Opinion
2:19-cv-01544 WBS KJN
09-01-2022
ZOOM IMAGING SOLUTIONS, INC., Plaintiff, v. EDWARD ROE; MAXWELL RAMSAY; JON CROSSEN; CORINNE FUERST; ANDREW ALSWEET, KEVIN TOON; JASON PEEBLER; ABIGAIL NEAL; POWER BUSINESS TECHNOLOGY LLC; BRYAN DAVIS; MAURA LOPEZ; JEFFREY ORLANDO; JESSICA HINTZ; and DOES 1 through 100, inclusive, Defendants.
MEMORANDUM AND ORDER RE: PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT, DEFENDANTS ROE AND POWER'S MOTION FOR SUMMARY JUDGMENT, AND DEFENDANTS RAMSAY, CROSSEN, PEEBLER, DAVIS, AND LOPEZ'S MOTION FOR SUMMARY JUDGMENT
WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE
Plaintiff Zoom Imaging Solutions, Inc. (“Zoom”) brings this action against defendants Edward Roe, Maxwell Ramsay, Jon Crossen, Jason Peebler, Bryan Davis, Maura Lopez, and Power Business Technology LLC (“Power”), arising from defendants' allegedly wrongful conduct in violation of defendants' employment agreements, as well as state and federal law. (First Am. Compl. (“FAC”) (Docket No. 61).) Before the court are three motions for summary judgment: (1) plaintiff's motion for partial summary judgment (Docket No. 238); (2) defendants Roe and Power's motion for summary judgment (Docket No. 239); and (3) defendants Ramsay, Crossen, Peebler, Davis, and Lopez's (“employee defendants”) motion for summary judgment (Docket No. 237).
The parties previously stipulated to voluntary dismissal of defendants Andrew Alsweet, Corinne Fuerst, Jessica Hintz, Abigail Neal, Jeffrey Orlando, and Kevin Toon. (Docket No. 191.)
Plaintiff requests that the court judicially notice: (1) Ed Roe's declaration from a different lawsuit in state court; (2) Power's Articles of Organization; and (3) Power's Seller's Permit. (Docket No. 238-2.) The court does not rely on these documents, and therefore, the request is denied as moot.
I. Factual and Procedural Background
The undisputed facts are as follows. Zoom provides “imaging and document solution services to businesses (including the sale, installation, and servicing of digital print and copy systems, managed print services, and the sale of software solutions) . . . and is a vendor for multiple brands of digital copy, print, and scan equipment.” (Defs.' Joint Response to Pl.'s Statement of Undisputed Facts (“PSUF”) ¶ 1 (Docket No. 243 5).) Zoom is owned by Xerox Business Solutions (“Xerox”). (Id. ¶ 3.) Zoom was the number one dealer for Toshiba in the central Bay Area in California at the beginning of 2019. (Id. ¶ 5.)
Roe worked for Zoom from April 1, 2004 until April 3, 2019,and for approximately the last two years of his employment he served as the President of Zoom. (Id. ¶ 11.) On March 13, 2019, Roe filed Articles of Organization with the California Secretary of State to formally create Power, a company that provides services and equipment similar to Zoom. (Id. ¶ 59.)
Roe argues that he effectively was no longer President of Zoom starting on or around February 12-19, 2019 because he was allegedly told he would be let go soon. The relevance of this argument is discussed below.
Ramsay, Crossen, Peebler, Davis, and Lopez are former Zoom employees and now employed by Power. (Pl.'s Resp. to Employee Defs.' Statement of Undisputed Facts (“Emp. DSUF”) ¶ 1 (Docket No. 249-1).) Ramsay worked as the Regional Sales Manager for Zoom from October 7, 2008 to April 18, 2019, when his Zoom office space closed, and he became a Power employee on April 18, 2019. (Id. ¶ 23; Decl. of Max Ramsay ¶ 3 (Docket No. 237-4) .) Crossen worked at Zoom until the spring of 2019, when his Zoom office space closed, and became a Power employee on July 30, 2019. (Decl. of Jon Crossen ¶ 3 (Docket No. 237-9).) Peebler worked at Zoom until the Spring of 2019, when his Zoom office space closed, and became a Power employee on April 10, 2019. (Decl. of Jason Peebler ¶ 3 (Docket No. 237-5).) Davis served as the Vice President of Service and Operations for Zoom until the spring of 2019 and then on April 8, 2019 became a Power employee. (Emp. DSUF ¶ 23; Decl. of Bryan Davis ¶ 3 (Docket No. 237-8).) Lopez worked as the Director of Marketing at Zoom from April 1, 2010 to April 5, 2019, when her Zoom office space closed, and on April 8, 2019 she became a Power employee. (Emp. DSUF ¶ 23; Decl. of Maura Lopez ¶ 3 (Docket No. 237-6).)
In dispute is the state of Zoom in 2019. Plaintiff claims that Xerox initiated a plan to save costs by consolidating office space among subsidiaries while continuing service to clients seamlessly. (PSUF ¶ 29.) Defendants claim that Xerox's plan in 2019 was to close all Zoom offices and warehouse space, terminate Roe as president, and decrease Zoom's dealership of Toshiba products. (Pl.'s Resp. to Roe and Power's Statement of Undisputed Facts (“Roe and Power SUF”) ¶ 19 (Docket No. 250-1).)
