" and persuade them to instead act as surrogates for Defendants' competing business. See Compl. ¶ 30.
On approximately December 20, 2016, Defendants German and Martinez "filed for a fictitious business name of `Elite Women Surrogacy' with the County of Orange Clerk-Recorder." See Compl. ¶ 29. Defendants also created a Facebook page for Elite Women Surrogacy, which "states that the business launched on November 12, 2016." See Compl. ¶ 29.
In February 2017, Defendant German resigned from her position with Plaintiff, and Defendants Nash, Simas, Macias, and Munoz followed suit "within a few weeks." See Compl. ¶ 25. Following their resignations, Defendants began operating Elite Women Surrogacy "in full force." See Compl. ¶ 31. Since her resignation, Defendant German has allegedly "refused to return certain property of Plaintiff's, including a company credit card, office keys, an electronic key card and a cell phone." See Compl. ¶ 125.
Further, Plaintiff alleges Defendants have "started a smear campaign against Plaintiff." See Compl. ¶ 32. For example, on the Facebook page for Elite Women Surrogacy, Defendant German wrote a post describing "getting hired by Plaintiff," and stated that the agency "look[ed] nice" but was "terribly wrong." See Compl. ¶ 32. The post criticized Plaintiff's owner, calling her greedy and arrogant, and stating that the owner was willing to accept surrogates that were 18 years old or had "bad medical records." See Compl. ¶ 32. In the post, Defendant German stated that upon leaving Plaintiff's employ, Defendant "received vicious attacks from the owner" as well as threatening emails and phone calls. See Compl. ¶ 32. Additionally, Defendant Leon allegedly "posted reviews online" falsely stating "that she received a letter from Plaintiff to her regarding enforcement of her surrogacy contract" and which demanded payment. See Compl. ¶ 138. Defendant included a photograph of a letter in an online review on Yelp, but Plaintiff denies ever sending it. In the Yelp review, Defendant stated that Plaintiff "would rather see you suffer through your [surrogacy] journey than care for you!" See Compl. ¶ 138.
Based on the foregoing, the Complaint asserts the following causes of action against all Defendants: violation of the Economic Espionage Act ("EEA"), 18 U.S.C. § 1831 et seq., as amended by the Defend Trade Secrets Act of 2016 ("DTSA"), PL 114-153, May 11, 2016, 130 Stat 376;
Defendants have filed several motions to dismiss, and two motions to strike. Specifically, Defendants Nash, Simas, and Munoz move to dismiss the following claims pursuant to Rule 12(b)(6) for failure to state a claim: violation of the DTSA; breach of contract; intentional interference with contractual relations; inducing breach of contracts; intentional interference with prospective economic relations; negligent interference with prospective economic relations; violation of the Computer Fraud and Abuse Act; violation of California's Comprehensive Computer Data Access and Fraud Act; breach of the duty of loyalty; violation of California's Business and Professions Code; conversion; and civil conspiracy. See Doc. No. 4.
Defendants Escamilla, Jimenez, and Martinez join the motion to dismiss filed by Defendants Nash, Simas, and Munoz insofar as it requests dismissal of the following claims: violation of the DTSA; intentional interference with contractual relations; inducing breach of contracts, intentional interference with prospective economic relations; negligent interference with prospective economic relations; violation of California's Business and Professions Code; and conversion. See Doc. No. 14. Defendants Escamilla, Jimenez, and Martinez also move to dismiss Plaintiff's claim for violation of the Computer Fraud and Abuse Act,
Defendant German has also filed a motion to dismiss, joining Defendants Nash, Simas, and Munoz's motion to dismiss in its entirety, as well as moving to dismiss Plaintiff's trade libel claim, and seeking dismissal for insufficient service of process under Rule 12(b)(5). See Doc. No. 15.
Additionally, Defendant Leon filed a motion to dismiss, joining Defendants Nash, Simas, and Munoz's motion to dismiss insofar as it seeks dismissal of the following claims: violation of the DTSA; intentional interference with contractual relations; inducing breach of contracts; intentional interference with prospective economic relations; negligent interference with prospective economic relations; breach of duty of loyalty; violation of California's Business and Professions Code; conversion; and civil conspiracy. See Doc. No. 17. Defendant Leon also moves to dismiss Plaintiff's claim for trade libel.
Further, Defendant Macias filed a motion to dismiss stating that she joins Defendants Nash, Simas, and Munoz's motion to dismiss in its entirety. See Doc. No. 19.
