BACKGROUND 

This is a trade secret misappropriation case.  In December 2022, Galway Holdings LP, a national financial services firm, considered a potential merger with or acquisition of KSFB Management LLC and non-party NKSFB LLC (the “2022 Proposed Transaction”). (Cross-Compl. ¶¶ 3, 13.)  Non-party NKSFB is a business management firm providing a variety of services for high-net-worth individuals, including financial planning and accounting services.  (Id. ¶ 1.)  Defendant Nigro Karlin Segal & Feldstein, LLP (“NKSF”) provides accounting and other services to the clients of non-party NKSFB. (Id.)  Defendant KSFB receives a management fee from NKSFB.  (Id.)  NKSFB is a wholly owned subsidiary of Focus Financial Partners, LLC (“Focus”).   

As part of the 2022 Proposed Transaction, Galway and KSFB entered into a Non- Disclosure Agreement (“NDA”). (Id. ¶¶ 14–15, and Ex. D.)  The NDA provides that Galway shall not use any confidential information other than to evaluate the 2022 Proposed Transaction.  (Id. Ex. D, ¶ 2.)  Galway also agreed to not solicit, hire, retain, or engage any personnel of any NKSFB entity “about whom Galway . . . received Evaluation Material or with whom any of them had direct contact in connection with the [2022] Proposed Transaction.”  (Id.)  

In connection with the 2022 Proposed Transaction, KSFB provided Galway with high-level financial and other information (the “Evaluation Material”), which KSFB and NKSF allege is a trade secret.  (Id. ¶¶ 14–15, ¶ 28.)  KSFB and NKSF further allege that its “Confidential Client Information” and “Confidential Business Information” are also trade secrets. (Id. ¶ 51.)  The “Confidential Client Information” is described as “institutional knowledge and market research” about their clients’ needs.  (Id. ¶ 48.)  The “Confidential Business Information” is defined as partners’ compensation, book of business, overhead costs, business development efforts, and potential for future business.  (Id. ¶ 50.)  

Ultimately, the 2022 Proposed Transaction never occurred. (Id. ¶ 23.)  More than a year later, Defendant Craig Brown got into a dispute with KSFB and its managing partner, Mickey Segal. (Compl. ¶¶ 19-21.)  That dispute eventually led to Mr. Brown informing Mr. Segal that he no longer wished to remain at KSFB. (Compl. ¶ 22.)  KSFB then offered Mr. Brown a deal where he could purchase his business and hire certain NKSFB employees to go with him. (Compl. ¶ 24.)   

To facilitate this, Mr. Brown approached Galway, who eventually sent a Letter of Intent to Focus to employ Mr. Brown, Heather Washkuhn and Daniel Moore (the “Former Partners”) and to acquire their business. (Id. at ¶ 25; Cross Compl., ¶ 24 and Ex. E.)  Galway conditioned its Letter of Intent on the opportunity to conduct due diligence, stating that it would “need to review the books, financial records, agreements, papers and other documents, information and data relating to the Business that shows the historic revenue and expense of the Business,” confirming that Galway did not already have this information.  (Cross-Compl. Ex. E.)  Neither KSFB nor NKSF gave Galway the requested information and instead rejected Galway’s offer.   

In 2024, KSFB and NKSF expelled the Former Partners, and Galway hired them thereafter. (Compl. ¶ 45; Cross-Compl. ¶ 4.)  The Former Partners then filed suit in aid of arbitration to maintain their clients because KSFB and NKSF threatened interference with the ability of the Former Partners’ clients to choose their day-to-day personal and business managers. (Compl. ¶ 2.)   

Shortly thereafter, KSFB and NKSF filed the Cross-Complaint here against the Former Partners and Galway, and another Complaint against Galway in New York.  According to Galway, KSFB and NKSF’s claims against Galway in both the New York action and here are based on Galway’s alleged obligations under the NDA, which mandates that New York is the exclusive jurisdiction for all disputes arising under the NDA. (Cross-Compl. Ex. D.)  In its cross-claims against Galway, KSFB and NKSF allege that Galway misappropriated their trade secrets and caused the Former Partners to breach their agreements in their alleged solicitation of clients and recruitment of other NKSFB employees.   

