The opinion
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
SOUTHERN DIVISION
HILL PHOENIX, INC., Case No.: 8:19-cv-00695-DOC-JDE
Plaintiff,
v.
ORDER RE: PLAINTIFF’S MOTION
FOR PARTIAL SUMMARY
CLASSIC REFRIGERATION SOCAL,
INC. et al.,
JUDGMENT
Defendants.
1 Before the Court is Plaintiff Hill Phoenix, Inc.’s (“Plaintiff”) Motion for Partial Summary
2 Judgment (“Motion”) (Dkt. 121), accompanied by a supporting Memorandum (Dkt. 121-1).
3 Having reviewed the parties’ moving papers and considered their oral arguments, the Court
4 GRANTS IN PART AND DENIES IN PART Plaintiff’s Motion.
5 I. Background
6 A. Facts
7 The following facts are drawn from Plaintiff’s First Amended Complaint (“FAC”) (Dkt.
8 101); the Counterclaims of Defendants David Rogers (“Rogers”) and Classic Refrigeration
9 SoCal, Inc. (“Classic”) (“Counterclaims”) (Dkt. 104); and Plaintiff’s Memorandum in support of
10 the instant Motion. Plaintiff Hill Phoenix, Inc. is a retail refrigeration company, and operates an
11 aftermarket services group (“AMS Group”) as part of its business. FAC ¶ 7. Defendant Rogers
12 first began working for Plaintiff in August 2014 as a project manager, and later accepted a July
13 11, 2016 written offer to work as the General Manager of the AMS Group. Countercls. ¶¶ 8-9.
14 On July 11, 2016, Plaintiff also made a written employment offer to Defendant Thomas Lowe (
15 “Lowe”). FAC ¶ 13. These offers required Defendants Rogers and Lowe to agree to the Dover
16 Corporation’s1 Code of Business Conduct and Ethics (“Code of Conduct”). Id. ¶¶ 12-13. The
17 Code of Conduct provides that employees must use their business devices for business purposes;
18 protect or encrypt sensitive business information; limit disclosure of confidential information;
19 and avoid conflicts of interest. Id. ¶ 15. Defendants Rogers and Lowe were also prohibited,
20 during and after their employment, from using or disclosing any of Plaintiff’s confidential
21 information or trade secrets, which the employment agreements defined at length. Id. ¶¶ 17-18.
22 In December 2018, while still employed by Plaintiff, Defendant Rogers and Mr. Travis
23 VanderLoon2 formed a new company called Tyler Refrigeration SoCal LLC, now known as
24 Classic Refrigeration SoCal, Inc. (“Classic”), a defendant in this action. Id. ¶ 24; see also id.
25 ¶¶ 31, 38. Defendants Rogers and Lowe left their employment with Plaintiff on January 3, 2019
26 and March 14, 2019, respectively, and on March 19, 2019, the Articles of Incorporation for
27 Tyler Refrigeration SoCal were filed with the California Secretary of State. Id. ¶¶ 25-26.
1 Plaintiff alleges Defendants misappropriated trade secrets learned during their
2 employment with Plaintiff to start their new business. Id. ¶ 27. For purposes of this Motion,
3 Plaintiff claims six trade secrets were misappropriated: (1) a customer list, including names and
4 phone numbers, of over 1500 entries; (2) a “Customer Master Location List” with “detailed
5 information about specific stores,” which Plaintiff estimates would take at least a year to
6 compile; (3) a “Wage Matrix with confidential wage and hour and margin information”; (4) a
7 “Contract Sales/Change Order with very detailed pricing information for an important
8 customer”; (5) “very detailed job costing templates”; and (6) an “Installation Proposal/Contract”
9 with confidential information regarding a bid for one of Plaintiff’s customers. Mem. at 4-5.
10 Additionally, many of Plaintiff’s employees have since left to work for Defendant Classic. FAC
11 ¶ 30.
12 Defendant Rogers alleges that on February 7, 2019 (after leaving Plaintiff’s
13 employment), he received an email from Plaintiff’s employee Mr. Paul Sindoni about his
14 (Rogers’s) 2018 bonus. Countercls. ¶ 18. Mr. Sindoni complimented Defendant Rogers’s
15 performance and told Defendant Rogers that Plaintiff’s board was in the process of approving
16 the 2018 bonuses. Id. Defendant Rogers has not been paid this bonus, although the other twenty-
17 eight employees eligible for bonuses received them. Id. ¶¶ 19-20.