Zoom alleges the following claims for relief: (1) breach of contract against Roe based on his executive agreement; (2) breach of contract against Roe, Ramsay, Crossen, Peebler, Davis, and Lopez (“the individual defendants”) for the 2018 Employee Handbook; (3) breach of contract against Roe, Crossen, and Lopez for the 2013 Employee Handbook; (5) violation of the California Uniform Trade Secrets Act, California Civil Code § 3426, against Roe, Ramsay, and Power; (6) violation of the Defend Trade Secrets Act, 18 U.S.C. § 1836, against Roe, Ramsay, and Power; (7) intentional interference with contractual relations against Roe, Ramsay, Lopez, Davis, and Power; (8) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, against Roe; (9) breach of fiduciary duty against Roe, Ramsay, Lopez, and Davis; and (10) breach of loyalty against Roe, Ramsay, Lopez, and Davis. Plaintiff also alleges civil conspiracy within its seventh, ninth, and tenth claims.
The court dismissed the FAC's fourth and eleventh claims in its January 29, 2020 order, and therefore those claims are excluded from this list and order. (Docket No. 84.)
Plaintiff moves for partial summary judgment on claims one, two, three, seven, nine, and ten and civil conspiracy as alleged in the seventh, ninth, and tenth claims. (Mem. ISO Pl.'s Mot. for Summ. J. (“Pl.'s MSJ”) at 1 (Docket No. 238-1).) Defendants Roe and Power move for summary judgment on each of the claims against them, or in the alternative partial summary judgment. (Defs.' Roe and Power's Mot. for Summ. J. (“Roe and Power's MSJ”) at 8 (Docket No. 239).) Defendants Ramsay, Crossen, Lopez, Davis and Peebler move for summary judgment on each of the claims against them, or in the alternative partial summary judgment, and join in Roe and Power's motion for summary judgment. (Mem. ISO of Defs.' Employee Mot. for Summ. J. (“Employee Defs.' MSJ”) at 1 (Docket No. 237-2).)
II. Evidentiary Objections
Plaintiff has filed 177 evidentiary objections (Docket Nos. 249-2, 250-2, 253-1), objecting to portions of nine declarations on grounds of lack of foundation, hearsay, lack of personal knowledge, speculation, improper opinion testimony, lack of authentication, vagueness, and argumentative. Defendants have filed 25 evidentiary objections (Docket Nos. 243-1, 243-2, 243-3, 243-4, 254-2, 254-3), objecting to portions of five declarations submitted by plaintiff on the grounds of lack of personal knowledge, relevance, lack of authentication, and hearsay.
One can only imagine how many attorney hours were consumed in coming up with this laundry list of objections. The majority of plaintiff's counsel's 177 objections consist of one-word objections without any explanation or argument. Such objections are typically found to be “meritless, if not downright frivolous.” Sandoval v. Cnty. of San Diego, 985 F.3d 657, 665 (9th Cir. 2021) (holding that defendants' one-word objections at the motion for summary phase were “meritless, if not downright frivolous”). One of Roe and Power's counsel's objections is to an entire declaration submitted by plaintiff which consists of nearly 1300 pages of attached exhibits. (Docket No. 243-4.)
It is inconceivable that the parties could have expected the court to rule on each objection and simultaneously prepare for a meaningful hearing on the merits of their complicated motions for summary judgment on nine claims for relief. The parties also chose to not meaningfully respond, or for the most part not respond at all, to each other's objections. If the parties could not be bothered to take these objections seriously, they must not have believed that these objections would be considered by the court. No serious consideration seems to have been given to whether the objections are necessary, or even useful, given the nature of summary judgment motions in general, and the facts of this case.
“A party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence.” Fed.R.Civ.P. 56(c)(2). “[T]o survive summary judgment, a party does not necessarily have to produce evidence in a form that would be admissible at trial, as long as the party satisfies the requirements of Federal Rules of Civil Procedure 56.” Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003) (quoting Block v. City of Los Angeles, 253 F.3d 410, 418-19 (9th Cir. 2001)) (quotations omitted). Even if the non-moving party's evidence is presented in a form that is currently inadmissible, such evidence may be evaluated on a motion for summary judgment so long as the moving party's objections could be cured at trial. See Burch v. Regents of the Univ. of Cal., 433 F.Supp.2d 1110, 1119-20 (E.D. Cal. 2006).
Objections to evidence on the ground that the evidence is irrelevant, speculative, argumentative, vague and ambiguous, or constitutes an improper legal conclusion are all duplicative of the summary judgment standard itself. See Sandoval, 985 F.3d at 665 (9th Cir. 2021) (citing Burch, 433 F.Supp.2d at 1119 20). A court can award summary judgment only when there is no genuine dispute of material fact. It cannot rely on irrelevant facts, and thus relevance objections are redundant. Instead of objecting, parties may argue that certain facts are not material. Similarly, statements based on speculation, improper legal conclusions, or argumentative statements, are not facts and can only be considered as arguments, not as facts, on a motion for summary judgment. Instead of challenging the admissibility of this evidence, lawyers may challenge its sufficiency. Objections on any of these grounds are superfluous, and the court will overrule them.
While the parties use various phrases to describe their remaining objections (lack of foundation, lack of personal knowledge, lack of authentication, and hearsay) the bulk of the objections essentially debate the accuracy and relevance of the opposing party's documents as submitted into the record. As explained above, these objections deal not with whether documents are admissible but whether the facts contained therein are true and relevant. The court always considers the relevance of the facts as it considers the parties' arguments, and the court must take all disputed facts in the light most favorable to the nonmoving party, but the court need not rule on the admissibility of such facts when no reason has been shown why they would not be admissible at trial. Further, many of the “objected to documents either reflect personal knowledge of individuals who could be called to testify at trial or will likely be admissible at trial” for other reasons. See Sandoval, 985 F.3d at 666.
In the interest of brevity, as the parties are aware of the substance of their objections and the grounds asserted in support of each objection, the court will not review the substance or grounds of each of the individual objections here. The parties' objections are all overruled.
