Judge: Melissa R. Mccormick, Case: "27 Diamonds, Inc. v. Soto", Date: 2022-08-04 Tentative Ruling

Defendant Vyanca Soto’s Demurrer to First Amended Complaint

Defendant Vyanca Soto demurs to the eleven causes of action in plaintiff 27 Diamonds, Inc.’s first amended complaint.  In her opening brief, Soto argues the second cause of action for trade secret misappropriation is uncertain, and the California Uniform Trade Secrets Act (CUTSA), California Civil Code § 3426 et seq. displaces the other ten causes of action.  In her reply, Soto modifies the relief she seeks; Soto argues: (i) the second and sixth causes of action are uncertain; (ii) the CTUSA displaces the first, fifth, seventh, eighth, ninth, and tenth causes of action; (iii) the third and fourth causes of action should be dismissed; and (iv) the fifth cause of action “does not involve unfair competition.”  For the following reasons, Soto’s demurrer is sustained in part and overruled in part.

In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint.  Blank v. Kirwan (1985) 39 Cal.3d 311, 318.  A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations.  Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-05.  Questions of fact cannot be decided on demurrer.  Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.  Because a demurrer tests only the sufficiency of the complaint, a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice.  Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 n.7.

Plaintiff’s second cause of action alleges trade secret misappropriation.  Plaintiff asserts this cause of action pursuant to the California Uniform Trade Secrets Act (CUTSA), California Civil Code § 3426 et seq.  Plaintiff’s sixth cause of action alleges breach of contract.  Soto’s demurrers to the second and sixth causes of action for uncertainty are overruled.  These cause of action is not “so incomprehensible that [Soto] cannot reasonably respond.”  Lickiss v. Financial Indus. Regulatory Auth. (2010) 208 Cal.App.4th 1125, 1135; see also A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.

Soto argues the CUTSA displaces the first (violation of Penal Code section 502), fifth (violation of Business & Professions Code section 17200), seventh (breach of duty of loyalty), eighth (fraud by concealment), ninth (interference with contractual relations), and tenth (interference with prospective economic advantage) causes of action in the first amended complaint.  Section 3426.7(b) preempts common law claims that are based on the same nucleus of facts as the misappropriation of trade secrets claim.  K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc. (2009) 171 Cal.App.4th 939, 958.  Depending on the particular facts pleaded, the statute can operate to displace claims such as breach of confidence, interference with contract, and unfair competition.  Id. at 958-59.  In interpreting a complaint, a court gives the complaint a reasonable interpretation, reading it as a whole and its parts in their context, and ignoring erroneous or confusing labels if the complaint pleads facts which would entitle the plaintiff to relief.  Id. at 959.  The court focuses on the actual gravamen of the complaint in construing it.  Id.

The first cause of action for violation of Penal Code section 502(c) alleges, inter alia, that Soto improperly accessed plaintiff’s company computer system as part of Soto’s alleged “scheme to defraud” plaintiff by taking plaintiff’s client files and other information.  See, e.g., First Amended Complaint ¶¶ 13, 14, 32.  The CUTSA may preempt common law and unfair competition claims but does not preempt a section 502(c) claim.  See, e.g., JEB Group, Inc. v. San Jose III (C.D. Cal. 2020) 2020 WL 2790012, at *4; Heieck v. Fed. Signal Corp. (C.D. Cal. 2019) 2019 WL 6873869, at *4–5.  Soto’s demurrer to the first cause of action is overruled.

The seventh cause of action alleges Soto breached a duty of loyalty to plaintiff by, inter alia, operating a competing business while employed by plaintiff.  This cause of action is not based on the same nucleus of facts as the misappropriation of trade secrets claim.  The latter claim focuses on Soto’s alleged use and disclosure of plaintiff’s “Confidential Information” to solicit and service plaintiff’s clients and to disrupt plaintiff’s business relationships.  Soto’s demurrer to the seventh cause of action is overruled.

The eighth cause of action for fraudulent concealment alleges, inter alia, Soto concealed a client’s alleged $4,000 payment and took the payment for herself.  This cause of action is not based on the same nucleus of facts as the misappropriation of trade secrets claim.  As discussed, the latter claim focuses on Soto’s alleged use and disclosure of plaintiff’s “Confidential Information” to solicit and service plaintiff’s clients and to disrupt plaintiff’s business relationships.  Soto’s demurrer to the eighth cause of action is overruled.

The ninth and tenth causes of action allege intentional interference with contractual relations and intentional interference with prospective economic advantage, respectively.  These causes are based on plaintiff’s allegations Soto used plaintiff’s “Confidential Information” to solicit and service plaintiff’s clients and to disrupt plaintiff’s business relationships.  These causes of action are based on the same nucleus of facts as the misappropriation of trade secrets claim.  The CUTSA thus displaces these causes of action.  Soto’s demurrers to the ninth and tenth causes of action are sustained without leave to amend.

Soto concedes the third and fourth causes of action state claims based on plaintiff’s allegation Soto improperly collected a $4,000 payment.  Soto’s demurrers to third and fourth cause of action are overruled.

Soto’s demurrer to the fifth cause of action on the basis that the claim “does not involve unfair competition” is overruled.  California’s Unfair Competition Law (UCL) creates a cause of action for business practices that are unlawful, unfair, or fraudulent.  Cal. Bus. & Prof. Code § 17200 et seq.  Each prong of the UCL provides a separate and distinct theory of liability.  South Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 878.  Plaintiff’s fifth cause of action, which rests in part the same alleged conduct underlying plaintiff’s third, fourth, seventh, and eights causes of action, alleges sufficient facts to state a section 17200 claim.   

Soto shall file and serve an answer by August 15, 2022.

Soto to give notice.

Defendant Vyanca Soto’s Motion to Strike First Amended Complaint

Defendant Vyanca Soto moves to strike paragraph 28 of plaintiff 27 Diamonds, Inc.’s first amended complaint.  Soto argues paragraph 28 is “not relevant to the matters alleged.” 

Pursuant to Code of Civil Procedure Section 436 the court may strike out “any irrelevant, false, or improper matter inserted in any pleading.”  The use of the motion must be “cautious and sparing” and is not intended to be used as a “procedural ‘line item veto’ for the civil defendant.”  PH II, Inc. v. Super. Ct. (1995) 33 Cal.App.4th 1680, 1682-83.

Soto’s motion to strike paragraph 28 is denied.  Soto has not demonstrated that the allegations in paragraph 28 are irrelevant, false, or improper matters subject to a motion to strike.

In her reply, Soto seeks also to strike paragraphs 49, 50, 58 and 59 of the first amended complaint.  Soto did not identify these paragraphs as subject to her motion to strike in her notice of motion.  See Cal. R. Ct. 3.1332(a).  Soto’s motion to strike paragraphs 49, 50, 58, and 59 is denied. 

Soto to give notice.

Defendant Vyanca Soto’s Motion to Quash Subpoena

Defendant Vyanca Soto moves to quash four document subpoenas served by plaintiff 27 Diamonds, Inc. to (i) A Design Lifestyle, LLC dba ADL Interiors; (ii) ASAP Tobacco, Inc. dba Smokerzland; (iii) Michelle Duro; and (iv) Hina Sindhu.  Plaintiff states in its opposition that it has withdrawn all four subpoenas.  DelRosario Decl. ¶ 5 & Ex. 3.  Soto’s motion is denied as moot.

Plaintiff’s and Soto’s requests for sanctions are denied.

Soto to give notice.

Case Management Conference

The trial is scheduled for December 18, 2023 at 9:00 a.m. in Department C13.

Clerk to give notice.