Judge: Andrew E. Cooper, Case: 23CHCV01702, Date: 2024-02-01 Tentative Ruling

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Case Number: 23CHCV01702    Hearing Date: February 1, 2024    Dept: F51

DEMURRER

Demurrer Filed: 10/2/23

MOVING PARTY: Defendants Vahagn Lusparyan and VADA Insurance Services, Inc. (“Defendants”)

RESPONDING PARTY: Plaintiff Golden Pro Insurance Services, Inc. (“Plaintiff”)

NOTICE: OK

RELIEF REQUESTED: Defendants demur against Plaintiff’s entire complaint.

TENTATIVE RULING: The demurrer is overruled. Defendants to file their answer to Plaintiff’s complaint within 20 days.

BACKGROUND 

This is a fraud action in which Plaintiff alleges that defendant Vahagn Lusparyan misappropriated Plaintiff’s exclusive proprietary information and trade secrets to defame Plaintiff and steal its customers, in violation of his written agreement not to do so. (Compl. ¶¶ 6–7, 9, 15.) On 6/12/23, Plaintiff filed its complaint, alleging against Defendants the following causes of action: (1) Injunctive Relief; (2) Theft of Trade Secrets; and (3) Fraud (against Lusparyan).

On 10/2/23, Defendants filed the instant demurrer. On 1/17/24, Plaintiff filed its opposition. No reply has been filed to date.

ANALYSIS

Defendants demur to Plaintiff’s entire complaint on the bases that “each of the claims asserted against Lusparyan and VADA is barred either by the exclusive remedy provided by the California Uniform Trade Secrets Act (‘CUTSA’).” (Dem. 3:9–10.)

A.    Meet and Confer

Defendants’ counsel declares that on 8/2/23 and 9/21/23, he and Plaintiff’s counsel met and conferred regarding the issues raised in the instant demurrer, but the parties were unable to come to an informal resolution. (Decl. of Mario Rivera ¶¶ 2–4.) Accordingly, the Court finds that counsel has satisfied the preliminary meet and confer requirements of Code of Civil Procedure section 430.41, subdivision (a).

B.     Theft of Trade Secrets

Plaintiff’s second cause of action alleges Theft of Trade Secrets against both Defendants. “Under the [CUSTA], a prima facie claim for misappropriation of trade secrets requires the plaintiff to demonstrate: (1) the plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff’s trade secret through improper means, and (3) the defendant’s actions damaged the plaintiff.” (Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1665; Civ. Code § 3426.1.) “‘Trade secret’ means 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.” (Civ. Code § 3426.1, subd. (d).) “‘Improper means’ includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” (Id. at subd. (a).)

Here, Plaintiff alleges that it provided Lusparyan “with proprietary information and trade secrets that exclusively belonged to” Plaintiff; that Defendants “misappropriated Plaintiff's proprietary information and trade secrets … and are using such proprietary information and trade secrets to defame Plaintiff and steal business from Plaintiff; and that Defendants’ actions have harmed Plaintiff by at least $29,974. (Compl. ¶¶ 14, 16–17.)

Defendants argue that “Plaintiff’s claims against Lusparyan and VADA for injunctive relief, theft of trade secrets and fraud are preempted by the CUTSA and fail as a matter of law.” (Dem. 7:8–10.) Defendants appear to concede that Plaintiff’s “allegations fall squarely within the CUTSA’s broad definitions of ‘misappropriation.’” (Id. at 6:27–28.) As Plaintiff observes in opposition, “nowhere do Defendants identify anything plead in Plaintiff’s second cause of action which is inconsistent with bringing a claim under the California Uniform Trade Secrets Act. Rather Defendants argue that the Plaintiff has in fact plead a theft of trade secrets.” (Pl.’s Opp. 4:7–9.) The Court agrees, and notes that the CUTSA does not preempt Plaintiff’s trade secrets cause of action, but in fact provides for the statutory relief Plaintiff seeks. Based on the foregoing, the Court finds that Plaintiff’s factual allegations, as pled, sufficiently constitute a cause of action for Theft of Trade Secrets against Defendants. Accordingly, the demurrer to Plaintiff’s second cause of action is overruled.

