“a court can consider a 3 document on which the complaint relies if the document is central to the plaintiff's claim, 4 and no party questions the authenticity of the document”
How later courts described this case
- “a court can consider a 3 document on which the complaint relies if the document is central to the plaintiff's claim, 4 and no party questions the authenticity of the document”
Written by the judges who cited it.
The opinion
1
2
3 UNITED STATES DISTRICT COURT
4 NORTHERN DISTRICT OF CALIFORNIA
5
6 CISCO SYSTEMS, INC., et al.,
Case No. 19-cv-07562-PJH
7 Plaintiffs,
8 v. ORDER RE MOTIONS TO COMPEL
ARBITRATION, STAY THE CASE,
9 WILSON CHUNG, et al., AND DISMISS
10 Defendants. Re: Dkt. Nos. 40, 41, 43, 45, 47, 54, 57,
11 80
12 Before the court are defendant Jedd Williams’ (“Williams”) motion to compel
13 arbitration and stay the case or, in the alternative, motion to dismiss (Dkt. 41), defendant
14 Wilson Chung Ph.D.’s (“Chung”) motion to dismiss and joinder to Williams’ motions (Dkt.
15 43), defendant Plantronic Inc.’s (“Plantronics” or “Poly”) motion to dismiss (Dkt. 40) and
16 joinder to Williams’ and Chung’s motions (Dkt. 47), defendant Thomas Puorro’s
17 (“Puorro”) motion to dismiss and joinder to his co-defendants’ respective motions (Dkt.
18 45), and defendant James He’s (“He”) motion to dismiss and joinder to Williams’ motion
19 to compel arbitration (Dkt. 54) (collectively, “defendants”).
20 Having read the parties’ papers and carefully considered their argument and the
21 relevant legal authority, and good cause appearing, the court hereby GRANTS Williams’
22 motion to compel arbitration and stay the instant litigation with respect to the claims
23 against him, TERMINATES his alternative motion to dismiss, and DENIES his motion to
24 stay with respect to the claims against the remaining defendants. Additionally, the court
25 GRANTS Chung’s and He’s motions to dismiss and GRANTS IN PART and DENIES IN
26 PART Puorro’s and Plantronic’s motions to dismiss.
27 BACKGROUND
1 Cisco Technology, Inc.’s (collectively, “plaintiff” or “Cisco”) purported trade secrets. At
2 core, plaintiff alleges that its former employees schemed with a competitor, Plantronics,
3 to improperly reveal a range of its purported trade secrets.
4 A. The Underlying Claims
5 Plaintiff filed its initial complaint on November 18, 2019. Dkt. 1. On December 17,
6 2019, plaintiff filed the operative pleading in this action, its First Amended Complaint
7 (“FAC”). Dkt. 25. In it, plaintiff alleges claims for the following:
8 • Misappropriation of trade secrets under both federal (Title 18 U.S.C. § 1836)
9 and California state law (Cal. Civ. Code § 3426) against Chung. FAC ¶¶ 197-
10 226.
11 • Misappropriation of trade secrets under both federal and California state law
12 against He. Id. ¶¶ 227-55.
13 • Misappropriation of trade secrets under both federal and California state law
14 against Williams. Id. ¶¶ 256-82.
15 • Misappropriation of trade secrets under both federal and California state law
16 against Puorro. Id. ¶¶ 283-306.
17 • Intentional interference with a contractual relationship under California state
18 law against Puorro. Id. ¶¶ 307-313.
19 • Misappropriation of trade secrets under both federal and California state law
20 against Plantronics. Id. ¶¶ 314-41.
21 • Intentional interference with a contractual relationship under California state
22 law against Plantronics. Id. ¶¶ 342-44.
23 Except Chung, plaintiff seeks both monetary and injunctive relief against all
24 defendants. FAC, Prayer for Relief. Plaintiff seeks only injunctive relief against Chung.
25 Id. ¶¶ 220, 226.
26
27
1 B. Factual Background1
2 1. The Parties and an Overview of Defendants’ Alleged Misconduct
3 a. Plaintiff
4 Plaintiff is a California corporation that designs, engineers, manufactures, and
5 sells software, hardware, and other electronic devices. FAC ¶ 2.
6 b. Plantronics
7 Plantronics is a Delaware corporation with its principal place of business in Santa
8 Cruz, California. Id. ¶ 12. Plantronics is “in the IP telephone, headset, video, and
9 collaboration space” and is a market competitor to plaintiff. Id.
10 c. Chung
11 Chung served as a Principal Engineer in plaintiff’s Unified Communications
12 Technology Group (“UCTG”). Id. ¶ 26. Chung’s responsibilities included developing
13 plaintiff’s collaboration products, including “IP telephony solutions and audio headsets.”
14 Id. Incidental to his role, Chung had access to “some of Cisco’s most confidential trade
15 secrets used within the UCTG, including design specifications, schematics, source code,
16 product market analyses, and vendor contract details.” Id.
17 Chung formally departed plaintiff’s employment on February 28, 2019, id. ¶ 62, but
18 began working for Plantronics on February 26, 2019, id. ¶ 69. As part of his employment
19 with plaintiff, Chung received two laptops, a Lenovo and a MacBook. Chung returned his
20 Lenovo laptop on February 27, 2019, id. ¶ 77, but, at least as of September 27, 2019, did
21 not return his MacBook laptop, id. ¶ 95.
22 Plaintiff alleges a series of instances between February 3, 2019 and at least March
23 8, 2019 in which Chung downloaded, copied, or emailed various plaintiff’s documents
24 and files concerning certain technological and business subject matter to multiple
25 external devices not owned by plaintiff. Id. ¶¶ 36-80. Such subject matter includes
26 “Cisco’s contribution to 5G technology . . . and design specification of a pre-release video
27
1 conferencing display prototype,” id. ¶ 36, source code for debugging a user interface, id.
2 ¶ 41, pre-release video conferencing display prototypes, id. ¶ 42, design details and
3 specifications related to plaintiff’s sound bar products, id. ¶ 45 (alleged on information
4 and belief), over 100 webinar presentations relating to plaintiff’s communications product
5 portfolio, id. ¶ 65 (alleged on information and belief), a presentation detailing strategy and
6 costs for a pre-release video conferencing display product, id. ¶ 51 (alleged on
7 information and belief), plaintiff’s marketing position in the collaboration space, id. ¶ 64,
8 and “component specifications and competitive differentiators” for plaintiff’s current and
9 unreleased hardware products, id. ¶ 74.
10 Chung used at least six different external devices to improperly download or
11 transfer the subject information. Id. ¶ 37 (First Seagate Drive), ¶ 42 (Second Seagate
12 Drive), ¶ 44 (SanDisk Drive), ¶ 39 (Samsung Drive), Chung’s personal email account, id.
13 ¶¶ 64, 80, and his corporate email account at Plantronics, id. ¶ 80. At the time of his
14 departure from plaintiff’s employment, Chung did not provide plaintiff the four external
15 drives. Id. ¶ 77. Chung accessed at least three specific documents (the “EA Document,”
16 the “Webex Vision Document,” and the “Cisco collaboration roadmap document”) during
17 his employment at Plantronics. Id. ¶ 86.
18 As a condition of his employment, Chung signed a Proprietary Information and
19 Inventions Agreement (“PIIA”), which, among other things, prohibited him from
20 maintaining simultaneous employment with any industry competitor, barred him from
21 removing any plaintiff information except as necessary to perform his employment duties,
22 and required that he return all plaintiff information upon termination of his employment.
23 Id. ¶ 93. Revealed in the parties’ briefing, Chung maintained an arbitration agreement
24 (“Chung Arbitration Agreement”) with plaintiff. Dkt. 50-3 at 2-5.
25 d. He
26 He served as an engineer. Id. ¶ 97. Incidental to his role, He had access to
27 “some of Cisco’s most confidential trade secrets used within Cisco’s UCTG, including
1 contract details.” Id. As early as March 2019, Chung began to recruit He to join
2 Plantronics. Id. ¶ 99-100. In June 2019, He departed plaintiff’s employment, id. ¶ 114,
3 and joined Plantronics on June 24, 2019. Id. ¶ 117 (alleged on information and belief).
4 Plaintiff alleges a series of instances between May 13, 2019 and June 20, 2019 in
5 which He took photographs of or downloaded plaintiff’s diagrams and documents
6 concerning various technological and business subject matter to his iPhone and an
7 external drive (the “LaCie drive”). Id. ¶¶ 102-114. Such subject matter includes an
8 unreleased headset concept and like prototypes, FAC ¶¶ 103, 105, 109, “vendor
9 roadmaps for Cisco’s products,” id. ¶ 109, “an unreleased IP telephone project,” id. ¶¶
10 112, 118, “full engineering specifications for a next-generation conference room
11 collaboration device,” id. ¶ 120, emerging business opportunities in the collaboration
12 space, id. ¶ 106, and “Cisco’s strategic product development decisions,” id. ¶ 111.
13 At the time of his departure, He did not return the LaCie Drive. Id.¶ 115. He
14 accessed at least three specific documents (an unreleased IP telephone project
15 schematic, a vendor roadmap update, and specification for a next-generation conference
16 room collaboration device) during his employment at Plantronics. Id. ¶¶ 118-120.
17 He signed his own PIIA, which similarly barred him from removing certain plaintiff’s
18 information except as necessary to perform his employment duties and required that he
19 return all such information upon termination of his employment. Id. ¶ 126. He did not
20 maintain an arbitration agreement with plaintiff.
21 e. Puorro and Williams
22 Puorro is the Executive Vice President and General Manager of Products at
23 Plantronics. Id. ¶ 128. Before joining Plantronics in early 2019, Puorro served as
24 plaintiff’s Vice President of its Unified Communications Technology Group between
25 October 2014 and December 2018. Id.
26 Williams served as a Regional Sales Director and Director in Global Collaboration
27 Sales prior to his termination from plaintiff’s employment in October 2019. Id. ¶ 127. In
1 collaboration products to market. Id.
2 Shortly after Puorro’s departure, Williams began to pursue employment at
3 Plantronics. Id. ¶ 129. To do so, he reached out to Puorro, who initiated a “scheme” in
4 which Puorro would exchange professional coaching and advocacy for his employment at
5 Plantronics in exchange for Williams’ provision of “confidential details about Cisco’s
6 competitive business.” Id. ¶ 130. Williams received an offer to join Plantronics on
7 September 26, 2019. Id. ¶ 176. Between February 2019 and receipt of that offer,
8 Williams underwent multiple interviews with various Plantronics executives. Id. ¶ 134
9 (March 3-4, 2019 interviews with unidentified “First Poly Executive”); ¶ 147 (April 30,
10 2019 interviews with other unspecified executives); ¶¶ 152, 155 (June 12, 2019 interview
11 with other executive); ¶ 158 (June 28, 2019 interviews scheduled with other unspecified
12 executives). Williams began his employment at Plantronics on October 14, 2019. Id. ¶
13 179.
14 Plaintiff alleges a series of communications between Williams, Puorro, and
15 unidentified Plantronic executives during the February 2019 to September 2019 period to
16 substantiate the alleged scheme. While the court will detail those communications in its
17 analysis, Williams allegedly shared information concerning plaintiff’s collaboration
18 business, id. ¶¶ 131, 153, a sales strategy named “Project Liberator,” id. ¶ 153,
19 unannounced organizational changes (i.e., layoffs), id. ¶¶ 141, 158, plaintiff’s product
20 strategy, id. ¶ 156, a sales strategy named “Project x,” id. ¶ 164, and some particular
21 product, id. ¶ 169 (actual name redacted in the FAC).