III. Legal Standard
A party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact as to the basis for the motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A material fact is one that could affect the outcome of the suit, and a genuine issue is one that could permit a reasonable trier of fact to enter a verdict in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party moving for summary judgment can satisfy its burden by presenting evidence that negates an essential element of the non-moving party's case. Celotex Corp, 477 U.S. at 322-23. Alternatively, the movant can demonstrate that the non-moving party cannot provide evidence to support an essential element upon which it will bear the burden of proof at trial. Id. Summary judgment is appropriate when, viewing the evidence in the light most favorable to the non-moving party, there is no genuine dispute as to any material fact. Acosta v. City Nat'l Corp., 922 F.3d 880, 885 (9th Cir. 2019).
Where, as here, parties submit cross-motions for summary judgment, “each motion must be considered on its own merits.” Fair Hous. Council of Riverside Cnty., Inc. v. RiversideTwo, 249 F.3d 1132, 1136 (9th Cir. 2001) (internal citations and modifications omitted). “[T]he court must consider the appropriate evidentiary material identified and submitted in support of both motions, and in opposition to both motions, before ruling on each of them.” Tulalip Tribes of Wash. v. Washington, 783 F.3d 1151, 1156 (9th Cir. 2015). Accordingly, in each instance, the court will view the evidence in the light most favorable to the non-moving party and draw all inferences in its favor. ACLU of Nev. v. City of Las Vegas, 333 F.3d 1092, 1097 (9th Cir. 2003) (citations omitted).
IV. Discussion
A. Claim One: Breach of Contract against Roe
Plaintiff and Roe move for summary judgment on the first claim. Plaintiff's FAC alleges Roe breached clause 4(b) in his executive agreement by using plaintiff's confidential information to service, assist, and solicit customers that previously employed Zoom and solicit employees to leave Zoom within two years of the end of his employment with Zoom. (FAC ¶¶ 60, 65, 66; Decl. of Meg Paulding, Ex. 1(y) (“Executive Agreement”) (Docket No. 238-8).) However, plaintiff now argues that Roe breached different provisions of the executive agreement pertaining to Roe's alleged executive duties owed to Zoom. (Pl.'s Opp'n to Roe and Power's Mot. at 17 (Docket No. 250); Pl.'s MSJ at 13.)
The parties dispute whether this is the actual version of the operative executive agreement at the time Roe left Zoom. However, this dispute is irrelevant to the grounds upon which the court decides the motions on plaintiff's first claim.
The FAC specifically quotes clause 4(b) of the executive agreement as the clause which plaintiff sought to enforce, (FAC ¶ 60; Executive Agreement ¶ 4(b)), and states that Roe's agreement to comply with this clause “constituted a valid and binding contract” between Roe and Zoom. (FAC ¶ 62.) The FAC then refers to this “contract” when alleging how Roe breached it and does not plead any other portions of the executive agreement that Roe allegedly breached. (See FAC ¶¶ 59-72.)
Plaintiff improperly argues its breach of contract claim against Roe based on a new theory at the motion for summary judgment stage. See Chavez v. Wynar, 536 F.Supp. 3D 517, 535 (N.D. Cal. 2021) (“Plaintiffs may not raise a new claim or theory of liability for the first time in response to a motion for summary judgment.”). Therefore, the court will not consider plaintiff's arguments about Roe's alleged breach of clauses other than clause 4(b).
To the extent plaintiff's breach of contract claim is based on clause 4(b), plaintiff now abandons that theory and presents no argument or evidence on it. (Pl.'s Opp'n to Roe and Power's Mot. at 20, 22.)
The parties dispute whether this clause constitutes a “non-compete” clause. As discussed, plaintiff has abandoned the breach of contract theory based on this clause, and therefore, the court will not address that dispute.
Accordingly, the court will deny plaintiff's motion for summary judgment and grant defendant Roe's motion for summary judgment on the first claim.
B. Claims Two and Three: Breach of Contract against Individual Defendants
Plaintiff and the individual defendants move for summary judgment on the second and third claims. In California, to allege a cause of action for breach of contract, plaintiff must plead “(1) the existence of a contract, (2) defendant's breach, (3) plaintiff's performance or excuse for nonperformance, and (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 51 Cal.4th 811, 821 (2011). Plaintiff alleges that all individual defendants breached provisions of the employee handbook pertaining to safeguarding confidential information. (FAC ¶ 76; Decl. of Meg Paulding, Ex. 1(i) (“2018 Employee Handbook”) (Docket Nos. 238-7, 238-8); Decl. of Meg Paulding, Ex. 1(h) (“2013 Employee Handbook) (Docket No. 238-8) .) Plaintiff's second claim against all individual defendants is based on the 2018 employee handbook. Plaintiff's third claim against defendants Roe, Crossen, and Lopez is based on the 2013 employee handbook.
The individual defendants argue that neither the 2013 nor 2018 employee handbook is a contract, to which plaintiff responds that it is an implied-in-fact contract. (Employee Defs.' MSJ at 3-5; Roe and Power's MSJ at 40-41; Pl's Opp'n to Employee Defs.' Mot. at 11 (Docket No. 249).)
“Parties can form implied contracts, the existence and terms of which are manifested by conduct.” SMC Networks Inc. v. Hitron Techs. Inc., No. SACV 12-1293, 2013 WL 12114104, at *3 (C.D. Cal. Nov. 13, 2013) (quoting Binder v. Aetna Life Ins. Co., 75 Cal.App.4th 832, 849 (2d Dist. 1999)) (quotations omitted). There must be a “meeting of minds or an agreement” and “[w]hile an implied in fact contract may be inferred from the conduct, situation, or mutual relation of the parties, the very heart of this kind of agreement is an intent to promise.” Id. (quoting Div. of Labor Law Enf't v. Transpacific Transp. Co., 69 Cal.App.3d 268, 275 (1st Dist. 1977)). Whether an implied-in-fact contract is created by an employee handbook is “a factual question in each case.” Asmus v. Pac. Bell, 23 Cal. 4Th 1, 11 (2000).