18 B. Procedural History
19 As relevant to this Motion, Plaintiff filed its First Amended Complaint (Dkt. 101) on
20 September 20, 2019. The FAC brings the following eight causes of action:
21 (1)breach of contract;
22 (2)violation of the Defend Trade Secrets Act;
23 (3)violation of the California Uniform Trade Secrets Act;
24 (4)violation of the Comprehensive Computer Access and Fraud Act;
25 (5)breach of fiduciary duty;
26 (6)breach of the duty of loyalty;
27 (7)trademark infringement; and
1 See generally FAC. Defendants filed an Answer to the FAC on October 4, 2019 (Dkt. 104).
2 Along with the Answer, Defendants Classic and Rogers brought the following twelve
3 counterclaims:
4 (1) failure to timely pay unpaid wages due at time of separation, in violation of California
5 Labor Code section 202(a);
6 (2) waiting time penalties pursuant to California Labor Code section 203;
7 (3) failure to provide complete and accurate wage statements, in violation of California
8 Labor Code section 226;
9 (4) failure to provide COBRA notice, in violation of 26 U.S.C. § 4980;
10 (5) breach of contract;
11 (6) breach of the covenant of good faith and fair dealing;
12 (7) promissory estoppel;
13 (8) unfair business practices, in violation of California Business and Professions Code
14 section 17200;
15 (9) retaliation, in violation of California Labor Code section 98.6(a);
16 (10) intentional infliction of emotional distress;
17 (11) intentional interference with prospective economic relations; and
18 (12) negligent interference with prospective economic relations.
19 See generally Countercls.
20 On February 3, 2020, Plaintiff brought the instant Motion (Dkt. 121), seeking summary
21 judgment on its trade secrets and contract claims, as well as on Defendants’ first, second, third,
22 fifth, seventh, eighth, eleventh, and twelfth Counterclaims. On February 18, 2020, Defendants
23 filed an Opposition (Dkt. 134), and Plaintiff submitted its Reply (Dkt. 153) on February 28,
24 2020.
25 II. Legal Standard
26 Summary judgment is proper if “the movant shows that there is no genuine dispute as to
27 any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
1 its factually grounded claims and defenses tried to a jury. Celotex Corp. v. Catrett, 477 U.S.
2 317, 327 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A court must view
3 the facts and draw inferences in the manner most favorable to the non-moving party. United
4 States v. Diebold, Inc., 369 U.S. 654, 655 (1992); Chevron Corp. v. Pennzoil Co., 974 F.2d
5 1156, 1161 (9th Cir. 1992). The moving party bears the initial burden of demonstrating the
6 absence of a genuine issue of material fact for trial, but it need not disprove the other party’s
7 case. Celotex, 477 U.S. at 323. When the non-moving party bears the burden of proving the
8 claim or defense, the moving party can meet its burden by pointing out that the non-moving
9 party has failed to present any genuine issue of material fact as to an essential element of its
10 case. See Musick v. Burke, 913 F.2d 1390, 1394 (9th Cir. 1990).
11 Once the moving party meets its burden, the burden shifts to the opposing party to set out
12 specific material facts showing a genuine issue for trial. See Liberty Lobby, 477 U.S. at 248–49.
13 A “material fact” is one which “might affect the outcome of the suit under the governing law.”
14 Id. at 248. A party cannot create a genuine issue of material fact simply by making assertions in
15 its legal papers. S.A. Empresa de Viacao Aerea Rio Grandense v. Walter Kidde & Co., Inc., 690
16 F.2d 1235, 1238 (9th Cir. 1982). Rather, there must be specific, admissible evidence identifying
17 the basis for the dispute. See id. The Court need not “comb the record” looking for other
18 evidence; it is only required to consider evidence set forth in the moving and opposing papers
19 and the portions of the record cited therein. Fed. R. Civ. P. 56(c)(3); Carmen v. S.F. Unified Sch.