22 Williams signed his own PIIA, which required that, absent plaintiff’s consent, he
23 maintain the confidentiality of any information concerning plaintiff’s business (actual or
24 anticipated) and return all plaintiff information upon termination of his employment. Id. ¶¶
25 265-67.2 Williams maintained an arbitration agreement (“Williams Arbitration
26
2 Plaintiff alleges that Williams used a so-called “Time Machine back-up” of his corporate
27
laptop and, at the time of his termination, failed to return that device. Id. ¶ 187. For
1 Agreement”) with plaintiff. Dkt. 41.
2 2. Pre-Complaint Events
3 By September 2019, plaintiff notified both He and Chung of their purported
4 misconduct. Id. ¶¶ 89, 122. After receiving notice of their preservation obligations, both
5 defendants attempted to conceal the information they purportedly misappropriated by, for
6 example, performing Internet searches on how to delete information from certain devices
7 without detection, id. ¶ 91 (Chung), and deleting files, id. ¶ 123 (He).
8 Plantronics conducted its own investigation into the allegations against both
9 Chung and He. Following each investigation, Plantronics terminated He’s employment,
10 id. ¶ 124, and placed Chung on administrative leave, id. ¶¶ 95-96. Plantronics reinstated
11 Chung on November 14, 2019. Id. ¶ 96. Plaintiff filed this action four days later. Dkt. 1.
12 C. The Instant Motions
13 Plantronics, Puorro, Chung, and Williams respectively filed their motions on
14 January 27, 2020. He filed his motion on February 10, 2020. All defendants request
15 dismissal under Rule 12(b)(6).
16 As noted above, Williams’ motion includes a primary request to compel arbitration
17 of the claims against him and stay the instant litigation against both him and all
18 defendants. After Williams filed his motion, the remaining defendants either filed a
19 supplementary notice of joinder to Williams’ compulsion and stay requests with respect to
20 the claims respectively against them or indicated such joinder in their briefing. Except
21 Chung, who himself maintained an arbitration agreement with plaintiff, all of the non-
22 Williams defendants rely upon the Williams Arbitration Agreement in support of their
23 joinder requests. The court will analyze the various requests to compel arbitration, stay
24 the instant litigation, and dismiss in that order.
25 DISCUSSION
26 A. Legal Standards
27 1. Motion to Compel Arbitration
1 Federal Arbitration Act (“FAA”), Title 9 U.S.C. §§ 1, et. seq., may bring a motion to
2 compel arbitration and stay the proceeding pending resolution of the arbitration. 9 U.S.C.
3 §§ 3-4; Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir.
4 2004). The FAA requires the court to compel arbitration of issues covered by the
5 arbitration agreement. Dean Witter Reynolds, Inc., v. Byrd, 470 U.S. 213, 218 (1985).
6 In ruling on a motion to compel arbitration under the FAA, the district court’s role is
7 typically limited to determining whether (i) an agreement exists between the parties to
8 arbitrate; (ii) the claims at issue fall within the scope of the agreement; and (iii) the
9 agreement is valid and enforceable. Lifescan, 363 F.3d at 1012; Chiron Corp. v. Ortho
10 Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). If the answers are yes, the
11 court must enforce the agreement. Lifescan, 363 F.3d at 1012.
12 Regarding whether an agreement exists to arbitrate, the “first principle” that
13 underscores the U.S. Supreme Court’s arbitration decisions is that “[a]rbitration is strictly
14 a matter of consent, and thus is a way to resolve those disputes—but only those
15 disputes—that the parties have agreed to submit to arbitration.” Granite Rock Co. v. Int'l
16 B’hd of Teamsters, 561 U.S. 287, 299 (2010); First Options of Chicago, Inc. v. Kaplan,
17 514 U.S. 938, 943 (1995). Thus, “a court may order arbitration of a particular dispute only
18 where the court is satisfied that the parties agreed to arbitrate that dispute.” Granite
19 Rock, 561 U.S. at 297 (emphasis in the original).
20 Regarding the validity of the agreement, the FAA provides that arbitration clauses
21 “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in
22 equity for the revocation of any contract.” 9 U.S.C. § 2. Thus, state contract defenses
23 may be applied to invalidate arbitration clauses if those defenses apply to contracts
24 generally. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996); Circuit City
25 Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2002).
26 Regarding the scope of the agreement, “any doubts concerning the scope of
27 arbitrable issues should be resolved in favor of arbitration.” Moses H. Cone Mem'l Hosp.
1 arbitration should be denied if “it may be said with positive assurance that the arbitration
2 clause is not susceptible of an interpretation that covers the asserted dispute.” AT&T
3 Techs., Inc. v. Commc'n Workers, 475 U.S. 643, 650 (1986).
4 2. Motion to Stay
5 Title 9 U.S.C. § 3 provides that a federal court must stay its proceedings against a
6 party bound to an arbitration agreement subject to the FAA. 9 U.S.C. § 3.
7 Distinct from Title 9 U.S.C. § 3’s statutorily mandated stay, a district court
8 maintains authority to enter a stay of litigation as part of its inherent authority to manage
9 its own docket. Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936). The United States
10 Supreme Court has recognized that such entry may be advisable in litigation involving
11 mixed arbitrable and non-arbitrable claims but has reiterated that “[t]hat decision is one
12 left to the district court . . . as a matter of its discretion to control its docket.” Moses H.
13 Cone Mem'l Hosp, 460 U.S. at 21 n.23.
14 3. Rule 12(b)(6) Motion to Dismiss
15 A motion to dismiss under Rule 12(b)(6) tests for the legal sufficiency of the claims
16 alleged in the complaint. Ileto v. Glock, 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Rule 8
17 requires that a complaint include a “short and plain statement of the claim showing that
18 the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Under Rule 12(b)(6), dismissal “is
19 proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege
20 sufficient facts to support a cognizable legal theory.” Somers v. Apple, Inc., 729 F.3d 953,
21 959 (9th Cir. 2013). While the court is to accept as true all the factual allegations in the
22 complaint, legally conclusory statements, not supported by actual factual allegations,
23 need not be accepted. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). The complaint
24 must proffer sufficient facts to state a claim for relief that is plausible on its face. Bell
25 Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 558-59 (2007).
26 As a general matter, the court should limit its Rule 12(b)(6) analysis to the
27 contents of the complaint, although it may consider documents “whose contents are
1 physically attached to the plaintiff's pleading.” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th
2 Cir. 2005); Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007) (“a court can consider a
3 document on which the complaint relies if the document is central to the plaintiff's claim,
4 and no party questions the authenticity of the document”). The court may also consider
5 matters that are properly the subject of judicial notice, Lee v. City of L.A., 250 F.3d 668,
6 688–89 (9th Cir. 2001), exhibits attached to the complaint, Hal Roach Studios, Inc. v.
7 Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989), and documents
8 referenced extensively in the complaint and documents that form the basis of the
9 plaintiff's claims, No. 84 Emp'r-Teamster Jt. Counsel Pension Tr. Fund v. Am. W. Holding
10 Corp., 320 F.3d 920, 925 n.2 (9th Cir. 2003).
11 B. Analysis
12 1. Defendants’ Requests to Compel Arbitration
13 a. Williams’ Motion to Compel Arbitration
14 In support of his motion to compel arbitration, Williams cites the Williams
15 Arbitration Agreement. Dkt. 41-2 at 2-3. Plaintiff does not dispute that it and Williams
16 entered the Williams Arbitration Agreement and that that agreement remains enforceable.
17 In relevant part, the Williams Agreement provides:
18 “The Company and I agree to resolve exclusively through
binding arbitration all claims . . . (“claims”), past, present or
19 future, whether or not arising out of my employment (or its
termination), that the Company may have against me or that I
20 may have against any of the following: (1) the Company . . .
Examples of claims that we both agree to submit to arbitration
21 include claims of discrimination, harassment, retaliation,
wrongful termination, unpaid wages, breach of contract,
22 defamation, and all other claims related to the employment
relationship (or its termination), regardless of whether the claim
23 is brought by me or the Company.” Dkt. 41-2 at 2.
24 Plaintiff consented to Williams’ alternative motion to compel arbitration under this
25 agreement. Dkt. 53 at 6. Therefore, the court grants Williams’ motion to compel
26 arbitration with respect to the claims against him.
27 b. Chung’s Request to Compel Arbitration
1 at 12-14. In support of that request, Chung initially argued that the claims against him
2 are also subject to the Williams’ Arbitration Agreement because those claims are
3 “intimately founded in and intertwined with” that agreement. Id. at 14. In its opposition,
4 plaintiff proffered evidence of an arbitration agreement between it and Chung signed
5 January 29, 2007 (the Chung Arbitration Agreement referenced above). Dkt. 50-3 at 2-5.
6 That agreement includes the following provisions:
7 “We agree to arbitrate before a neutral arbitrator any and all
disputes or claims arising from or relating to Employee’s
8 recruitment to or employment with Cisco, or the termination of
that employment, including claims against any current or former
9 agent or employee of Cisco, whether the disputes or claims
arise in tort, contract, or pursuant to a statute, regulation, or
10 ordinance now in existence or which may in the future be
enacted . . . including, but not limited to . . claims for fraud . . .
11 or breach of contract . . . [and various other employment related
claims].” Dkt. 50-3 at 3 (i.e., “general arbitration agreement
12 provision”).
13 . . .
14 “We understand and agree that nothing in this Agreement shall
prevent either party from seeking from a court the remedy of an
15 injunction for a claimed misappropriation of a trade secret,
patent right, copyright, trademark, or any other intellectual or
16 confidential property.” Id. at 4 (i.e., the “intellectual property
injunctive relief carveout”).
17
. . .
18
“We understand and agree that if any term or portion of this
19 Agreement shall, for any reason, be held to be invalid . . . or to
be contrary to public policy. . . then the remainder of this
20 Agreement shall not be affected by such invalidity . . . but shall
remain in full force and effect, as if the invalid . . . term or portion
21 thereof had not existed within this Agreement.” Id. (i.e., the
“severability provision”).
22
23 In his reply, Chung contested that this agreement provides a second independent
24 basis for this court to compel arbitration of the claims against him. Dkt. 56 at 6-7. The
25 court analyzes each of Chung’s arguments below.
26 i. The Chung Arbitration Agreement Does Not Require
27 Arbitration of the Claims Against Him
1 unenforceable because, when considered in light of the general arbitration agreement
2 provision, the Chung Arbitration Agreement is ambiguous. Dkt. 56 at 6. In support of
3 that argument, Chung cites Comedy Club, Inc. v. Improv West Associates, 555 F.3d 1227
4 (9th Circ. 2009) for the proposition that the Ninth Circuit has considered and held
5 ambiguous an arbitration provision including a similar carveout for equitable relief. Dkt.
6 56 at 6-7.
7 Chung overstates the relevance of Comedy Club, Inc. here. The arbitration
8 provision at issue in Comedy Club, Inc. generally provided the following:
9 “All disputes relating to or arising under this Agreement or the
Asset Purchase Agreement shall be resolved by arbitration in
10 Los Angeles, California . . .” Id. at 1281.
11 The provision then added that:
12 “Notwithstanding this agreement to arbitrate, the parties, in
addition to arbitration, shall be entitled to pursue equitable
13 remedies and agree that the state and federal courts shall have
exclusive jurisdiction for such purpose and for the purpose of
14 compelling arbitration and/or enforcing any arbitration award.”
Id.
15
16 On appeal, the parties in Comedy Club, Inc. disputed whether this provision
17 allowed the arbitrator authority to adjudicate equitable claims. Id. at 1284. The parties
18 advanced two competing interpretations of this provision on that issue: (1) the carveout
19 “is explicit that only state and federal courts, and not an arbitrator, have jurisdiction over
20 equitable claims”; and (2) that clause “only carved out equitable claims ‘in aid of
21 arbitration’ to maintain the status quo between the parties pending arbitration” and it “did
22 not supplant the arbitrator’s authority to decide all disputes under the Trademark
23 Agreement.” Id. The Ninth Circuit found that a “natural reading of [the carveout] lends
24 plausibility” to the second interpretation. Id. at 1285. It reasoned that “[t]he language ‘in
25 addition to arbitration’ . . . suggests that arbitration still applies to all disputes, but that in
26 addition, the parties are ‘entitled to pursue equitable remedies’ before courts. . . .
