Judge: Armen Tamzarian, Case: 24STCV30569, Date: 2025-04-09 Tentative Ruling

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Case Number: 24STCV30569    Hearing Date: April 9, 2025    Dept: 52

Defendant 48North Partners LLC’s Motion to Stay

Defendant 48North Partners LLC (48North) moves to stay this action by plaintiff CriticalPoint Partners LLC.

Summary of Proceedings   

In March 2023, plaintiff submitted a demand for arbitration with JAMS against respondents Phillipe Didisheim, Chapin Newhard, Jared Roberts, and 48North Partners, LLC.  (Silverstein Decl., Ex. A, pp. 1-2.)  The initial statement of claims includes seven causes of action: (1) breach of contract against Didisheim, Newhard, and Roberts, (2) breach of fiduciary duty against Didisheim and Roberts, (3) breach of duty of loyalty against Didisheim and Roberts, (4) aiding and abetting breach of fiduciary duty and duty of loyalty against Newhard, (5) conversion against all respondents, (6) violation of Penal Code section 502 against Didisheim, Newhard, and Roberts, and (7) unfair business practices against all respondents.  (Id., Ex. A.)

            Plaintiff’s operative second amended demand for arbitration with JAMS asserts a sole cause of action against respondents Newhard, Roberts, and Didisheim for breach of contract.  (Silverstein Decl., Ex. B.)  In it, plaintiff alleges the individual respondents breached confidentiality agreements that provided “they ‘shall not at any time, including after the termination or separation of Employee’s employment with [CriticalPoint], directly or indirectly, use or exploit the Confidential Information for the Employee’s own benefit, and/or for the benefit of any other person or entity, including the competitors of [CriticalPoint].’  [Citation.]  Respondents agreed they have ‘no rights or interest whatsoever, and shall acquire no such rights or interest, whether prepared by Employee or otherwise coming into Employee’s possession, in any Confidential Information, including without limitation any copyright, trademark, “moral rights,” or other similar rights.’ ”  (Id., ¶ 38.)

            In this action, plaintiff CriticalPoint Partners LLC asserts four causes of action against two defendants, 48North Partners LLC and Anvil Partners, LLC (Anvil): (1) intentional interference with prospective economic relations, (2) negligent interference with prospective economic relations, (3) intentional interference with contractual relations, and (4) violation of Business and Professions Code section 17200. 

In the complaint, plaintiff alleges its former employee Newhard founded 48North and former employee Didisheim founded Anvil.  (Comp., ¶ 6.)  Plaintiff alleges Newhard and Didisheim “had unfettered access to a treasure trove of highly confidential, financial, customer, operational and other proprietary documents, files, data, client lists, customer lists, vendor lists and business target lists.”  (Ibid.)  Plaintiff alleges, “48North and Anvil were formed based entirely on stolen information, data and clients from CriticalPoint.  48North and Anvil have never stopped using CriticalPoint’s confidential data and information.”  (¶ 7.)  Plaintiff alleges defendants are using plaintiff’s “client/customer lists, business acquisition target compilations and the time-sensitive information about the entities on these lists to develop its business” and that “every client that Defendants have engaged was either a CriticalPoint client or target.”  (¶ 8.) 

Motion to Stay

            48North moves to stay the action under Code of Civil Procedure section 1281.4.  That statute does not apply.  It requires a court to stay an action in either of two circumstances: (1) “If a court of competent jurisdiction, whether in this State or not, has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State …”, or (2) “If an application has been made to a court of competent jurisdiction …  for an order to arbitrate a controversy which is an issue involved in an action or proceeding pending before a court of this State and such application is undetermined … .”  (Ibid.)  Nothing in the record shows any court has ordered arbitration of a controversy or that any party has applied for an order to arbitrate a controversy.  The record instead shows plaintiff voluntarily initiated an arbitration proceeding without any court order or motion for such an order. 

