Judge: John J. Kralik, Case: 23BBCV02407, Date: 2024-05-17 Tentative Ruling
Case Number: 23BBCV02407 Hearing Date: May 17, 2024 Dept: NCB
North
Central District
|
EPICURUS GOURMET, Plaintiff, v. HILLARY HIRSCH, et
al., Defendants. |
Case No.: 23BBCV02407 Hearing Date: May 17, 2024 [TENTATIVE] order RE: Demurrer; Motion to strike |
BACKGROUND
A.
Allegations
Plaintiff Epicurus Gourmet
(“Plaintiff”) alleges that it is in the business of selling gourmet food
products and is located at 12140 Sherman Way, North Hollywood, California
91605. Plaintiff alleges that Defendant
Hillary Hirsch was an employee of Plaintiff from 2016 until March 17, 2023 and
was the secretary of the Board of Directors.
Defendant Eric Gitter is alleged to have conspired with Hirsch by
directing, encouraging, ratifying, and approving Hirsch’s unlawful
conduct.
In February 2016, Epicurus opened
its store. In March 2016, Hirsch began
working at the premises as the manager for the store and became the secretary
for the Board of Directors, such that she owed fiduciary duties and had job
responsibilities to order products, keep financial books, pay bills, etc. Plaintiff alleges that as a part of her
duties, Hirsch had access to Plaintiff’s Sales Order System (“SOS”), a
proprietary database with confidential trade secrets, customer lists, and sales
data. She also had access to
confidential business passwords for bank accounts, QuickBooks accounting,
social media, payroll, and credit card processing. Plaintiff alleges that in January 2017,
Gitter approached Kevin Jones (president and sole shareholder of Plaintiff)
about becoming a partner in the business. Gitter loaned Plaintiff $217,000 to
construct the premises. On February 3,
2018, Gitter filed his own Articles of Incorporation for Epicurus Gourmet LA,
LLC and thereafter Defendants conspired to convert Plaintiff’s confidential
proprietary information. Plaintiff
alleges that in August 2018, Hirsch opened a Wells Fargo account in Plaintiff’s
name, made herself the sole signatory, and began depositing all proceeds from
Plaintiff into the account in September 2018.
Hirsch also allegedly changed all passwords for Plaintiff.
Plaintiff alleges that it pays all
local, state, and federal taxes from Kevin Jones’ personal funds and that Kevin
Jones renegotiated and extended Plaintiff’s lease at the premises. On March 23, 2023, Hirsch was removed as
secretary and on October 10, 2023 was terminated from employment. Upon her termination, Plaintiff demanded
Hirsch provide Kevin Jones with the passwords and access to the bank account,
but Defendants contacted Plaintiff’s vendors and customers, instructing them to
discontinue conducting business with Plaintiff.
The first amended complaint (“FAC”),
filed February 27, 2023, alleges causes of action for: (1) breach of fiduciary
duty; (2) conversion; (3) intentional interference with prospective economic
advantage; (4) unfair competition; (5) misappropriation of trade secrets; and
(6) declaratory relief.
B.
Motions on Calendar
On March 21, 2024, Defendants Eric Gitter
and Hillary Hirsch filed a demurrer and a motion to strike portions of the
FAC.
On April 19, 2024, Plaintiff filed
opposition briefs.
On May 10, 2024, Defendants filed reply
briefs.
REQUeST
FOR JUDICIAL NOTICE
Defendants request judicial notice
of the FAC. The request is granted. (Evid. Code, § 452(d).)
DISCUSSION
RE DEMURRER
Defendants Gitter and Hirsch demur
to the 3rd and 5th causes of action on the grounds that
they fail to state sufficient facts to constitute causes of action and are
uncertain.
The elements of
the tort of intentional interference with prospective economic advantage are: “(1) an economic relationship between the
plaintiff and some third party, with the probability of future economic benefit
to the plaintiff; (2) the defendant's knowledge of the relationship; (3)
intentional acts on the part of the defendant designed to disrupt the
relationship; (4) actual disruption of the relationship; and (5) economic harm
to the plaintiff proximately caused by the acts of the defendant.” (Korea
Supply Co. v. Lockheed Martin Corp. (2003)
29 Cal.4th 1134, 1153.)
In the
3rd cause of action, Plaintiff alleges that Defendants Hirsch and
Gitter had access to Plaintiff’s SOS database containing current and
prospective customers and vendors and social media accounts. (FAC, ¶35.)