20 Dist., 237 F.3d 1026, 1029 (9th Cir. 2001). The Supreme Court has held that “[t]he mere
21 existence of a scintilla of evidence . . . will be insufficient; there must be evidence on which the
22 jury could reasonably find for [the opposing party].” Liberty Lobby, 477 U.S. at 252.
23 III. Discussion
24 Plaintiff has moved for summary judgment on its trade secrets claims (under both
25 California and federal law) and breach of contract claim. Plaintiff also seeks summary judgment
26 against several of Defendants’ counterclaims. The Court addresses each claim and counterclaim
27 in turn.
1 A. Plaintiff’s Trade Secrets Claims Are Inappropriate for Summary Judgment
2 As discussed above, Plaintiff alleges trade secret misappropriation with respect to six
3 pieces of information: a customer list, customer master location list, wage matrix, sales order,
4 job costing templates, and a confidential bid document (collectively, the “Alleged Trade
5 Secrets”). Mem. at 4-5.
6 1. Legal Standard
7 To succeed on a claim under the California Uniform Trade Secrets Act (“CUTSA”), three
8 elements must be proved: (1) the plaintiff’s possession of a trade secret; (2) the defendant’s
9 misappropriation of said trade secret, i.e., wrongful acquisition, disclosure, or use thereof; and
10 (3) that the defendant’s misappropriation caused or threatened damage to the plaintiff. Integral
11 Dev. Corp. v. Tolat, 675 F. App’x 700, 702 (9th Cir. 2017) (citing Silvaco Data Sys. v. Intel
12 Corp., 184 Cal. App. 4th 210, 220 (2010)). The Defend Trade Secrets Act (“DTSA”) presents a
13 similar standard, requiring “plaintiff’s ownership of the trade secret; defendant’s
14 misappropriation of the trade secret; and damage to the plaintiff caused by the
15 misappropriation.” Johnson Controls, Inc. v. Therma, LLC, No. SA CV 18-00636 AG (KESx),
16 2018 WL 6133674, at *4 (C.D. Cal. Aug. 17, 2018).
17 Under the CUTSA:
18 “Trade secret” means information, including a formula, pattern,
19 compliation, program, device, method, technique, or process, that:
20 (1) Derives independent economic value, actual or potential, from not being
21 generally known to the public or to other persons who can obtain
22 economic value from its disclosure or use; and
23 (2) Is the subject of efforts that are reasonable under the circumstances to
24 maintain its secrecy.
25 Cal. Civ. Code § 3426.1(d). The DTSA uses a very similar definition. See 18 U.S.C. § 1839(3).
26 “Misappropriation” obtains when a person acquires the trade secret through improper means, or
27 when they disclose or use the trade secret knowing or having reason to know that it was
1 “Improper means” is defined to include “theft, bribery, misrepresentation, breach or inducement
2 of a breach of a duty to maintain secrecy, or espionage through electronic or other means,” but
3 excludes reverse engineering and independent derivation. 18 U.S.C. § 1839(6); Cal. Civ. Code
4 § 3426.1(a).
5 2. Discussion
6 The first element of a trade secrets claim requires that a plaintiff actually possess a trade
7 secret. Here, Plaintiff argues that this element is satisfied because the Alleged Trade Secrets
8 were kept confidential and have independent economic value—that, for example, the Alleged
9 Trade Secrets could save a competitor the work of cold calling prospective clients, or could help
10 a competitor undercut Plaintiff’s bids. Mot. at 5-6.
11 Defendants, however, present declarations from longtime workers in the refrigeration
12 industry disputing that any of the Alleged Trade Secrets are in fact eligible for protection as
13 trade secrets. Defendants argue, for example, that customer contact information is “easily
14 obtained” through LinkedIn or “publicly-available business phone numbers.” Opp’n at 6.
15 Defendants also offer declarations which call into question whether the customer list was subject
16 to reasonable efforts to maintain its secrecy. E.g., Declaration of David R. Tuttle ¶¶ 9-10
17 (“Tuttle Declaration”) (Dkt. 138). Similarly, Defendants assert that the remaining items in the
18 Alleged Trade Secrets are “not proprietary or unique,” or are otherwise “known to all with
19 significant experience in the industry.” Opp’n at 7. And, again, the declarations offered by
20 Defendants suggest that Plaintiff’s Alleged Trade Secrets are in fact non-confidential forms and
21 templates, and/or matters of public record. See, e.g., Tuttle Decl. ¶¶ 14-21.