Also, Defendants German and Leon move to strike Plaintiff's trade libel claims pursuant to California's anti-SLAPP statute. See Doc. Nos. 16, 18.
Finally, Plaintiff moves for a preliminary injunction based on its claims for violation of the DTSA, violation of California's Business and Professions Code, breach of contract, and conversion. See Doc. No. 13.
Federal Rule of Civil Procedure 4 governs service of process. See Fed. R. Civ. P. 4. "A federal court does not have jurisdiction over a defendant unless the defendant has been served properly under [Rule] 4." Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988). However, "Rule 4 is a flexible rule that should be liberally construed so long as a party receives sufficient notice of the complaint." Vasic v. Patent Health, L.L.C., No. 13CV849 AJB (MDD), 2013 WL 12076475, at *2 (S.D. Cal. Nov. 26, 2013) (quoting United Food & Commercial Workers Union v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984)). Nevertheless, "neither actual notice nor simply naming the defendant in the complaint will provide personal jurisdiction." Id. (quoting Benny v. Pipes, 799 F.2d 489, 492 (9th Cir. 1986)).
Pursuant to Federal Rule of Civil Procedure 12(b)(5), a defendant may move to dismiss or quash service for insufficient service of process, thereby challenging "the sufficiency of the manner of attempted service." See Perrotte v. Johnson, No. 1:15-cv-00026-LJO-SAB (PC), 2016 WL 4440972, at *4 (E.D. Cal. Aug. 19, 2016). "Where service of process is insufficient, the court has broad discretion to dismiss the action or to retain the case but quash the service that has been made on defendant." See Cranford v. United States, 359 F.Supp.2d 981, 984 (E.D. Cal. 2005). "Ordinarily," the court will "quash service and require [the] plaintiff to effect proper service." See Agricola ABC, S.A. de C.V. v. Chiquita Fresh N. Am., LLC, No. 10CV772-IEG NLS, 2010 WL 4809641, at *3 (S.D. Cal. Nov. 19, 2010).
A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief . . . ." Fed. R. Civ. P. 8(a)(2). However, plaintiffs must also plead "enough facts to state a claim to relief that is plausible on its face." Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The plausibility standard thus demands more than "a formulaic recitation of the elements of a cause of action," or "naked assertions devoid of further factual enhancement." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations omitted). Instead, the complaint "must contain allegations of underlying facts sufficient to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
In reviewing a motion to dismiss under Rule 12(b)(6), courts must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). The court need not take legal conclusions as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). Similarly, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).
In determining the propriety of a Rule 12(b)(6) dismissal, courts generally may not look beyond the complaint for additional facts. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). "A court may, however, consider certain materials—documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice—without converting the motion to dismiss into a motion for summary judgment." Id.; see also Fed. R. Evid. 201; see also Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) overruled on other grounds by Galbraith v. Cnty. Of Santa Clara, 307 F.3d 1119, 1125-26 (9th Cir. 2002).
Where dismissal is appropriate, a court should grant leave to amend unless the plaintiff could not possibly cure the defects in the pleading. Knappenberger v. City of Phoenix, 566 F.3d 936, 942 (9th Cir. 2009).
California's anti-SLAPP
"Resolution of an anti-SLAPP motion requires the court to engage in a two-step process." Jarrow Formulas, Inc. v. LaMarche, 31 Cal.4th 728, 733 (2003) (internal citations and quotations omitted). First, the defendant must make a "threshold showing that the challenged cause of action is one arising from protected activity." Id. Second, to avoid dismissal, the plaintiff must demonstrate a probability of prevailing on the claim. Id.
"A preliminary injunction is an extraordinary remedy never awarded as of right." Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 9 (2008). "A plaintiff seeking a preliminary injunction must establish that he is" (1) "likely to succeed on the merits," (2) "likely to suffer irreparable harm in the absence of preliminary relief," (3) "that the balance of equities tips in his favor," and (4) "that an injunction is in the public interest." Id. at 20; see JL Beverage Co., LLC v. Jim Beam Brands Co., 828 F.3d 1098, 1105 (9th Cir. 2016) (stating that the plaintiff "bears the burden of establishing the merits of its claims" on a motion for preliminary injunction). The Ninth Circuit employs a "`sliding scale' approach to evaluating the first and third Winter elements," which dictates that "a preliminary injunction may be granted when there are `serious questions going to the merits and a hardship balance that tips sharply toward the plaintiff,' so long as `the other two elements of the Winter test are also met.'" See Ass'n des Eleveurs de Canards et d'Oies du Quebec v. Harris, 729 F.3d 937, 944 (9th Cir. 2013) (quoting Alliance for the Wild Rockies v. Cottrell, 632 F.3d at 1131-32 (9th Cir. 2011)). "Serious questions" are "substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberative investigation." See Republic of the Philippines v. Marcos, 862 F.2d 1355, 1362 (9th Cir. 1988). "Serious questions need not promise a certainty of success, nor even present a probability of success, but must involve a `fair chance of success on the merits.'" Id.