27 Because the parties included this language, it is plausible and a permissible contract
1 designed to maintain the status quo between the parties.” Id. Giving the benefit of the
2 doubt to the “federal presumption in favor of arbitration,” the Ninth Circuit held that the
3 agreement “should be interpreted as granting arbitration coverage over ‘all disputes’
4 arising from the [underlying agreement at issue].” Id. at 1286.
5 The Ninth Circuit’s conclusion in Comedy Club, Inc. does not control this court’s
6 interpretation of the intellectual property injunctive relief carveout. The ambiguity issue in
7 Comedy Club, Inc. concerned the arbitrator’s authority to adjudicate equitable claims.
8 The issue here is whether any such authority conferred to an arbitrator under the general
9 arbitration agreement provision deprives plaintiff of its option to have such claims
10 adjudicated in this court pursuant to the intellectual property injunctive relief carveout.
11 Stated differently, there is no question here about the arbitrator’s authority to litigate
12 equitable claims; rather, the question is whether that authority (contractually allowed
13 under the arbitration agreement) creates an ambiguity about this court’s concurrent
14 authority to adjudicate the equitable claims contemplated under the intellectual property
15 injunctive relief carveout. Based on a plain reading of the relevant provisions in the
16 Chung Arbitration Agreement, the answer is no.
17 The intellectual property injunctive relief carveout states that “nothing in this
18 Agreement shall prevent either party from seeking from a court the remedy of an
19 injunction . . .,” id. (emphasis added), and—unlike the oddly inserted “in addition to
20 arbitration” phrase generating the confusion in Comedy Club, Inc.—is contained in a
21 separate paragraph directly below the general arbitration agreement provision. Dkt. 50-2
22 at 3. Like its construction of most contracts containing general provision, exceptions, and
23 limitations, the court reasonably construes the Chung Arbitration Agreement to generally
24 require the parties to arbitrate any and all claims (general arbitration agreement
25 provision), except those seeking an injunction for allegedly misappropriated intellectual
26 property (intellectual property injunctive relief carveout). For that latter set of claims,
27 either party may (general arbitration agreement) but need not (intellectual property
1 In this case, plaintiff chose to limit the relief sought for the trade secret
2 misappropriation claims against Chung to a permanent injunction. Consistent with the
3 Chung Arbitration Agreement’s recognition that “nothing in this Agreement shall prevent
4 either party from seeking from a court the remedy of an injunction” for such claims,” Dkt.
5 50-2 at 3, plaintiff chose to bring such claims in this court. As a result, the court rejects
6 Chung’s attempt to compel arbitration on the basis of the intellectual property injunctive
7 relief carveout’s purported ambiguity.
8 In a passing paragraph, Chung asserts that the court should invoke the Chung
9 Arbitration Agreement’s severability provision to strike the intellectual property injunctive
10 relief carveout because “[t]ime and again, California Courts have determined that one-
11 sided arbitration provisions that reserve the claims employers are likely to pursue (e.g.,
12 trade secret claims for equitable relief) for court and push employee-based claims . . . to
13 arbitration are substantively unconscionable.” Dkt. 56 at 7. Chung fails to explain how or
14 why the carveout here—which states that “nothing in this Agreement shall prevent either
15 party from seeking from a court . . .“ Dkt. 50-2 at 3 (emphasis added)— qualifies as
16 “one-sided.” Plainly that provision allows either party to it to seek the subject equitable
17 relief outside of arbitration. In any event, Chung further fails to explain why this provision
18 is also procedurally unconscionable. Accordingly, the court rejects Chung’s attempt to
19 compel arbitration on the basis of the intellectual property injunctive relief carveout’s
20 purported unenforceability. Given the above, Chung’s first argument in support of his
21 request for arbitration fails.3
22
23
3 In his reply brief, Chung footnotes his intention “to file a separate motion to compel
arbitration so that the Court can either compel arbitration of his claims pursuant to Mr.
24
Williams’ motion or pursuant to a standalone motion brought pursuant to the specific
Cisco-Chung Arbitration Agreement.” Dkt. 56 at 8 n.2. Chung already “joined” in
25
Williams’ motion to compel arbitration, Dkt. 43 at 12, so he has no basis to bring a
separate motion to compel arbitration on that ground. Chung has also had over two and
26
a half months to bring a separate motion to compel on grounds of his arbitration
agreement and, significantly, has already briefed whether arbitration is proper on grounds
27
of that agreement. Given these circumstances, the court cautions Chung that he should
1 ii. The Claims Against Chung Are Not Sufficiently Related to
2 the Williams Arbitration Agreement
3 California courts recognize that “a non-signatory defendant may invoke an
4 arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of
5 action against the non-signatory are ‘intimately founded in and intertwined’ with the
6 underlying contract obligations.” Boucher v. Alliance Title Co., 127 Cal. App. 4th 262,
7 271 (2005). According to California courts, the basis for such compulsion arises out of
8 equitable estoppel, id. at 272, which may require compelling arbitration for claims against
9 a non-signatory “when a party has signed an agreement to arbitrate but attempts to avoid
10 arbitration by suing non-signatory defendants for claims that are ‘based on the same
11 facts and are inherently inseparable’ from arbitrable claims against signatory defendants.”
12 Turtle Ridge Media Grp., Inc. v. Pac. Bell Directory, 140 Cal. App. 4th 828 (2006), as
13 modified (July 20, 2006).
14 To determine whether compelling arbitration on this basis is proper, courts must
15 analyze the relationship between the claims against a non-signatory defendant and the
16 contract including the subject arbitration agreement. Turtle Ridge Media Grp., Inc., 140
17 Cal. App. 4th at 835 (“Regardless of whether equitable estoppel may require detrimental
18 reliance in other contexts, the test for applying equitable estoppel to an arbitration
19 agreement is whether the causes of action are intertwined with the contract containing
20 the agreement.”). Construing California decisional law, the Ninth Circuit in Kramer v.
21 Toyota Motor Corp., 705 F.3d 1122 (9th Cir. 2013) acknowledged that compelling the
22 arbitration for claims against a non-signatory is proper under the following two
23 circumstances:
24 “(1) when a signatory must rely on the terms of the written
agreement in asserting its claims against the nonsignatory or
25 the claims are ‘intimately founded in and intertwined with’ the
underlying contract;” and
26
“(2) when the signatory alleges substantially interdependent
27 and concerted misconduct by the nonsignatory and another
the underlying agreement.’ Id. at 1128-29 citing Goldman v.
1 KPMG LLP, 173 Cal.App.4th 209, 221 (2009)
2 Here, the claims against Chung are not sufficiently related to the Williams
3 Arbitration Agreement. To substantiate his argument on this issue, Chung cites plaintiff’s
4 allegations that defendants collectively engaged in a “scheme” to misappropriate its trade
5 secrets, Dkt. 43 at 14, and a recent decision by the Central District of California in
6 Chartwell Staffing Services, Inc., v. Atlantic Solutions Group, Inc., 2020 WL 620294 (C.D.
7 Cal. Jan. 9, 2020) purportedly compelling arbitration for trade secret misappropriation
8 claims against non-signatories on the basis of similar allegations of conspiracy, Dkt. 56 at
9 5.
10 Again, Chung overstates his cited authority. The court in Chartwell considered a
11 single motion to compel arbitration collectively filed by nine defendants in an alleged
12 scheme to misappropriate plaintiff’s trade secrets. Id. at *1. Eight of those defendants
13 were former employees, only four of whom had employment agreements with plaintiff that
14 contained arbitration provisions. Id. While repeatedly citing its respective employment
15 agreements with the former employee defendants in support of its trade secret
16 misappropriation claims, id. at *6, plaintiff opposed arbitration with even those four former
17 employee defendants who entered arbitration agreements as a condition of their
18 employment, id. at *3. The court found in favor of the defendant non-signatories on both
19 grounds stated in Kramer and compelled arbitration on the claims against them. Id. at *8.
20 With respect to its decision on the first ground, the court stated that plaintiff’s
21 repeated reference to the various employment agreements in a prior ex parte application
22 “were not mere inconsequential mentions of the agreements” but instead calculated
23 attempts by plaintiff to show that “(1) certain of its information constitutes protected trade
24 secrets; (2) each individual Defendant, as a former Chartwell employee, was put on
25 notice by the Employment Agreements of the nature of that information; and, (3) each
26 individual Defendant, as a former Chartwell employee, has agreed that they are
27 prohibited from engaging in unauthorized use of those trade secrets.” Id. at *6. On the
1 non-signatory [defendants] are founded in and inextricably bound up with the obligations
2 imposed by the agreement containing the arbitration clause.” Id. at *7. The court further
3 observed that the subject “trade secret information would not have been provided to
4 defendants but for the contracts they entered into with [plaintiff].” Id.
5 With respect to its decision on the second ground, the court cited its decision on
6 the first ground as largely dispositive and then went on to address plaintiff’s “allegations
7 of a concerted and collusive effort by Defendants to misappropriate and use Chartwell
8 trade secrets to siphon off Chartwell customers and employees for the benefit of
9 [corporate defendant].” Id. The court characterized these allegations as “center[ing]
10 around the rights and obligations created by the Employment Agreements” (without
11 specifying which employment agreements) and, on the basis of that characterization,
12 concluded that plaintiff’s claims against the non-signatory defendants “are based on the
13 same facts and are inherently inseparable from arbitrable claims against signatory
14 [defendants].” Id.
15 For multiple reasons, the court rejects the argument that Chartwell controls this
16 instant case. First, unlike the plaintiff in Chartwell, plaintiff here expressly consented to
17 Williams’ motion to compel arbitration. Plainly, then, plaintiff is not trying to avoid certain
18 terms of its employment arrangement with Williams but nonetheless selectively assert
19 others. Given that, compelling the non-signatory claims to arbitration would not advance
20 the rationale underlying the subject equitable doctrine.
21 Second, unlike the broader employment contracts in Chartwell that included
22 certain “prohibitions and restrictive covenants,” id. at * 6, the Williams Arbitration
23 Agreement is a standalone two-page document that says nothing about Williams’
24 substantive employment obligations with respect to plaintiff’s trade secrets, Dkt. 41-2 at
25 2-3. The Williams Arbitration Agreement itself does not support any of the various
26 showings that the court in Chartwell identified as supporting plaintiff’s trade secret claims
27 against the non-signatory defendants. Id. at *7.
1 on the non-signatory compulsion issue unpersuasive. Significantly, with respect to the
2 first ground set forth in Kramer, the court in Chartwell failed to explain why the signatory
3 employment contracts were necessary to plaintiff’s claims against the non-signatory.
4 While the court in Chartwell identified three aspects of the underlying claims that the
5 subject agreements supported, id. at *6, helping to substantiate a required element is
6 different than being necessary to substantiate such an element. Similarly, with respect to
7 the second ground set forth in Kramer, the court in Chartwell based its decision upon its
8 characterization of the allegations of the defendants’ collective misconduct. Aside from
9 the cursory “but for” observation supporting its first decision, the court did not clarify how
10 the alleged collective misconduct by defendants generally arises out of the signatory
11 employees’ employment contracts.