22 On the record currently available, then, the Court finds that a genuine dispute of material
23 fact exists as to whether Plaintiff possesses a trade secret. Because this is fundamental to a trade
24 secrets claim (i.e., there can be no finding of misappropriation or damages if no trade secret
25 exists in the first place), the Court need not consider the remaining elements of Plaintiff’s trade
26 secrets claims. The Court finds that Plaintiff’s claims under the DTSA and CUTSA are
27 inappropriate for summary judgment and are properly a matter for a jury to resolve.
1 B. Plaintiff’s Breach of Contract Claims Are Inappropriate for Summary
2 Judgment
3 1. Legal Standard
4 Under California state law, breach of contract has four elements: “(1) the existence of the
5 contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and
6 (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811,
7 821 (2011) (citing Reichert v. Gen. Ins. Co., 68 Cal. 2d 822, 830 (1968)).
8 2. Discussion
9 Plaintiff argues that Defendants Rogers and Lowe’s employment contracts prohibited
10 them “from disclosing any trade secrets or other confidential materials.” Mem. at 14. Their
11 agreements define “confidential information” as
12 information which is of value to HP [Hill Phoenix] because it is not
13 generally known in the industry, and includes, but is not limited to, such
14 information related to: (a) the tooling, equipment, and choice of machinery
15 involved in the manufacturing of systems; (b) scientific and technical
16 information, ideas, discoveries, designs, improvements, processes,
17 procedures, software, and formulas; (c) the names, buying habits, or
18 practices of any of HP’s customers; (d) HP’s marketing methods, business
19 plans and related data; (e) the names of any of HP’s vendors or suppliers;
20 (f) the costs, prices, or discounts HP obtains or has obtained or at which it
21 sells or has sold its products or services; (g) compensation paid to
22 employees or other terms of employment; and, (h) all other know-how and
23 other such information not generally known to the public.
24 Hill Phoenix Emp. Agreement (Dkt. 124-1, Ex. A). That is, Plaintiff intends that even
25 information that does not meet the legal definition of a trade secret should still be subject to the
26 confidentiality provisions of its employment agreement. Mem. at 15. The agreement requires
27 that the employee, both during and after their employment, “will not use, disclose or
1 course and scope of employment with HP.” Hill Phoenix Emp. Agreement (Dkt. 124-1, Ex. A).
2 According to Plaintiff, Defendants Rogers and Lowe breached their contractual obligation to
3 protect Plaintiff’s confidential information.
4 Defendants disagree, disputing whether a contract was ever formed, whether Plaintiff
5 performed under the employment contract, and whether Defendants breached any confidentiality
6 obligation.
7 Contract formation. There is no genuine dispute of material fact that Defendants Rogers
8 and Lowe formed valid contracts with Plaintiff. Defendant Rogers has admitted as much—as his
9 counsel, in a letter to Mr. Sindoni, wrote that prior to his departure, “Mr. Rogers was employed
10 by the Company [i.e., Hill Phoenix] pursuant to a written agreement . . . [and] that Mr. Rogers
11 performed his job duties pursuant to that employment agreement exceedingly well.” Ghassemian
12 Letter at 7 (Dkt. 121-15). The Court will not entertain Defendant Rogers’s attempt to bring a
13 counterclaim under his employment agreement with Plaintiff while simultaneously denying its
14 existence or validity.
15 As for Defendant Lowe, Plaintiff presents an offer letter and employment agreement,
16 both bearing Defendant Lowe’s digital signature, as well as a DocuSign “Certificate of
17 Completion” for Defendant Lowe’s offer letter. Dkt. 65-6, 65-7. The DocuSign certificate,
18 moreover, indicates that the digital signature was linked to “David Lowe” and the email address
19 “david.lowe@hillphoenix.com,” signed at 3:09:02 p.m. on July 22, 2016. Dkt. 65-7. Defendants
20 respond that Defendant Lowe and others do not recall this agreement, and that a computer
21 forensics expert was unable to verify the digital signature. Opp’n at 11-12.