C.    Fraud

Plaintiff’s third cause of action alleges Fraud against Lusparyan. “One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.” (Civ. Code § 1709.) The elements that must be pleaded in a cause of action for fraud are: (1) a misrepresentation (false representation, concealment or nondisclosure); (2) knowledge of its falsity (or “scienter”); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage. (Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363.)

Here, Plaintiff alleges that Lusparyan “promised that he would not use or disseminate said proprietary information and trade secrets to anyone outside GOLDEN PRO INSURANCE SERVICES, INC., including himself”; but “was lying and never intended to not use or disseminate said proprietary information and trade secrets”; and instead “intended to steal everything he could from GOLDEN PRO INSURANCE SERVICES, INC., and use it to form and benefit VADA INSURANCE SERVICES, INC., and then solicit Plaintiff’s customers.” (Compl. ¶¶ 21–22.) Plaintiff further alleges that it “reasonably relied to its detriment on Defendant, VAHAGN LUSPARYAN’S, false promise that he would not use or disseminate said proprietary information and trade secrets to anyone outside GOLDEN PRO INSURANCE SERVICES, INC.,” and has consequently been harmed by at least $29,974.00. (Id. at ¶¶ 23–25.)

Defendants argue that the factual allegations supporting Plaintiff’s fraud cause of action “are based on the same basic nucleus of alleged facts” as Plaintiff’s trade secrets cause of action, and therefore reiterate their argument that Plaintiff’s claims are preempted by the CUTSA. (Dem. 6:24–25.) However, as Plaintiff observes, “the Fraud is based upon VAHAGN LUSPARYAN making a promise that he had no intention of performing in order to obtain employment.” (Pl.’s Opp. 5:2–3.) The Court agrees, and finds that Plaintiff’s factual allegations, as pled, sufficiently constitute a cause of action for Fraud against Lusparyan. Moreover, as the Court notes above, Plaintiff’s trade secrets claims are not preempted by the CUTSA, but instead derive therefrom. Accordingly, the demurrer to Plaintiff’s third cause of action is overruled.

D.    Injunctive Relief

Plaintiff’s first cause of action seeks Injunctive Relief against Defendants. “The elements of a cause of action for injunctive relief are (1) a tort or other wrongful act constituting a cause of action; and (2) irreparable injury, i.e., a factual showing that the wrongful act constitutes an actual or threatened injury to property or personal rights which cannot be compensated by an ordinary damage award.” (Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.) “Actual or threatened misappropriation [of trade secrets] may be enjoined. Upon application to the court, an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.” (Civ. Code § 3426.2.)

Here, Plaintiff alleges that Lusparyan “executed the agreement attached hereto as Exhibit A and incorporated by reference, wherein he agreed that an injunction could be issued for using proprietary information and trade secrets that exclusively belonged to GOLDEN PRO INSURANCE SERVICES, INC.” (Compl. ¶ 7.) Plaintiff therefore alleges that it “is entitled to injunctive relief barring Defendants … from doing any business with any of Plaintiff’s clients or using any of Plaintiff’s proprietary information and trade secrets.” (Id. at ¶ 12.)

Defendants argue that “the claim for an injunction should … be dismissed-not only because it does not state a cause of action in the first place but also because the claims on which Plaintiffs would have to prevail to obtain an injunction fail as a matter of law.” (Dem. 7:17–20.) To the extent that Defendants contend that Plaintiff’s claim for injunctive relief fails because Plaintiff has failed to allege facts sufficient to constitute the causes of action on which the claim is based, the Court disagrees, as outlined above. Accordingly, the demurrer to Plaintiff’s first cause of action is overruled.

CONCLUSION 

The demurrer is overruled. Defendants to file their answer to Plaintiff’s complaint within 20 days.