12 Instead, the court concludes that the claims against Chung do not depend upon
13 the Williams Arbitration Agreement. The claims against Chung are for misappropriation
14 of trade secrets under federal and California state law. As a general matter, a plaintiff
15 need not identify an agreement to state a trade secrets misappropriation claim and
16 Chung fails to explain why plaintiff’s theory of his liability for such claims depend upon the
17 Williams Arbitration Agreement. While Chung accurately points out plaintiff’s allegations
18 that defendants conspired in a collective scheme to misappropriate its trade secrets, such
19 allegations do not establish that the claims against Chung necessarily rely upon or are
20 intimately connected with the Williams Arbitration Agreement.
21 Chung’s remaining argument—i.e., that the court should order arbitration to avoid
22 duplicative litigation in parallel proceedings, Dkt. 56 at 6—is a policy oriented critique that
23 Chung fails to support with any citation to controlling California law, and, in any event,
24 has already been characterized by the United States Supreme Court as an acceptable
25 byproduct of litigation.4 As a result, the court denies Chung’s request to compel
26
4 Moses H. Cone Mem'l Hosp., 460 U.S. at 19-20 (“The Hospital points out that it has two
27
substantive disputes here—one with Mercury . . . and the other with the Architect . . . The
1 arbitration of the claims against him.
2 c. The Remaining Defendants’ Requests to Compel Arbitration
3 The remaining non-signatory defendants base their request for arbitration on a
4 materially similar theory of intertwinement to that proffered by Chung. In his opening
5 brief, He asserts that “[p]lainly, each Defendant’s defense is inextricably intertwined,”
6 explaining only that “[e]ach defendant will require the testimony of the others to rebut
7 Cisco’s allegations” and “the outcome of one may affect the others.” Dkt. 54 at 9-10. In
8 his reply, He literally copies and pastes (without formatting) Chung’s argument
9 concerning Chartwell’s applicability. Plantronics similarly takes a page out of Chung’s
10 briefing, both joining in it, Dkt. 47, and citing Chartwell for the vague proposition that
11 ”[o]ther courts have ordered non-signatories to arbitration in trade secret cases, for
12 example, when the trade secret claims asserted against signatory and non-signatory
13 defendants were intertwined claims for misappropriation and the trade secret claim
14 against the signatory was encompassed within the sweeping language of the arbitration
15 clause at issue,” Dkt. 59 at 16. Puorro does largely the same when joining Chung’s
16 motion in his opening brief. Dkt. 45 at 12-14.
17 Here, the court denies the remaining non-signatory defendants’ requests to
18 compel arbitration of the claims against them for the same reasons noted above with
19 respect to Chung. Significantly, these defendants’ theory of intertwinement fails to
20 establish how or why the various claims against them necessarily rely upon or are
21 intimately connected with the Williams Arbitration Agreement. Similarly, just as the court
22 rejected Chung’s summary assertion that compelling arbitration would advance the
23 court’s interest in judicial efficiency, it does the same with respect to that argument by
24 Puorro. Dkt. 60 at 5. While consolidating all litigation related to a dispute in a single
25
26
if Mercury obtains an arbitration order for its dispute, the Hospital will be forced to resolve
these related disputes in different forums. That misfortune, however, is not the result of
27
any choice between the federal and state courts; it occurs because the relevant
1 forum is desired policy, its efficiency gains do not overcome plaintiff’s right to litigate
2 against the non-signatory defendants in this forum. Accordingly, the court denies the
3 remaining non-signatory defendants request to compel arbitration of the claims against
4 them.
5 2. Motion to Stay
6 a. The Court Stays the Instant Litigation Against Williams
7 A court must stay judicial proceedings against a party bound to an arbitration
8 agreement that falls within the scope of the FAA. 9 U.S.C. § 3. As detailed above,
9 plaintiff consented to Williams’ alternative motion to compel arbitration, which Williams
10 brought pursuant to Title 9 U.S.C. § 4, Dkt. 41 at 2. Given that, the court grants Williams’
11 request for a stay of the proceedings against him.
12 b. The Court Allows the Instant Litigation Against the Non-
13 Signatory Defendants to Proceed
14 To determine whether staying litigation under its inherent authority is proper, a
15 district court should weigh the following competing interests:
16 1. The possible damage that may result from granting a stay.
17 2. The hardship or inequity that a party may suffer if required to litigate.
18 3. How a stay would affect the “orderly course of justice,” including whether it
19 would simplify or complicate factual and legal issues in the pending
20 litigation. Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005).
21 In Clinton v. Jones, the United States Supreme Court has acknowledged that “[t]he
22 proponent of a stay bears the burden of establishing its need.” 520 U.S. 681, 708 (1997).
23 Citing Landis, the Ninth Circuit in Lockyer further clarified that “if there is even a fair
24 possibility that the stay . . . will work damage to someone else, the party seeking the stay
25 must make out a clear case of hardship or inequity.” Lockyer, 398 F.3d at 1112.
26 Here, as a general matter, each of the non-signatory defendants only joined in
27 Williams’ briefing to support their respective requests. Dkt. 47; Dkt. 45 at 12-13; Dkt. 43
1 advanced any argument different than that proffered by Williams. Given that, the court
2 will generally refer to only Williams’ briefing when addressing the propriety of a stay of the
3 proceedings against them.
4 i. Inequity Resulting from Denying the Stay
5 In his opening brief, Williams failed to offer any showing of inequity that would
6 befall him or the non-signatory defendants in the event the court denied the requested
7 stay of proceedings against the non-signatory defendants. In his reply, Williams posits
8 only that “[a]llowing Cisco to pursue identical claims against Mr. Puorro and Poly in this
9 Court while concurrently arbitrating those claims against Mr. Williams could very likely
10 result in ‘inconsistent and adverse rulings’ harmful to Mr. Williams.” Dkt. 58 at 9. Other
11 than that summary assertion, Williams failed to explain what those hypothetical rulings
12 might actually be, their likelihood, or why they would be unfairly harmful to his litigation
13 position. Absent such explanations, Williams’ cannot establish the “clear case of
14 hardship or inequity” necessary for this court to enter a stay. Lockyer, 398 F.3d at 1112.
15 As a result, the court concludes that this factor cuts against granting the requested stay.
16 ii. Possible Damage Resulting from Grant of Stay
17 Williams similarly fails to show the absence of any damage that would befall
18 plaintiff in the event the court were to grant his requested stay of proceedings against the
19 non-signatory defendants. Instead, Williams turns the applicable burden on its head,
20 neglecting any argument on this issue in his opening brief and mistakenly dedicating a
21 section of his reply to the argument that “Cisco has not demonstrated that it will be
22 prejudiced by a stay pending arbitration.” Dkt. 58 at 9-10 (emphasis added). Williams’
23 reply on this point only critiqued the purported harms that plaintiff argues in its opposition
24 it would suffer in the event of a stay. Id. at 9 (“Cisco also attempts to argue that it will be
25 ‘damaged’ and ‘unduly prejudiced’ by a stay. These arguments fail for several reasons.”).
26 Perhaps a fine distinction, such criticisms themselves fail to affirmatively show that
27 plaintiff would not suffer damage from a stay.
1 affirmative showing, the court finds that the purported harms identified by plaintiff in its
2 opposition would tend to undermine any such showing. Significantly, plaintiff argues that
3 a stay would create a material risk of spoliation. Dkt. 53 at 17-18. While the court
4 understands Williams’ critique that plaintiff failed to offer any evidence substantiating
5 actual spoliation and, even if such spoliation did occur, plaintiff could seek sanctions, Dkt.
6 58 at 9-10, the court recognizes the reality that sanctions do not always adequately
7 compensate an aggrieved party. Such recognition is particularly well-placed in a situation
8 where, like here, the full extent of some alleged wrongdoing cannot be known.
9 Additionally, while not evidence, plaintiff proffers various non-information and belief
10 allegations supporting its claimed risk of spoliation. FAC ¶ 91 (Chung performed online
11 searches for “how to permanently delete icloud backup” and “how to see what is [sic] the
12 thumb drive without detection”), id. ¶ 123 (He deleted from his LaCie drive thousands of
13 plaintiff’s files, some of which contained confidential information, as well as certain source
14 code stacks), id. ¶ 132 (Williams, Puorro, and unspecified Plantronics’ executives used
15 their personal emails and phone calls to communicate). These allegations, which appear
16 substantiated by pre-complaint investigations, support plaintiff’s claimed risk of spoliation
17 in the event of a stay. Accordingly, the court concludes that this consideration cuts
18 against granting the requested stay.
19 iii. Effect of a Stay on the Orderly Course of Justice
20 In his opening brief, Williams asserts that the claims against the non-signatory
21 defendants (especially those against Puorro) “raise numerous questions of fact and law
22 that are common to each Defendant.” Dkt. 41 at 15-16. On that basis, Williams argues
23 that that the court should stay the action against the non-signatory defendants to avoid
24 needless litigation and minimize the risk of inconsistent rulings. Id.
25 In its opposition, plaintiff argues that the claims against each non-signatory
26 defendant, as well as their supporting allegations, “stand alone” and that there are
27 numerous factual and legal questions implicated in the claims against the non-signatory
1 also asserts that there is no risk of inconsistent rulings because any ruling by the
2 arbitrator would not bind this court. Dkt. 53 at 19-20.
3 In his reply, Williams points out numerous paragraphs in the FAC alleging a
4 collective scheme by the defendants to misappropriate plaintiff’s purported trade secrets.
5 Dkt. 58 at 8. Williams also points out that some allegations supporting both the claims
6 against him, Puorro, and Plantronics are identical and that, on the basis of such
7 allegations, the liability of the latter two defendants “is entirely derivative of Mr. Williams’
8 own liability and thus the arbitration will have preclusive effect on those claims should the
9 arbitrator find Mr. Williams did not misappropriate Cisco’s trade secrets.” Id. Relying
10 upon these two sets of allegations relating to both him and the other non-signatory
11 defendants, Williams argues that “a stay will assist in simplifying issues of proof and
12 evidence relating to overlapping factual issues.” Id. Williams further adds that whether
13 the purportedly misappropriated information itself qualifies as a trade secret poses
14 numerous other common questions. Id. at 7. Lastly, Williams responds to plaintiff’s final
15 assertion by clarifying that just because an arbitrator’s ruling may not preclude a finding
16 in this litigation does not prevent the possibility that a ruling from this court would be
17 inconsistent with that of the arbitrator. Id. at 9.
18 Here, the court concludes that a stay would advance the orderly course of justice.
19 As an initial matter, the court agrees that various allegations proffered to support the
20 claims against Williams are similarly used to support the claims against Puorro, FAC 127-
21 177, 285-86, 300-01, and Plantronics, id. ¶¶ 317-18, 321 (alleging vicarious and direct
22 liability on the basis of Puorro’s and Williams’ alleged misconduct). Plaintiff’s allegations
23 of a collective “scheme,” which included Williams, further show factual questions common
24 to all defendants. FAC ¶ 8, 317-22. Aside from the defendants’ purported conduct,
25 Williams is also correct that a core issue in this litigation—whether the information
26 purportedly misappropriated by defendants qualifies as trade secrets—poses numerous
27 threshold issues that must be decided both by Williams’ arbitrator and this court. Given
1 the possibility of inconsistent rulings.
2 That said, Williams’ fails to explain how the court’s abstention in this action would
3 simplify those questions. Plaintiff posits that the Williams arbitration would have no
4 preclusive effect on the claims against the non-signatory defendants. Dkt. 53 at 19-20.
5 Except as provided by the doctrine of nonmutual collateral estoppel, Dkt. 58 at 8 n.3,
6 Williams does not disagree, Dkt. 58 at 8-9. The court understands that there is a
7 scenario that the non-signatory defendants may invoke that doctrine on certain issues in
8 this litigation (i.e., in the event Williams were to prevail on them at arbitration) and that—
9 in the event the court determined such invocation were proper—granting the requested
10 stay would then simplify the issues presented. However, given that this scenario rests on
11 at least two contingencies, the court assigns it only little weight when assessing Lockyer’s
12 third interest. In any event, such limited weight fails to offset Williams’ other
13 shortcomings under Lockyer.