Plaintiff alleges that after Hirsch was terminated, Defendants contacted
Plaintiff’s vendors and instructed/encouraged them not to do business with
Plaintiff, and they contacted Plaintiff’s employees on October 10, 2023 and
directed them not to come to work. (Id.,
¶36.) Plaintiff alleges that Defendants
caused false and derogatory information about Plaintiff to be distributed in
emails and social media accounts. (Id.) Plaintiff alleges that by engaging in such
conduct, Defendants knew that such a disruption of relationship was certain or
substantially certain to occur. (Id.,
¶37.) Plaintiff alleges that as a result
of Defendants’ conduct, Plaintiff’s economic relationships with current and
potential customers, vendors, and employees have been disrupted and/or
interfered with, and there is a reasonable probability that Plaintiff would
have continued to profit from these relationships but for Defendants’ improper
conduct. (Id., ¶38.)
Defendants
demur to the 3rd cause of action, arguing that Plaintiff fails to
allege facts establishing the first element regarding an economic relationship
between Plaintiff and a third party, with the probability of future economic
benefit to Plaintiff. Defendants argue
that Plaintiff only alleges an economic relationship with “potential”
customers, vendors, and employees. (FAC,
¶38.) In opposition, Plaintiff argues
that it is not merely alleging a potential customer, but that it already had a
relationship established with customers based on previous in-person purchases
at Plaintiff’s store.
However, Plaintiff
has not alleged the identity of any third-party customers, vendors, and
employees. For example, in Westside
Center Associates v. Safeway Stores 23, Inc. (1996) 42
Cal.App.4th 507, the plaintiff alleged that Safeway interfered in its
relationship with the class of all potential buyers for its property and
thereby reduced the property’s market value, thus claiming that Safeway
interfered not with a particular sale but with the plaintiff’s “opportunity” to
sell the property for its true value.
The Court of Appeal held that “[w]ithout an existing relationship with
an identifiable buyer, [the plaintiff’s] expectation of a future sale was ‘at
most a hope for an economic relationship and a desire for future benefit.’” (Westside Center Associates v.
Safeway Stores 23, Inc. (1996) 42 Cal.App.4th 507, 527.) Similarly, in George v. eBay, Inc. (2021) 71
Cal.App.5th 620, the plaintiff failed to allege a specific economic
relationship that was disrupted and instead argued that asserting “repeat
buyers” was sufficient for an intentional interference with prospective
economic advantage claim. (George v. eBay, Inc. (2021) 71 Cal.App.5th 620,
639.) However,
the Court of Appeal found that “[m]erely referring to unidentified
‘repeat buyers’ is insufficient, when there are no facts to show that the
unidentified buyers were likely to purchase the unidentified listings that were
supposedly ‘hidden’ by eBay.” (Id.)
Here, the allegations fail to
allege the identity of any third party for the first element of the intentional
interference with prospective economic advantage cause of action. As this element has not been sufficiently
alleged, the demurrer to the 3rd cause of action is sustained with
leave to amend.
“Under the UTSA, 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.) A “trade secret” means “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(d).)
For a UTSA cause
of action, “the information
claimed to have been misappropriated be clearly identified. Accordingly, a
California trade secrets plaintiff must, prior to commencing discovery,
‘identify the trade secret with reasonable particularity.’” (Altavion, Inc. v. Konica
Minolta Systems Laboratory, Inc. (2014) 226 Cal.App.4th 26, 43.) “[U]ntil the content and nature of the claimed secret is
ascertained, it will likely be impossible to intelligibly analyze the remaining
elements that constitute the cause of action. [Citation.] The trade secret must
be described with sufficient particularity to separate it from matters of
general knowledge in the trade or of special knowledge of those persons who are
skilled in the trade, and to permit the defendant to ascertain at least the
boundaries within which the secret lies.”
(Id. at 43-44 [citations and internal quotation marks omitted].)
In the 5th cause of
action, Plaintiff alleges that it is the owner of confidential proprietary
customer lists and information that had actual and/or potential independent
economic value because it was developed over years by Plaintiff and contained
information not readily available to others outside of Plaintiff. (FAC, ¶44.)
Plaintiff alleges it took reasonable efforts to keep the customer lists
and information by restricting access to the database within computers with
passwords and limited access availability.
(Id.) Plaintiff alleges
that after Hirsch was terminated, Defendants misappropriated the customer list
and information by causing the lists and information to be copied/moved to
other storage devices, computer programs, etc. and kept the information from
Plaintiff. (Id, ¶45.) Plaintiff alleges that Defendants used the
lists to obstruct Plaintiff from conducting business and to damage Plaintiff’s
relationship with its customers by spreading false and damaging
information. (Id.)
Defendants argue that Plaintiff has
not adequately identified its purported trade secret and that it alleges in a
conclusory fashion that the customer list and information are trade
secrets. Defendants argue that Plaintiff
has not alleged how a customer or vendor list for a specialty gourmet food
business would be a trade secret or what information is contained in the
list.