The circumstances in this case do not show that the employee handbook was a contract between each of the individual defendants and Zoom. Upon receipt of the employee handbook, the individual defendants, except for Davis, signed a “Confirmation of Receipt.” (2018 Employee Handbook at 80; 2013 Employee Handbook at 48.) The confirmations of receipt for both handbooks are nearly identical and do not contain any language demonstrating an intent to promise or the individual defendants' intent to be bound by the handbooks. (2018 Employee Handbook at 80; 2013 Employee Handbook at 48.) The confirmation states, in relevant part: “I have received my copy of the company's Employee Handbook. I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the handbook.” (See 2018 Employee Handbook at 80; 2013 Employee Handbook at 48.) This statement supports that the individual defendants received the handbook, not that they entered into a contract to adhere to the terms of the handbook.
Notably, a prior confirmation of receipt attached to a 2006 version of Zoom's employee handbook stated that the signing employee acknowledged he or she was to “read, understand, and adhere to company policies.” (Decl. of Martin Jensen, Ex. A (Docket No. 237-7) (emphasis added).) That language is not part of the 2013 or 2018 confirmations.
Further, plaintiff's past Human Resource's Director testified that some of the policies in the handbook were not meant to “restrict” certain conduct, but merely to “discourage” it. (See Decl. of Thomas Woods ISO Opp'n, Ex. F, Dep. of Amy Breshears, 84:23-85:4 (Docket No. 243-7).) If Zoom's own Human Resource's Director did not see each of the policies in the employee handbook as something the employees must be bound by, it follows that there was no “meeting of minds or an agreement” to adhere to the handbook's policies. See SMC Networks, 2013 WL 12114104, at *3.
The record also demonstrates that not all of the individual defendants signed confirmations of receipt for the updated 2018 employee handbook, although it states that it supersedes all previously issued handbooks. (2018 Employee Handbook at 5; PSUF ¶¶ 18, 20, 28 (Roe and Crossen signed the 2013, but not 2018, employee handbook confirmation of receipt, and Davis did not sign any employee handbook confirmation of receipt).) Therefore, if not all individual defendants even acknowledged receipt of the operative handbook, it cannot be inferred from the parties' conduct that an implied-in-fact contract was created. See SMC Networks, 2013 WL 12114104, at *3.
The record does not demonstrate that the 2013 or 2018 handbook is a “binding” contract, but instead was “meant merely to provide guidelines to employees.” See id. (holding that an employee handbook was not a binding contract because the evidence demonstrated that it contained guidelines for the company).
Plaintiff has not proven an essential element of its breach of contract claims, the existence of a contract, and the individual defendants have shown that plaintiff cannot present evidence to prove that element. Therefore, summary judgment will be granted in favor of the individual defendants on plaintiff's second and third claims, and plaintiff's motion for summary judgment on the same will be denied.
C. Claims Five and Six: Trade Secret Misappropriation against Roe, Ramsay, and Power
Defendants Roe, Ramsay, and Power move for summary judgment on the fifth and sixth claims. The court will analyze the Defend Trade Secrets Act (“DTSA”) and California Uniform Trade Secrets Act (“CUTSA”) claims together as the “elements are substantially similar[:]” (1) the existence of a trade secret, and (2) misappropriation of that trade secret. See InteliClear, LLC v. ETC Global Holdings, Inc., 978 F.3d 653, 657 (9th Cir. 2020).
1. Ramsay
Regardless of whether the information at issue is a trade secret, plaintiff presents no evidence to create a genuine dispute of material fact that Ramsay misappropriated that information. Plaintiff's evidence only shows that Ramsay was a “sales rep” for certain prospective customers of Power. (See Decl. of David A. Garcia ISO Opp'n, Ex. 1 (Docket No. 249-3).) Plaintiff's cited evidence makes no showing of misappropriation by Ramsay, but instead only purports to demonstrate misappropriation by others. (See id.; Pl.'s Opp'n to Employee Defs.' Mot. at 22 (Docket No. 249) (bullet point list of evidence in support of plaintiff's argument only describes conduct by other individuals and Power, not Ramsay).) Accordingly, Ramsay's motion for summary judgment on the fifth and sixth claims for trade secret misappropriation will be granted.
2. Roe and Power
Roe and Power argue that the information at issue is not a trade secret. A trade secret is “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” See Cal. Civ. Code § 3426.1(d); 18 U.S.C. § 1839.
Plaintiff alleges that the trade secrets at issue consist of (1) customer lists, which contain specifics on contact information, underlying costs, pricing, and profit margin for each customer; (2) the duration and expiration dates of service contracts sold and serviced by Zoom; (3) Zoom's employee costs including rates of insurance premiums and salary and its impact on Zoom's product costs; and (4) the specific costs and prices of maintenance services within the financed loan amounts for Zoom equipment sold to customers. (FAC ¶¶ 213, 230; Pl.'s Identification of Trade Secrets (Docket No. 36-1).)
On categories three and four, employee costs and the specific costs and prices of maintenance services, plaintiff presents no evidence to create a genuine dispute that this information is a trade secret. Therefore, summary judgment will be granted in favor of Roe and Power on the fifth and sixth claims to the extent they are based on these two categories of information.
A customer list may qualify as a trade secret because of its “economic value” when its “disclosure would allow a competitor to direct its sales efforts to those customers who have already shown a willingness to use a unique type of service or product as opposed to a list of people who only might be interested and [plaintiff] took reasonable steps to protect this information.” Hanger Prosthetics & Orthotics, Inc. v. Capstone Orthopedic, Inc., 556 F.Supp.2d 1122, 1135 (E.D. Cal. 2008).