14 Separate from Williams’ briefing, Plantronics and Chung raise two other distinct
15 arguments in support of the requested stay of the proceedings against them. In its reply,
16 Plantronics suggests that, absent a stay, litigation in this action would “undermine”
17 Williams’ arbitration proceeding and “thwart the federal policy in favor of arbitration.” Dkt.
18 58 at 16-17. Aside from reciting the existence of overlapping questions of fact between
19 the two proceedings (already addressed above), Plantronics fails to explain that
20 suggestion.
21 Chung summarily asserts that this court “must” stay the instant proceeding
22 pending the Williams arbitration because the two proceedings involve the same
23 substantive allegations of wrongdoing. Dkt. 56 at 8. In support of it, he cites Rent-A-
24 Center West, Inc. v. Jackson, 561 U.S. 63, 78 n.2 (2010) and Ziober v. BLB Resources,
25 Inc., 839 F.3d 814, 817 (9th Cir. 2016). Chung’s citation to Rent-A-Center is
26 unsupportable, as that citation corresponds to the dissent and, in any event, the footnote
27 is entirely off topic. Chung’s citation to Ziober fares no better, as that portion of the Ninth
1 federal court litigation against a signatory defendant pending arbitration. By his adoption
2 of Williams’ briefing on this issue, Chung has already ceded that a stay of proceedings
3 against non-signatory defendants is discretionary. Dkt. 41 at 15 (citing district court case
4 law for the proposition that a court “may” stay an entire action pending arbitration). Given
5 the above, any distinct arguments on the stay issue contributed by the non-signatory
6 defendants are immaterial.
7 In short, defendants failed to carry their burden under Lockyer. As a result, the
8 court denies the motion to stay the proceedings against the non-signatory defendants.
9 4. Motions to Dismiss5
10 Given the relationship between the claims alleged against the various defendants,
11 the court analyzes their motions to dismiss on a claim-by-claim (rather than motion-by-
12 motion) basis.
13 a. Trade Secret Misappropriation Claims
14 “To state a claim for trade secret misappropriation under the [Title 18 U.S.C. §
15 1836] and [California Civil Code § 3426], a plaintiff must allege that: (1) the plaintiff
16 owned a trade secret; (2) the defendant misappropriated the trade secret; and (3) the
17 defendant's actions damaged the plaintiff.” Alta Devices, Inc. v. LG Elecs., Inc., 343 F.
18 Supp. 3d 868, 877 (N.D. Cal. 2018).
19 i. Whether Plaintiff Adequately Alleged Ownership of Trade
20 Secrets in the Purportedly Misappropriated Information
21 Title 18 U.S.C. § 1839(3) defines a trade secret to mean the following:
22 “all forms and types of financial, business, scientific, technical,
economic, or engineering information, including patterns,
23 plans, compilations, program devices, formulas, designs,
24
5 Because the court has ordered that plaintiff litigate its claims against Williams in
25
arbitration, the court TERMINATES without decision Williams’ alternative motion to
dismiss. At this time, the court does not make any decision on the preclusive effect of
26
this section of its order on the Williams arbitration. Relatedly, the court will not consider
the arguments made by Williams in support of his now-terminated alternative motion to
27
dismiss in its analysis of the remaining defendants’ respective motions to dismiss.
prototypes, methods, techniques, processes, procedures,
1 programs, or codes, whether tangible or intangible, and
whether or how stored, compiled, or memorialized physically,
2 electronically, graphically, photographically, or in writing if--
3 (A) the owner thereof has taken reasonable measures to keep
such information secret; and
4
(B) the information derives independent economic value, actual
5 or potential, from not being generally known to, and not being
readily ascertainable through proper means by, another person
6 who can obtain economic value from the disclosure or use of
the information.” 18 U.S.C. § 1839(3)(A)-(B).
7
8 California Civil Code § 3426.1(d) similarly defines a trade secret to mean
9 “information . . . that (1) [d]erives independent economic value, actual or potential, from
10 not being generally known to the public or to other persons who can obtain economic
11 value from its disclosure or use; and (2) [i]s the subject of efforts that are reasonable
12 under the circumstances to maintain its secrecy.” Cal. Civ. Code § 3426.1(d)(1)-(2).
13 California courts have explained that “[i]nformation has a broad meaning” and
14 “[t]he definition of trade secret is . . . unlimited as to any particular class or kind of matter
15 and may be contrasted with matter eligible for patent or copyright protection, which must
16 fall into statutorily defined categories . . . A trade secret may consist of any formula,
17 pattern, device or compilation of information which is used in one's business, and which
18 gives him an opportunity to obtain an advantage over competitors who do not know or
19 use it.” Altavion, Inc. v. Konica Minolta Sys. Lab., Inc., 226 Cal. App. 4th 26, 53 (2014).
20 Here, defendants proffer the following two grounds to support their argument that
21 plaintiff failed to allege its ownership of trade secrets in the misappropriated information
22 at issue: (1) plaintiff failed to allege such secrets with sufficient particularity and (2)
23 plaintiff failed to show that the purportedly misappropriated information has independent
24 economic value. The court analyzes each ground in turn.
25 A. Description of the Purportedly Misappropriated
26 Information
27 “[C]ourts are in general agreement that trade secrets need not be disclosed in
1 requirement would result in public disclosure of the purported trade secrets.” Autodesk,
2 Inc. v. ZWCAD Software Co., 2015 WL 2265479, at *6 (N.D. Cal. May 13, 2015). Given
3 that, “a plaintiff need not spell out the details of the trade secret,” but it must “describe the
4 subject matter of the trade secret with sufficient particularity to separate it from matters of
5 general knowledge in the trade or of special persons who are skilled in the trade, and to
6 permit the defendant to ascertain at least the boundaries within which the secret lies.”
7 Alta Devices, 343 F. Supp. 3d at 881-82; accord Autodesk, 2015 WL 2265479, at *5;
8 Vendavo, Inc. v. Price f(x) AG, 2018 WL 1456697, at *4 (N.D. Cal. Mar. 23, 2018);
9 MedioStream, Inc. v. Microsoft Corp., 869 F. Supp. 2d 1095, 1113 (N.D. Cal. 2012) (“The
10 complaint need not ‘spell out the details of the trade secret’ but must identify the trade
11 secret with sufficient particularity to give defendants ‘reasonable notice of the issues
12 which must be met at the time of trial and to provide reasonable guidance in ascertaining
13 the scope of appropriate discovery.’”).6
14 As this court has recently noted, “allegations that set out purported trade secrets in
15 broad, categorical terms that are merely descriptive of the types of information that
16 generally may qualify as protectable trade secrets’ are insufficient to state a claim. Five
17 Star Gourmet Foods, Inc. v. Fresh Express, Inc., 2020 WL 513287, at *7 (N.D. Cal. Jan.
18 31, 2020) (emphasis in the original). For example, courts reject the following sorts of
19 descriptions as insufficiently specific to allege a trade secret:
20 • Allegations of “source code, customer lists and customer related information,
21 pricing information, vendor lists and related information, marketing plans and
22
23
6 In its reply, Plantronics cites Top Agent Network, Inc. v. Zillow, Inc., 2015 WL 7709655,
at *4 (N.D. Cal. Apr. 13, 2015) for the proposition that a pleading must offer “enough
24
detail to allow the Court to make the required ‘item-by-item determination’ of what is
and is not protectable under [California Civil Code § 3426].” Dkt. 59 at 10 (emphasis in
25
the original). The court in Top Agent did not cite any Ninth Circuit authority directly
supporting such an onerous requirement. Rather, the court in Top Agent merely cited
26
another district court opinion and provided a parenthetical to a Ninth Circuit decision
holding that “while a particular customer database qualified as a trade secret, the
27
generalized assertion of trade secrets in diagnostic software and operating systems did
1 strategic business development initiatives, ‘negative knowhow’ learned through
2 the course of research and development, and other information related to the
3 development of its price-optimization software, including ideas and plans for
4 product enhancements.” Vendavo, 2018 WL 1456697, at *3-4.
5 • Allegations of “data on the environment in the stratosphere” and “data on the
6 propagation of radio signals from stratospheric balloon-based transceivers.”
7 Space Data Corp. v. X, 2017 WL 5013363, at *2 (N.D. Cal. Feb. 16, 2017).
8 • Allegations of “marketing strategy, product composition, packaging and
9 manufacturing logistics,” Five Star Gourmet Foods, 2020 WL 513287, at *7.
10 For analytical purposes, the court separately addresses each portion of the
11 allegedly misappropriated trade secret information per each defendant below.
12 1. The Information Allegedly Misappropriated
13 by Williams
14 Plaintiff argues that the FAC adequately alleges that Puorro induced Williams to
15 take the following categories of information: “market and strategy data, product strategy,
16 financial data, information about Cisco’s Limited Restructurings, Cisco’s investments in
17 emerging technologies, sales opportunities and customer lists, product pipelines, partner
18 margins, and future plans for current products.” Dkt. 51 at 13; Dkt. 52 at 10-11.7 Plaintiff
19 further argues that “[w]ithin those categories of information, Cisco alleges with
20 particularity the subject matter of specific trade secrets that Mr. Puorro induced Mr.
21 Williams to take,” including “a redacted document” containing a range of “non-public
22
23
7 Plaintiff also notes its allegation that Williams retained a “Time Machine back-up” of his
company laptop that included “sales forecasts, customer names, commitments, and
24
upsides.” Id. at 13-14. Unlike the information listed above, plaintiff alleges
misappropriation of that device’s information only in its claim against Williams. Compare
25
FAC ¶ 259 (“Mr. Williams misappropriated Cisco’s trade secrets by acquisition by
improper means (including . . . by retaining possession of Cisco Confidential
26
Materials after the termination of his employment) (emphasis added) with id. ¶¶ 286,
317 (omitting retention of that device as a basis for misappropriation in its claims against
27
Puorro and Plantronics). Accordingly, the court need not consider whether plaintiff
1 financial information” and a sales strategy named “Project Liberator,” Dkt. 51 at 13; Dkt.
2 52 at 11, as well as “information about organizational changes at Cisco before they were
3 made public, a discussion guide including Cisco product strategy and other financial data,
4 details of a Cisco program named ‘Project X’ [and] Cisco’s future plans for particular
5 collaboration products,” Dkt. 51 at 13; Dkt. 52 at 11.
6 In its reply, Plantronics argues that plaintiff’s proffered descriptions of this
7 information are potentially applicable to “millions of documents in a technology company
8 like Cisco and hardly provide Poly with notice of what specific information is at issue here
9 or whether it is protectable.” Dkt. 59 at 11. With respect to the particular subject matter
10 identified by plaintiff, Plantronics addresses only two documents supposedly referenced
11 in the allegations noted immediately above—"the document described in paragraphs
12 156-7 . . . that Mr. Williams assembled for an interview with Poly []” and “the document
13 described in paragraph 164 . . . an email describing Cisco’s sales strategy, Project X [].”
14 Dkt. 59 at 12. Plantronics contends that the FAC alleges only that the information
15 referenced in these documents is “non-public or confidential,” id., and, as a result, does
16 not merit trade secret status. Relatedly, Puorro adds that plaintiff “only identifies
17 information that is the very type of publicly available market share and financial
18 information that is available for any publicly traded company like Cisco” and “cannot
19 therefore be trade secrets.” Dkt. 60 at 3.