Further, "[i]n deciding a motion for preliminary injunction, the district court `is not bound to decide doubtful and difficult questions of law or disputed questions of fact.'" Int'l Molders' and Allied Workers' Local Union No. 164 v. Nelson, 799 F.2d 547, 551 (9th Cir.1986) (citing Dymo Indus., Inc. v. Tapewriter, Inc., 326 F.2d 141, 143 (9th Cir.1964)). But, if a court does make factual findings or legal conclusions "when evaluating the merits of a preliminary injunction motion," those findings and conclusions "are not binding at trial on the merits." See Purdum v. Wolfe, No. C-13-04816 DMR, 2014 WL 171546, at *4 (N.D. Cal. Jan. 15, 2014) (quoting Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981)).
Defendants Escamilla, Jimenez, Martinez, and German move to dismiss all claims asserted against them for insufficient service of process pursuant to Rule 12(b)(5). See Doc. Nos. 14, 15. Rule 4(e) provides that an individual may be served by delivering a copy of the summons and complaint to the individual personally, "leaving a copy of each at the individual's dwelling or usual place of abode with someone of suitable age and discretion who resides there," or delivering a copy of each to an agent authorized to accept service on the individual's behalf. See Fed. R. Civ.
"When a defendant challenges service, the plaintiff bears the burden of establishing the validity of service as governed by Federal Rule of Civil Procedure 4." See Bernhoft Law Firm, S.C. v. Pollock, No. 3:12-CV-1608 W-BLM, 2012 WL 5511777, at *1-2 (S.D. Cal. Nov. 14, 2012). A plaintiff may meet that burden by producing the proof of service, which courts typically accept as prima facie evidence of proper service. Id. However, a defendant may show, either by a defect apparent on the face of the proof of service, or by producing "affidavits, discovery materials, or other admissible evidence" that service was insufficient. Id.
Here, the relevant proofs of service state that the process server "left the summons at the individual's residence or place of abode with Delores Villa . . . a person of suitable age and discretion who resides there, on 4/17/2017, and mailed a copy to the individual's last known address." See Doc. Nos. 5, 6, 7, 10. Specifically, the proofs of service all state that the process server went to the same address in Maywood, California three times in April 2017, but was unable to contact anyone at that location. The process server states that she went back a fourth time, and "Sub-served Dolores Villa, Co-Tenant." See Doc. Nos. 5, 6, 7, 10. She states that it was "[v]ery hard getting information from" Ms. Villa, and that Ms. Villa "did not want to answer any questions about defendants." See Doc. Nos. 5, 6, 7, 10. While the proofs of service may be prima facie evidence of proper service, Defendants Escamilla, Jimenez, and Martinez declare under penalty of perjury that they do not live at the address that the process server visited, and that they have never lived at that address. See Doc. No. 14. Defendant German declares under penalty of perjury that she formerly lived at that address, but has not lived there since June 2016. See Doc. No. 15. Accordingly, Defendants produce evidence demonstrating that service was insufficient.
Plaintiff does not provide evidence to the contrary, and its arguments in response are unpersuasive. Plaintiff argues Defendants have not met their burden to show service was insufficient because Defendants "do not provide any evidence as to where their purported dwelling or usual place of abode is, if not at the property where they were served." See Doc. No. 25. However, where Defendants do reside is beside the point for our purposes. In this instance, the propriety of the method of service used turns on whether the address that the process server visited constituted Defendants' "residence or place of abode," and Defendants explicitly deny that they lived at that address in April 2017. See Doc. Nos. 5, 6, 7, 10. Second, Plaintiff argues it has made a prima facie case of proper service because Defendants clearly received notice and have filed motions to dismiss based on the merits of Plaintiff's claims. However, actual notice is insufficient to provide personal jurisdiction over Defendants. See Vasic, 2013 WL 12076475, at *2.