Here, plaintiff has identified facts showing that the customer information had economic value and Zoom made reasonable efforts to maintain its secrecy, therefore creating a genuine issue of material fact. The customer information in its compiled form not only provides a narrowed list of customers who have “already shown a willingness to use” imaging and document solution services, but also allows Zoom to “tailor its service contracts and pricing to the unique needs of its customers.” See MAI Sys. Corp. v. Peak Comput., Inc., 991 F.2d 511, 521 (9th Cir. 1993) (holding that a customer database, assembled over many years which allowed the defendant competitor to direct its sales efforts to those potential customers that were already using plaintiff's services, qualified as a trade secret).
Plaintiff raises a genuine dispute of material fact over the economic value in this form of compiled customer information because it allows a company to easily identify clients, know whom to contact, and what services to offer at what price. Plaintiff makes a showing that this customer list may not be “readily ascertainable through public sources, such as business directories,” but rather one which Zoom “expended time and effort” on to “identify[] customers with particular needs or characteristics.” See Pyro Spectaculars N., Inc. v. Souza, 861 F.Supp.2d 1079, 1088 (E.D. Cal. 2012).
Plaintiff also identifies facts to demonstrate that it took reasonable measures to maintain secrecy over the customer information. Plaintiff's employee handbook contained a policy for employees to keep “customer lists, [and] knowledge about customers (documents, requirements, preferences, history, etc)” confidential. (2018 Employee Handbook at 36.) Zoom employees could only access customer information for those accounts which were assigned to them. (PSUF ¶¶ 8, 10.) Zoom required passwords for email access, databases, and a software that contained Zoom's sale and lease agreements. (Id. ¶ 9.)
Plaintiff also presents evidence to create a genuine issue of material fact as to whether Roe and Power misappropriated the customer information. “It is well recognized” that “[c]ircumstantial evidence is particularly appropriate in trade secret cases.” See UniRAM Tech., Inc. v. Taiwan Semiconductor Mfg. Co., 617 F.Supp.2d 938, 944 (N.D. Cal. 2007) (holding that the plaintiff had “offered circumstantial evidence sufficient to create a genuine issue of fact for trial” on a trade secret misappropriation claim).
Plaintiff presents evidence that Power employees, who were previously employed by Zoom, created customer lists for Power, consisting of customers they had serviced at Zoom, that included key person and contact information, pricing, and service history. (Decl. of Garcia ISO Opp'n to Emp. Defs.' Mot., Ex. 1.) Further, Crossen was seen boxing up Zoom customer files before resigning from Zoom and starting employment at Power. (PSUF ¶ 101; Decl. of Garcia, Ex. 9, Decl. of Amy Breshears ¶ 11 (Docket No. 238-5).) Plaintiff submitted text messages by Roe in which he asked a Zoom employee to “pull two buyouts” for two different Zoom customers after the employee sent him an invoice for another customer. (PSUF ¶ 130.) Power also took “hundreds of Zoom customers.” (Id. ¶ 97.) Whether or not these circumstances show misappropriation by Power and Roe is a question for the jury.
Accordingly, Roe and Power's motion for summary judgment will be denied because plaintiff has presented evidence that, when viewed in the light most favorable to plaintiff, creates a genuine dispute as to whether the customer information was a trade secret and whether it was misappropriated.
D. Claim Seven: Intentional Interference with Contractual Relations against Roe, Ramsay, Lopez, Davis, and Power
Plaintiff and defendants Roe, Ramsay, Lopez, Davis, and Power move for summary judgment on plaintiff's seventh claim. A claim for intentional interference with contractual relations requires plaintiff to prove “(1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” Walters v. Fid. Mortg. of CA, 730 F.Supp.2d 1185, 1210 (E.D. Cal. 2010).
Plaintiff identifies 366 customers who were formerly Zoom customers and are now Power customers. (Decl. of Joseph Egan ¶ 7, Ex. B (Docket No. 238-9).) Defendants do not dispute that these 366 customers are now Power customers. (PSUF ¶ 135.) Plaintiff argues that defendants intentionally acted to disrupt its contracts with these customers by “unbundling” service contracts from equipment contracts at Zoom so they could easily solicit customers at Power, obtaining a dealer agreement with Toshiba (Zoom's largest supplier), assisting with the formation of Power, hiring key Zoom personnel, and preparing letters and correspondence informing customers that Zoom was closing its business. (Pl.'s MSJ at 22; Pl.'s Opp'n to Employee Defs.' Mot. at 24.)
However, plaintiff fails to prove defendants actually interfered with any contract that resulted in damages for plaintiff. Of the 366 Power customers that were Zoom customers, plaintiff does not specify whether any customer on the list had an active contract with Zoom at the time that it became a Power customer. If these customers finished their contractual term with Zoom or had at-will contracts, then there would be no disruption to a contract or damages to Zoom when these customers chose to leave Zoom for another competitor.
Accordingly, plaintiff fails to present evidence of an essential element of its claim, and therefore, summary judgment will be granted in favor of Power, Roe, Ramsay, Lopez, and Davis on plaintiff's seventh claim, and plaintiff's motion for summary judgment on the same will be denied.
E. Claim Eight: Computer Fraud and Abuse Act against Roe
Roe moves for summary judgment on plaintiff's eighth claim. The Computer Fraud and Abuse Act (CFAA), 18 U.S.C § 1030, “prohibits a number of different computer crimes, the majority of which involve accessing computers without authorization or in excess of authorization, and then taking specified forbidden actions, ranging from obtaining information to damaging a computer or computer data.” LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1131 (9th Cir. 2009). The CFAA permits “[a]ny person who suffers damage or loss by reason of a violation of this section [to] maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief.” 18 U.S.C. § 1030(g).