22 Defendant Lowe, however, makes no attempt to explain why these documents bear his
23 signature and apparently originate from his email address. Lapses of memory regarding
24 paperwork nearly four years old do not overcome the evidence presented by Plaintiff—nor does
25 an “inconclusive” forensic analysis of the failed cryptographic verification associated with the
26 DocuSign. See Declaration of Doris Little ¶¶ 6-7 (“Little Decl.”) (Dkt. 141). As a result,
27 Defendant Lowe’s evidence does not clear the “scintilla” threshold needed to establish a genuine
1 The Court therefore finds that Plaintiff has established the existence of valid contracts
2 with Defendants Rogers and Lowe.
3 Plaintiff’s performance. Plaintiff argues that it “performed under its contracts with Lowe
4 and Rogers, having employed them pursuant to the terms set forth this those [sic] agreements
5 and having paid them their annual salaries.” Mem. at 16. Defendants respond that a genuine
6 dispute of material fact exists because Plaintiff “failed to pay Rogers his earned bonus in the
7 face of his great job performance.” Opp’n at 13.
8 With respect to Defendant Lowe, then, Defendants raise no challenge to Plaintiff’s
9 performance under the contract. The Court will take this element as admitted with respect to
10 Defendant Lowe, and thus need only consider whether Plaintiff performed under its agreement
11 with respect to Defendant Rogers.
12 Defendant Rogers’s signed offer letter provides that “[y]our bonus opportunity will
13 continue to be 30% of Annual Base Salary. The annual bonus is discretionary, and is based on
14 your individual and Hillphoenix [sic?] performance. This bonus target is also tied to this new
15 position and will be adjusted if no longer in the position.” Rogers Offer Letter at 5 (Dkt. 121-3,
16 Ex. 1).
17 According to Plaintiff, “Rogers left his position before any alleged bonus was calculated,
18 and . . . that bonus was tied to the position Rogers left”—and therefore that Defendant Rogers
19 was not entitled to receive a bonus under his contract. Mem. at 21. Defendant Rogers offers a
20 competing interpretation, noting that this provision “does not indicate that Rogers still had to be
21 employed on a certain date to receive the bonus.” Opp’n at 14. Defendant Rogers further notes
22 that, after he left Plaintiff’s employment, current Hill Phoenix employee Mr. Sindoni “sent
23 Rogers an email acknowledging that a bonus was still due and owing to Rogers.” Id. at 15. The
24 parties further dispute whether Defendant Rogers’s bonus was calculable while he was still
25 employed: Defendant Rogers asserts that the bonus could have been calculated “as of January 3,
26 2019,” while his last day of work was January 18, 2019, Opp’n at 15, whereas Plaintiff claims
27 that “it would have been impossible to calculate a discretionary bonus at the time Rogers quit,”
1 employees had left the company yet still received their bonuses,” Opp’n at 20, adding a further
2 interpretive difficulty to the plain text of the contract.
3 In light of these significant disputes, the Court finds summary judgment improper as to
4 Plaintiff’s performance under the contract. There is first the factual issue of whether Defendant
5 Rogers’s bonus could have been calculated while he was still employed, and then a knot of
6 interpretive questions—e.g., whether this purported calculability entails Defendant Rogers’s
7 eligibility for the bonus. The Court also finds that the current record is inadequate to
8 independently interpret the contract, as the Court has insufficient evidence available to account
9 for Plaintiff’s general course of performance with respect to bonus provisions or industry norms
10 on bonuses.
11 Because there is a genuine issue of material fact as to whether Defendant Rogers was
12 entitled to a bonus, the Court will not grant summary judgment on Plaintiff’s contract claim with
13 respect to Defendant Rogers.
14 Defendants’ breach. The Court need not address the element of breach with respect to
15 Defendant Rogers; the following discussion will therefore only pertain to Defendant Lowe.
16 Plaintiff asserts that, even if he did not misappropriate Plaintiff’s trade secrets, Defendant
17 Lowe violated his obligation to protect confidential information. Mem. at 17. The confidentiality
18 provision, however, excludes information generally known in the industry. Hill Phoenix Emp.