            This court’s authority to stay the action, however, is not limited to that provided in Code of Civil Procedure section 1281.4.  “ ‘[A] court ordinarily has inherent power, in its discretion, to stay proceedings when such a stay will accommodate the ends of justice.’ ”  (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 141.)  “ ‘[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.’ ”  (Ibid.)  Staying this action serves those interests.

In its opposition to this motion, plaintiff overstates the differences between the arbitration proceeding and this lawsuit.  In contrast, in its opposition to Anvil’s motion to quash service of summons, plaintiff argues this court has personal jurisdiction over non-resident Anvil because that company was “founded on Didisheim’s theft from” plaintiff.  (Opp. to Motion to Quash, p. 7.)  Plaintiff argues, “For months, Anvil’s founder and principal, Didisheim, deliberately and repeatedly stole CPP’s confidential information as part of his scheme to take clients away from CPP for the new business that Didisheim was planning.”  (Id., p. 10.)  “Anvil is now using the information that Didisheim stole to intentionally interfere with CPP’s business relationships.”  (Ibid.) 

In that opposition, plaintiff further argues, “Didisheim is no ‘third-party’—he is Anvil’s ‘founder,’ ‘Manager and sole member.’  … ‘Anvil does not have any employees.’  [Citation.]  In other words, the only actions Anvil can take are through Didisheim.”  (Opp. to Motion to Quash, p. 12.)  “Anvil is merely Didisheim’s alter ego and the successor entity that assumes Didisheim’s contacts and liability for his actions on behalf of the company.”  (Ibid.)  Those arguments and the supporting evidence demonstrate the substantial overlap between the arbitration proceeding against Didisheim and this lawsuit against Anvil.  The same reasoning applies to the arbitration proceeding as against Newhard and this lawsuit as against 48North. 

In the arbitration proceeding, plaintiff alleges Newhard and Didisheim breached their confidentiality agreements and stole plaintiff’s proprietary information.  In this lawsuit, plaintiff alleges Newhard and Didisheim started new companies, defendants 48North and Anvil, which “were formed based entirely on stolen information, data and clients.”  (Comp., ¶ 7.)  And that stolen information is the same information that Newhard and Didisheim allegedly acquired and exploited in breach of their confidentiality agreements. 

The facts in Mattson Technology, Inc. v. Applied Materials, Inc. (2023) 96 Cal.App.5th 1149 (Mattson) are analogous.  There, a corporation sued its former employee and his subsequent employer on the basis that they stole or exploited the plaintiff corporation’s trade secrets.  (Id. at p. 1153.)  The trial court granted the individual employee’s motion to compel arbitration but denied the defendant company’s motion to stay the action pending arbitration.  (Ibid.)  The Court of Appeal held it was error to deny the motion to stay.  (Ibid.)  The court reasoned that the plaintiff corporation’s claim against the new company was not “independent of the same claim against” the former employee.  (Id. at p. 1162.)  The proceedings both “rel[y] on the same factual allegations factual allegations” of “a scheme whereby” the defendant company “recruited” plaintiff’s former employee “to provide it with [plaintiff’s] trade secrets.”  (Ibid.)  The claims “thus share common factual questions concerning [the employee’s] activities … and [defendant company’s] alleged involvement in them.”  (Ibid.)

Unlike this case, Code of Civil Procedure section 1281.4 applied in Mattson.  A stay was therefore mandatory.  Nevertheless, the same reasoning applies here and favors a discretionary stay.  The arbitration proceeding and this lawsuit arise from the same events and involve common issues of fact.  Staying this action until resolution of the arbitration proceeding will serve the interest in judicial economy.  The court will exercise its discretion to stay this action.

Disposition

            Defendant 48North Partners LLC’s motion to stay is granted.  The court hereby stays this entire action pending resolution of the arbitration proceeding between plaintiff CriticalPoint Partners LLC and respondents Phillipe Didisheim and Chapin Newhard.

The court hereby vacates the following seven hearings: (1) defendant Anvil Partners LLC’s motion to quash service of summons set for this date, (2) defendant 48North Partners LLC’s motion for relief from waiver of objections set for May 5, 2025, and (3-7) the five discovery motions set for May 8, 2025.