In sum, the uncontroverted evidence indicates that service of process was insufficient as to Defendants Escamilla, Jimenez, Martinez, and German. However, in its discretion, the Court declines to dismiss this action against them. Instead, the Court
The Court turns to those motions filed by properly served defendants. In particular, Defendants Munoz, Nash, Simas, Macias, and Leon move to dismiss all of the causes of action against them. Because the Court's jurisdiction over this action is based on federal question jurisdiction, the Court begins by addressing the sufficiency of Plaintiff's federal claims.
Plaintiff alleges a claim for violation of the Defend Trade Secrets Act of 2016. On May 11, 2016, Congress enacted the DTSA, which creates a civil cause of action for owners of trade secrets that are misappropriated "if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce." See Cave Consulting Grp., Inc. v. Truven Health Analytics Inc., No. 15-CV-02177-SI, 2017 WL 1436044, at *3 (N.D. Cal. Apr. 24, 2017); 18 U.S.C. § 1836(b)(1). The DTSA only provides a cause of action for acts that occurred on or after the date of its enactment. See Cave Consulting Grp., Inc., 2017 WL 1436044, at *3; Wang v. Golf Tailor, LLC, No. 17-CV-00898-LB, 2017 WL 2861111, at *4 (N.D. Cal. July 5, 2017). "Trade secret" is defined as "all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes" so long as that information "derives value from being secret," and "the owner took reasonable measures to keep [it] secret." See 18 U.S.C. § 1839(3); Cave Consulting Grp., Inc., 2017 WL 1436044, at *3. "Misappropriation" includes both the "acquisition of a trade secret" "by a person who knows or has reason to know that the trade secret was acquired by improper means" and "disclosure or use of a trade secret . . . without express or implied consent by a person who [] used improper means to acquire knowledge of the trade secret," or "knew or had reason to know that the knowledge" was gained through a person who had improperly acquired it or owed a duty to maintain its secrecy. See 18 U.S.C. § 1839(5). In sum, the DTSA "contemplates three theories of liability: (1) acquisition, (2) disclosure, or (3) use." See Cave Consulting Grp., Inc., 2017 WL 1436044, at *4; 18 U.S.C. § 1839(5).
Here, insofar as Plaintiff wishes to assert theories of liability based on the acquisition and disclosure of trade secrets, Plaintiff does not sufficiently allege claims based on conduct occurring after the enactment of the DTSA. Although the Complaint states in conclusory fashion that the "misappropriation appears to have begun on or around April 5, 2016, and was ongoing until February 2017," the Complaint does not include any fact-specific allegations of conduct amounting to acquisition or disclosure of purported trade secrets occurring after April 2016. Rather, the Complaint focuses on conduct occurring in or prior to April 2016. For example, Plaintiff alleges Defendant German began working at Physician's Surrogacy in April 2016, and "immediately" thereafter planned to terminate her employment and form a competing agency. See Compl. ¶ 23. The Complaint states that one of the defendants created an email address "in or around early 2016," which Defendants used to email "a significant amount of the proprietary information and trade secrets . . . from [Plaintiff's] computers and work email accounts." See Compl. ¶ 24. Further, Plaintiff alleges Defendant German sent emails "with copies of proprietary information" to Defendant Martinez "on or around April 29, 2016." See Compl. ¶ 24. Those allegations constitute essentially all of the Complaint's factual allegations regarding alleged acquisition and disclosure of purported trade secrets. As such, the Court is left only with Plaintiff's conclusory statement that "misappropriation . . . was ongoing until February 2017," which is insufficient to state a claim for violation of the DTSA arising after its enactment.
As the Complaint is currently pleaded, Plaintiff also fails to sufficiently state a use-based claim arising out of actions occurring after the DTSA's enactment. "Nothing suggests that the DTSA forecloses a use-based theory simply because the trade secret being used was misappropriated before the DTSA's enactment." See Cave Consulting Grp., Inc., 2017 WL 1436044, at *4. Regarding Defendants' use of potentially proprietary information, Plaintiff alleges Defendants stole "lists of Plaintiff's surrogates and potential surrogates," and emailed some of those individuals. See Compl. ¶¶ 24, 26, 27. Even assuming that Plaintiff's lists of surrogates and potential surrogates constitute trade secrets, the Complaint does not state when Defendants sent emails to surrogates and potential surrogates or whether those recipients were included in the allegedly misappropriated lists. Further, insofar as Plaintiff wishes to assert a use-based claim based on Defendants' competing surrogacy agency, the Complaint fails to allege what, if any, misappropriated trade secrets Defendants used in creating and running their competing agency.