20 Here, the court concludes that plaintiff described the trade secret information
21 purportedly misappropriated by Williams with sufficient particularity. As an initial matter,
22 the court agrees with Plantronics that—if left unqualified—some of the descriptions of the
23 categories of information purportedly misappropriated by Williams would serve as the
24 exact sort of allegations that a consensus of courts in this district have held insufficiently
25 particularized. FAC ¶ 154 (“market and strategy data”); ¶ 157 (“product strategies and
26 other financial data”); ¶ 159 (“business information”). However, plaintiff narrowed the
27 scope of information at issue in such categories to particular subjects mentioned in
1 plaintiff’s collaboration business, id. ¶ 131, the “Project Liberator” sales strategy, id. ¶
2 153, plaintiff’s impending layoffs (including the identities of employees who would be
3 affected), id. ¶¶ 141, certain marketing opportunities, id. ¶ 156, the “Project x” sales
4 strategy, id. ¶ 164, and the status of a particular but unidentified product, id. ¶ 169.
5 The court understands Plantronic’s criticism in its reply that the FAC itself alleges
6 that the above noted documents and communications contain only “non-public and
7 confidential” information. Dkt. 59 at 12. However, Plantronics fails to cite any controlling
8 authority for the proposition that plaintiff must, at the pleading stage, show that the
9 specific information contained in the above referenced documents itself qualifies as a
10 trade secret to satisfy the particularity requirement. Such proposition is not the test.
11 Rather, the test is whether the complaint’s “level of detail . . . is sufficient to ascertain at
12 least the boundaries within which the secrets lie and the scope of appropriate discovery.”
13 Five Star Gourmet Foods, 2020 WL 513287, at *7. When limiting the categories of the
14 information allegedly misappropriated by Williams to the particular subjects referenced in
15 the above noted documents, the FAC passes that test.
16 Puorro’s added criticism does not alter this conclusion. In his single paragraph
17 reply on this issue, he failed to explain how the specifics of the subject matter noted
18 above were publicly known, particularly at the time of their alleged disclosure. On a
19 related point, the divisive declaration proffered by Williams in support of his reply (Dkt.
20 58-1) also does not alter this conclusion. In that declaration, Williams purports to attach
21 the documents referenced at FAC paragraph 156 (“Exhibit A”) and paragraph 164
22 (“Exhibit B”), which, as cited above, serve as two of the allegations referencing
23 documents that detail two aspects of the subject matter allegedly misappropriated by
24 Williams. Dkt. 58-1 ¶¶ 2-3. Plantronics footnotes that the court should consider each of
25 these documents because “plaintiff’s response briefs rely extensively [upon them] as
26 central to its trade secret claims.” Dkt. 59 at 12 n.4. While Plantronics fails to close the
27 loop on the relevance of such consideration, it appears to suggest that the court’s
1 argument that they reference matters subject to trade secret protection. Plaintiff objects
2 to this request on grounds of authenticity of the materials attached. Dkt. 65 at 4-5.
3 The court sustains that objection. The document referenced at FAC paragraph
4 164 is an August 22, 2019 email. FAC ¶ 164. The document attached as Exhibit B is an
5 email dated September 19, 2019. Dkt. 57-1 at 15. Plainly, they are not the same email.
6 While FAC paragraph 156 references more than one “version” of the “discussion guide”
7 PowerPoint presentation, id. ¶ 156, Exhibit A does not include the “Poly has to be on Par
8 with Cisco” statement allegedly included in the first referenced version and does not
9 include any parent document showing that it was the version “later emailed” to a
10 Plantronics executive’s personal address. Dkt. 57-2. Given that, whichever “version” of
11 the PowerPoint discussion guide Exhibit A might be, it is neither of those referenced at
12 FAC paragraph 156. Accordingly, the court will not consider Exhibit A or Exhibit B in its
13 decision.8 As a result, plaintiff described the trade secret information purportedly shared
14 by Williams with Puorro and Plantronics with sufficient particularity.
15 2. The Information Allegedly Misappropriated
16 by Chung
17 Plaintiff argues that the FAC adequately alleges that Chung took the following
18 categories of information: “source code, schematics, design details and specifications,
19 user feedback, design documentation, and features relating to Cisco’s existing and future
20 products, as well as Cisco business information such as marketing strategy, cost and
21 pricing information, and payment information.” Dkt. 51 at 11-12; Dkt. 50 at 9. Plaintiff
22 further argues that, “beyond categories of information, Cisco alleges with particularity the
23 technical subject matter of specific trade secrets within those categories that Dr. Chung
24 took, including, for example, Cisco’s marking opportunities in 5G, design specifications of
25 a pre-release video conferencing display prototype, source code for debugging a user
26
8 Given this decision, the court need not consider Williams’ underlying administrative
27
motion to seal those materials (Dkt. 57) or plaintiff’s declaration in support of that motion
1 interface, artwork prototypes, user experience design documentation, user interview
2 feedback, and schematics for the above-mentioned pre-release video conferencing
3 display prototype, design details and specifications for Cisco’s sound bar products, and
4 the ‘EA document’ describing component specifications and competitive differentiators for
5 Cisco’s current and not yet released products.” Dkt. 51 at 11-12; Dkt. 50 at 9.
6 In its reply, Plantronics similarly characterizes these descriptions as potentially
7 applicable to “millions of documents” and incapable of providing it “with notice of what
8 specific information is at issue here or whether it is protectable.” Dkt. 59 at 11.
9 Plantronics fails to address the effect that plaintiff’s identification of the above referenced
10 subjects would have upon such notice. Chung, however, does go one step further. He
11 argues that, even though plaintiff identified various subject matter of information
12 purportedly misappropriated by him, plaintiff fails to allege that such information contains
13 trade secrets. Dkt. 56 at 9-10. In Chung’s words, if plaintiff’s position were accepted,
14 “everything mentioned in the complaint is a trade secret.” Id. at 10.
15 Here, the court concludes that plaintiff described the trade secret information
16 purportedly misappropriated by Chung with sufficient particularity. Again, while the court
17 agrees with defendants that the categories of misappropriated information alleged at FAC
18 paragraphs 26 and 199 are themselves insufficiently particularized, plaintiff qualifies the
19 breadth of such information by reference to their subject matter in other allegations. As
20 argued by plaintiff, such subject matter includes “Cisco’s contribution to 5G technology . .
21 . and design specification of a pre-release video conferencing display prototype,” FAC ¶
22 36, source code for debugging a user interface, id. ¶ 41, pre-release video conferencing
23 display prototypes, id. ¶ 42, design details and specification related to plaintiff’s sound
24 bar products, id. ¶ 45 (alleged on information and belief), over 100 webinar presentations
25 relating to plaintiff’s communications product portfolio, id. ¶ 65 (alleged on information
26 and belief), a presentation detailing strategy and costs for a pre-release video
27 conferencing display product, id. ¶ 51 (alleged on information and belief), plaintiff’s
1 competitive differentiators” for plaintiff’s current and unreleased hardware products, id. ¶
2 74. These subject matter qualifications again allow defendants a “level of detail . . . [that]
3 is sufficient to ascertain at least the boundaries within which the secrets lie and the scope
4 of appropriate discovery.” Five Star Gourmet Foods, Inc., 2020 WL 513287, at *7.
5 Accordingly, plaintiff described the trade secret information purportedly misappropriated
6 by Chung with sufficient particularity.
7 3. The Information Allegedly Misappropriated
8 by He
9 Plaintiff argues that the FAC adequately alleges that He took the following
10 categories of information: “design and architectural documents, hardware diagrams,
11 schematics, source code stacks, and engineering specifications relating to existing and
12 future Cisco products, and non-public financial information.” Dkt. 51 at 12; Dkt. 66 at 9.
13 Plaintiff further argues that, “within those categories of information, Cisco alleges with
14 particularity the technical subject matter of specific trade secrets that Mr. He took,
15 including for example, architectural design documents for an unreleased Cisco headset
16 concept, a hardware diagram for a Cisco headset prototype, design and configuration
17 documents for Cisco’s headset prototypes, a schematic for an unreleased IP telephone
18 project, and a full engineering specification for a next-generation conference room
19 collaboration device.” Dkt. 51 at 12; Dkt. 66 at 9-10.
20 In its reply, Plantronics repeats its prior arguments on this issue, Dkt. 59 at 11, and
21 again fails to address the effect that plaintiff’s identification of the above referenced
22 subjects would have upon the sort of notice required to understand the scope of
23 information at issue. In his reply, He adopts a materially similar rebuttal to that proffered
24 by Chung on this issue. Namely, He contends that, despite the various subject matter
25 purportedly identified by plaintiff, plaintiff fails to allege that the documents serving as the
26 basis for describing such subject matter themselves contain trade secrets. Dkt. 71 at 4.
27 Here, the court concludes that plaintiff described th trade secret information
1 breadth of the categories of information allegedly misappropriated by He with reference
2 to their subject matter. Such subject matter includes an unreleased headset concept and
3 like prototypes, FAC ¶¶ 103, 105, 109, “vendor roadmaps for Cisco’s products,” id. ¶ 109,
4 “an unreleased IP telephone project,” id. ¶ 118, and “full engineering specifications for a
5 next-generation conference room collaboration device,” id. ¶ 120. These subject matter
6 qualifications provide defendants sufficient detail to understand the boundaries within
7 which the alleged trade secrets lie and the scope of appropriate discovery. Therefore,
8 plaintiff described the trade secret information purportedly misappropriated by He with
9 sufficient particularity.9
10 B. Independent Economic Value of the Allegedly
11 Misappropriated Information
12 “To have independent economic value, a trade secret must be sufficiently valuable
13 and secret to afford an actual or potential economic advantage over others.” Calendar
14 Research LLC v. StubHub, Inc., 2017 WL 10378336, at *3 (C.D. Cal. Aug. 16, 2017). A
15 plaintiff may show independent economic value “by circumstantial evidence of the
16 resources invested in producing the information, the precautions taken to protect its
17 secrecy, and the willingness of others to pay for its access.” Id. Although “the standard
18 to show that trade secrets derive [independent] economic value is not a high standard,”
19 id. at * 4, courts recognize that merely reciting this element in a pleading is insufficient to
20 state a claim for trade secret misappropriation, Acrisure of Ca. v. So. Cal. Commc’l Ins.
21 Servs., Inc., 2019 WL 4137618, at *4 (C.D. Cal. Mar. 27, 2019) (dismissing plaintiff’s
22 trade secret claim where complaint offered “mere recitation of California Civil Code §
23 3426.1’s [independent economic value] legal element”).
24
25
9 On April 24, 2020, plaintiff filed an administrative motion for leave to file a supplemental
26
opposition. Dkt. 80. In it, plaintiff repeats its argument that, in the event the court found
that it failed to allege the misappropriated trade secrets with the requisite specificity, its
27
disclosure statement would remedy that shortcoming. Dkt. 80-1 at 5. Because plaintiff
1 1. Value of the Information Misappropriated by
2 Chung and He
3 In its opposition, plaintiff advances three grounds to support its position that the
4 information misappropriated by Chung and He is economically valuable. The court
5 analyzes each in turn.
6 First, plaintiff points to its allegations at FAC paragraph 2 and paragraph 3, Dkt. 51
7 at 17; Dkt. 66 at 12-13, which provide the following in relevant part:
8 “Cisco has invested significant resources to design, build, and
sell its robust collaboration platform, which includes unified
9 communications and video conferencing software and
collaboration endpoints. . . . Cisco’s engineers rely upon
10 tangible and intangible financial, business, scientific,
technical, economic, and engineering information, such as
11 source code, schematics, design details and specifications,
user feedback, design documentation, and feature
12 documentation relating to Cisco’s existing and future products,
as well as Cisco business information such as operations,
13 marketing, and resource strategies and plans, supplier
information, cost and pricing information, and payment
14 information to develop Cisco’s products. Cisco takes
reasonable measures to keep this information secret, and this
15 information derives independent economic value from not
being generally known to, and not being readily ascertainable
16 through proper means by, others who can obtain economic
value from the disclosure or use of the information.” FAC ¶ 2.
