Judge: Maurice A. Leiter, Case: 22STCV21509, Date: 2023-11-27 Tentative Ruling

Case Number: 22STCV21509    Hearing Date: April 10, 2024    Dept: 54

Hearing Date: April 10, 2024

Department 54, Judge Maurice A. Leiter

Motion for Summary Judgment, or in the alternative, Motion for Summary Adjudication

Moving Party: Defendants Raj Vir, NGL Labs LLC, Joao Figueiredo and Hunter Issacson

Responding Party: Plaintiff Iconic Hearts Holdings, Inc.

T/R:      DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, MOTION FOR SUMMARY ADJUDICATION IS DENIED.

DEFENDANTS 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 September 6, 2022, Plaintiff Iconic Hearts Holdings, Inc. filed the operative first amended complaint against Defendants Raj Vir and NGL Labs LLC, asserting causes of action for (1) breach of contract; and (2) misappropriation of trade secrets. Plaintiff alleges its founder Hunter Rice and Defendant Raj Vir were longtime friends. Plaintiff alleges that while Vir worked as a consultant and developer for Plaintiff’s app “sendit”, he breached a confidentiality agreement and misappropriated Plaintiff’s trade secrets to create a competing app called “NGL.”

EVIDENCE OBJECTIONS

“In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion.” (CCP § 437c(q).) Plaintiff’s objections to the Vir Declaration and Schuman Declaration are OVERRULED. Defendants’ objections to the Rice Declaration are OVERRULED.

ANALYSIS

“The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Trial judges are required “to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (CCP § 437c(p)(2).) Once the defendant has met that burden, “the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.” (Id.)  To establish a triable issue of material fact, the party opposing the motion must produce “substantial responsive evidence.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

A. First Cause of Action for Breach of Contract

“The standard elements of a claim for breach of contract are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.’” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.) 

Plaintiff alleges that Defendant Vir entered into a “Master Development Agreement” with Plaintiff on September 1, 2018. The MDA contains a confidentiality provision, which states, “[d]uring and after the term of this Agreement, Developer will hold in the strictest confidence, and take all reasonable precautions to prevent any unauthorized use or disclosure of Confidential Information, and Developer will not (i) use the Confidential Information for any purpose whatsoever other than as necessary for the performance of the Services on behalf of Company, or (ii) disclose the Confidential Information to any third party without the prior written consent of an authorized representative of Company.” (FAC Exh. A. § 6.2.) Plaintiff alleges Vir violated this provision, using Plaintiff’s confidential information to create a competing app.

Defendants assert that the first cause of action fails because Plaintiff was not an incorporated entity at the time the agreement was executed, the MDA expired in 2018, and Defendants did not breach the agreement by using confidential information. In support, Defendants present evidence showing the MDA was executed in connection with one small work order for 10 hours of work from Defendant Vir for Plaintiff. Defendants argue the MDA expired at completion of Vir’s work order. Defendants also state that Vir did not use any purported confidential information while the MDA was in force.

In opposition, Plaintiff disputes that the agreement expired at the completion of the contracted work. Plaintiff points to the language of the agreement, which contains no expiration date and states that it applies during and after the term of the agreement. Plaintiff represents that the parties did not intend to terminate the confidentiality clause upon completion of the contracted work. Plaintiff also presents evidence purporting to show that Vir misused Plaintiff’s trade secrets. And Plaintiff contends that the agreement was made for its benefit, allowing Plaintiff to execute and enforce the agreement before Plaintiff was an incorporated entity. (See 02 Dev., LLC v. 607 S. Park, LLC (2008) 159 Cal. App. 4th 609, 612.) This is sufficient to create a triable issue of fact as to breach of contract.

Defendants’ motion for summary judgment is DENIED. Defendants’ motion for summary adjudication of the first cause of action is DENIED.

B. Second Cause of Action for Misappropriation of Trade Secrets

Defendants assert the second cause of action fails because Plaintiff did not take reasonable steps to protect its confidential information. (See Hooked Media Grp., Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323, 333.) Defendants present evidence showing that Plaintiff and Vir had public conversations about the purported trade secrets, Plaintiff provided a consultant, David Tesler, unfettered access to the trade secrets, and Plaintiff posted trade secret information on social media. Defendants Joao Figueiredo and Hunter Isaacson represent that they did not know the MDA existed or that Vir had any confidentiality obligations.

