Judge: Maurice A. Leiter, Case: 22STCV14590, Date: 2022-10-28 Tentative Ruling

Case Number: 22STCV14590    Hearing Date: October 28, 2022    Dept: 54

Hearing Date: October 28, 2022

Department 54, Judge Maurice A. Leiter

Demurrer to Complaint

Moving Party: Defendant Hugo Sanchez

Responding Party: Plaintiff TruConnect Communications, Inc.

T/R:     DEFENDANT’S DEMURRER TO THE FIRST CAUSE OF ACTION SUSTAINED WITH LEAVE TO AMEND.

DEFENDANT’S DEMURRER TO THE SECOND CAUSE OF ACTION IS OVERRULED.

PLAINTIFF TO FILE AND SERVE A FIRST AMENDED COMPLAINT WITHIN 30 DAYS. DEFENDANT TO FILE AND SERVE A RESPONSE WITHIN 30 DAYS THEREAFTER.

DEFENDANT TO NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, opposition, and reply.

BACKGROUND

On May 2, 2022, Plaintiff TruConnect Communications, Inc. sued Defendant Hugo Sanchez for (1) breach of contract; and (2) trade secret misappropriation. Defendant is a former employee of Plaintiff. Plaintiff alleges Defendant disclosed confidential trade secret information to his new employer and Plaintiff’s direct competitor.

ANALYSIS

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action in it.  (CCP § 430.50(a).)  A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff's ability to prove those allegations.  (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.)  The court must treat as true the complaint's material factual allegations, but not contentions, deductions or conclusions of fact or law.  (Id. at 732-33.)  The complaint is to be construed liberally to determine whether a cause of action has been stated.  (Id. at 733.)

A. First Cause of Action for Breach of Contract

            Plaintiff alleges Defendant breached the confidentiality provision of the parties’ employment contract. Defendant demurs to the first cause of action on the ground that the confidentiality agreement is void because it operates as an improper non-compete clause in violation of Bus. & Prof. Code § 16600.

Defendant relies on Brown v. TGS Mgmt. Co., LLC (2020) 57 Cal.App.5th 303. The Court of Appeal in Brown found that the following confidentiality provision violated section 16600:

[Confidential Information] “means information, in whatever form, used or usable in, or originated, developed or acquired for use in, or about or relating to, the Business[.]” “The Business,” in turn, is defined to include “without limitation analyzing, executing, trading and/or hedging in securities and financial instruments and derivatives thereon, securities-related research, and trade processing and related administration ....”

(Id. at 316.) The Court reasoned that this provision was so broad that it effectively precluded the plaintiff from working in the securities industry.

            The employment agreement in this case defines confidential information as “any information of any kind, nature, or description concerning any matters affecting or relating to Employee’s services for TruConnect, the business or operations of TruConnect, and/or the products, drawings, plans, processes, intellectual property or other data of TruConnect.” (Compl. Exh A.) Defendant asserts that this provision prevents Defendant from working in the entire telecommunication industry.

            Plaintiff disputes this interpretation. Plaintiff argues the clause does not target all information known in the telecommunication industry because it specifically limits the definition to information relating to services for TruConnect, the business or operations of TruConnect, and the products, drawings, plans, processes, intellectual property, or other data of TruConnect.

            Part of this definition is limited to intellectual property and internal operations of TruConnect. But “any information of any kind, nature, or description concerning any matters affecting or relating to Employee’s services for TruConnect” is so broad it effectively would prevent Defendant from using in another job any of his knowledge about the telecommunication industry. Under Brown, this violates Bus. & Prof. Code § 16600.

            The demurrer to the first cause of action is SUSTAINED.

B. Second Cause of Action for Misappropriation of Trade Secrets

            Defendant asserts that the second cause of action (and the first cause of action) fails because Plaintiff has not alleged what trade secrets Defendant purportedly misappropriated.

“[T]he complainant should describe the subject matter of the trade secret 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.” (Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 252.) Plaintiff alleges Defendant misappropriated Plaintiff’s “third-party distributor compensation model.” This is sufficiently particular.

The demurrer to the second cause of action is OVERRULED.