17
. . .
18
“Cisco also has made substantial and significant investments
19 in developing its routes to market for its collaboration products
and services, through extensive engagement of partner,
20 customer, and industry connections by its global sales force.
Cisco’s global sales force relies upon tangible and intangible
21 financial, business, and economic information, such as non-
public financial reporting, customer lists, pricing models,
22 forecasting, sales, resourcing, and competitive strategies and
plans, and product refresh strategies to develop Cisco’s go-to-
23 market and business development plans and to market and sell
Cisco products. Cisco takes reasonable measures to keep this
24 information secret, and this information derives independent
economic value from not being generally known to, and not
25 being readily ascertainable through proper means by, others
who can obtain economic value from the disclosure or use of
26 the information.” Id. ¶ 3.
27 The above allegations only generally relate to plaintiff’s collaboration platform.
1 misappropriated by Chung or He that concern the handful of subject matter that plaintiff
2 alleged with sufficient particularity. While that subject matter may serve as constituent
3 parts falling under the umbrella of plaintiff’s “collaboration platform,” that relationship does
4 not compel a reasonable inference that any information about such particular subject
5 matter is itself economically valuable.
6 Second, plaintiff relies upon allegations that Chung and He signed a PIIA and
7 those agreements generally prohibited them from disclosing its confidential and
8 proprietary information. Dkt. 51 at 17. While the existence of these agreements supports
9 the inference that information reviewed by Chung and He in the course of their
10 employment is valuable, it says nothing about the economic value of the particular
11 information at issue.
12 Third, plaintiff relies upon Chung’s and He’s decisions to “risk [their] futures” at
13 Plantronics by “maintaining simultaneous employment at Cisco” and “accessing Cisco’s
14 trade secrets while employed there.” Dkt. 51 at 18; Dkt. 66 at 14. While plaintiff cites this
15 alleged conduct as “circumstantial evidence of the willingness of others to pay for access
16 to [the] secret information” misappropriated by these defendants, Dkt. 51 at 18, plaintiff
17 fails to provide any coherent nexus linking such risks to the subject information.10 As a
18 result, the court concludes that plaintiff failed to adequately allege that the information
19 purportedly misappropriated by Chung and He maintained independent economic value.
20 2. Value of the Information Misappropriated by
21 Williams
22 In its opposition to Plantronic’s motion, plaintiff advances three grounds to support
23 its position on this issue with respect to Williams. The first two grounds are materially
24 similar to those considered and rejected above with respect to Chung and He. Dkt. 51 at
25 17. Given that, these grounds do not provide a basis to conclude that the information
26
10 In its opposition to He’s motion, plaintiff argues that He’s “use” of its trade secrets
27
“while at Poly—combined with his efforts to conceal that use—is circumstantial evidence
1 purportedly misappropriated by Williams maintained independent economic value.
2 As its third ground, plaintiff points to the alleged quid pro quo between Williams
3 and Puorro. Dkt. 51 at 18. As alleged, Williams provided Puorro certain information
4 pertaining to the subject matter identified above in exchange for employment at
5 Plantronics. FAC ¶¶ 137-146. Employment comes with certain monetary and other
6 compensatory benefits, which, plainly, are economically valuable. Given that, the court
7 may fairly infer that the information Puorro allegedly traded such employment for, too,
8 was economically valuable. Otherwise, Puorro would not have engaged in the alleged
9 quid pro quo. Accordingly, plaintiff has adequately alleged that the information
10 purportedly misappropriated by Williams has independent economic value.
11 ii. Alleged Misappropriation by Puorro and Plantronics
12 Under California Civil Code § 3426.1, “misappropriation” extends to “Acquisition of
13 a trade secret of another by a person who knows or has reason to know that the trade
14 secret was acquired by improper means.” Cal. Civ. Code § 3426.1(b)(1). Under that
15 same section, “improper means” is defined to include “breach or inducement of a breach
16 of a duty to maintain secrecy, or espionage through electronic or other means.” Cal. Civ.
17 Code § 3426.1(a).11 Only Puorro and Plantronics challenge the trade secrets
18 misappropriation claims against them on the basis of plaintiff’s failure to adequately
19 allege misappropriation. The court analyzes each challenge in turn.
20 A. Misappropriation by Puorro
21 In his opening brief, Puorro summarily argues that “[n]owhere does plaintiff plead
22 any ‘reasonable basis’ to infer that Mr. Puorro improperly misappropriated Cisco’s alleged
23 trade secrets . . . Cisco has pled no facts describing how Mr. Puorro misappropriated
24 these alleged trade secrets.” Dkt. 45 at 11-12. In response, plaintiff argues that the FAC
25 adequately alleges that Puorro misappropriated the subject information under an
26
27
11 Title 18 U.S.C. § 1839(5) and § 1839(6) adopt materially identical definitions of
1 improper acquisition theory. Dkt. 52 at 15. “In particular,” plaintiff argues, “Mr. Puorro
2 initiated a scheme to induce Mr. Williams to reveal Cisco’s trade secrets to himself and
3 other executives for the benefit of Poly.” Id.. In reply, Puorro argues that plaintiff’s theory
4 fails to show that Puorro actually “received or acquired” the subject information or that he
5 “actually knew or had reason to know he had acquired a trade secret.” Dkt. 60 at 4.
6 Here, the court concludes that plaintiff adequately alleged misappropriation by
7 Puorro. Plaintiff alleges a series of communications between February 2019 and
8 September 2019 that show “a scheme whereby [Puorro] would exchange coaching and
9 advocacy on Mr. Williams’ behalf for confidential details about Cisco’s competitive
10 business.” FAC ¶ 130. Allegations showing that scheme—none of which are based on
11 the “information and belief” condition that defendants contest in their briefing on this issue
12 and many of which are substantiated by text messages—include the following:
13 • On March 6, 2019, Puorro “asked Mr. Williams if ‘org changes’ had happened
14 at Cisco. Mr. Williams provided a detailed response.” Id. ¶ 137.
15 • On March 8, 2019, “Mr. Williams provided information to Mr. Puorro about
16 organizational changes at Cisco. Mr. Puorro requested further details . . .” Id.
17 ¶ 140.
18 • On March 11, 2019, Puorro texts Williams asking him “talk?” and, within a
19 minute, Williams responds “Yes sir.” Three hours later, Williams texts Puorro
20 stating “[t]ime is now to recruit. Let’s execute a project x like we did with
21 [another company] . . . I have a list.” Id. ¶ 141.
22 • On March 22, 2019, four days following an in-person meeting with Puorro,
23 Williams “communicated highly confidential details about a matter at Cisco,
24 including [its] legal strategy, to Mr. Puorro.” Id. ¶¶ 142, 143.
25 • On May 9, 2019, after learning that an unknown plaintiff employee knows
26 something about his role at Plantronics, Puorro tells Williams “I think we have a
27 leak in our India team. Anyway you can find out?” In less than an hour,
1 Williams then talk over the phone. Id. ¶ 148.
2 • On May 22, 2019, after Puorro introduced Williams to an unidentified third-
3 party consultant (later hired as a Plantronics employee), Williams texts Puorro
4 stating: “I’m having dinner with [consultant] tonight . . . Let me know if you want
5 me to pass on anything.” Id. ¶150.
6 • On May 25, 2019, Williams texts Puorro stating: “I have something you
7 probably want to know . . . .Just ring me when you can sneak away – don’t
8 want to put this one in writing.” Id.¶ 151.
9 • On June 28, 2019, shortly before Williams’ interview with executives for a
10 position at Plantronics, Puorro contacts Williams stating: “I heard more LR in
11 the BU’s . . . Wonder if [particular employee] is safe or not . . . Dig for me?” Id.
12 ¶ 158.
13 • On July 1, 2019, Puorro asked Williams if plaintiff had executed its planned
14 “LR” (i.e., “limited restructuring” or layoffs). Williams responded. Id. ¶ 160.
15 • On August 19, 2019, Williams provides Puorro with the names of various
16 employees affected by the layoffs and who could be recruited to Plantronics.
17 Id. ¶ 163.
18 • On August 27, 2019, Puorro texts Williams about an internal meeting among
19 plaintiff’s personnel, stating “How was UC break out yesterday?” Williams
20 responds suggesting a phone call and then stating “ping me later – don’t want
21 to put anything on Text [sic] that I don’t want Cisco to have!” Id. ¶ 165.
22 • On August 28, 2019, Williams sends pictures from the subject internal meeting
23 to Puorro. Such pictures include screenshots of presentations and images of a
24 new headset. Puorro asks “[d]oes it work with Zoom?” On that same day,
25 Williams provided Puorro with details from a presentation at that same meeting
26 concerning plaintiff’s competitive focus. Id. ¶ 167.
27 • On September 3, 2019, Williams contacts Puorro informing Puorro that he is
1 that customer’s business away from plaintiff. Id. ¶ 168.
2 • On September 7, 2019, Puorro texts Williams asking about some product.
3 Williams responds “Talk? . . . Just in case big brother is watching…” Puorro
4 responds “Calling.” Id. ¶ 169.
5 • On September 12, 2019, Williams contacted Puorro providing him with details
6 about plaintiff’s upcoming layoffs and an employee to recruit. Id. ¶ 170.
7 • On September 13, 2019, Williams contacts Puorro stating that he heard
8 “interesting rumors” about plaintiff’s collaboration platform and wanted to speak
9 with Puorro live. Puorro called Williams shortly after. Id. ¶ 171.
10 • On September 16, 2019, Williams contacted Puorro (and an unidentified
11 Plantronics executive) to provide information about Project x. Id. ¶ 172.
12 • On September 18, 2019, Williams contacted Puorro with information
13 concerning plaintiff’s upcoming layoffs, the status of a particular business unit,
14 and the name of a potential employee to recruit. Id. ¶ 174.
15 The court concludes that the above allegations show that Puorro received the
16 information relating to the various subject matter that Williams purportedly
17 misappropriated. The sensitive nature of the information shared is shown by the multiple
18 suggestions by Puorro and Williams that they take their communications off texting and to
19 a phone call. Their attempts at secrecy support a reasonable inference that Puorro knew
20 or should have known that the allegedly shared information was being passed along by
21 Williams in violation of his PIIA. Given Puorro’s status as a former plaintiff employee
22 subject to a PIIA, FAC ¶ 309, the court may also reasonably infer that Puorro should
23 have known that Williams maintained a like agreement. Accordingly, plaintiff adequately
24 alleged that Puorro misappropriated information concerning the various subjects
25 purportedly shared by Williams.
26 B. Misappropriation by Plantronics
27 Plaintiff premises its trade secrets misappropriation claims against Plantronics
1 upon the alleged conduct of each individual defendant. FAC ¶¶ 314-22, 335.12 To
2 support such claim premised upon Puorro’s alleged conduct, plaintiff advances theories
3 of both vicarious liability and direct liability. Id. ¶¶ 317-318. With respect to Williams’
4 alleged conduct, plaintiff advances only a theory of direct liability by ratification. Id. ¶ 321.
5 The court analyzes each theory in turn.
6 1. Vicarious Liability for Puorro’s Conduct
7 “Under the doctrine of respondeat superior, an employer is vicariously liable for the
8 torts of its employees committed within the scope of [their] employment.” SolarCity Corp.
9 v. Pure Solar Co., 2016 WL 11019989, at *5 (C.D. Cal. Dec. 27, 2016). Such liability
10 extends to “intentional torts, even if the employer has not authorized the employee to
11 perform the tortious activity, so long as there is a ‘causal nexus’ between the activity and
12 the employee’s work.” Id. Courts consider conduct “within the scope of employment
13 when it is performed, at least in part, to benefit the employer, though the employer may
14 forbid it.” Id.