In the New York action, KSFB moved for a preliminary injunction and temporary restraining order on these same claims alleging Galway had misappropriated KSFB/NKSF’s trade secrets. (Request for Judicial Notice (“RJN”), Lewitz Decl., Exs. 4-5.) The New York court denied the TRO application, reasoning that the Court was “at a loss to determine which specific trade secrets have been misappropriated.” (Id. at Ex. 6.)  Specifically, the Court held that “KSFB had only alleged in broad strokes” the trade secret misappropriation and failed to show what specific trade secrets Galway received that it was allegedly misusing.  (Id.)  Thus, KFSB was unlikely to succeed on the merits of this claim.  (Id.) 

This hearing is on Galway’s motion to dismiss or stay based on forum non-conveniens or, in the alternative, compel arbitration and stay action pending arbitration or in the alternative, demurrer to the cross-claims brought by KSFB/NKSF against Galway.  Galway argues there is a mandatory forum selection clause contained in an NDA with Galway, which requires that any claims arising thereunder proceed in New York, and accordingly, this case should be dismissed on grounds of forum non conveniens.   

Alternatively, Galway argues there is an already pending arbitration to which KSFB and NKSF’s claims against Galway should be joined, as KSFB and NKSF’s claims here relate to and arise from the restrictive covenants contained in the very agreements that require arbitration.  Although a non-signatory, Galway argues KSFB and NKSF cannot seek to enforce those agreements against Galway and at the same time resist their arbitration clauses.   

Finally, Galway argues that if the Court wishes to retain jurisdiction over KSFB and NKSF’s cross-claims against Galway, this Court should sustain its demurrer to the cross-claims because (1) the claims for trade secret misappropriation under CUTSA and DTSA (Counts V and VI) insufficiently allege the existence of a trade secret, which was the finding of the New York Court; (2) the state law claims based on trade secret misappropriation under CUTSA and DTSA (Counts VII–X) are precluded under CUTSA supersession as they all rely on the premise that there are trade secrets at issue, which there are not; and (3) alternatively, if the trade secret misappropriation claims do pass muster, then the remaining state law tort claims are preempted by CUTSA.  

REQUEST FOR JUDICIAL NOTICE 

The Court grants judicial notice of the following: 

Pursuant to Evid. Code § 452(d), this Court may take judicial notice of the records of any court of record of the United States.   

FORUM NON CONVENIENS 

Legal Standard 

Forum non conveniens¿is “an equitable doctrine invoking the discretionary power of a court to decline the exercise of jurisdiction it has over a transitory cause of action when it believes that the action may be more appropriately and justly tried elsewhere.” (Stangvik v. Shiley, Inc. (1991) 54 Cal.3d 744, 751.) “In California, the procedure for enforcing a forum selection clause is a motion to stay or dismiss for forum non conveniens pursuant to¿Code of Civil Procedure sections 410.30¿and¿418.10¿[citation], but a motion based on a forum selection clause is a special type of forum non conveniens motion.” (Berg v. MTC Electronics Technologies (1998) 61 Cal.App.4th 349, 358.) 

Code Civ. Proc. § 410.30(a)¿states, “[w]hen a court upon motion of a party or its own motion finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just.” ¿Code Civ. Proc. § 418.10(a)(2)¿states, “[a] defendant, on or before the last day of his or her¿time to plead or within any further time that the court may for good cause allow, may serve and file a notice of motion … [t]o stay or dismiss the action on the ground of inconvenient forum.” 

“California favors contractual forum selection clauses so long as they are entered into freely and voluntarily …” (Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 146.)¿  “California courts routinely enforce forum selection clauses even where the chosen forum is far from the plaintiff’s residence.” (Net2Phone, Inc. v. Superior Court (2003) 109 Cal.App.4th 583, 588.) “California law is ‘in accord with the modern trend which favors enforceability of such [mandatory] forum selection clauses.¿[Citations.] ” (Quanta Computer Inc. v. Japan Communications Inc. (2018) 21 Cal.App.5th 438, 444.) ¿  

The factors that apply generally to a forum non conveniens motion do not control in a case involving a mandatory forum selection clause.  “Where there is a mandatory forum selection clause, ‘the test is simply whether application of the clause is unfair or unreasonable, and the clause is usually given effect.  Claims that the previously chosen forum is unfair or inconvenient are generally rejected.¿[Citation.] A court will usually honor a mandatory forum selection clause without extensive analysis of factors relating to convenience. [Citation.]”¿(Id. at 445.) 