19 Agreement (Dkt. 124-1, Ex. A). And as discussed above with respect to Plaintiff’s Alleged
20 Trade Secrets, the parties disagree as to whether this information is publicly available and/or
21 generally known in the refrigeration industry. This disagreement over a material fact precludes
22 summary judgment on this claim.
23 In sum, then, the Court finds that Defendants Rogers and Lowe entered into valid
24 contracts, and that Plaintiff performed under its contract with respect to Defendant Lowe. The
25 Court DENIES summary judgment on all the other elements of Plaintiff’s breach of contract
26 claims against Defendants Rogers and Lowe.
27
1 C. Counterclaims
2 Plaintiff next seeks summary judgment on several of Defendants Rogers and Classic’s
3 counterclaims. The Court will address each of these in turn.
4 1. Defendant Rogers’s Unpaid Wages Counterclaim Is Inappropriate for
5 Summary Judgment
6 As Plaintiff observes, this counterclaim “is premised on an allegedly earned bonus.”
7 Mem. at 18. In the discussion of the breach of contract claim above, the Court found a genuine
8 dispute of material fact as to whether Defendant Rogers is owed this bonus under his contract.
9 Here, as there, this factual dispute necessitates that the Court DENY summary judgment on the
10 unpaid wages counterclaim.
11 2. Summary Judgment is Warranted Against Defendant Rogers’s
12 Counterclaim for Waiting Time Penalties
13 The California Labor Code provides, in relevant part, as follows:
14 If an employer willfully fails to pay . . . any wages of an employee who is
15 discharged or who quits, the wages of the employee shall continue as a
16 penalty from the due date thereof at the same rate until paid or until an
17 action therefor is commenced; but the wages shall not continue for more
18 than 30 days.
19 Cal. Lab. Code § 203(a). California courts, however, have ruled that an employer’s “good
20 faith belief in a legal defense will preclude a finding of willfulness.” Armenta v. Osmose, Inc.,
21 135 Cal. App. 4th 314, 325 (2005) (citing Barnhill v. Robert Saunders & Co., 125 Cal. App. 3d
22 1, 8-9 (1981)).
23 As discussed above, the parties disagree as to whether Defendant Rogers is owed a bonus
24 under the contract. Moreover, the Court cannot conclude, on the present record, that Plaintiff’s
25 position in that disagreement is in bad faith, and Defendant Rogers’s accusations of retaliation
26 do not surmount the “scintilla” threshold for summary judgment. As such, the Court GRANTS
27 summary judgment against the counterclaim for waiting time penalties.
1 3. Defendant Rogers’s Counterclaim for Accurate Wage Statements Is
2 Inappropriate for Summary Judgment
3 This counterclaim is also predicated on whether Plaintiff owes Defendant Rogers a
4 bonus, the lack of which constitutes the purported inaccuracy in the wage statement Plaintiff
5 provided to Defendant Rogers. Again, as the parties have a genuine dispute over whether
6 Plaintiff owes Defendant Rogers a bonus, summary judgment must be DENIED for this
7 counterclaim.
8 4. A Genuine Issue of Material Fact Precludes Summary Judgment on
9 the Breach of Contract Counterclaim
10 Defendant Rogers’s breach of contract counterclaim is premised on Plaintiff’s purported
11 failure to pay his bonus. The genuine dispute of material fact over the bonus requires the Court
12 to DENY summary judgment on this counterclaim.
13 5. Summary Judgment Is Appropriate Against Defendant Rogers’s
14 Counterclaim for Promissory Estoppel
15 To the extent Defendant Rogers bases his counterclaim for promissory estoppel on “the
16 terms of the express written employment agreement” and Plaintiff’s course of performance
17 thereunder, see Countercls. ¶¶ 87-91, Defendant Rogers is actually alleging a breach of contract,
18 which the Court has addressed above.