15 Here, plaintiff adequately alleged that Puorro acted within the scope of his
16 employment at Plantronics when he misappropriated the information purportedly taken by
17 Williams. Significantly, as noted above, the subject information concerned, among other
18 things, the status of particular internal meetings, FAC ¶ 165, the status of particular
19 products, id. ¶¶ 167, 169, 171, and the names of employees affected by plaintiff’s layoffs
20 that Plantronics may recruit, id. ¶¶ 137, 140, 141, 158, 160, 163, 172. Given that
21 Plantronics and plaintiff operate in the same industry, the court may reasonably infer that
22 Puorro acquired the information purportedly taken by Williams to benefit Plantronics. As
23 a result, plaintiff adequately alleged that Plantronics misappropriated the information
24 purportedly taken by Williams under a theory of vicarious liability.
25
12 The court has concluded that plaintiff failed to adequately allege that the information
26
purportedly misappropriated by Chung and He maintained independent economic value.
As a result, to the extent plaintiff bases its trade secrets misappropriation claims against
27
Plantronics on the information allegedly misappropriated by either defendant, such claims
1 2. Direct Liability for Ratifying Puorro’s and
2 Williams’ Conduct
3 “As an alternate theory to respondeat superior, an employer may be liable for an
4 employee's act where the employer either authorized the tortious act or subsequently
5 ratified an originally unauthorized tort.” Garcia ex rel. Marin v. Clovis Unified Sch. Dist.,
6 627 F. Supp. 2d 1187, 1201 (E.D. Cal. 2009). “The theory of ratification is generally
7 applied where an employer fails to investigate or respond to charges that an employee
8 committed an intentional tort.” Id.
9 Here, plaintiff alleges multiple instances where, over the course of interviewing for
10 a position at Plantronics, Williams communicated the subject information to various
11 unidentified Plantronics executives. Despite such communications, those executives did
12 not reprimand Williams for (or otherwise caution him against) making such disclosures.
13 In some instances, those executives instead requested additional related information.
14 Allegations reflecting the above conduct by Plantronics’ executives include the following:
15 • “In preparation for the June 28 interviews, Mr. Williams prepared a ‘discussion
16 guide’ PowerPoint presentation. This presentation contained Mr. Williams’
17 plans for accelerating sales at Poly, which included Cisco’s product strategy
18 and other financial data . . . Mr. Williams later emailed a version of this
19 presentation to Second Poly Executive at the executive’s personal email
20 address as opposed to the executive’s Poly email.” FAC ¶ 156.
21 • “On July 31, 2019, Mr. Williams sent a message to Second Poly Executive in
22 which Mr. Williams proposed that it was ‘[t]ime to execute Project Liberator
23 while Cisco is further distracted, grow sales and gain marketshare.’ Project
24 Liberator is an ongoing Cisco sales strategy that Mr. Williams was involved
25 with developing and executing while at Cisco.” Id. ¶ 162.
26 • “On August 22, 2019, Mr. Williams sent an email to Second Poly Executive’s
27 personal gmail account describing his vision for executing ‘Project x’ at Poly.
1 developing and executing while at Cisco. . . . Mr. Williams discussed Project x
2 with Second Poly Executive. The Second Poly Executive asked Mr. Williams
3 to connect with Mr. Puorro and yet another Poly executive (‘Third Poly
4 Executive’) to ‘figure out next steps to execute the concept . . . .’ Mr. Williams
5 subsequently shared the details of Project x with Mr. Puorro and Third Poly
6 Executive.” Id. ¶ 164.
7 • On September 16, 2019, “Mr. Williams communicated with Mr. Puorro and
8 Third Poly Executive about Project x. Mr. Williams conveyed to Second Poly
9 Executive that these were ‘Great conversations’ and asked Second Poly
10 Executive if anything further was required.” Subsequently, “Second Poly
11 Executive said that he would get the HR people ’in gear today.’ Second Poly
12 Executive asked Poly’s human resources department to move fast.” Id. ¶¶
13 172-173.
14 Plaintiff flagged each of these allegations in support of its position on this issue in
15 its opposition. Dkt. 51 at 22. In its reply, Plantronics failed to explain how or why any of
16 them fall short of ratification.13 Instead, Plantronics argues that the FAC’s
17 acknowledgement that “Mr. Williams certified to Poly [on October 12, 2019, FAC ¶ 181]
18 that he did not possess any Cisco confidential information when he was hired by Poly”
19 undermines any assertion that its executives had knowledge of Williams’ alleged conduct.
20 Dkt. 59 at 9. That argument is deflective. Whatever the certification’s contents, it does
21 not alter the executives’ alleged participation in, or knowledge of, the communications
22 bulleted above. Accordingly, plaintiff has adequately alleged that Plantronics
23 misappropriated the information purportedly taken by Williams under a theory of direct
24 liability by ratification as well.
25
26
13 Plantronic’s opening brief similarly neglects any such explanation. In it, Plantronics
27
summarily asserts that “plaintiff alleges nothing more than Mr. Williams sought
1 b. Interference with Contract Claims
2 California Civil Code § 3426.7(b) “preempts common law claims that are based on
3 the same nucleus of facts as the misappropriation of trade secrets claim for relief.” K.C.
4 Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 Cal. App. 4th 939, 958
5 (2009).
6 In its oppositions, plaintiff argues that its intentional interference claims do not
7 arise from the same nucleus of facts as its trade secrets claims because Puorro induced
8 Williams to breach his PIIA and that inducement “stands irrespective of the trade secret
9 misappropriation.” Dkt. 51 at 24; Dkt. 52 at 16. To substantiate that assertion, plaintiff
10 explains that “Mr. Puorro engaged in a scheme to have Mr. Williams deliver information
11 about Cisco’s restructurings and provide information about Cisco employees,” id. (citing
12 FAC ¶¶ 6, 130), and also used Williams “as an agent for Poly within Cisco to recruit Cisco
13 employees not impacted by restructurings, and to take business from Cisco, thereby
14 causing Mr. Williams to violate his own PIIA,” id. (citing FAC ¶¶ 130, 137, 141, 148, 168,
15 309-10). Plaintiff then summarily asserts that “[t]hese allegations are separate, distinct,
16 and tied to the interference and the breach of the PIIA document as opposed to the
17 misappropriation of trade secrets.” Dkt. 51 at 25; Dkt. 52 at 16.
18 Here, the court concludes that plaintiff failed to allege an intentional interference
19 with contract claim that arises out of a set of operative facts distinct from those relied
20 upon to support its trade secret misappropriation claims. By its own argument in support
21 of these claims, plaintiff cites the same “scheme” by Puorro that it proffered to support its
22 trade secret misappropriation claims. Compare Dkt. 51 at 24 (citing FAC ¶ 130) with Dkt.
23 51 at 21 (citing FAC ¶ 130). While plaintiff cites certain communications by Williams
24 concerning potential employees available for recruitment, Dkt. 51 at 24 (citing FAC ¶¶
25 130, 137, 141), upcoming layoffs, id. (citing FAC ¶ 6), and existing clients potentially
26 available for poaching, id. (citing FAC ¶ 168), specifically in support of its intentional
27 interference claim, plaintiff relies upon the exact same sort of communications just a few
1 pages earlier in its opposition to substantiate its trade secrets misappropriation claims.14
2 Plaintiff may not have it both ways.
3 With respect to the remaining allegation cited by plaintiff in support of its claims—
4 namely that Puorro asked Williams to run-down some leak in Plantronic’s India team,
5 FAC ¶ 148—plaintiff fails to explain how or why it maintained a property right in
6 identifying which members of Plantronics were “telling everyone [Puorro is] now the guys
7 at Poly.” Bus. Sols., LLC v. Ganatra, 2019 WL 926351, at *6 (C.D. Cal. Jan. 7, 2019)
8 (“common law claims premised on the wrongful taking of information which does not
9 qualify as a trade secret are also superseded, unless the plaintiff identifies some law
10 which confers the plaintiff with property rights in the information.” ).
11 In any event, the very agreement that plaintiff bases its intentional interference
12 claims upon (Williams’ PIIA agreement), Dkt. 51 at 24, serves as the sole basis for
13 alleging the acquisition by “improper means” aspect of its trade secrets misappropriation
14 claims against both Puorro and Plantronics, Dkt. 52 at 15 (“Mr. Puorro knew that the
15 trade secrets were acquired through improper means, as having Mr. Williams disclose
16 the trade secrets would violate his duty to maintain confidentiality established in Mr.
17 Williams’ PIIA. [FAC] ¶ 309”); Dkt. 51 at 21 (same argument). Because plaintiff relies
18 heavily upon the breach of that agreement to substantiate the misappropriation element
19 of its trade secrets claims against Puorro and Plantronics, that agreement may not also
20 serve as the object of its intentional interference claim absent a clear explanation of how
21 its breach arises from a different set of facts. Plaintiffs fails to provide such explanation.
22 Given the above, the court concludes that plaintiff has failed to allege an intentional
23 interference with contract claim against both Puorro and Plantronics.
24
14 Id. at 13 (“With respect to Mr. Williams and Mr. Puorro, the FAC identifies categories of
25
information that Mr. Puorro induced Mr. Williams to misappropriate, including, for
example . . . information about Cisco’s Limited Restructurings (citing FAC ¶159) . . .
26
sales opportunities and customer lists . . . (citing FAC ¶ 258) . . . Within those categories
of information, Cisco alleges with particularity the subject matter of specific trade secrets
27
that Mr. Puorro induced Mr. Williams to take.”) (emphasis added); id. at 15 (“The FAC
1 c. Leave to Amend the Dismissed Claims
2 A district court “should grant the plaintiff leave to amend if the complaint can
3 possibly be cured by additional factual allegations,” however, dismissal without such
4 leave “is proper if it is clear that the complaint could not be saved by amendment.”
5 Somers, 729 F.3d at 960.
6 Here, the court will allow plaintiff leave to amend its trade secret misappropriation
7 claims against Chung and He only to allege the independent economic value of the
8 purportedly misappropriated trade secret information with the requisite specificity.
9 Plantronics and Puorro failed to advance any argument establishing that plaintiff cannot
10 allege a basis for its intentional interference with contract claims that is legally distinct
11 from that proffered in support of its trade secrets misappropriation claims. Given that, the
12 court cannot conclude that plaintiff’s intentional interference with contract claims cannot
13 be saved by amendment and will allow plaintiff one opportunity to do so. Absent leave of
14 court or consent of defendants, plaintiff may not otherwise amend its pleadings. That
15 prohibition extends to any attempt by plaintiff to expand its allegations to information that
16 falls outside the subject matter previously found to have satisfied the sufficient
17 particularity pleading requirement.
18 CONCLUSION
19 For the above reasons, the court rules as follows:
20 • Williams’ unopposed motion to compel arbitration and stay the instant litigation
21 with respect to the claims against him is GRANTED, his motion to stay the
22 instant litigation with respect to the claims against all other defendants is
23 DENIED, and his alternative motion to dismiss is TERMINATED.
24 • Chung’s and He’s respective motions to dismiss are GRANTED with leave to
25 amend as specified above.
26 • Plantronics’ and Puorro’s respective motions to dismiss are DENIED IN PART
27 and GRANTED IN PART with leave to amend as specified above.
1 complaint accounting for the deficiencies in the dismissed claims. Failure to do so will
2 result in dismissal of the subject claims with prejudice. Upon the filing of any amended
3 complaint, plaintiff must also file a redline version clearly demarcating its changes from
4 the FAC.
5 IT IS SO ORDERED
6 Dated: May 26, 2020
7 /s/ Phyllis J. Hamilton
PHYLLIS J. HAMILTON
8 United States District Judge
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