In the absence of a mandatory forum selection clause, a court must first “determine whether the alternate forum is a ‘suitable’ place for trial. If it is, the next step is to consider the private interests of the litigants and the interests of the public in retaining the action for trial in California.” (Id.)  “The granting or denial of such a motion is within the trial court’s discretion, and substantial deference is accorded its determination in this regard.” (Id.) 

As the moving party, a defendant has the burden to prove that: (1) a suitable alternative forum exists; and (2) the balance of private and public interest factors make it just to transfer the litigation.  (Stangvik, 54 Cal.3d at 751.)  Under the doctrine of forum non conveniens, an action by a California resident may be stayed, but not dismissed absent exceptional circumstances. (Morris v. AGFA Corp. (2006) 144 Cal.App.4th 1452, 1463.) 

Analysis 

Galway urges the Court to transfer this case to the “pending” New York federal action.  (Motion at 12:10-11, 13:12-13, 13:19-21, 19:13-15.)  KSFB/NKSF point out, however, that the New York federal action has already been dismissed, and there is no “pending” New York action to which this case can be transferred.  (Opp. at fn.1.)  Galway counters that while KSFB/NKSF dismissed the New York federal action, they then filed a nearly identical complaint in the New York Supreme Court three days later.  Ultimately, the parties’ dispute about whether there is an existing New York action to which this case may be transferred is irrelevant as the Court may still dismiss for forum non conveniens grounds even in the absence of such a case so long as a suitable alternative forum exists.   

The Court turns now to the merits of the motion.  Galway argues that the forum selection clause in the NDA is mandatory and requires KSFB/NSKF litigate their claims in New York.  In opposition, KSFB/NSKF argue that NSKF is not a party to the NDA; their cross-complaint covers claims that are not within the scope of the forum selection clause, and it would be unreasonable in any event to force KSFB to litigate its cross-claims in New York while NSKF litigates its cross-claims in Los Angeles, risking inconsistent results.  The Court agrees with KSFB/NSKF.   

Pursuant to Code Civ. Proc. § 410.30, a trial court has discretion to stay or dismiss a transitory cause of action that it believes may be more appropriate and justly tried elsewhere.  (Stangvik, 54 Cal.3d at 751.)  In cases involving forum selection clauses, “traditional forum non conveniens analysis do not control.”  (Korman v. Princess Cruise Lines, Ltd. (2019) 32 Cal.App.5th 206, 213.)  Rather, the “forum selection clause is presumed valid and will be enforced” unless the clause is not mandatory, and the claimant shows that enforcement would be unreasonable.  (Id.)  

“To be mandatory, a clause must contain language that clearly designates a forum as the exclusive one.”  (Id. (quoting Council of Laborers v. Pittsburg-Des Moines Steel (9th Cir. 1995) 69 F.3d 1034, 1037).  Here, the NDA provides that New York state or federal courts are the “exclusive jurisdiction” for “any controversy” arising under the NDA and “waives any objection (on the grounds of lack of jurisdiction, forum non conveniens or otherwise) to the exercise of such jurisdiction over it by any such courts.”  (Cross-Compl. Ex. D.)   

NSKF/KSFB argue that NSKF is not a party to the NDA, and the mandatory forum selection clause in the NDA cannot require NSKF to litigate in New York.  Galway counters that a forum selection clause may be enforced against “a plaintiff who is not a party to the contract in question if the plaintiff is ‘closely related to the contractual relationship.’”  (Net2Phone, Inc. v. Superior Court (2003) 109 Cal.App.4th 583, 588.)  Here, however, NSKF has not asserted a breach of the NDA; accordingly, its claims are not closely related to the contract that contains the forum selection clause.   

NSKF/KSFB next argue the NDA covers only claims relating to the “Agreement, including the performance and enforceability hereof.”  The Court agrees.  The cross-complaint does not assert a breach of the NDA, and while it asserts that Galway misused information received under the NDA, it also covers other claims unrelated to the NDA, including that Galway misappropriated trade secrets (beyond those provided it under the NDA) and caused the Former Partners to breach their agreements in their alleged solicitation of clients and recruitment of other NKSFB employees.  Because the NDA is not enforceable against NSKF and the forum selection clause does not cover the claims at issue in the cross-complaint, the Court does not go on to consider whether the clause is unreasonable as applied to this case.