As an aside, the Court notes that in coming to the above conclusions, the Court applies general pleading standards, which require plausibility as opposed to particularity. In other words, the Court finds unpersuasive Defendants' argument that Plaintiff must plead DTSA claims with particularity, as is required of plaintiffs asserting claims under California's Uniform Trade Secrets Act ("CUTSA"). See David Bohrer, Threatened Misappropriation of Trade Secrets: Making A Federal (DTSA) Case Out of It, 33 Santa Clara High Tech. L. J. 506, 521 (2017) (stating that the DTSA "does not incorporate the requirement . . . that . . . the plaintiff must identify its relevant trade secrets with `reasonable particularity'"). Even under general pleading standards, Plaintiff's claims lack sufficient detail with regard to any conduct that may have occurred after May 11, 2016.
As such, the Court
The Computer Fraud and Abuse Act ("CFAA"), a federal statute, "was originally designed to target hackers who accessed computers to steal information or to disrupt or destroy computer functionality, as well as criminals who possessed the capacity to `access and control high technology processes vital to our everyday lives . . . .'" See LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1130 (9th Cir. 2009) (citing 1131 H.R. Rep. 98-894, 1984 U.S.C.C.A.N. 3689, 3694 (July 24, 1984)). "The CFAA prohibits a number of different computer crimes, the majority of which involve accessing computers without authorization or in excess of authorization, and then taking specified forbidden actions, ranging from obtaining information to damaging a computer or computer data." See Brekka, 581 F.3d at 1131; 18 U.S.C. § 1030(a)(1)-(7).
Relevant here, section 1030(a)(4) provides for the punishment of any individual who "knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value . . . ." See Brekka, 581 F.3d at 1131; 18 U.S.C. § 1030(a)(4). Section 1030(g) of the act provides a private right of action for individuals who have been injured by the crimes delineated by the Act so long as the defendant's conduct involves one of the factors set forth in section 1030(c)(4)(A)(i), subclause (I), (II), (III), (IV), or (V). See Brekka, 581 F.3d at 1131; 18 U.S.C. § 1030(g). Subclause (I) proscribes conduct that causes a loss of at least $5,000 to one or more persons during any one-year period. See 18 U.S.C. § 1030(c)(4)(A)(i)(I). Thus, to bring a civil action for a violation of § 1030(a)(4), a plaintiff must show that the defendant: "(1) accessed a `protected computer,' (2) without authorization or exceeding such authorization that was granted, (3) `knowingly' and with `intent to defraud,' and thereby (4) `further[ed] the intended fraud and obtain[ed] anything of value,' causing (5) a loss to one or more persons during any one-year period aggregating at least $5,000 in value." See Brekka, 581 F.3d at 1131; 18 U.S.C. §§ 1030(a)(4), (g).
In the Complaint, Plaintiff alleges Defendants German, Nash, Simas, Macias, Munoz, Escamilla, Jimenez, and Martinez violated section 1030(a)(4) of the CFAA. Because the Court quashes service as to Defendants German, Escamilla, Jimenez, and Martinez, the Court only addresses Plaintiff's claims as to Defendants Nash, Simas, Macias, and Munoz, who were all formerly employees of Plaintiff.
The Complaint alleges Plaintiff "provided [Defendants] access" to Plaintiff's "protected computer . . . for the limited purpose of performing their duties and responsibilities as employees of Plaintiff." See Compl. ¶ 88. The Complaint alleges Defendants' access was "unauthorized," however, because Defendants accessed Plaintiff's protected computer with the intent to misappropriate trade secrets and proprietary information, did in fact do so, and thereby violated Defendants' contractual obligations and common law duties to Plaintiff. See Compl. ¶¶ 88, 89.
Based on the foregoing, Plaintiff fails to allege Defendants' were "without authorization" or "exceeded authorization" in accessing the computer. "[A]n employer gives an employee `authorization' to access a company computer when the employer gives the employee permission to use it." Brekka, 581 F.3d at 1133. Here, Plaintiff admits it gave Defendants permission to use the computer. Further, Plaintiff does not allege Defendants obtained or altered any information on the computer that Defendants were not authorized to access or alter. Moreover, the Ninth Circuit has explicitly rejected the argument that "authorization to use a computer ceases when an employee resolves to use the computer contrary to the employer's interest," or that an employee exceeds authorization "if the defendant breaches a state law duty of loyalty to an employer." Id. at 1133, 1135 n.7. The CFAA does not give rise to liability where "an employee is authorized to access information while employed and then later misuses the information because the CFAA governs unauthorized access rather than use." See Astec Am. LLC v. Li, No. 14CV1457 JLS (NLS), 2014 WL 12516024, at *3 (S.D. Cal. Nov. 17, 2014). "[T]he CFAA is not meant to serve as a supplement or replacement for misappropriation claims." Lakeland Tours, LLC v. Bauman, No. 13CV2230-CAB-JMA, 2014 WL 12570970, at *4 (S.D. Cal. Feb. 11, 2014).