Plaintiff brings this claim based on a violation of 18 U.S.C. § 1030(a)(2)(C) under which plaintiff must prove that Roe: “(1) intentionally accessed a computer; (2) without authorization or exceeding authorized access; and that he (3) thereby obtained information (4) from any protected computer (if the conduct involved an interstate or foreign communication), and that (5) there was loss to one or more persons during any one-year period aggregating at least $5,000 in value.” LVRC Holdings LLC, 581 F.3d at 1132.
Plaintiff alleges that Roe knowingly accessed Zoom's protected computer system without permission, in excess of his authorized scope, to obtain Zoom customer account details and communications which resulted in financial loss and reputational damage. (FAC ¶¶ 256-59.) However, plaintiff's presented evidence does not create a genuine issue of material fact about whether Roe “accessed a computer without authorization” or “exceed[ed] authorized access.”
Plaintiff presents a text conversation between Roe, after he left Zoom, and a Zoom employee. In the conversation, the Zoom employee sent a phone number for an alleged Zoom customer and a photograph of a printed Zoom invoice for a customer, and Roe asked the employee to “pull two buyouts” for two customers - to which the employee did not respond. (Decl. of Garcia, Ex. 22 (Docket No. 238-7) .) This evidence does not raise a genuine dispute about whether Roe accessed a computer without authorization or exceeded his authorized access. The Zoom employee, and in turn Roe, could have obtained the phone number and invoice without accessing any computer.
Plaintiff also cites to an email that Roe received and then forwarded to his wife that allegedly contains confidential information on pay. However, as this court explained in its November 8, 2019 Order on Roe's Motion to Dismiss (Docket No. 53), the Ninth Circuit has held that an employee's unauthorized disclosure or use of information to which an employer has given an employee access is alone insufficient to prove that the employee exceeded authorized access. See United States v. Nosal, 676 F.3d 854, 863-64 (9th Cir. 2012). “[T]he phrase ‘exceeds unauthorized access' in the CFAA does not extend to violations of use restrictions.” Id. at 863. Roe had authorized access to this email, and the manner in which he used it does not extend to a violation of the CFAA.
Further, in its opposition plaintiff argues that Power accessed information without authorization. However, plaintiff only brought this claim against Roe, and therefore, its arguments pertaining to Power are irrelevant.
Accordingly, Roe's motion for summary judgment on plaintiff's eighth claim will be granted.
F. Claim Nine: Breach of Fiduciary Duty against Roe, Ramsay, Lopez, and Davis
“The elements of a breach of fiduciary duty claim are (1) existence of a fiduciary relationship; (2) breach of the fiduciary duty; and (3) damage proximately caused by that breach.” Lane v. Vitek Real Estate Indus. Grp., 713 F.Supp.2d 1092, 1104 (E.D. Cal. 2010).
1. Ramsay, Lopez, and Davis
Defendants Ramsay, Lopez, and Davis argue that no fiduciary relationship existed between them and Zoom. “Under California law, a fiduciary duty exists where an employee participates in the management of a corporation and exercises discretionary authority, while an employee who exercises no management authority is not a fiduciary.” WeRide Corp. v. Kun Huang, 379 F.Supp.3d 834, 852 (N.D. Cal. 2019) (citing Iconix v. Tokuda, 457 F.Supp.2d 969, 981 (N.D. Cal. 2006)); see GAB Bus. Servs., Inc. v. Lindsey & Newsom Claim Servs., Inc., 83 Cal.App.4th 409, 420-21 (4th Dist. 2000) (holding the same), overruled on other grounds, Reeves v. Hanlon, 33 Cal.4th 1140 (2004). “Whether a particular officer participates in management is a question of fact[,] . . . once this factual prerequisite is established, the law imposes a fiduciary duty.” GAB, 83 Cal.App.4th at 421.
a. Ramsay
It is undisputed that Ramsay was the Regional Sales Manager for Zoom and was responsible for overseeing the sale of equipment and services to customers, searching for more customers, and overseeing a team of sales representatives. (PSUF ¶ 45.) The record contains no evidence about how large the team was, whether he controlled the budget for the team, or specifics about the type of management authority he had. See WeRide, 379 F.Supp.3d at 853 (holding fiduciary duty existed where the “Director of Hardware” managed a “team of 10-12 engineers” and “controlled the team's budget”); Iconix, 457 F.Supp.2d at 98182 (holding a fiduciary duty existed because the employee managed the largest department at the company, had hiring authority, established the overall objectives and initiatives, and 16 of the company's 24 employees reported to him). Plaintiff's evidence is insufficient to prove that Ramsay owed Zoom a fiduciary duty.
b. Lopez
It is undisputed that Lopez was the Director of Marketing at Zoom and “her duties included preparing marketing material and communicating with Roe.” (PSUF ¶ 99.) Plaintiff argues that Lopez “assisted with new hiring of personnel in the sales team,” however, the evidence plaintiff cites in support states that Lopez assisted with hiring in her new role at Power, not Zoom. (Compare Pl.'s Reply at 19 (Docket No. 253) with PSUF ¶ 100.) The record is insufficient to establish that Lopez participated in management or exercised discretionary authority, and therefore, there is no fiduciary relationship between Lopez and Zoom.
c. Davis
It is undisputed that Davis “served as the Vice President of Service and Operations for Zoom, in charge of the continued financial success of services and operations for Zoom.” (PSUF ¶ 88.) This vague statement of Davis' duties is insufficient to demonstrate what his role was in the “participation of management” and whether he had “discretionary authority.” GAB, 83 Cal.App.4th at 421-22 (holding that a fiduciary relationship existed because the employee made “decisions and commitments on complex and important issues,” had “authority to develop and/or approve policies,” controlled a $20 million budget, and had “final responsibility” on the “supervision and management of others”). Therefore, there is no fiduciary relationship between Davis and Zoom.