Plaintiff argues that it took reasonable steps to protect its trade secrets by requiring officers, management, and critical contractors to sign confidentiality agreements, by only sharing confidential information with those who had signed an agreement, and by limiting access to digital files with two-factor authentication. Plaintiff presents evidence showing Figueiredo and Isaacson knew that Vir was obtaining “inside information” from Rice about Plaintiff and encouraged this conduct—Vir had relayed information he learned from Rice under false pretense to Figueiredo and Isaacson, including information about how Iconic Hearts got sendit content on Instagram, and which of Iconic Hearts’ prompts were top performing so Defendants could re-create those prompts for the NGL App. This is sufficient to create triable issues of fact.

Defendants’ motion for summary adjudication of the second cause of action is DENIED.

Hearing Date: April 10, 2024

Department 54, Judge Maurice A. Leiter

Motion for Sanctions

Moving Party: Defendants Raj Vir, NGL Labs LLC, Joao Figueiredo and Hunter Issacson

Responding Party: Plaintiff Iconic Hearts Holdings, Inc.

T/R:      DEFENDANTS’ MOTION FOR SANCTIONS IS DENIED.

DEFENDANTS 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 September 6, 2022, Plaintiff Iconic Hearts Holdings, Inc. filed the operative first amended complaint against Defendants Raj Vir and NGL Labs LLC, asserting causes of action for (1) breach of contract; and (2) misappropriation of trade secrets. Plaintiff alleges its founder Hunter Rice and Defendant Raj Vir were longtime friends. Plaintiff alleges that while Vir worked as a consultant and developer for Plaintiff’s app “sendit”, he breached a confidentiality agreement and misappropriated Plaintiff’s trade secrets to create a competing app called “NGL.”

ANALYSIS

Code of Civil Procedure § 128.7(b) provides that by signing and filing a pleading, an attorney “is certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following conditions are met: (1) [i]t is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation[;] (2) [t]he claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law[;] (3) [t]he allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery[;] (4) [t]he denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.” CCP § 128.7 authorizes the court to impose appropriate sanctions upon attorneys or parties that have violated subsection (b). (CCP § 128.7(c).)

Defendants move for sanctions against Plaintiff on the ground that Plaintiff added Defendants Joao Figueiredo and Hunter Issacson to delay trial. Defendant assert Plaintiff has no evidence that Figueiredo and Issacson knew Vir was possibly misappropriating Plaintiff’s trade secrets.

Plaintiff alleges that Figueiredo and Issacson, who developed Defendants’ competing app, knew Vir acquired and was using Plaintiff’s trade secrets. Plaintiff presents evidence showing that Figueiredo and Issacson knew Vir had worked on Plaintiff’s app and that Defendants’ app was a copy of Plaintiff’s app. Defendants have not shown that Plaintiff violated CCP § 128.7.

Defendants’ motion for sanctions is DENIED.

Hearing Date: April 10, 2024

Department 54, Judge Maurice A. Leiter

Motion to Seal

Moving Party: Plaintiff Iconic Hearts Holdings, Inc.

Responding Party: Defendants Raj Vir, NGL Labs LLC, Joao Figueiredo and Hunter Issacson

T/R:      PLAINTIFF’S MOTION TO SEAL IS GRANTED.

PLAINTIFF 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 September 6, 2022, Plaintiff Iconic Hearts Holdings, Inc. filed the operative first amended complaint against Defendants Raj Vir and NGL Labs LLC, asserting causes of action for (1) breach of contract; and (2) misappropriation of trade secrets. Plaintiff alleges its founder Hunter Rice and Defendant Raj Vir were longtime friends. Plaintiff alleges that while Vir worked as a consultant and developer for Plaintiff’s app “sendit”, he breached a confidentiality agreement and misappropriated Plaintiff’s trade secrets to create a competing app called “NGL.”

ANALYSIS

“The court may order that a record be filed under seal only if it expressly finds facts that establish: (1) There exists an overriding interest that overcomes the right of public access to the record; (2) The overriding interest supports sealing the record; (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) The proposed sealing is narrowly tailored; and (5) No less restrictive means exist to achieve the overriding interest.”  (CRC Rule 2.550(d).)  “The motion or application must be accompanied by a memorandum and a declaration containing facts sufficient to justify the sealing.”  (CRC Rule 2.551(b)(1).) 

Plaintiff moves to seal documents Defendants filed with their motion for summary judgment. Plaintiff asserts these documents, designated confidential or highly confidential under the parties’ protective order, disclose confidential information regarding Plaintiff’s trade secrets.

In opposition, Defendants assert that Plaintiff’s motion is untimely, and these documents already have become part of the public record. The Court declines to deny this motion on these grounds. Plaintiff has made a good faith effort to keep these documents sealed, and there is no evidence the documents already are in the public record. Plaintiff’s interest in the confidential documents overrides the public’s need for access. The requirements of California Rules of Court 2.550(d) have been established.

Plaintiff’s motion is GRANTED.