Here, Plaintiff has sufficiently
alleged facts regarding the customer list, but the other “information,” remains
vague. As such, the demurrer to the 5th cause of action is sustained.
Plaintiff may amend to eliminate or further explain the term “information.”
DISCUSSION RE MOTION TO STRIKE
Defendants move to strike portions of
the FAC as follows: (1) the request for disgorgement of profits from paragraph
42 (4th cause of action for Unfair Competition); (2)-(6) the request
for attorney’s fees in paragraphs 28, 33, 39, and 47 (the 1st, 2nd,
3rd, and 5th causes of action); (7) the request for
punitive damages in the prayer for damages at paragraph 53.C; and (8) the
request for attorney’s fees in the prayer for damages at paragraph 53.D.
In the 4th
cause of action for Unfair Competition, Plaintiff alleges that Defendants’
conduct constitutes unlawful, unfair, and/or fraudulent business
practices. (FAC, ¶41.) Plaintiff alleges that as a direct result of
Defendants’ wrongful conduct, Defendants have unfairly competed against
Plaintiff, including by converting and wrongfully retaining Plaintiff’s funds
and using Plaintiff’s property, such that Plaintiff is entitled to restitution
and the disgorgement of profits that Defendants wrongfully obtained. (Id., ¶42.) Plaintiff alleges that it is also entitled to
injunctive relief. (Id.)
Defendants argue that non-restitutionary
disgorgement of profits is not permissible under a UCL claim. In opposition, Plaintiff agrees to strike the
language.
As such, the motion to
strike the phrase “disgorgement of fees” from the 4th cause of
action is sustained without leave to amend.
Defendants move to
strike the allegations for punitive damages alleged in the FAC.
A complaint including a request for
punitive damages must include allegations showing that the plaintiff is
entitled to an award of punitive damages. (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253,
1255.) A claim for punitive damages cannot be pleaded generally and
allegations that a defendant acted "with oppression, fraud and
malice" toward plaintiff are insufficient legal conclusions to show that
the plaintiff is entitled to an award of punitive damages. (Brousseau v. Jarrett (1977) 73
Cal.App.3d 864, 872.) Specific factual allegations are required to
support a claim for punitive damages. (Id.)
Civil Code § 3294
authorizes a plaintiff to obtain an award of punitive damages when there is
clear and convincing evidence that the defendant engaged in malice, oppression,
or fraud. Section 3294(c) defines the terms in the following manner:
(1)
"Malice" means conduct which is
intended by the defendant to cause injury to the plaintiff or despicable
conduct which is carried on by the defendant with a willful and conscious
disregard of the rights or safety of others.
(2)
"Oppression" means despicable
conduct that subjects a person to cruel and unjust hardship in conscious
disregard of that person's rights.
(3)
"Fraud" means an intentional
misrepresentation, deceit, or concealment of a material fact known to the
defendant with the intention on the part of the defendant of thereby depriving
a person of property or legal rights or otherwise causing injury.
With respect to
paragraph 47 in the 5th cause of action, Plaintiff states in its
opposition papers that it will revise the request for punitive damages.
Thus, at issue is
the request for punitive damages in connection with the 1st, 2nd,
and 3rd causes of action. Based
on the Court’s review of the allegations of the FAC, the Court finds that the
allegations for punitive damages are generalized. The allegations that Defendants acted with
malice or oppression are conclusory and are not pled with the requisite
specificity for a punitive damages request.
Thus, the Court will grant the motion to strike the allegations for
punitive damages with respect to the 1st, 2nd, and 3rd
causes of action with leave to amend.
Defendants argue that
Plaintiff has not identified the basis for which it seeks attorney’s fees.
CCP § 1021 states that attorney’s fees are
recoverable if allowed under statute and/or by agreement.
In the prayer for damages, Plaintiff seeks
attorney’s fees as provided by law. In
paragraph 47 in connection with the 5th cause of action, Plaintiff
alleges that it is seeking attorney’s fees pursuant to Civil Code, §
3426.4. However, as paragraph 47 is
being revised, the Court will allow Plaintiff to amend the prayer for damages
to allege the basis for attorney’s fees.
The motion to strike the allegations for
attorney’s fees is granted with leave to amend.
CONCLUSION
AND ORDER
Defendants Hillary
Hirsch and Eric Gitter’s demurrer to the FAC is sustained with 20 days leave to
amend as to the 3rd and 5th causes of action.
Defendants’ motion
to strike is granted without leave to amend as to the phrase “disgorgement of
fees” from the 4th cause of action.
The motion to strike the allegations for punitive damages and attorney’s
fees is granted with 20 days leave to amend.
Defendants shall
provide notice of this order.
DATED:
May 17, 2024 ___________________________
John
Kralik
Judge
of the Superior Court