2. Breach of Fiduciary Duty Claim against Roe
As an initial matter, Roe argues that even though he was President of Zoom, on or about February 12, 2019 he ceased owing a fiduciary duty to Zoom. (Defs.' Joint Opp'n at 33.) He was allegedly informed by his direct supervisor, George Cavallaro, the Senior Vice President at Xerox, that Zoom offices would close down and that Roe would be terminated. (Roe and Power SUF ¶¶ 19, 21; Decl. of Edward Roe ¶ 5 (Docket No. 239-2).) Roe argues that he stayed with Zoom until April 3, 2019 because Cavallaro asked him to help with the transition, but that effectively he no longer had “the discretion to run the business he had before.” (Roe and Power SUF ¶ 21; Defs.' Joint Opp'n at 34.)
“Even when an officer loses power or authority, that officer still owes a fiduciary duty to the corporation. To divest himself [] of the duty, the officer mut resign the office.” GAB, 83 Cal.App.4th at 421. Therefore, even if Roe was told he would be terminated, he officially remained President of Zoom and owed a fiduciary duty until April 3, 2019.
Plaintiff argues that Roe breached his fiduciary duty by: (1) forming Power on March 13, 2019; (2) soliciting business from Toshiba in February and March 2019; (3) obtaining a line of credit on behalf of Power while still at Zoom; (4) instructing Zoom employees to find real estate space for Power while he was still at Zoom; (5) creating a business plan on behalf of Power to submit to Toshiba while at Zoom; and (6) using Zoom's “confidential employee salary information” to recruit Zoom employees to work at Power. (Pl.'s MSJ at 18.)
Roe had a duty to “protect the interests of [Zoom], [and] also to refrain from doing anything that would work injury to the corporation, or [] deprive it of profit or advantage which his skill and ability might properly bring to it.” Bancroft-Whitney Co. v. Glen, 64 Cal. 2d 327, 345 (1966). The Ninth Circuit explained that “[w]hether or not a corporate opportunity exists is largely a question of fact to be determined from the objective facts and surrounding circumstances existing at the time the opportunity arises.” Robinson, Leatham & Nelson, Inc. v. Nelson, 109 F.3d 1388, 1393 (9th Cir. 1997) (quotations omitted). “The mere fact that the officer makes preparations to compete before he resigns his office is not sufficient to constitute a breach of duty. It is the nature of his preparations which is significant.” Bancroft, 64 Cal. 2d at 346.
Roe presents evidence that Zoom was set to close all offices and the business, and that he was being terminated. (Roe and Power SUF ¶¶ 19, 20; Decl of Garcia, Ex. 9, Decl. of Amy Breshears ¶ 3.) Employees also state they left Zoom because of the plan to close Zoom offices and change conditions of their employment. (Roe and Power SUF ¶ 24.) Defendants argue that though Zoom still exists in name, it does little business. However, Zoom presents evidence that its services and employees would not be impacted by the plan to consolidate office space, and that the business itself was not closing. (Decl of Garcia, Ex. 9, Decl. of Amy Breshears ¶¶ 6-7.) Whether Roe usurped a corporate opportunity is dependent on the state of Zoom at the time of his creation of Power. There is a genuine dispute of material fact about the “surrounding circumstances at the time” of Roe's alleged conduct.
During oral argument, plaintiff's counsel cited Johnson v. Superior Court, 38 Cal.App.4th 463 (1995) in support of his argument that Roe's conduct breached his fiduciary duty. Upon review, Johnson is inapposite to the issue before the court.
In conclusion, Ramsay, Lopez, and Davis' motion for summary judgment on plaintiff's ninth claim will be granted. Plaintiff and Roe's motions for summary judgment as to the same will be denied.
G. Claim Ten: Breach of Loyalty against Roe, Ramsay, Lopez, and Davis
Plaintiff and defendants Roe, Ramsay, Lopez, and Davis move for summary judgment on the tenth claim. Plaintiff must prove: “(1) the existence of a relationship giving rise to a duty of loyalty; (2) one or more breaches of that duty; and (3) damage proximately caused by that breach.” E.D.C. Techs., Inc. v. Seidel, 216 F.Supp.3d 1012, 1016 (N.D. Cal. 2016).
Plaintiff pleads the claims for breach of fiduciary duty and breach of loyalty separately but analyzes them together. (Pl.'s MSJ at 20.) “Although they are similar, breach of fiduciary duty and breach of the duty of loyalty are two distinct claims under California Law.” E.D.C. Techs., 216 F.Supp. At 1016. An employer may bring a duty of loyalty claim against a non-fiduciary employee as “California courts generally have not distinguished between managerial employees and lower-level employees.” Id.
California Labor Code section 2863 imposes on employees a duty of loyalty to their employer. Section 2863 requires any “employee who has any business to transact in his own account, similar to that entrusted to him by his employer, [to] always give the preference to the business of the employer.” Therefore, Roe, Ramsay, Lopez, and Davis had relationships with Zoom that gave rise to a duty of loyalty, regardless of whether they each had a fiduciary relationship with Zoom.
Plaintiff argues that Roe breached the duty of loyalty in the same manner that he breached his fiduciary duty. As discussed above, there is a genuine dispute of material fact about whether Zoom was planning to close its business or simply consolidate office space at the time that Roe created Power. If Zoom did indeed plan to close operations, it follows that Roe would not be taking business away from Zoom in violation of his duty of loyalty. Therefore, a genuine dispute of fact exists pertinent to whether Roe breached his duty of loyalty.