19 Defendant Rogers also argues that, after he left his job with Plaintiff, he received an
20 email from Mr. Sindoni, which said, “Bonuses get approved with the board over the next couple
21 of weeks. Once they are, I will send over a document to sign for us to release the funds.” Opp’n
22 at 23. However, according to Mr. Sindoni—which representation Defendant Rogers does not
23 dispute—Defendant Rogers “did not return the signed agreement.” Declaration of Paul Sindoni
24 ¶ 16 (Dkt. 121-11). Because Defendant Rogers never took the action upon which the release of
25 funds was conditioned, he cannot have reasonably relied on the funds being released.
26 The Court thus GRANTS summary judgment against Defendant Rogers’s counterclaim
27 for promissory estoppel.
1 6. Summary Judgment is Inappropriate as to Defendant Rogers’s
2 Retaliation Counterclaim
3 Defendant Rogers bases his retaliation counterclaim under California Labor Code section
4 98.6 on three alleged actions by Plaintiff: refusal to pay the allegedly owed bonus, allowing his
5 medical insurance to lapse, and filing the instant lawsuit. Countercls. ¶¶ 96-99.
6 Section 98.6 provides that “[a] person shall not discharge an employee or in any manner
7 discriminate, retaliate, or take any adverse action against any employee or applicant for
8 employment because the employee or applicant engaged in any conduct” protected under the
9 Labor Code. Cal. Lab. Code § 98.6 (emphasis added). Other district courts have interpreted this
10 language to require the employee to have been employed at the time the alleged discrimination
11 occurred. See, e.g., Fenters v. Yosemite Chevron, No. CV-F-05-1630 OWW/DLB, 2009 WL
12 4928362, at *6 (E.D. Cal. Dec. 14, 2009) (finding dismissal appropriate because the alleged
13 retaliation occurred after the plaintiff’s resignation); OptiStreams, Inc. v. Gahan,
14 No. CVF050117RECSMS, 2005 WL 3309589, at *4 (E.D. Cal. Dec. 6, 2005) (holding section
15 98.6 applies by its terms “only to actions that employers take against ‘employees’ or
16 ‘applicants,’ not former employees”).
17 Therefore, because Defendant Rogers was no longer Plaintiff’s employee by the time he
18 had left and started his own company (the alleged basis for retaliation, see Countercls. ¶ 95), it
19 might be the case that Plaintiff cannot have retaliated against him within the meaning of
20 California Labor Code section 98.6. But, as stated above, there are genuine questions of material
21 fact as to whether Defendant Rogers’s bonus was (1) calculable and (2) owed to Defendant
22 Rogers while he was still working for Plaintiff—which, if so, would present a reasonable claim
23 that Plaintiff took an adverse action against a current employee, by withholding a bonus to
24 which he became entitled while still an employee.
25 Given these genuine issues of material fact, the Court DENIES summary judgment
26 against Defendant Rogers’s counterclaim for retaliation.
27
1 7. Defendants Rogers and Classic’s Counterclaims for Intentional and
2 Negligent Interference with Economic Advantage
3 According to Defendants Rogers and Classic, Plaintiff is liable for intentional and
4 negligent interference with economic advantage because (1) Plaintiff filed this lawsuit;
5 (2) Plaintiff’s “employees have been spreading rumors about Classic and its principals,” and
6 (3) Plaintiff “has sent copies of this lawsuit to Classic’s customers, telling the customers that
7 Rogers and other Classic principles [sic] will soon be going to jail.” Countercls. ¶¶ 42, 117, 127.
8 To the extent this counterclaim is predicated on the filing of the instant action, the
9 counterclaim is precluded by the litigation privilege codified in California Civil Code section
10 47(b). The wide sweep of section 47(b) has been interpreted to bar actions for “interference with
11 contract and prospective economic advantage.” Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50
12 Cal 3d 1118, 1132 (1990). Because the filing of this lawsuit is a “judicial proceeding,” section
13 47(b) privileges Plaintiff against these counterclaims.
14 As for the statements Plaintiff’s employees have allegedly made to others, these
15 counterclaims are foreclosed by the Noerr-Pennington doctrine. As originally articulated by the
16 Supreme Court, the doctrine holds “that the First Amendment Petition Clause immunizes acts of
17 petitioning the legislature from antitrust liability.” EcoDisc Tech. AG v. DVD Format/Logo
18 Licensing Corp., 711 F. Supp. 2d 1074, 1081 (C.D. Cal. 2010) (citing United Mine Workers v.
19 Pennington, 381 U.S. 657 (1965), and E. R.R. Presidents Conference v. Noerr Motor Freight,
20 Inc., 365 U.S. 127 (1961)). The doctrine has since expanded beyond the antitrust context; as the
21 Ninth Circuit has held, the Noerr-Pennington doctrine applies to state law claims for intentional
22 interference with prospective economic advantage—and indeed “applies equally in all contexts.”