As such, the Court
"A district court `may decline to exercise supplemental jurisdiction' if it `has dismissed all claims over which it has original jurisdiction.'" See Sanford v. MemberWorks, Inc., 625 F.3d 550, 561 (9th Cir. 2010) (citing 28 U.S.C. § 1367(c)(3)). "[I]n the usual case in which all federal-law claims are eliminated before trial, the balance of factors to be considered under the pendent jurisdiction doctrine—judicial economy, convenience, fairness, and comity—will point toward declining to exercise jurisdiction over the remaining state-law claims." Id. (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988), superseded on other grounds by statute as recognized in Fent v. Okla. Water Res. Bd., 235 F.3d 553, 557 (10th Cir. 2000)).
Plaintiff also asserts numerous California state law claims. However, because Plaintiff fails to state a claim over which the Court has original jurisdiction, the Court declines to exercise supplemental jurisdiction over Plaintiff's state law claims at this time. See Shames v. Hertz Corp., No. 07-CV-2174 H, 2008 WL 11318291, at *5 (S.D. Cal. Apr. 8, 2008). The Court
In support of their motion to dismiss, Defendants Nash, Simas, and Munoz request judicial notice of a copy of a PIIAA agreement, a copy of the Recommendations for Practices Utilizing Gestational Carriers by the American Society for Reproductive Medicine, and a copy of an Ethics Committee opinion regarding "consideration of the gestational carrier." See Doc. No. 4-2. However, judicial notice of these documents is unnecessary for the instant purposes, as the Court finds dismissal is proper without reference to those documents. See Kuzmenko v. Lynch, 606 F. App'x 399 (9th Cir. 2015) ("[J]udicial notice is inappropriate where the facts to be noticed are not relevant to the disposition of the issues before the court."). Accordingly, the Court declines to take judicial notice of the proffered documents.
Defendants German and Leon move to strike Plaintiff's trade libel claims pursuant to California's anti-SLAPP statute, California Code of Civil Procedure § 425.16. However, as noted above, the Court dismisses Defendant German's motion to strike without prejudice because the Court quashes service as to Defendant German. Regarding Defendant Leon's motion, the Court declines to address the propriety of her motion to strike at this stage based on the Court's dismissal without prejudice of all claims against those Defendants who were properly served. "[G]ranting a defendant's anti-SLAPP motion to strike a plaintiff's initial complaint without granting the plaintiff leave to amend would directly collide with Fed. R. Civ. P. 15(a)'s policy favoring liberal amendment." Verizon Delaware, Inc. v. Covad Commc'ns Co., 377 F.3d 1081, 1091 (9th Cir. 2004) (emphasis added). This outcome does not cause prejudice to defendants because "the purpose of the anti-SLAPP statute, the early dismissal of meritless claims, would still be served if plaintiffs eliminated the offending claims from their original complaint." See id. "If the offending claims remain in the first amended complaint, the anti-SLAPP remedies remain available to defendants." Id.
In sum, because the Court dismisses the offending claim on other grounds, the Court
Plaintiff moves for a preliminary injunction based on its claims for violation of the DTSA, unfair competition, breach of contract, and conversion. However, as discussed, the Court dismisses all claims against those Defendants who were properly served without prejudice and with leave to amend. Accordingly, Plaintiff has not shown a likelihood of success or serious questions going to the merits of Plaintiff's claims. See Winter, 555 U.S. at 20 (stating that a plaintiff seeking a preliminary injunction must generally establish a likelihood of success); Ass'n des Eleveurs de Canards et d'Oies du Quebec v. Harris, 729 F.3d 937, 944 (9th Cir. 2013) (stating that, alternatively, a plaintiff may demonstrate "serious questions going to the merits," meaning at least a "fair chance of success on the merits," and that equities tip sharply in the plaintiff's favor).
Based on the foregoing, the Court
For the foregoing reasons, the Court
The Court further