Plaintiff presents evidence that Ramsay and Davis were taking steps to form Power while employed by Zoom, including finding real estate space, setting up payroll, registering the Power website domain name, and creating a business plan to submit to Toshiba on behalf of Power. (PSUF ¶¶ 46, 71, 90, 112, 117, 119, 121-23, 127.) However, if these steps damaged Zoom in any manner is in dispute given the opposing evidence submitted by both sides as to the state of Zoom's future. Therefore, there is a genuine dispute of material fact relevant to whether Ramsay and Davis breached their duty of loyalty.
For Lopez, the only evidence presented by plaintiff shows that Lopez was aware that certain Power employees were previously employees of Zoom. (PSUF ¶ 17, 99-100 (citing Decl. of Garcia, Ex. 19, Dep. of Maura Lopez).) This evidence does not demonstrate that Lopez used Zoom's allegedly confidential compensation data to poach employees, nor does it prove that she breached her duty of loyalty to Zoom. (Pl.'s Opp'n to Employee Defs.' Mot. at 27.)
For the foregoing reasons, Lopez's motion for summary judgment on plaintiff's tenth claim will be granted. Plaintiff and defendants Roe, Ramsay, and Davis' motions for summary judgment on the same will be denied.
H. Civil Conspiracy
Within its seventh, ninth, and tenth claims, plaintiff alleges that defendants Roe, Ramsay, Lopez, and Davis were part of a civil conspiracy to commit the alleged violation of Zoom's rights. (FAC ¶¶ 248, 265, 276.) Civil “[c]onspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its preparation.” Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 510-11 (1994). Under California law, a party may be vicariously liable for another's tort in a civil conspiracy where the plaintiff shows “(1) formation and operation of the conspiracy and (2) damage resulting to plaintiff (3) from a wrongful act done in furtherance of the common design.” Rusheen v. Cohen, 37 Cal.4th 1048, 1062 (2006) (citing Doctors' Co. v. Superior Court, 49 Cal.3d 39, 44 (1989)).
A claim for civil conspiracy is a derivative action that can only succeed when based on an independent tortious act. Entm't Research Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211, 1228 (9th Cir. 1997). Defendants will be granted summary judgment on plaintiff's seventh claim and therefore no liability based on civil conspiracy can exist for that claim.
For the ninth claim, it has been established that the employee defendants did not have a fiduciary duty toward Zoom, and therefore, they cannot be liable for the claim based on a theory of conspiracy. See Applied Equip., 7 Cal.4th at 511 (“[T]ort liability arising from conspiracy presupposes that the coconspirator is legally capable of committing the tort, i.e., that he or she owes a duty to plaintiff recognized by law and is potentially subject to liability for breach of that duty.”)
For the tenth claim, plaintiff presents no undisputed evidence of the formation and operation of a “common plan or design in [] preparation” of the tort between Roe, Ramsay, Lopez, and Davis. See Hanger Prosthetics & Orthotics, 556 F.Supp.2d at 1139. Plaintiff must prove that Roe, Ramsay, Lopez, and Davis had “actual knowledge that a tort is planned and concur[red] in the tortuous scheme with knowledge of its unlawful purpose.” Id. Here, the record does not demonstrate knowledge on behalf of Roe, Ramsay, Lopez, and Davis that they were engaging together in an unlawful purpose.
Therefore, plaintiff's motion for summary judgment based on its civil conspiracy theory within its seventh, ninth, and tenth claims will be denied.
IT IS THEREFORE ORDERED that:
1. On the claim for relief 1 for breach of contract, plaintiff's motion for summary judgment be, and the same hereby is, DENIED and defendant Roe's motion for summary judgment be, and the same hereby is, GRANTED.
2. On the claim for relief 2 for breach of contract, plaintiff's motion for summary judgment be, and the same hereby is, DENIED and defendants Roe, Ramsay, Lopez, Crossen, Davis, and Peebler's motions for summary judgment be, and the same hereby are, GRANTED.
3. On the claim for relief 3 for breach of contract, plaintiff's motion for summary judgment be, and the same hereby is, DENIED and defendants Roe, Lopez, and Crossen's motions for summary judgment be, and the same hereby are, GRANTED.
4. On the claims for relief 5 and 6 for trade secret misappropriation, defendant Ramsay's motion for summary judgment be, and the same hereby is, GRANTED and defendants Roe and Power's motion for summary judgment be, and the same hereby is, GRANTED with respect to information about employee costs and costs of maintenance services, and DENIED in all other respects.
5. On the claim for relief 7 for intentional interference with contractual relations, plaintiff's motion for summary judgment be, and the same hereby is, DENIED and defendants Roe, Power, Ramsay, Lopez, and Davis' motions for summary judgment be, and the same hereby are, GRANTED.
6. On the claim for relief 8 for the Computer Fraud and Abuse Act, defendant Roe's motion for summary judgment be, and the same hereby is, GRANTED.
7. On the claim for relief 9 for breach of fiduciary duty, plaintiff and defendant Roe's motions for summary judgment be, and the same hereby are, DENIED and defendants Ramsay, Lopez, and Davis' motion for summary judgment be, and the same hereby is, GRANTED.
8. On the claim for relief 10 for breach of the duty of loyalty, plaintiff and defendants Roe, Ramsay, and Davis' motions for summary judgment be, and the same hereby are, DENIED and defendant Lopez's motion for summary judgment be, and the same hereby is, GRANTED.
9. Plaintiff's motion for summary judgment based on its theory of civil conspiracy within its seventh, ninth, and tenth claims be, and the same hereby is, DENIED.
Plaintiff's claims for relief 5 and 6 for trade secret misappropriation against Roe and Power, claim for relief 9 for breach of fiduciary duty against Roe, and claim for relief 10 for breach of loyalty against Roe, Ramsay, and Davis remain pending in this action.