23 EcoDisc, 711 F. Supp. 2d at 1081 (citing Theme Promotions, Inc. v. News Am. Mktg. FSI, 546
24 F.3d 991, 1007 (9th Cir. 2008), and White v. Lee, 227 F.3d 1214, 1231 (9th Cir. 2000)).
25 Additionally, “[c]onduct incidental to a lawsuit,” such as a pre-suit demand letter, is within the
26 Noerr-Pennington doctrine’s protection. Theme Promotions, Inc. v. News Am. Mktg. FSI, 546
27 F.3d 991, 1007 (9th Cir. 2008).
1 Here, the Court finds that sending “copies of this lawsuit” and discussing it are within the
2 ambit of conduct incidental to the suit. Having filed suit, Plaintiff’s employees have allegedly
3 shown “copies of the TRO and the Complaint” to another company’s vice president, Opp’n at
4 24; the Court sees no legal basis to penalize them for doing so. (Defendant Rogers has also
5 testified that some of Plaintiff’s employees “have been spreading rumors about defendants going
6 to Jail” [sic], Opp’n at 24, but the Court finds this mere assertion insufficient to meet the
7 “scintilla” standard for summary judgment.) And Defendants have not shown that Plaintiff’s
8 lawsuit and related conduct are “so baseless” as to render this action a “sham” (i.e., objectively
9 baseless, and initiated to interfere with a competitor’s business), and thus excepted from the
10 protection of the Noerr-Pennington doctrine.
11 The Court therefore finds that all of the conduct underlying Defendants’ interference
12 counterclaims are protected by either state or federal privilege, and accordingly GRANTS
13 summary judgement against both counterclaims.
14 IV. Disposition
15 For the reasons set forth above, the Court GRANTS IN PART AND DENIES IN PART
16 Plaintiff’s Motion for Partial Summary Judgment. In particular, the Court rules as follows:
17 (1) As to Plaintiff’s first cause of action, for breach of contract, summary judgment is
18 DENIED; although—
19 a. the Court finds no genuine issue of material fact as to the existence of valid contracts
20 between Plaintiff and Defendants Rogers and Lowe, and thus GRANTS summary
21 adjudication on this element; and
22 b. the Court finds no genuine issue of material fact as to Plaintiff’s performance with
23 respect to Defendant Lowe, and thus GRANTS summary adjudication on this
24 element.
25 (2) As to Plaintiff’s second and third causes of action, for violation of the Defend Trade
26 Secrets Act and the California Uniform Trade Secrets Act, respectively, summary
27 judgment is DENIED.
1 (3) As to Defendant Rogers’s first counterclaim, for unpaid wages, summary judgment is
2 DENIED.
3 (4) As to Defendant Rogers’s second counterclaim, for waiting time penalties, the Court
4 GRANTS Plaintiff’s Motion for Partial Summary Judgment.
5 (5) As to Defendant Rogers’s third counterclaim, for accurate wage statements, summary
6 judgment is DENIED.
7 (6) As to Defendant Rogers’s fifth counterclaim, for breach of contract, summary judgment
8 is DENIED.
9 (7) As to Defendant Rogers’s seventh counterclaim, for promissory estoppel, the Court
10 GRANTS Plaintiff’s Motion for Partial Summary Judgment.
11 (8) As to Defendant Rogers’s eighth counterclaim, for retaliation, summary judgment is
12 DENIED.
13 (9) As to Defendants Rogers and Classic’s eleventh and twelfth counterclaims, for
14 intentional and negligent interference with prospective economic relations, the Court
15 GRANTS Plaintiff’s Motion for Partial Summary Judgment.
16
17 DATED: March 15, 2020
18
DAVID O. CARTER
19
UNITED STATES DISTRICT JUDGE
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